Punjab Communications Limited.
Report on the Audit of the standalone Financial Statements
We have audited the standalone financial statements of Punjab Communications Limited("the Company") which comprise the Balance Sheet as at 31st March 2020 andthe Statement of Profit and Loss Statement of Changes in Equity and Statement of CashFlows for the year then ended and Notes to the financial statements including a summaryof significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give he information required bythe Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2020 and profit/loss changes in equity and its cash flows for the yearended on that c ate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our Report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
1. The Company had invested a sum of Rs. 698.74 Lacs (Face Value Rs. 700 Lacs) net ofcommission amounting to Rs.1.26 lacs in the Bonds of UP Co-operative Spinning MillsFederation Ltd. (UPCSMFL) for a tenure of 18 months which was duly guaranteed by the UPState Government. The Company approached UPCSMFL for redemption of bonds on due date i.e.20th December 1999. Upon failure of UPCSMFL to redeem the bonds on due date the Companyinvoked the aforesaid Government Guarantee through suit filed on 28th November2001 at Lower Court Chandigarh against UPCSMFL & UP State Govt for recovery of theaforesaid amount and the Hon'ble Lower Court passed decree in favor of the Company videits order dated 30th January 2004.
UP State through Special Secretary filed an application under Order 9 Rule 13 forsetting aside the above said Decree being ex parte on 2nd September 2004 and also appliedfor stay of execution at the Lower Court Chandigarh. Stay application of UP State wasdismissed on 13th September 2004 and the application under 9/13 was kept pencing.
UP State Govt filed the Revision Petition against the order of dismissal of stay bythe lower court at Hon'ble Punjab & Haryana High Court Chandigarh. In order to admittheir Revision Petition the Court ordered UP State Govt to deposit a sum of Rs.735.63lacs (50% of the Decretal amount). The aforesaid sum of Rs.735.63 lacs was released to theCompany against furnishing of Bank Guarantee of equivalent amount on 22nd April 2006.
On 12th March 2010 the application filed by UP State under Order 9 Rule 13 wasdismissed by the Lower Court Chandigarh. UP State filed an Appeal in the Court of Add.Dist Judge Chandigarh and got the stay on 21st July 2010. The application of UP State forStay got dismissed on 10th November 2012.
UP State filed Civil Revision against the order of Distt Judge Chandigarh at Punjaband Haryana High Court Chandigarh. The Civil Revision filed by UP State was dismissed bythe Hon'ble Punjab and Haryana High Court on 20th September 2013.
UP State Govt filed appeal against the aforesaid order of the Hon'ble Punjab &Haryana High Court with the Hon'ble Supreme Court through SLP .The Hon'ble Supreme Courtvide its order dated 19th January 2015 directed the company to refund theaforesaid sum of Rs 735.63 Lacs to the UP-State Government. In compliance with theaforesaid orders of the Hon'ble Supreme Court the company refunded Rs. 735.63 Lacs byallowing the Hon'ble Court to invoke the Bank Guarantee of the equivalent amountsubmitted to the court earlier.
In view of the aforesaid order passed by Hon'ble Supreme Court maintaining that the UPState was not a party defended before the trial court the company was constrained to filea fresh civil suit against the state of U.P at District Court Chandigarh as on 11th March2016 for recovery of Rs 684031048/- in order to preserve its right of huge claim. Lateron after aforesaid invocation of the Bank guarantee of Rs 73563325/- the company fileda revised claim on 30th October 2018 to the tune of Rs.757594373/- (Rs 684031046/-plus Rs 73563325/-) which is pending.
UPCSMFL is presently under liquidation and the company has filed its claim with theOfficial Liquidator on 23rd May 2016 at Kanpur and later on account ofinvocation of Bank Guarantee a revised claim was filed on 26th September 2018 to the tuneof Rs. 1107501023/-with interest as on 28th August 2018 in order to maintain itsvaluable rights in future. The revised claim was sent through the authorizedrepresentative of the company and was duly acknowledged by the officials of UPCSMFL. Itwas also sent through the Registered Post which has not been received back thus dulyserved.
In the light of the aforesaid orders of Hon'ble Supreme Court the decree is notmaintainable against the State of U.P therefore the Company filed a fresh executionapplication against the principal debtor i.e UPCSMFL at the Hon'ble Lucknow Court on30thJanuary 2016 (as the Decree was issued against both the parties viz. UPCSMFL and theState of UP).
The company has reflected the value of investment in bonds at cost. Further theprincipal amount of bond is fully guaranteed by the UP-State Government but due to theprotracted litigation the time of recovery is indeterminable. (Also Refer note 5 and 42(a)of Balance Sheet for the FY19-20.
Emphasis of Matters
We would like to draw the attention on the following matters:
1. Accounting Policy 1(b): Regarding certain items of income and expenditure which havebeen accounted for as and when these are incurred ascertained or settled. During the yearunder audit no entries deviating from accrual basis of accounting were noticed.
2. As per the information and explanations given to us the company has been selectedfor disinvestment by Cabinet Committee on Disinvestment Government of Punjab. During theFY 2019-20 the Directorate of Public Enterprises and Disinvestment Government of Punjabhas appointed M/s Resurgent India Limited Gurgaon (Haryana) as Transaction Advisor forPuncom Disinvestment.
3. Note no S and 21 are subject to confirmation.
Our opinion is not modified on the matters mentioned at item (1) in Key Audit Mattersand in item (1) to (3) in Emphasis of Matters hereinabove.
The Audit of financial statements of 31/03/2019 was carried out and reported by Grewal& Singh Charted Accountants whose report has been provided to us by the management andwas relied by us for the purpose of our audit.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theaccounting Standards specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the company's financialreporting process.
Auditor's Responsibility for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements
Report on Other Legal and Regulatory requirements
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the 'Annexure A' a statement on the matters specified in theparagraph 3 and 4 of the Order to the extent applicable.
As required by Section 143 (3) of the Act we report that
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164 (2) of the Act.
f) With respect to the adequacy of the interna! financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations in its financialposition and Its financial statements - Refer Notes 335 and 38 to the financialstatements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company
| ||FOR RAJ GUPTA & CO |
| ||Chartered Accountants |
| ||FRN:000203N |
| ||CA Sandeep Gupta |
| ||Partner |
| ||M.No.-529774 |
|Place: Chandigarh || |
|Dated: June 19 2020 || |
|UDIN : 20529774AAAABV4873 || |
"ANNEXURE - A" TO THE INDEPENDENT AUDITORS' REPORT FINANCIAL YEAR 2019-20
1. (a) As per the information and explanations provided to us the company ismaintaining proper records showing full particulars including quantitative details andsituation of fixed assets;
(b) The company has a regular system of verification of fixed assets at the end of eachyear which in our opinion is reasonable having regard to the size of the company and thenature of its assets. Fixed assets were verified by the company and no discrepancy wasnoticed.
(c) As per the information and explanations provided to us the title deeds ofimmovable properties of the company are held in the name of company.
2. The company has a regular system of verification of the inventory at the end of eachyear which in our opinion is reasonable having regard to the size of the company. Theinventory was verified and the discrepancies noticed on physical verification betweenphysical stock and book records were not material and have been adequately dealt in thebooks of account.
3. As per the information and explanations given to us the company has not granted anyloans secured or unsecured to companies firms LLPs or other parties covered in theregister maintained under section 189 of the Companies Act.
4. In our opinion and according to the information and explanations given to us inrespect of loans investments guarantees and securities the company has complied withthe provisions of Section 185 and 186 of the Companies Act 2013.
5. According to the information and explanations given to us we are of opinion thatthe company has not accepted any deposit in pursuance of sections 73 to 76 or any otherrelevant provisions of the Companies Act and the rules framed there under.
6. The company was not required to maintain cost records as per the provisions ofSection 148(1). Accordingly this point is not applicable.
7. (a) According to the information and explanations given to us and books and recordsas produced and examined by us are in accordance with generally accepted auditingpractices in India and also based on management representation the company is regular indepositing undisputed statutory dues including provident fund employees state insuranceincome-tax sales tax service tax duty of customs duty of excise value added tax cessand any other statutory dues with the appropriate authorities. Further we report that noundisputed amount payable in respect to such statutory dues were outstanding as at March31 2020 for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us there are no dues ofprovident fund employees state insurance income-tax sales tax service tax duty ofcustoms duty of excise value added tax cess and any other statutory dues which havenot been deposited on account of any dispute. However the following demands have beenraised in respect of disputed dues pending before various statutory authorities:
|S. Particulars ||Tentative amount involved ||Matter / Cases pending since ||Forum where dispute is pending ||Current Status / Reason for pendency |
|1. Excise and Custom Duty Demand ||Rs.30.20 Lacs ||FY 2002-03 ||Deputy Commissioner of Customs New Delhi ||Reply was submitted in 2002-03. Thereafter no further communication(s) has been received. |
|2 Sales Tax Demand ||Rs.14.85 Lacs ||FY 2011-12 ||Sales Tax Appellate Tribunal Andhra Pradesh ||Appeal against the Sales Tax Demand for FY 2004-05 was admitted. Matter not listed for hearing yet. |
|3 Sales Tax Demand ||Rs.102.92 Lacs ||FY 2019-20 ||Appeal filed before additional commissioner Gbaziabad UP against Ex-parte assessment ||Appeal against the Sales Tax Demand for FY 2014-15 was admitted. Matter not listing for hearing yet. |
8. In our opinion and according to the information and explanations given to us thecompany has not defaulted in repayment of dues to the financial institutions or banks. Wefurther repart that the company has no debenture holders during the year.
9. The Company did not raise any money by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year under audit.
10. According to the information and explanations given to us no fraud by or on thecompany by its officers/employees has been noticed or reported during the course of ouraudit.
11. The Section 197 read with Schedule V to the Companies Act in relation to themanagerial remuneration is not applicable to Government companies as per Notification NoGSR 463E dated 5 June 2015.
12. The company is a manufacturing company and not a chit fund or a Nidhi Company.Therefore this clause is not applicable to the Company.
13. The company transactions with the related parties are in compliance with section188 and 177 of Companies Act 2013 and the details have been disclosed in the financialstatement as required by the Indian Accounting Standards and Companies Act 2013 andamendments thereon.
14. The company has not made any preferential aliotment/private placement of shares orfully or partly convertible debentures during the year.
15. As per information and explanation provided to us no such non cash transactionswere entered into by the Company with Directors or persons connected with it.
16. According to the information and explanations given to us the company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
| ||FOR RAJ GUPTA & CO |
| ||Chartered Accountants |
| ||FRN:0002Q3N |
| ||CA Sandeep Gupta |
| ||Partner |
| ||M.NO.-529774 |
|Place: Chandigarh || |
|Dated: June19 2020 || |
"ANNEXURE - B" TO THE INDEPENDENT FINANCIAL YEAR 2019-20
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of PunjabCommunications Limited ("the Company") as of 31st March 2020 inconjunction with our audit of the financial statements of the Company for the year endedon that date. Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI').
These responsibilities include the design implementation and maintenance of adequateinterna! financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013. Auditors'Responsibility
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofinternal Financial Controls and both issued by the institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate interna! financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a materia! weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemoverfinancial reporting
Meaning of internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for externa! purposes In accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) pertains to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provides reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
(3) provides reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the interna! financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2020based on the internal control overfinancial reporting criteria established by the Companyconsidering the essentia! components of interna! control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the institute ofChartered Accountants of India.
| ||FOR RAJ GUPTA & CO |
| ||Chartered Accountants |
| ||FRN:000203N |
| ||CA Sandeep Gupta |
|Place: Chandigarh ||Partner |
|Dated: June19 2020 ||M.No-529774 |