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Rainbow Denim Ltd.

BSE: 532441 Sector: Industrials
NSE: N.A. ISIN Code: INE820D01025
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NSE 05:30 | 01 Jan Rainbow Denim Ltd
OPEN 4.76
PREVIOUS CLOSE 4.76
VOLUME 30
52-Week high 10.25
52-Week low 2.25
P/E
Mkt Cap.(Rs cr) 6
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 4.76
CLOSE 4.76
VOLUME 30
52-Week high 10.25
52-Week low 2.25
P/E
Mkt Cap.(Rs cr) 6
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Rainbow Denim Ltd. (RAINBOWDENIM) - Auditors Report

Company auditors report

To the Members of Rainbow Denim Limited

Report on the Financial Statements Qualified Opinion

We have audited the Financial Statements of Rainbow Denim Limited ("theCompany") which comprise of the Balance Sheet as at 31st March 2021 and theStatement of Profit and Loss Statement of Changes in Equity and Statement of Cash Flowsfor the year then ended and notes to the Financial Statements including a summary ofsignificant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion section of our report the aforesaid financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India

(a) in the case of the Balance Sheet of the state of affairs of the Company as atMarch 31 2021;

(b) in the case of the Statement of Profit and Loss of the Loss for the year ended onthat date;

(c) in the case of the Statement of Changes in Equity of the changes in equity for theyear ended on that date; and

(d) in the case of the Cash Flow Statement of the cash flows for the year ended onthat date.

Basis for Qualified Opinion

Going Concern - We draw attention to Note 37 regarding the Company's FinancialStatements having been prepared using the going concern basis of accounting. Management isresponsible for assessing the Company's ability to continue as a going concern. The Valueof impairment of assets if any has not been ascertained. The Balance Sheet and Cash FlowStatement indicate that as on March 31 2021 the Company's Current Liabilities are morethan double of its total Assets; and Company has incurred net Operating Loss of Rs.65054911/- during the year ended March 312021. Further discontinuance of productionindicates that a material uncertainty exists which casts significant doubt on theCompany's ability to continue as a going concern. Our opinion is modified in respect ofthis matter.

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

S.N. Key Audit Matters Auditor's Response
1. Impairment of assets Refer para on Basis for Qualified Opinion of the report above.
2. Provision for Doubtful Advances and Recoverable Review of future recoverability in the light of applicable statute.
3. Ability to continue as a going concern Our opinion is suitably modified. Refer para on Basis for Qualified Opinion of the report above.

Information Other than the Financial Statements and Auditor's Report thereon

The Management of the Company is responsible for the preparation of the otherinformation. The Drafts of other information comprises of the information included in theManagement Discussion and Analysis Board's Report including Annexures to the said Board'sReport Corporate Governance and Shareholder's Information but does not include thefinancial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon. In connection with our audit of thefinancial statements our responsibility is to read the other information and in doingso consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated. If based on the work we have performed we conclude thatthere is a material misstatement of this other information; we are required to report thatfact. We have nothing to report in this regard.

Management's Responsibility for the Financial Statements

The Hon'ble National Company Law Tribunal Chandigarh bench ("NCLT") admittedan insolvency and bankruptcy petition filed by an operational creditor against the Companyvide its order dated 9th December 2019 ("the Order") and appointedMr. Dharmendra K Bhasin to act as Interim Resolution Professional ("IRP") who issubsequently appointed as Resolution Professional (RP). On the basis of the Order of theNCLT Mr. Dharmendra K Bhasin in his capacity as IRP / RP has taken control and custody ofthe management and operations of the Company from 9th December 2019.

The Management of the Company is responsible for the matters stated in section 134(5)of the Act with respect to the preparation of these financial statements that give a trueand fair view of the financial position financial performance changes in equity and cashflows of the Company in accordance with the Ind AS and other accounting principlesgenerally accepted in India. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate implementation and maintenance of 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. The Management is also responsible for overseeing the Company'sfinancial reporting process.

Auditor's Responsibilities 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 they could reasonably beexpected to influence the economic decisions of users taken on the basis of thesefinancial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

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 Companies Act 2013 we give in the Annexure a statement on the matters specified inparagraphs 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 the Statement of Changes inEquity and the Cash Flow Statement dealt with by this Report are in agreement with therelevant books of account.

d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

e) On the basis of the written representations received from the directors as on 31stMarch 2021 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2021 from being appointed as a director in terms of Section164(2) of the Act.

f) With respect to the adequacy of the internal 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 does not have any pending litigations which would impact its financialposition except as disclosed in the Notes to the Financial Statements.

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

iii. There were no dues which were required to be transferred to Investor Education andProtection Fund by the company.

For Khandelwal & Mehta LLP Chartered Accountants Firm Regn. No. W100084
Place : Mumbai Date : 29th June 2021 S. L. Khandelwal (Partner) M. No. : 101388 UDIN : 21101388AAAACL4278

"ANNEXURE A" TO THE INDEPENDENT AUDITORS REPORT

The annexure referred to our Report of even date to the members of Rainbow DenimLimited ("the Company")

on the financial statements for the year ended 31st March 2021. We reportthat:

1. In respect of its fixed assets:

a) The Company on the basis of available information has maintained proper recordsshowing full particulars including quantitative details and situations of fixed assets;

b) Management has certified that they have carried out physical verification of fixedassets and no material discrepancy was noticed on such verification;

c) The title deeds of immovable properties are held in the name of company.

2. In respect of Inventory:

a) According to the information and explanations given to us the inventories have beenphysically verified at reasonable intervals by the management during the year and nomaterial discrepancies have been noticed.

b) In our opinion and according to the information and explanations given to us theprocedures followed by the management for physical verification of inventory arereasonable and adequate in relation to the size of the Company and the nature of thebusiness.

c) No material discrepancies have been noticed on physical verification of the stocksas compared to book records in so far as it appears from our examination of the books.

3. According to the information and explanations given to us and on the basis of ourexamination of books of account the company has not granted any loans secured orunsecured to companies firms or other parties covered in the register maintained undersection 189 of the Companies Act 2013 ("the Act") and hence paragraph 3(iii) ofthe Order is not applicable.

4. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans made; the Company has not made any investments or given any guarantee orsecurity.

5. According to the information and explanation given to us the company has notaccepted any deposits as per the provisions of Section 73 to 76 or any other relevantprovisions of the Act and the rules framed there under.

6. We have broadly reviewed the books of accounts maintained by the Company pursuant tothe rules made by the Central Government for the maintenance of cost records under section148 (1) of the Act in respect of the Company's Products to which the said rules are madeapplicable and are of the opinion that prima facie the prescribed accounts have beenmade and maintained. We have however not made a detailed examination of the records witha view to determine whether they are accurate.

7. a) According to the records of the Company except following unpaid liabilitiesthere were no undisputed amounts payable in respect of Provident Fund Employee's StateInsurance Income Tax Sales Tax Service Tax Goods and Service Tax Custom Duty ExciseDuty Value added tax Cess and any other statutory dues with appropriate authoritiesoutstanding as on 31st March 2021 for a period of more than six months from the datethey became payable.

Name of Statute Nature of Dues Amount In Rs. Period to which the amount relates Due Date Date of Payment
Employees State Insurance Act 1948 Employees State Insurance 3192713 FY-2019-20 & FY-2020-21 Various Dates Unpaid
Name of Statute Nature of Dues Amount In Rs. Period to which the amount relates Due Date Date of Payment
Employees Provident Fund and Miscellaneous Provisions Act 1952 Provident Fund 16248309 FY-2019-20 & FY-2020-21 Various Dates Unpaid
The Punjab Labour Welfare Fund Act1965 Labour Welfare Fund 73550 FY-2019-20 30.04.2020 Unpaid

b) According to the records of the Company and information and explanations given to usthere are no dues of Sales Tax Goods and Service Tax Income Tax Wealth Tax ServiceTax Custom Duty Excise Duty Value Added Tax cess on account of any disputes.

8. On the basis of our examination of the books and according to the information andexplanation given to us the company has restructured all previous defaulted loansincluding interest and Letter of Credit devolvement with securitization companies inearlier years. The company has defaulted in the repayment of dues including interestamounting Rs. 377286932/- as at 31st March 2021.

9. In our opinion and on the basis of information and explanations given to us theCompany has not raised money by way of further public offer during the year and term loansavailed by the Company were prima facie applied by the Company for the purpose for whichthe loans were obtained.

10. According to the information and explanations given to us and to the best of ourknowledge and belief no fraud on or by the Company has been noticed or reported during theyear.

11. According to the information and explanations give to us Company has not paid orprovided any managerial remuneration during the year.

12. In our opinion and according to information and explanations given to us thecompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable.

13. According to information and explanations given to us and based on our examinationof the records of the company transactions with related parties are in accordance withsection 177 and 188 of the act where applicable and details of such transactions have beendisclosed in Financial Statements as required by applicable accounting standards.

14. According to the information and explanation given to us the Company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year.

15. According to information and explanations given to us and based on our examinationof the records of the company the company has not entered into non-cash transactions withdirectors or persons connected with him. Therefore paragraph 3(xv) of the Order is notapplicable.

16. In our opinion and according to the information and explanations given to us theCompany is not required to be registered under section 45- IA of Reserve Bank of IndiaAct 1934.

For Khandelwal & Mehta LLP
Chartered Accountants
Firm Regn. No. W100084
S. L. Khandelwal
(Partner)
Place : Mumbai M. No. : 101388
Date : 29th June 2021 UDIN : 21101388AAAACL4278

"ANNEXURE B" TO THE INDEPENDENT AUDITOR'S REPORT"

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 RainbowDenim Limited ("the Company") as of March 31 2021 in conjunction with our auditof the financial statements of the Company for the year ended on 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 responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.

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 Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated 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 material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's 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 systemover financial 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 external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material 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 internal 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.

Opinion

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 March 31 2021 based on theinternal control over financial reporting criteria established by the company consideringthe essential components of Internal Control stated in the Guidance note on Audit ofInternal Financial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India (ICAI).

For Khandelwal & Mehta LLP Chartered Accountants Firm Regn. No. W100084
Place : Mumbai Date : 29th June 2021 S. L. Khandelwal (Partner) M. No. : 101388 UDIN : 21101388AAAACL4278

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