To the Members of REGENCY CERAMICS LIMITED HYDERABAD Report on the Audit of theFinancial Statements Qualified Opinion
We have audited the accompanying financial statements of REGENCY CERAMICS LIMITED("the Company") which comprise the Balance Sheet as at March 31 2020 theStatement of Profit and Loss (including other comprehensive income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date andnotes to the financial statements including a summary of the significant accountingpolicies and other explanatory information (herein after referred to as "thefinancial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of our observations stated in "Basis forQualified Opinion" section below the accompanying financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandard) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its Loss and total comprehensive income changes in equity and its cash flows for the yearended on that date.
Basis for Qualified Opinion
1. Manufacturing operations of the company were stopped due to riots strike andmalicious damage at factory since 27.01.2012. The company declared lock out of the planton 31.01.2012 and the condition of the fixed assets and its realizable value could not beestimated. The machinery and building were not insured during the year and disclosed atbook value after providing depreciation on account of efflux of time.
2. The condition of the raw materials stores and spares and its realizable value couldnot be estimated by the company. The stocks were not insured during the year and disclosedat book value.
3. During the year the company has not provided the provisional liability towardssalary wages and other benefits to its factory employees pending orders/judgment of theindustrial Tribunal. Further the company has not provided for its liability towardsGratuity and leave encashment in accordance to Ind AS-19 "Employee Benefits".Since the company could not compute the liability in the absence of complete records weare unable to comment upon the impact of non-provision of additional loss of the companyfor the year and on the current liabilities as at 31.03.2020.
4. Confirmation of balances was not obtained from Debtors Creditors loan and advancesand other current assets.
5. The lenders of the company earlier initiated action under section 13(4) of theSARFAESI Act and also filed an application under section 19 of the Recovery of Debts dueto Banks and Financial Institutions Act 1993 in the Debts Recovery Tribunal Hyderabadfor recovery of their dues. Subsequently All the five banks sanctioned revised OTSpackage for settlement of their dues and the company paid entire OTS amount. Thereafterthree banks filed satisfaction of Memo in the DRT and one bank filed Satisfaction ofcharges with Registrar of Companies. One bank filed the petition before the Hon'ble NCLTHyderabad bench under section 7 of the Insolvency and Bankruptcy Code 2016 and later onwithdrawn the same. The process in respect of other banks for complete closure of theaccount balances is in progress and as such the Long Term Borrowings are considered ascurrent maturities of long term borrowings and shown under Other Financial Liabilities.
6. The company did not provide the interest on Unsecured loans received from Directorsand Body Corporates. Also interest has not been provided in respect of overdue amountpayable to Micro Small and Medium Enterprises suppliers for a period exceeding 45 days.
7. The company has not provided the liability towards interest and penalties payable onaccount of statutory dues. The Company is of opinion that the statutory authorities shallwaive the same in view of the unprecedented incident.
Consequent to the above the Net loss would increase and Shareholders funds wouldreduce to this extent.
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under Section 143(10) of the Act. Our responsibilities underthose standards are further described in the Auditors responsibility for the Audit ofFinancial 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 (ICAI) together with the ethical requirements that are relevant to our audit offinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our qualified audit opinion on the financialstatements.
Material Uncertainty Related to Going Concern
We draw attention to note no. 1 to the financial statements regarding the preparationof the financial statements on a going concern basis despite erosion of the net worth andno cash inflows from the existing business activities. However the accompanying financialhave been prepared on "Going Concern" basis for the reasons stated in the saidnote.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Except for the matters described in the Basis for Qualified Opinion section andMaterial Uncertainty Related to Going Concern section we have determined that there areno other key audit matters to communicate in our report.
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial 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 the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated. If based on the workwe have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance including othercomprehensive income cash flows and changes in equity of the Company in accordance withthe Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read withrelevant rules issued there under and other accounting principles generally accepted inIndia. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the companyand for preventing and detecting the frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation offinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements the Board of Directors is responsible forassessing the company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe Board of Directors either intends to liquidate the company or to cease operations orhas no realistic alternative but to do so. The Board of Directors are responsible foroverseeing the Company's financial reporting 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.
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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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
1) As required by the Companies (Auditor's Report) Order2016 ("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 the paragraph 3 and 4 of the Orderto the extent applicable.
2) As required by Section 143(3) of the Act we report that:
a) We have sought and except for the matters described in the Basis for qualifiedopinion paragraph obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit
b) Except for the effects of the matters described in the Basis for qualified opinionparagraph above in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books.
c) the balance sheet the statement of profit and loss including other comprehensiveincome statement of changes in equity and the cash flow statement dealt with by thisReport are in agreement with the books of account
d) Except for the effects of the matters described in the basis for qualified opinionparagraph in our opinion the aforesaid Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act. e) The matters described inBasis for Qualified Opinion and Material Uncertainty Relation to Going Concern above inour opinion may have an adverse effect on the functioning of the Company
f) On the basis of 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 terms of Section164(2) of the Act g) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls wecouldn't evaluate as Company didn't have any manufacturing and business operations duringthe year under review.
h) No Managerial remuneration was paid during the year under review so reporting underrequirements of section 197 doesn't apply.
i) 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 on its financialposition in its financial statements Refer Note 28 29 30 31 and 32 to thefinancial 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 amounts which were required to be transferred to the InvestorEducation and
Protection Fund by the Company.
| ||for K.S.RAO & CO. |
| ||Chartered Accountants |
| ||Firm's Regn No. 003109S |
| ||(V.VENKATESWARA RAO) |
|Place : Hyderabad ||Partner |
|Date : 27.07.2020 ||Membership No. 219209 |
Annexure - A to the Auditor's Report:
The Annexure referred to in Para 1 under the heading of "Report on Other Legal andRegulatory Requirements" of our report of even date to the members of REGENCYCERAMICS LIMITED for the year ended March 312020.
1. a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. As As explained to us the management could not verify physically the fixed assetssituated at Yanam due to riots strike and malicious damage. c. According to theinformation and explanation given to us and on the basis of our examination of the recordsof the Company the title deeds of immovable properties are held in the name of theCompany.
2. No Physical verification of inventory has been conducted during the year.
3. a. During the year the Company has not granted any loans secured or unsecured toCompanies firms limited liability partnerships or other parties covered in the registermaintained under Section 189 of the Companies Act 2013.
b. In view of our comments in para (a) above Clause (III) (a) (b) and (c) ofparagraph 3 of the aforesaid order are not applicable to the Company.
4. In our opinion and according to the information and explanation given to us theCompany has not advanced any loan to any Director and no investments were made during theyear as referred to in sections 185 and 186 of the Act. Therefore the provisions ofParagraph 3(iv) of the Companies (Auditor's Report) Order 2016 are not applicable to theCompany.
5. The Company has not accepted any deposits from the public. Hence the provisions ofSections 73 to 76 or any other relevant provisions of the Companies Act 2013 and therules framed there under do not apply to this Company.
6. During the year there is no production and its related activity in the factory andas such cost records pursuant to sub-section (1) of section 148 of the Companies Act2013 have not been maintained.
7. a. According to the records the company is not regular in depositing undisputedstatutory dues including provident fund employees state insurance Income-taxSales-tax Service tax Goods and Services Tax Duty of customs Duty of excise Valueadded tax Cess and all other statutory dues with the appropriate authorities. Howeverthe extent of arrears of outstanding statutory dues as at March 31 2020 for a period morethan six months from the date they became payable are as below.
|Name of the Statute ||Nature of the dues ||Amount (Rs. in Lakhs) ||Period to which the amount relates ||Due Date ||Date of Payment |
|CST Act 1956 ||Central Sales Tax ||26.78 ||2011-12 ||Nov-2011 ||Not yet paid |
|VAT Act 2005 ||VAT ||335.02 ||2011-13 ||Sept-2011 ||Not yet paid |
|Central Excise & || || || || || |
|Service Tax Act 1994 ||Service Tax Employee State ||44.75 ||2011-13 ||Oct-2011 ||Not yet paid |
|ESI Act 1948 ||Insurance ||3.28 ||2011-13 ||Oct-2011 ||Not yet paid |
b. According to the records of the Company and the information and explanations givento us there were no dues of income tax or sales tax or service tax or duty of customs orduty of excise or value added tax have not been deposited on account of any dispute exceptthe following.
|Name of the Statute ||Nature of dues ||Amount (Rs. in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Central Excise & Service Tax Act 1994 ||Service Tax ||5.33 ||2009-10 ||CESTAT Hyderabad |
|Central Excise & Service Tax Act 1994 ||Excise Duty ||39.99 ||2011-12 ||CESTAT Chennai |
|Income Tax Act 1961 ||Income Tax ||90.98 ||2004-2005 ||Income Tax Appellate Tribunal |
|The Pondicherry Municipality Act 1973 ||Municipal Tax ||75.79 ||1998-2007 ||Yanam Municipality |
8. In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of loans to financial institutions and Banks. Below arethe details of defaults as on Balance Sheet date
|Name of Lenders: ||Amount of default as at the Balance Sheet date (Rs in Lakhs) ||Period of default |
|SBI ||2894.37 ||From June 2012 |
|SBI (e-SBT) ||1134.33 ||From June 2012 |
|SOUTH INDIAN BANK ||776.98 ||From June 2012 |
|Total ||4805.68 || |
The above banks offered settlement under OTS and the company paid the entire settlementamount. The banks issued NOC but the process of filing satisfaction of charges with ROCwas not completed and hence shown as amount of Default as at the Balance Sheet date.
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. Accordingly theprovisions of paragraph 3 (ix) of the Companies (Auditor's Report) Order 2016 are notapplicable.
10. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.
11. No managerial remuneration has been paid or provided during the year under report;Hence paragraph 3(xi) of the Companies (Auditor's Report) Order 2016 is not applicable.
12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Companies (Auditor'sReport) Order 2016 is not applicable.
13. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
14. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Companies (Auditor's Report) Order 2016 is not applicable.
16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
| ||for K.S.RAO & CO. |
| ||Chartered Accountants |
| ||Firm's Regn No. 003109S |
| ||(V.VENKATESWARA RAO) |
|Place : Hyderabad ||Partner |
|Date : 27.07.2020 ||Membership No. 219209 |