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Reliance Communications Ltd.

BSE: 532712 Sector: Telecom
NSE: RCOM ISIN Code: INE330H01018
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VOLUME 21495568
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OPEN 2.95
CLOSE 2.99
VOLUME 21495568
52-Week high 5.49
52-Week low 1.53
P/E
Mkt Cap.(Rs cr) 808
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Reliance Communications Ltd. (RCOM) - Auditors Report

Company auditors report

To the Members of Reliance Communications Limited

Report on the Audit of the Standalone Financial Statements

Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code 2016 (IBC)

The Hon'ble National Company Law Tribunal Mumbai Bench ("NCLT") admitted aninsolvency and bankruptcy petition filed by a operational creditor against RelianceCommunications Limited ("the Company") and appointed Resolution Professional(RP) who has been vested with management of affairs and powers of the Board of Directorswith direction to initiate appropriate action contemplated with extant provisions of theInsolvency and Bankruptcy Code 2016 and other related rules.

Qualified Opinion

We have audited the accompanying Financial Statements of Reliance CommunicationsLimited ("the Company") which comprise the Balance Sheet as at March 312020 and the Statements of Profit and Loss Statements of Changes in Equity andStatements of Cash Flows for the year then ended and notes to the Financial Statementsincluding a summary of significant 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 possible effect of matters described in the Basis forQualified Opinion section of our report the aforesaid Financial Statements give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies ( Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2020 and its loss (includingtotal comprehensive loss) and its cash flows for the year ended on that date.

Basis for Qualified Opinion

We draw attention to following notes to the accompanying financial statements for theyear ended March 312020:-

A. Note no. 2.15 & Note no 2.31 "Assets Held for Sale (AHS)" includingWireless Spectrum Towers Fiber and Media Convergence Nodes (MCNs) continue to beclassified as held for sale at the value ascertained at the end of March 31 2018 for thereasons referred to in the aforesaid note and impact of the non-payment of spectruminstalments due to Department of Telecommunication (DOT). Non determination of fair valueas on the reporting date is not in compliance with Ind AS 105 "Non-Current AssetsHeld for Sale and Discontinued Operations". Accordingly we are unable to comment onthe consequential impact if any on the carrying amount of Assets Held for Sale and onthe reported losses for the year ended March 31 2020.

B. Note no. 2.48 regarding admission of the Company and its three subsidiaries intoCorporate Insolvency Resolution Process ("CIRP") and pending determination ofobligations and liabilities including various claims submitted by theOperational/financial/other creditors and employees including interest payable on loansduring CIRP. We are unable to comment the accounting impact and disclosure there ofpending reconciliation and determination of final obligation.

The Company accordingly has not provided interest on borrowings amounting to Rs 4212Crore for year ended March 31 2020 and Rs 6962 Crore up to the previous financial yearcalculated based on basic rate of interest as per terms of loan. The Company further hasnot provided for foreign exchange variance (gain)/ loss amounting to Rs 1313 Crore for theended March 31 2020 and Rs 803 Crore of loss up to the previous financial year. Had suchinterest and foreign exchange variation (gain)/ loss as mentioned above been provided thereported loss for the year ended March 31 2020 would have been higher by Rs 5524 Crore .Non provision of interest and nonrecognition of foreign exchange variation (gain)/ loss isnot in compliance with Ind AS 23 "Borrowing Costs" and Ind AS 21 "TheEffects of Changes in Foreign Exchange Rates" respectively.

C. Note no. 2.31 regarding pending comprehensive review of carrying amount of allother assets including investment in subsidiaries and liabilities on account of reasonstated in the said note and accordingly non provision for impairment of carrying value ofassets and write back of liabilities if any. Further Goods & Service Tax (GST) and TaxDeducted at source are pending for reconciliation. In the absence of Comprehensive reviewas mentioned above for the carrying value of all other assets and liabilities and pendingreconciliation of Goods & Service Tax (GST) and Tax Deducted at Source (TDS) we areunable to comment that whether any adjustment is required in the carrying amount of suchassets and liabilities and consequential impact if any on the reported losses for theyear ended March 31 2020. Non determination of fair value of financial assets &liabilities and carrying amount for other assets and liabilities are not in compliancewith Ind AS 109- Financial Instruments and Ind AS 37- Provisions Contingent Liabilities& Contingent Assets.

D. Note no. 2.52 regarding non adoption of Ind AS 116 "Leases" effectivefrom April 012019 and the consequent impact thereof. The aforesaid accounting treatmentis not in accordance with the relevant Indian Accounting Standard Ind-AS 116.

E. Note no 2.31 regarding continuous losses incurred by the Company currentliabilities exceeding its current assets default in repayment of borrowings and defaultin payment of regulatory and statutory dues. This situation indicates that a materialuncertainty exists that may cast significant doubt on the Company's ability to continue asa going concern. The accounts however has been prepared by the management on a goingconcern basis for the reason stated in the aforesaid note. We however are unable to obtainsufficient and appropriate audit evidence regarding management's use of the going concernbasis of accounting in the preparation of the financial statements in view of on-goingCorporate Insolvency Resolution Process the outcome of which cannot be presentlyascertained.

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013 (the Act). Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Audit ofthe financial statements section of our report. We are independent of the Company inaccordance with the

Code of Ethics issued by the Institute of Chartered Accountants of India together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Companies Act 201 3 and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for qualified opinion.

Emphasis of Matter Paragraph

A. We draw attention to Note no. 2.39.2 of the statement regarding provision oflicense fee and spectrum usage charges based on management estimates pending special auditfrom Department of Telecommunications pursuant to the judgment of Hon'ble Supreme Courtof India vide its order dated October 24 201 9 and status of payment thereof.

B. We draw attention to Note no. 2.53 of the statement as regards to the management'sevaluation of COVID - 19 impact on the future performance of the Company. The actualoutcome of the assumptions and estimates may vary in future due to impact of pandemic.

Our opinion is not modified in respect of above matters.

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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.

For each matter below our description of how our audit addressed the matter isprovided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities forthe audit of the financial statements section of our report including in relation tothese matters. Accordingly our audit included the performance of procedures designed torespond to our assessment of the risks of material misstatement of the financialstatements. The results of our audit procedures including the procedures performed toaddress the matters below provide the basis for our audit opinion on the accompanyingfinancial statements.

1. Revenue Recognition

The accuracy and completeness of revenue amounts recorded is an inherent industry risk.The revenue is categorised broadly into service and wholesale revenue. Service revenuemainly consists of income from fixed line broadband rentals and installations. Wholesalerevenue comprises revenue from interconnection external administration capacity salesand from resellers.

We considered revenue recognition as a key audit matter as the amount involved ismaterial to the financial statements and due to the complexity of the systems andprocesses used to record revenue. The accounting policy and relevant disclosures relatingto revenue are set out in notes 1.12 and 2.25 respectively to the financial statements.

Our audit procedures included amongst others the following:

• Testing the end-to-end reconciliation from business support systems to billingand to the general ledger

• Performing tests on the accuracy of customer bill generation process on a samplebasis and testing of a sample of the credits and discounts applied to such customer bills;

• Performed substantive analytical procedures over the significant revenuestreams.

• Involving verification of controls surrounding revenue invoicing;

• Assessed transactions taking place before and after year-end to ensure thatrevenue was recognised in the appropriate period;

• Performing specific procedures to test the accuracy and completeness ofadjustments and performing procedures to ensure that the revenue recognition criteriaadopted by the Company is in line with the company's accounting policies.

2. Valuation and disclosure of accrual estimates for legal claims litigationsregulatory matters and contingencies and deposits against the same legal matters includingprovision of license fee and spectrum usage charges pursuant to the judgment of Hon'bleSupreme Court of India vide its order dated October 24 2019

The Company is involved as a party in legal proceedings including regulatory and othergovernmental proceedings. The Company has also deposited substantial amounts withregulatory authorities against the demands in dispute which has been classified asdeposit.

This area is significant to our audit since the accounting and disclosure for(contingent) legal liabilities is complex and judgmental (due to the difficulty inpredicting the outcome of the matter and estimating the potential impact if the outcome isunfavourable) and the amounts Involved are or can be material to the financialstatements as a whole. Further reference is made to Note no. 2.36 Contingent liabilitiesand note no. 2.39.2 on provision of Licence fees and Spectrum Usage Charges.

Our audit procedures included amongst others testing the effectiveness of theCompany's internal controls around the identification and evaluation of claims/provisionsproceedings and investigations at different levels in the group and the recording andcontinuous re-assessment of the related (contingent) liabilities and provisions anddisclosures. We inquired with both internal legal staff including Resolution Professional(RP) as well as with the Company's financial staff in respect of ongoing investigations orclaims proceedings and investigations inspected relevant correspondence inspected theminutes of the meetings of the Audit Committee and requested a confirmation from thegroup's in-house responsible officials and RP. Also the Company has obtained legalopinions in past against these disputes. For claims settled during the year we vouchedthe payments as appropriate and read the related orders to verify whether thesettlements were properly accounted for.

We also assessed the adequacy of the Company's disclosure around legal claimslitigations regulatory matters and contingencies as included in Note no. 2.36 Contingentliabilities.

We consider management's conclusion on the predicted outcome and estimation ofpotential impact reasonable and we assessed that the disclosures in Note no. 2.36Contingent liabilities are reasonable.

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

The Company's Board of Directors is responsible for the preparation of otherinformation. The other information comprises the information included in Board's Reportincluding Annexures to Board's Report but does not include the financial statements andour auditor's report thereon. Our opinion on the financial statements does not cover theother information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information identified above and in doing so consider whether the otherinformation is materially inconsistent with the financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. When we read thereport containing other information if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance. Wehave nothing to report in this regard

Responsibility of Management and Those Charged with Governance for the FinancialStatements

The financial Statements which is the responsibility of the Company's Management isrelied upon by the Resolution Professional based on the assistance provided by theDirectors and taken on record by the Resolution Professional as fully described in Noteno.2.54 of financial Statements .The Company's Management is responsible for the mattersstated in section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these financial statements that give a true and fair view of theFinancial position Financial performance (changes in equity) and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the accounting Standards specified under section 133 of the Act.

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 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 ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the financial statements Directors/Resolution Professional(RP) isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management (RP) either intends to liquidate the Company or tocease operations or has no realistic alternative but to do so.

The Management/RP is also responsible for overseeing the Company's Financial reportingprocess.

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. Misstatement 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company 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 Statements 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.

Other Matters

A. The entire audit finalisation process was carried from remote locations i.e. otherthan the office of the Company where books of account and other records are kept based onthe data/details or financial information provided to us through digital medium owing tocomplete lockdown imposed by the Central Government to restrict the spread of COVID 1 9..Being constrained we resorted to and relied upon the results of the alternative auditprocedures to obtain sufficient and appropriate audit evidence for significant matters incourse of our audit. Our report is not modified in respect of this matter.

B. Pursuant to applications filed by Ericsson India Pvt. Ltd before the NationalCompany Law Tribunal Mumbai Bench ("NCLT") in terms of Section 9 of theInsolvency and Bankruptcy Code 2016 read with the rules and regulations framed thereunder("Code") the NCLT had admitted the applications and ordered the commencement ofcorporate insolvency resolution process ("CIRP") of Reliance CommunicationsLimited ("the Company") and two of its subsidiaries namely Reliance InfratelLimited (RITL) and Reliance Telecom Limited (RTL) (collectively the "CorporateDebtors") vide its orders dated May 15 2018. The committee of creditors("CoC") of the Corporate Debtors at the meetings of the CoC held on May 302019 in terms of Section 22 (2) of the Code resolved with the requisite voting share toreplace the Interim Resolution Professionals with the Resolution Professional("RP") for the Corporate Debtors which has been confirmed by the NCLT in itsorders dated June 21 2019 (published on the website of the NCLT on June 28 2019).

The financial statements of the Company shall be signed by the Chairperson or ManagingDirector or Whole Time Director or in absence of all of them it shall be signed by anyDirector of the Company who is duly authorized by the Board of Directors to sign thefinancial statements. As mentioned in Note No 2.54 of the financial statement in view ofthe on going Corporate Insolvency Resolution Process the powers of the board of directorsstand suspended and are exercised by the Resolution Professional .

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" a Statements on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

As required by Section 143(3) of the Act we report that:

(a) Except for the matters described in the Basis of Qualified opinion paragraph aboveWe have sought and 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 possible effects of the matters described in the Basis of Qualifiedopinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books

(c) The Balance Sheet the Statements of Profit and Loss and the Statements of CashFlows and Statements of Changes in Equity dealt with by this Report are in agreement withthe books of account.

(d) In our opinion the aforesaid financial statements comply with the IndianAccounting Standards ( Ind AS) specified under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended except requirement of IndAS 105 on Non-Current Assets Held for Sale and Discontinued Operations Ind AS 23 onBorrowing Cost and Ind AS 21 on Effects of Changes in foreign exchanges Ind AS 116 onLeases Ind AS 109 Financial Instruments Ind 37 on Provisions Contingent Liabilitiesand Contingent Assets with regard to matters described in the Basis of Qualified Opinionparagraph above

(e) The matter described under the basis for qualified opinion paragraph above andQualified Opinion paragraph of 'Annexure B' to this report in our opinion may have anadverse effect on functioning of the Company and on the amounts disclosed in financialstatements of the Company;

(f) On the basis of the written representations received from two directors of theCompany as on March 31 2020 taken on record by the Board of Directors and based on legalopinion obtained by the Company during previous year with regard to non payment ofdebenture holder's due (Refer Note No.2.51) these two directors are not disqualified ason March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct. Further as mentioned in Note no. 2.51 of the financial statements other directors ofthe Company have resigned from the position of director however their resignation has notbeen accepted for the reason stated in the said note and Company has not receiveddeclarations from these directors in this regard accordingly we are unable to commentwhether these directors are disqualified as on March 31 2020 from being appointed as adirector in terms of Section 164(2) of the Act.

(g) The qualification relating to maintenance of accounts and other matters connectedtherewith are as stated in the Basis for Qualified Opinion paragraph above

(h) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".

(i) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanationgiven to us in respect of one managerial person of the Company Managerial remunerationhas been paid/provided in accordance with the requisite approval by shareholders asmandated by the provisions of section 197 read with schedule V of the Act.

Further in respect of one managerial person of the Company managerial remunerationpaid/provided is in excess of limits prescribed under section 197 read with schedule V ofthe Act. The company has paid/provided total managerial remuneration amounting to Rs 49lakhs to this managerial person which exceeds by Rs 22 lakhs from the limits prescribedunder this Section the company has disclosed the said excess payment as recoverable fromthe said managerial person and is in the process of obtaining requisite approval fromshareholders in ensuing Annual General Meeting.

The Ministry of Corporate Affairs has not prescribed other details under section197(16) which are required to be commented upon by us.

(a) 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 2.36 to the financial statements;

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

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Pathak H.D. & Associates LLP

Chartered Accountants

Firm's Registration No: 107783W/W100593

Parimal Kumar Jha

Partner

Membership No: 124262

July 31 2020 Mumbai

UDIN:20124262AAAADC4008

‘Annexure A' to the Independent Auditor's Report - March 31 2020

With reference to the Annexure A referred to in the Independent Auditors' Report to theMembers of Reliance Communications Limited ('the Company') on the financial statements forthe year ended March 31 2020 we report the following:

i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) We are informed that the Company physically verifies its assets over a three yearperiod. In our opinion this periodicity of physical verification is reasonable havingregard to the size of the Company and the nature of its assets. In accordance with thispolicy and on account of Covid 1 9 pandemic the Company has physically verified some ofthe fixed assets on sample basis during the year which is not under electronicsurveillance and no material discrepancies were identified on such physical verificationexcept certain Fixed Assets amounting to Rs 1.9 Crore taken from the Company's premisesfor which necessary action has been initiated.

(c) According to the information and explanations given to us the title deeds ofimmovable properties as disclosed in Note 2.01 &2.15 to the financial statements areheld in the name of the Company except for the following where the Company is in theprocess of transferring the title deeds in it's name as these were acquired throughvarious schemes of arrangement entered in the earlier years:

Particulars Freehold Land Leasehold Land Building
No of cases 359 14 376
Gross block as at March 31 2020 ( Rs in crores) 133 12 245
Net block as at March 31 2020 ( Rs in crores) 133 10 162

ii. The inventory has been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable. The discrepancies noticedon verification between the physical stocks and the book records were not material andhave been dealt with in books of account.

iii. According to the information & explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited liabilityPartnerships or other parties covered in the register maintained under Section 189 of theAct. Accordingly paragraph (iii) of the Order is not applicable to the Company.

iv. In our opinion according to the information and explanations given to us theCompany has not granted any loans or provided any guarantees or security to the partiescovered under Section 185 of the Act. The Company has complied with the applicableprovisions of Section 186 of the Act to the extent applicable.

v. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public in accordance with relevantprovisions of Sections 73 to 76 or any other relevant provisions of the Act and the rulesframed there under. Accordingly paragraph (v) of the Order is not applicable to theCompany.

vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules prescribed by the Central Government for maintenance of cost records undersub-section 1 of Section 148 of the Act in respect of telecommunication activities andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However we have not made a detailed examination of the records.

vii. (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company we observed that there are delays inamounts deposited with appropriate authorities for amounts deducted/accrued in the booksof account in respect of undisputed statutory dues including provident fund income taxgoods and services tax service tax duty of customs sales tax value added tax (VAT)entry tax employees' state insurance cess and other material statutory dues. Asexplained to us the Company did not have any dues on account of duty of excise.

According to the information and explanations given to us undisputed amounts payablein respect of provident Fund income tax goods and services tax sales tax value addedtax employees' state insurance and other material statutory dues which were in arrears asat March 31 2020 for a period of more than six months from the date they became payableare as under:

Name of Statute* Nature of Dues Amount ( Rs in crore) Period to which the amount relates Due Date Date of Payment
Maharashtra Value Added Tax Act 2002 Value Added Tax Payable 0.36 FY 2017-18 Various Dates Unpaid
Delhi Value Added Tax Act 2004 Value Added Tax Payable 0.04 FY 2017-18 Various Dates Unpaid
Karnataka Value Added Tax Act 2003 Value Added Tax Payable 0.05 FY2017-18 Various Dates Unpaid
Orissa Value Added Tax Act 2004 Value Added Tax Payable 0.00 FY2017-18 Various Dates Unpaid
Gujarat Value Added Tax Act2003 Value Added Tax Payable 0.41 FY2017-18 Various Dates Unpaid
Maharashtra Value Added Tax Act 2002 Works Contract Tax Payable 0.01 FY2017-18 Various Dates Unpaid
Rajasthan Value Added Tax Act 2003 Works Contract Tax Payable 0.03 FY 2017-18 Various Dates Unpaid

‘Annexure A' to the Independent Auditor's Report - March 31 2020

Name of Statute* Nature of Dues Amount ( Rs in crore) Period to which the amount relates Due Date Date of Payment
Gujarat CST Act1956 Central Sales Tax Payable 0.03 FY 2017-18 Various Dates Unpaid
Karnataka CST Act1956 Central Sales Tax Payable 0.07 FY 2017-18 Various Dates Unpaid
Andhra Pradesh CST Act1956 Central Sales Tax Payable 0.36 FY2017-18 Various Dates Unpaid
Punjab CST Act1956 Central Sales Tax Payable 0.42 FY2017-18 Various Dates Unpaid
Rajasthan CST Act1956 Central Sales Tax Payable 0.00 FY2017-18 Various Dates Unpaid
Madhya Pradesh CST Act1956 Central Sales Tax Payable 0.00 FY2017-18 Various Dates Unpaid
Jharkhand CST Act1956 Central Sales Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Chhattisgarh CST Act1956 Central Sales Tax Payable 0.01 FY 2017-18 Various Dates Unpaid
Himachal Pradesh CST Act1956 Central Sales Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Uttarakhand Value Added Tax Act2005 Works Contract Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Andhra Pradesh Value Added Tax Act2005 Works Contract Tax Payable 0.01 FY 2017-18 Various Dates Unpaid
Haryana Value Added Tax Act2003 Works Contract Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Himachal Pradesh Value Added Tax Act2005 Works Contract Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Punjab Value Added Tax Act2005 Works Contract Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Kerala Value Added Tax Act2003 Works Contract Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Maharashtra Value Added Tax Act2002 Works Contract Tax Payable 0.25 FY 2017-18 Various Dates Unpaid
Chhattisgarh Value Added Tax Act2003 Works Contract Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
Orissa Value Added Tax Act2004 Works Contract Tax Payable 0.01 FY 2017-18 Various Dates Unpaid
Madhya Pradesh Value Added Tax Act2003 Works Contract Tax Payable 0.01 FY 2017-18 Various Dates Unpaid
Income Tax Act 1961 Tax Deducted at source 20.99 FY 2017-18 & F.Y 2018-19 Various Dates Unpaid

*In respect of Goods & Service Tax (GST) payable the Company is in the process ofreconciliation (Refer note No. 2.31of the financial statements and our qualification inmain report and report on Internal Financial Control with reference to FinancialStatements in this regard). The Company has filed GST return up to the month February 2020and hence as at March 31 2020 no amount is unpaid for a period of more than six monthsfrom the date they became payable.

(b) According to the information and explanations given to us there are no dues ofcess which have not been deposited on account of any dispute. The dues of income tax dutyof customs service tax sales tax value added tax and entry tax as disclosed below havenot been deposited by the Company on account of disputes:

Name of Statue Nature of Dues Amount* ( Rs in crore) Period Forum
Central Sales Tax Bihar Central Sales Tax 0.04 2005-06 Appellate Tribunal
0.43 2011-12 Asst. Commissioner of Commercial Taxes
Central Sales Tax Chattisgarh Central Sales Tax 0.00 2011-12 Dy. Commissioner (Appeals)
Central Sales Tax Madhya Pradesh Central Sales Tax 0.03 2011-12 to 2013-14 Dy. Commissioner (Appeals)
Central Sales Tax Maharashtra Central Sales Tax 0.27 2011-12 Dy. Commissioner of Sales Tax
0.35 2013-14 Dy. Commissioner of Sales Tax
Central Sales TaxOrissa Central Sales Tax 0.00 2009-10 Addl. Commissioner (Appeals)
0.02 Oct '06 to March '09 Sales Tax Appellate Tribunal

‘Annexure A' to the Independent Auditor's Report - March 31 2020

Central Sales Tax Uttar Pradesh Central Sales Tax 0.07 2006-07 High Court
0.08 2010-11 Additional Commissioner (Appeals)
0.50 2013-14 Dy. Commissioner of Commercial Taxes
1.25 2014-15 Dy. Commissioner of Commercial Taxes
Central Sales Tax Uttarakhand Central Sales Tax 0.12 2009- 10 to 2010- 11 Dy. Commissioner of Commercial Taxes
0.14 2012-13 Jt. Commissioner of Commercial Taxes (Appeals)
Central Sales Tax West Bengal Central Sales Tax 0.34 2007-08 Tax Revision Board Jt.Commissioner
0.36 2014-15 Commercial Taxes
Central Sales Tax Punjab Central Sales Tax 0.05 2010-11 Dy. Excise and Taxation Commissioner (Appeals)
Entry Tax Bihar Entry Tax 0.38 2007- 08 to 2008- 09 Commercial Tax Tribunal
0.25 2011-12 Asst. Commissioner of Commercial Taxes
Entry Tax Chattisgarh Entry Tax 0.63 2006- 07 to 2007- 08 Dy. Commissioner (Appeals)
0.25 2010- 11 to 2011- 12 Dy. Commissioner (Appeals)
Entry Tax Himachal Pradesh Entry Tax 1.01 2010-11 to 2013-14 High Court
Entry Tax Madhya Pradesh Entry Tax 0.48 2002- 03 to 2003- 04 Asst. Commissioner of Commercial Taxes
1.58 2005-06 to 2008-09 & 2010-11 MP Taxation Board
0.21 2011-12 Dy. Commissioner (Appeals)
Entry Tax Orissa Entry Tax 0.08 2009-10 Addl. Commissioner (Appeals)
0.05 Oct 06- March 09 Sales Tax Appellate Tribunal
Entry Tax Uttar Pradesh Entry Tax 0.13 2003-04 Commercial Tax Tribunal
0.02 2013-14 Dy. Commissioner of Commercial Taxes
0.02 2014-15 Dy. Commissioner of Commercial Taxes
Entry Tax West Bengal Entry Tax 0.17 2014-15 Jt.Commisioner Commercial Taxes
0.18 2015-16 Commercial Tax officer
Entry Tax Rajasthan Entry Tax 1.70 2013- 14 to 2014- 15 Appellate Authority
14.73 2005-06 2007-08 to 2012-13 Supreme Court
Entry Tax Jammu & Kashmir Entry Tax 9.69 2008-09 to 2011-12 High Court
Entry Tax Punjab Entry Tax 0.01 Oct 2012 to Dec 2012 High Court
VAT Bihar VAT 0.24 2005-06 Commercial Tax Tribunal
8.33 2011-12 High Court
VAT Haryana VAT 1.15 2011-12 Commercial Tax Tribunal
VAT Kerala VAT 0.01 2006-07 Deputy Commisoner (Appeals)
2.79 2010-11 High Court
0.02 2011-12 Deputy Commissioner (Appeals)
0.32 2012-13 High Court
2.80 2013-14 High Court
2.15 2014-15 High Court
VAT Punjab VAT 0.05 2010-11 Deputy Commissioner (Appeals)
VAT Uttarakhand VAT 0.78 2009- 10 to 2010- 11 Dy. Commissioner of Commercial Taxes
0.03 2007-08 Jt. Commissioner (Appeals)
0.41 2012-13 Jt. Commissioner of Commercial Taxes (Appeals)
VAT West Bengal VAT 4.17 2005062007-08 to 2008-09 Tax Revision Board
0.03 2012-13 Jt. Commissioner of Commercial Taxes (Appeals)
0.02 2014-15 Jt. Commissioner Commercial Taxes
0.13 2015-16 Jt. Commissioner
VAT/Sales Tax Uttar Pradesh VAT/Sales Tax 0.24 2003-04 UP Trade Tax Tribunal
0.93 2004-05 High Court
0.52 2005-06 Jan 08 to March 08 Dy. Commissioner of Commercial Taxes
0.20 2010-11 Addl. Commissioner (Appeals)
2.38 2013-14 Dy. Commissioner of Commercial Taxes
1.83 2014-15 Dy. Commissioner of Commercial Taxes
VAT Chattisgarh VAT 0.02 2011-12 Dy. Commissioner (Appeals)
Finance Act 1994 CENVAT Credit 2.42 01.4.2004 to 31.3.2015 Commissioner CGST & Central Excise
3.21 01.4.2010 to 31.03.2014 Commissioner CGST & Central Excise
1.32 2014-15 CESTAT
Income Tax Act 1961 Income Tax 215.50 2009-10 Income Tax Appellate Tribunal
Income Tax Act 1961 Income Tax 82.60 2010-11 Income Tax Appellate Tribunal
Income Tax Act 1961 Income Tax 0.82 2011-12 Joint Commissioner of Income Tax
*Net of amounts paid ur ider protest.

viii. The company has defaulted in repayment of following dues to the financialinstitution banks and debenture holders during the year which were not paid as atBalance Sheet date.

Name of Lender

Borrowings

Interest

Amount (Rs In Cr.) Period (Maximum days) Amount (Rs In Cr.) Period (Maximum days)
I Loan from Banks
1 Burlington Loan Management DAC 163 842
2 Shubh Holdings Pte Ltd. 5022 1 129
3 Bank of Baroda 1 837 1 120 11 1 097
4 Bank of India 644 1 097 9 1 097
5 Bank of Maharashtra 473 1 049
6 Canara Bank 622 1 006
7 Central Bank of India 258 1 097 3 1 097
8 Corporation Bank 583 1 119 8 1 097
9 Dena Bank 250 784
10 Deutsche Bank 130 842 1 1 015
11 China Development Bank 2248 1 129 128 1 129
12 Industrial and Commercial Bank of Chine 1194 1129 33 1129
13 Export Import Bank of China 2 433 1 129 47 1 129
14 IDBI Bank 721 1 101 9 1 097
15 Indian Overseas Bank 120 1 097 1 1 097
16 RCOM Bond 1 955
17 Oriental Bank of Commerce 189 1 097 2 1 097
18 Punjab National Bank 623 1 098
19 Standard Chartered Bank 1 072 1 086
20 State Bank of India 2 227 1 097 21 1 097
21 Syndicate Bank 705 1 120 5 1 097
22 UCO Bank 681 1 097 9 1 097
23 Union Bank of India 742 1 097 3 1 097
24 United Bank of India 424 1 097 2 1 097
25 Vijaya Bank 16 686
II Debenture
26 Life Insurance Corporation of India 3 750 784
III Other Loans
27 Industrial Finance Corporation of India Limited 200 1 113 4 1 113
28 India Infrastructure Finance Corporation Limited 248 914 4 1 128
29 Asset Care and Reconstruction Enterprises Limited 492 1 108
30 Reliance Capital Limited 1 000 366 3 1 097
31 Neptune Steel Strips Limited 68 92
32 Deep Industrial Finance Limited 260 121
33 Pearl Housing Finance Limited 260 121
34 Shriyam Auto Fin Ltd 260 121
35 Traitrya Construction Finance Limited 260 121
36 Vishvakarma equipment finance Limited 142 121
Total 32 272 303

(Refer Note no 2.20.2 of Financials statements)

Apart from outstanding of Interest mentioned above the Company has not providedInterest Expense of Rs 4212 crore for the year and Rs 11174 crore up to March 31 2020in respect of loans taken from financial institutions banks debenture holders and otherlenders and therefore it has not been disclosed above.

c) Installments amounting to Rs 808 crore payable to Department of Telecommunicationsas on March 31 2020 for spectrum acquired on deferred payment basis has not been paid.(Refer Note 2.02)

ix. During the year the Company has not raised any money by way of initial publicoffer or further public offer (including debt instruments). The Company during the yearhas not taken term loans from banks and financial institutions hence question ofutilization of term loans does not arise.

x. 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.

xi. In our opinion and to the best of our information and according to the explanationgiven to us-

In respect of one managerial person Managerial remuneration has been paid/provided inaccordance with the requisite approval by shareholders as mandated by the provisions ofsection 197 read with schedule V of the Act.

Further in respect of one managerial person of the Company managerial remunerationpaid/provided is in excess of limits prescribed under section 197 read with schedule V ofthe Act. The company has paid/provided total managerial remuneration amounting to Rs 49lakhs to this managerial person which exceeds by Rs 22 lakhs from the limits prescribedunder this Section the Company has disclosed the said excess payment as recoverable fromthe said managerial person and is in the process of obtaining requisite approval fromshareholders in ensuing Annual General Meeting.

xii. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph (xii) of the Order is notapplicable to the Company.

xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections 177 and 188 of the Act where applicable. The details of suchrelated party transactions have been disclosed in the financial statements as required bythe applicable accounting standards.

xiv. According to the information and explanations given to us and based on ourexamination of the records the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year.

xv. According to the information and explanations given to us and based on ourexamination of the records the Company has not entered into non-cash transactions withdirectors or persons connected with him. Accordingly paragraph (xv) of the Order is notapplicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1 934. Accordingly the provisions of Clause (xvi) of the Order are notapplicable to the Company.

For Pathak H.D. & Associates LLP

Chartered Accountants

Firm's Registration No: 107783W/W100593

Parimal Kumar Jha

Partner

Membership No: 124262

July 31 2020 Mumbai

UDIN:20124262AAAADC4008

'Annexure B' to the Independent Auditor's Report - March 31 2020

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 with reference to financial statementsof Reliance Communications Limited ("the Company") as of March 31 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 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.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing as specified underSection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to financial statements was established and maintainedand 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 with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial reporting assessing the risk that a material weakness existsand testing and evaluating the design and operating effectiveness of internal controlbased on the assessed risk. The procedures selected depend on the auditor's judgmentincluding the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion on the Company's internal financial controlssystem with reference to financial statements.

Meaning of Internal Financial controls with reference to financial statements

A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles.

A company's internal financial control with reference to financial statements includesthose policies and procedures that (1) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company;and (3) provide 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 with reference to financialstatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial statements to future periods are subject to the risk that the internal financialcontrol with reference to financial reporting may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Basis of Qualified Opinion

According to the information and explanations given to us and based on our audit thefollowing material weaknesses has been identified in the operating effectiveness of theCompany's internal financial controls over financial statements as at March 31 2020:

i. Balances of Trade Receivables Trade Payables other liabilities and loan &advances are subject to confirmations. (Read with Note no. 2.31).

ii. Statutory dues including Goods and Service Tax/Service Tax/ Value Added Tax / TaxDeducted at Source accounts are not reconciled and during the year there were delays infiling of certain statutory returns with the respective authorities.

iii. The Company's internal control process in respect of closure of outstandingentries in Bank Reconciliation Statements.

iv. The Company's internal financial control with regard to the compliance with theapplicable Indian Accounting Standards and evaluation of carrying values of assets andliabilities and other matters as fully explained in basis for qualified opinion of ourmain report resulting in the Company not providing for adjustments which are required tobe made to the standalone financial statements.

A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial statements such that there is a reasonable possibilitythat a material misstatement of the Company's financial statements will not be preventedor detected on a timely basis.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects / possible effects of the material weaknessesdescribed above under Basis for Qualified Opinion paragraph on the achievement of theobjectives of the control criteria the Company has in all material respects an adequateinternal financial controls system with reference to financial statements and suchinternal financial controls over financial statements were operating effectively as atMarch 31 2020 based on the internal control over financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal financial controls over financial statementsissued by the ICAI.

We have considered material weakness identified and reported above in determining thenature timing and extent of audit tests applied in our audit of the financial statementsof the

Company for the year ended March 31 2020 and these material weaknesses affect ouropinion on the financial statements of the Company for the year ended March 31 2020 [ouraudit report dated July 31 2020 which expressed a qualified opinion on those financialstatements of the Company].

For Pathak H.D. & Associates LLP

Chartered Accountants

Firm's Registration No: 107783W/W100593

Parimal Kumar Jha

Partner

Membership No: 124262

July 31 2020 Mumbai

UDIN:20124262AAAADC4008

.