To The Members of Reliance Communications Limited
Report on the Audit of the Standalone Financial Statements
We have audited the Standalone Financial Statements of Reliance Communications Limited (the Company) which comprise the Balance Sheet as at March 31 2019 and the Statements of Profit and Loss Statements of Changes in Equity and Statements of Cash Flows for the year then ended and notes to the Financial Statements including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report the aforesaid standalone Ind As Financial Statements give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended (Ind AS) and other accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 and its profit (including other comprehensive income) and its cash flows for the year ended on that date. Basis for Qualified Opinion We draw attention to -
A. Note no. - 2.15 and 2.32 of the Financial Statements regarding Assets Held for Sale (AHS) including Spectrum acquired on Deferred Payment Basis being carried at the value determined in Financial Year 2017-18 pursuant to the Definitive Binding Agreement (DBA) dated December 28 2017 & August 11 2018 for monetization of assets of the Company and two of it's subsidiaries namely Reliance Infratel Ltd (RITL) & Reliance Telecom Ltd. (RTL) with Reliance Jio Infocomm Ltd. As the said agreement has been terminated on mutual consent on March 18 2019 and the Company and RTL have defaulted in payment of spectrum instalments due to Department of Telecom (DOT) the ultimate realisability of AHS is presently not ascertainable. Non determination of fair value on the reporting date is not in compliance with Ind AS 105 Non Current Assets Held for Sale and Discontinued Operations. Accordingly we are unable to comment on the consequential impact if any on the Financial Statements.
B. Note no. - 2.49 of the Financial Statements regarding commencement of Corporate Insolvency Resolution Process (CIRP) and various claims submitted by Operational/ Financial/ Other creditors and employees and pending reconciliation and determination of final obligation during Corporate Insolvency Resolution (CIR) Process the Company has not provided interest on borrowings amounting to Rs. 3907 crore for the current Financial Year (FY) & Rs. 3055 crore for the previous FY as per the terms of the borrowings. Also the Company has not provided foreign exchange losses amounting to Rs. 803 crore for the current FY resulting in under statement of loss by the said amounts. Had such interest and foreign exchange losses as mentioned above been provided the reported loss for the year ended March 31 2019 & March 31 2018 would have been Rs. 1863 crore & Rs. 12925 crore respectively and total equity of the Company would have been Rs. 4621 crore and Rs. 6261 crore respectively. Non provision of Bank interest is not in compliance with Ind AS 23 Borrowing Costs and non recognition of foreign exchange losses is not in compliance with Ind AS 21 The Effects of Changes in Foreign Exchange Rates.
C. Note no. 2.15 and 2.32 of the Financial Statements regarding the pending impairment review by the Company of it's tangible & intangible assets including capital work in progress investments and other financial and non financial assets as at March 31 2019 hence no provision in the books of account has been made by the Company. In the absence of assessment of impairment/provisions by the Company we are unable to comment on the recoverable amount with regard to said items.
Material Uncertainty Relating to Going Concern
We draw attention to Note no. - 2.32 of the Financial Statements regarding termination of definitive binding agreement for monetization of assets of the Company and two of it's subsidiaries namely RTL & RITL and National Company Law Appellate Tribunal (NCLAT) order dated April 30 2019 vacating it's order dated May 30 2018 regarding staying National Company Law Tribunal (NCLT) order dated May 15 2018 admitting the Company under IBC 2016. The Company has accumulated losses also the Company's current liabilities exceeded its current assets its wireless operations has been suspended and there is considerable decline in the level of wire line operations. Further the Company has defaulted in repayment of it's borrowings instalment dues related to Spectrum and payment of statutory dues.
These events raise significant doubt on the ability of the Company to continue as a Going Concern. These events or conditions along with other matters indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of most significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
For each matter below our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the Standalone Financial Statements section of our report including in relation to these matters. Accordingly our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Financial Statements. The results of our audit procedures including the procedures performed to address the matters below provide the basis for our audit opinion on the accompanying standalone Financial 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 revenue mainly consists of income from fixed line broadband rentals and installations. Wholesale revenue comprises revenue from interconnection external administration capacity sales and from resellers. We considered revenue recognition as a key audit matter as the amount involved is material to the Financial Statements and due to the complexity of the systems and processes used to record revenue. The accounting policy and relevant disclosures relating to revenue are set out in notes 1.15 and 2.26 respectively to the Financial Statements.
Our audit procedures included amongst others the following:
Testing the end-to-end reconciliation from business support systems to billing and to the general ledger;
Performing tests on the accuracy of customer bill generation process on a sample basis and testing of a sample of the credits and discounts applied to such customer bills;
Performed substantive analytical procedures over the significant revenue streams.
Involving verification of controls surrounding revenue invoicing;
Assessed transactions taking place before and after year-end to ensure that revenue was recognised in the appropriate period;
Performing specific procedures to test the accuracy and completeness of adjustments and performing procedures to ensure that the revenue recognition criteria adopted by the Company is in line with the Company's accounting policies.
2. Valuation and disclosure of accrual estimates for legal claims litigations regulatory matters and contingencies and deposits against the same legal matters.
The Company is involved as a party in legal proceedings including regulatory and other governmental proceedings. The Company has also deposited substantial amounts with regulatory authorities against the demands in dispute which has been classified as deposit.
This area is significant to our audit since the accounting and disclosure for (contingent) legal liabilities is complex and judgmental (due to the difficulty in predicting the outcome of the matter and estimating the potential impact if the outcome is unfavourable) and the amounts Involved are or can be material to the Financial Statements as a whole. Further reference is made to note 2.37 Contingent liabilities.
Our audit procedures included amongst others testing the effectiveness of the Company's internal controls around the identification and evaluation of claims proceedings and investigations at different levels in the group and the recording and continuous re-assessment of the related (contingent) liabilities and provisions and disclosures.
We inquired with both internal legal staff as well as with the Company's Financial staff in respect of ongoing investigations or claims proceedings and investigations inspected relevant correspondence inspected the minutes of the meetings of the Audit Committee and requested a confirmation from the group's in-house responsible officials. Also the Company has obtained legal opinions in past against these disputes. For claims settled during the year we vouched the payments as appropriate and read the related orders to verify whether the settlements were properly accounted for.
We also assessed the adequacy of the Company's disclosure around legal claims litigations regulatory matters and contingencies as included in note 2.37 Contingent liabilities.
We consider management's conclusion on the predicted outcome and estimation of potential impact reasonable and we assessed that the disclosures in note 2.37 Contingent liabilities are reasonable.
Information Other than the Standalone Financial Statements and Auditor's Report Thereon The Company's Board of Directors is responsible for the preparation of other information. The other information comprises the information included in Board's Report including Annexures to Board's Report but does not include the standalone Financial Statements and our auditor's report thereon. Our opinion on the standalone Financial Statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Financial Statements our responsibility is to read the other information identified above and in doing so consider whether the other information is materially inconsistent with the standalone Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. When we read the report containing other information if we conclude that there is a material misstatement therein we are required to communicate the matter to those charged with governance. We have nothing to report in this regard.
Responsibility of Management and Those Charged with Governance for the Standalone Financial Statements The Hon'ble National Company Law Tribunal Mumbai bench (NCLT) admitted an insolvency and bankruptcy petition filed by an operational creditor against Reliance Communications Limited (the Company) vide its order dated May 17 2018 and appointed Mr. Pardeep Kumar Sethi to act as Interim Resolution Professional (IRP) with direction to initiate appropriate action contemplated with extant provisions of the Insolvency and Bankruptcy Code 2016 and other related rules. However the National Company Law Appellate Tribunal (NCLAT) by an order dated May 30 2018 stayed the order passed by NCLT. Subsequently by order dated April 30 2019 the NCLAT allowed stay on Corporate Insolvency Resolution (CIR) process to be vacated and directed the NCLT to pass necessary orders on May 7 2019. On the basis of the orders of the NCLAT Mr. Pardeep Kumar Sethi in his capacity as IRP has taken control and custody of the management and operations of the Company from May 02 2019.
The Company's Management is responsible for the matters stated in section 134(5) of the Companies Act 2013 (the Act) with respect to the preparation of these standalone Financial Statements that give a true and fair view of the financial position Financial performance (changes in equity) and cash flows of the Company in accordance with the accounting principles generally accepted in India including the accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal Financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the Financial Statements that give a true and fair view and are free from material misstatement whether due to fraud or error.
In preparing the Financial Statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The Management/IRP are also responsible for overseeing the Company's Financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatement can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Financial Statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design 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 whether the company has adequate internal Financial controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the 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's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the Financial Statements including the disclosures and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone Financial Statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Financial Statements. We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a Statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be 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 of the Companies Act 2013 we give in the Annexure A a Statement on the matters 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) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b) except for the possible effects of the matters described in the Basis of Qualified opinion paragraph above in our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books
(c) The Balance Sheet the Statement of Profit and Loss and the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone Financial Statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended except requirement of Ind AS 105 on Non Current Assets Held for Sale and Discontinued Operations Ind AS 23 on Borrowing Cost and Ind AS 21 on Effects of Changes in foreign exchanges Ind AS 36 on Impairment of Assets Ind AS 37 on Provisions Contingent Liabilities and Contingent Asssets with regard to matters described in the Basis of Qualified Opinion paragraph above.
(e) The matters described under the basis for qualified opinion paragraph and Material Uncertainty Related to Going Concern paragraph above in our opinion may have an adverse effect on functioning of the Company and on the amounts disclosed in Standalone Ind AS Financial Statements of the Company;
(f) On the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors and based on legal opinion obtained by the Company with regard to non payment of debenture holder's due (Refer Note No. 2.52) none of the directors is disqualified as on 31st March 2019 from being appointed as a director in terms of Section 164 (2) of the Act.
(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure B.
(h) With respect to the other matters to be included in the Auditor's Report in accordance 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 explanations given to us the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
(i) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and 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 Financial position in its Financial Statements - Refer Note No. 2.37 to the Financial Statements;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses; and
iii There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.
For Pathak H.D. & Associates
Firm's Registration No:107783W
Parimal Kumar Jha
May 27 2019
`Annexure A' to the Independent Auditor's Report - 31 March 2019
With reference to the Annexure A referred to in the Independent Auditors' Report to the Members of Reliance Communications Limited (`the Company') on the standalone Ind AS Financial Statements for the year ended 31 March 2019 we report the following:
i. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) We are informed that the Company physically verifies its assets over a three year period. In our opinion this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this policy the Company has physically verified certain fixed assets during the year and no material discrepancies were identified on such physical verification.
(c) According to the information and explanations given to us the title deeds of immovable properties as disclosed in Note 2.01 to the standalone Ind AS Financial Statements are held in the name of the Company except for the following where the Company is in the process of transferring the title deeds in it's name as these were acquired through various schemes of arrangement entered in the earlier years:
|No of cases||18||4|
|Gross block as at 31 March 2019 (Rs. in crores)||3||4|
|Net block as at 31 March 2019 (Rs. in crores)||3||3|
ii. The inventory has been physically verified by the management during the year. In our opinion the frequency of such verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been dealt with in books of account.
iii. The Company has not granted any loans secured or unsecured to companies firms Limited liability Partnerships or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraph (iii) of the Order is not applicable to the Company.
iv. The Company has not granted any loans or provided any guarantees or security to the parties covered under Section 185 of the Act. The Company has complied with the applicable provisions of Section 186 of the Act.
v. In our opinion and according to the information and explanations given to us the Company has not accepted any deposits from the public in accordance with relevant provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under. Accordingly paragraph (v) of the Order is not applicable to the Company.
vi. We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under sub-section 1 of Section 148 of the Act in respect of telecommunication activities and are of the opinion that prima facie the prescribed accounts and records have been made and 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 of our examination of the records of the Company we observed that there are delays in amounts deposited with appropriate authorities for amounts deducted/accrued in the books of account in respect of undisputed statutory dues including provident fund income tax service tax goods and services tax duty of customs sales tax value added tax (VAT) entry tax employees' state insurance cess and other material statutory dues. As explained 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 payable in respect of provident fund income tax goods and services tax sales tax value added tax employees' state insurance and other material statutory dues which were in arrears as at 31 March 2019 for a period of more than six months from the date they became payable are as under:
|Name of Statute||Nature of Dues||Amount (Rs. In Crore)||Period to which the amount relates||Due Date||Date of Payment|
|Maharastra 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||FY 2017-18||Various Dates||Unpaid|
|Orissa Value Added Tax Act 2004||Value Added Tax Payable||0.00||FY 2017-18||Various Dates||Unpaid|
|Gujarat Value Added Tax Act 2003||Value Added Tax Payable||0.41||FY 2017-18||Various Dates||Unpaid|
|Maharastra Value Added Tax Act 2002||Works Contract Tax Payable||ight>0.01||FY 2017-18||Various Dates||Unpaid|
|Rajasthan Value Added Tax Act 2003||Works Contract Tax Payable||0.03||FY 2017-18||Various Dates||Unpaid|
|Income Tax Act 1961||Tax Deducted at source||59.79||FY 2017-18 &||Various Dates||Unpaid|
(b) According to the information and explanations given to us there are no dues of cess which have not been deposited on account of any dispute. The dues of income tax duty of customs service tax sales tax value added tax and entry tax as disclosed below have not been deposited by the Company on account of disputes:
|Name of Statue||Nature of Dues||Amount*||Period||Forum|
|(Rs. In Crore)|
|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. Commisoner (Appeals)|
|0.02||Oct `06 to March `09||Sales Tax Appellate Tribunal|
|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. Commisioner of Commercial Taxes|
|1.25||2014-15||Dy. Commisioner 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. Commisioner of Commercial Taxes (Appeals)|
|Central Sales Tax West Bengal||Central Sales Tax||0.34||2007-08||Tax Revision Board Jt.Commisioner|
|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||2011-11 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. Commisoner (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. Commisioner of Commercial Taxes|
|0.02||2014-15||Dy. Commisioner of Commercial Taxes|
|Entry Tax West Bengal||Entry Tax||0.17||2014-15||Jt.Commisioner Commercial Taxes|
|0.18||2015-16||Commercial Tax officer|
|1.70||2013-14 to 2014-15||Appellate Authority|
|Entry Tax Rajasthan ||Entry Tax ||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|
|VAT Haryana||VAT||1.15||2011-12||Commercial Tax Tribunal|
|VAT Kerala||VAT||0.01||2006-07||Deputy Commisoner (Appeals)|
|0.02||2011-12||Deputy Commisoner (Appeals)|
|VAT Punjab||VAT||0.05||2010-11||Deputy Commisoner (Appeals)|
|VAT Uttarakhand||VAT||0.78||2009-10 to 2010-11||Dy. Commissoner of Commercial|
|0.03||2007-08||Jt. Commisioner (Appeals)|
|0.41||2012-13||Jt. Commissioner of Commercial Taxes (Appeals)|
|VAT West Bengal||VAT||4.17||2005- 062007-08 to 2008-09||Tax Revision Board|
|0.03||2012-13||Jt. Commissioner of Commercial Taxes (Appeals)|
|0.02||2014-15||Jt. Commissioner Commercial Taxes|
|VAT/Sales Tax Uttar Pradesh||VAT/Sales Tax||0.24||2003-04||UP Trade Tax Tribunal|
|0.52||2005-06 Jan 08 to March 08||Dy. Commissioner of Commercial Taxes|
|0.20||2010-11||Addl. Commisoner (Appeals)|
|2.38||2013-14||Dy. Commissioner of Commercial Taxes|
|1.83||2014-15||Dy. Commisioner of Commercial Taxes|
|VAT Chattisgarh||VAT||0.02||2011-12||Dy. Commisooner (Appeals)|
|Finance Act 1994||CENVAT Credit||2.42||01.4.2004 to 31.3.2015||Commisoner CGST & Central Excise|
|3.21||01.4.2010 to 31.03.2014||Commisoner CGST & Central Excise|
|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||1.34||2011-12||Joint Commissioner of Income Tax|
*Net of amounts paid under protest.
viii. (a) The Company has defaulted in repayment of following dues to the financial institution banks and debentures which were paid on or before the Balance Sheet date
|Name of Lender ||During the year ended March 31 2019|
|(Rs. In Crore)||(Maximum days)|
|I Loan from Banks|
|Oriental Bank of Commerce||9||99|
|Punjab National Bank||114||89|
|State Bank of India||159||329|
(b) The Company has defaulted in repayment of following dues to the financials institution banks and debenture holders during the year which were not paid as at Balance Sheet date.
|Name of Lender||Borrowings||Interest|
|(Rs. In Crore)||(Maximum days)||(Rs. In Crore)||(Maximum days)|
|I Loan from Banks|
|Bank of America||359||476||-||-|
|Bank of Baroda||1022||754||11||731|
|Bank of India||308||731||9||731|
|Bank of Maharashtra||473||683||-||-|
|Central Bank of India||123||731||3||731|
|China Development Bank||4457||763||128||763|
|Industrial and Commercial Bank of China||1194||763||33||763|
|Export Import Bank of China||1779||763||47||763|
|Indian Overeseas Bank||57||731||1||731|
|Oriental Bank of Commerce||90||731||2||731|
|Punjab National Bank||618||732||-||-|
|Standard Chartered Bank||1072||720||-||-|
|State Bank of India||1507||731||21||731|
|Union Bank of India||610||731||3||731|
|United Bank of India||424||731||2||731|
|Life Insurance Corporation of India||3750||418||-||-|
|III. Other Loans|
|Assets Care and Reconstruction Enterprises Limited||492||742||-||-|
|Industrial Finance Corporation of India Limited||200||747||4||747|
|India Infrastructure Finance Corporation Limited||9||548||4||762|
|Reliance Capital Limited||-||-||3||731|
|Reliance Communications Enterprises Private Limited||-||-||54||731|
|Reliance Cleangen Limited||-||-||14||731|
Apart from above outstanding on interest the Company has not provided interest expenses of Rs. 3907 crore and Rs. 3055 crore for the year ended March 31 2019 and March 31 2018 respectively and therefore it has not been disclosed above.
(c) Installment amounting to Rs. 281 crore payable to Department of Telecommunications on 25th March2019 for spectrum acquired on deferred payment basis has not been paid. (Refer Note2.02)
ix. During the year the Company has not raised any money by way of initial public offer or further public offer (including debt instruments). The Company during the year has not taken term loans from banks and financial institutions hence question of utilisation of term loans does not arise.
x. According to the information and explanations given to us no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.
xi. In our opinion and according to the information and explanations given to us managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us the Company is not a nidhi company. Accordingly paragraph (xii) of the Order is not applicable to the Company.
xiii. According to the information and explanations given to us and based on our examination of the records of the Company transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable. The details of such related party transactions have been disclosed in the standalone Ind AS financial statements as required by the applicable accounting standards.
xiv. According to the information and explanations given to us and based on our examination of the records the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.
xv. According to the information and explanations given to us and based on our examination of the records the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly paragraph (xv) of the Order is not applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934. Accordingly the provisions of Clause (xvi) of the Order are not applicable to the Company.
For Pathak H.D. & Associates
Firm's Registration No:107783W
Parimal Kumar Jha
May 27 2019
`Annexure B' to the Independent Auditor's Report - 31 March 2019
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (the Act).
We have audited the internal financial controls over financial reporting of Reliance Communications Limited (the Company) as of 31 March 2019 in conjunction with our audit of the standalone Ind AS 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 internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) and the Standards on Auditing issued by ICAI and deemed to be prescribed under Section 143 (10) of the Act to the extent applicable to an audit of internal financial controls both applicable to an audit of Internal Financial Controls and both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the standalone Ind AS financial statements whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company'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 financial reporting including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
According to the information and explanations given to us and based on our audit the following material weaknesses have been identified in the operating effectiveness of the Company's internal financial controls over financial reporting as at March 31 2019:
i. Balances of trade receivable trade payables other liabilities certain bank balances and loan & advances are subject to confirmation. (Refer Note No. 2.32).
ii. Statutory dues (Goods and Service Tax / Value Added Tax / Tax Deducted at Source) accounts are in the process of reconciliation and there are delays in filing of certain statutory returns with the respective authorities. Company needs to strengthen internal control system in this regard.
iii. The Company's internal control process needs to be strengthened in respect of closure of outstanding entries in Bank Reconciliation Statements.
A `material weakness' is a deficiency or a combination of deficiencies in internal financial control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In our opinion except for the effects / possible effects of the material weaknesses described above under Qualified Opinion paragraph on the achievement of the objectives of the control criteria the Company has in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31 2019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.
We have considered material weakness identified and reported above in determining the nature timing and extent of audit tests applied in our audit of the March 31 2019 Ind AS financial statements of the Company and these material weaknesses affect our opinion on Ind AS financial statements of the Company for the year ended March 31 2019 [our audit report dated May 27 2019 which expressed a qualified opinion on those Ind AS financial statements of the Company].
For Pathak H.D. & Associates
Firm's Registration No:107783W
Parimal Kumar Jha
May 27 2019