To the Members of Richa Industries Limited
Report on the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of Richa IndustriesLimited ("the Company") which comprise the Balance Sheet as at 31 March 2018the Statements of Profit and Loss the Cash Flow Statement and the Statement of Changes inEquity for the year the ended and a summary of the significant accounting policies andother explanatory information [hereinafter referred to as "standalone financialstatements".
Management's Responsibility for the Standalone Financial Statements
2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the state ofaffairs (financial position) Profit or loss ( financial performance) cash flows andchanges in equity of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards ("Ind AS")specified under Section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgements and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements the give a true andfair view and are free from material misstatement whether due to fraud and error. Inpreparing the financial statements management is responsible for assessing the Company'sability to continue as a going concern disclosing as applicable matters related togoing concern and using the going concern basis of accounting unless management eitherintends to liquidate the Company or cease operations or has no realistic alternative butto do so.
3.Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
4. We have taken into account the provision of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
5. We conducted our audit in accordance with the Standards on Auditing specifiedrequire under Section 143(10) of the Act. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether these standalone financial statements are free from material misstatement.
6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the standalone financial statements. The procedures selected dependon the auditor's judgement including the assessments of the risks of materialmisstatement of the financial statements whether due to fraud or error. In making thoserisk assessments the auditor considers internal financial controls relevant to theCompany's preparation of the financial statements that give a true and fair view in orderto design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the standalone financial statements.
7.We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on these standalone financial statements.
8. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India [however it does not comply to the IndAs requirements as specified under Section 133 of the Act] of the state of affairs(financial position) of the company as at 31 March 2018 and its profit (financialperformance) its cash flows and the changes in equity for the year ended on that date.
Report on Other Legal and Regulatory Requirements
9. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of Section 143(11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
Further to our comments in "Annexure A" as required by Section 143(3) of theAct and comments / exceptions / disclaimers provided in significant accounting policiesand notes to accounts which should be read along with this report we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
b. In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of these books however it does notcomply to the Ind As requirements as specified under Section 133 of the Act;
c. The standalone financial statements dealt with by this report are in agreement withthe books of account;
d. In our opinion the aforesaid standalone financial statements do not comply with IndAS specified under Section 133 of the Act;
e. On the basis of the written representations received from the directors and takenon record by the Board of Directors none of the directors is disqualified as on 31 March2018 from being appointed as director in terms of Section 164(2) of the Act.
f. 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".
g. with respect to the other matter to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) inour opinion and to the best of our information and according to the explanation given tous:
i the company has disclosed the impact of pending litigation on its financial positionin the standalone financial statements.
ii the company has made provision as required under the applicable law for materialforeseeable losses if any on long-term contracts including derivative contracts (ifany);
iii there were no delay in transferring amounts which were required to be transferredto the Investor Education and Protection Fund by the Company.
iv the disclosure requirements relating to holding as well as dealing inspecified bank notes were applicable for the period from 8 November 2016 to 30 December2016 which are not relevant to these standalone financial statements. Hence reportingunder this clause is not applicable.
ANNEXURE-A' TO INDEPENDENT AUDITOR'S REPORT
Referred to paragraph 9 of the Independent Auditor's Report of even date to the membersof Richa Industries Limited on the standalone financial statement as of and for the yearended March 31 2018.
(i) [a] The Company has maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
[b] As per information and explanation given to us the Company has a regular programof physical verification of its fixed assets under which fixed assets are verified by theManagement in a phased manner over a period of three years which in our opinion isreasonable having regard to the size of Company and the nature of assets. In accordancewith this program certain fixed assets were verified during the year and no materialdiscrepancies were noticed on such verification. However no such verification has beenundertaken by us. The information and explanation given by the management is relied upon.
[c] The title deeds of the immoveable properties are held in the name of the Companybut the beneficiary interest lies with the bankers / lenders with whom the same aremortgaged as security.
(ii) The inventory including stocks with certain third parties has been physicallyverified by the Management during the year. In our opinion the frequency of verificationis reasonable. The discrepancies noticed on physical verification of inventory as comparedto book records were not material and have been appropriately dealt with in the books ofaccounts. However no physical verification of stocks has been undertaken by us due totechnical inability and lying of stocks on multiple locations. Further the valuation ofthe stocks is undertaken by the Management at its own which has been accepted as suchwithout further verification. Any variation may affect the financial position andfinancial performance to the extent.
(iii) The Company has granted interest free unsecured loans to companies covered in theregister maintained under Section 189 of the Act; and with respect the same:
(a) the unsecured loan has been given without specifying any terms and conditions andhence further comments can't be given
(b) the schedule of repayment of principal and payment of interest has not beenspecified hence further comments can't be given.
(c) No comment can be given due to the para (iii)(c) above.
Further the Company has not granted any secured loans to Companies firms LimitedLiability Partnerships or other parties covered in the register maintained under Section189 of the Companies Act 2013. Hence the clauses (a) (b) and (c) of Para 3(iii) of theorder are not applicable.
(iv)The Company granted interest free unsecured loans to Companies covered in theregister maintained under Section 189 of the Act; and the provisions of Sec 185 and Sec186 of the Companies Act 2013 have been complied with.
Further the Company has not made investments given guarantees or any other securityduring the year under consideration. Hence the Para 3(iv) of the order is not applicable.
(v)The Company has not accepted any Deposits from the public within the meaning ofSections 73 and 74 of the Act and the rules framed there under to the extent notified.Hence the Para 3(v) of the order is not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where pursuant to the rules made by the Central Government of India themaintenance of cost records has been specified under sub-section (1) of Section 148 of theAct. And are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We have not however made a detailed examination of the recordswith a view to determine whether they are accurate or complete.
(vii) [a] According to the information and examination provided to us and records ofthe Company examined by us in our opinion the Company is not regular in depositing theundisputed statutory dues of income tax sales tax / value added tax with the appropriateauthorities. The outstanding statutory dues as on the last day of the financial yearconcerned from the date they become payable are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs) ||Period to which the amount relates |
|Income Tax Act1961 and rules made thereunder ||TDS Payable U/s 192194C 194I 194J and TCS on scarp sold ||10439383.42 ||01-04-2017 to 31-03-2018 |
|Uttrakhand Sales Tax ||Uttrakhand Sales Tax ||1437619.90 ||01-04-2017 to 30-06-2017 |
Note : the amount stated above is gross payable amount without any interest on latedeposit of TDS. No provision for interest payable on late deposit of TDS is made as on31-March-2018.
[b] According to the information and explanations given to us and the records of theCompany examined by us the particulars of dues of income tax or sales tax or servicetax or duty of customs or duty or duty of excise or value added tax as at 31st March 2018which have not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs) ||Period to which the amount relates ||Forum where the dispute is pending |
|Income Tax Act 1961 and rules made there under ||Income Tax and other dues u/s 143(3) and 271(1)(C) ||571530.00 ||AY 2014-15 ||CIT (A) Faridabad |
| || ||2216086.00 ||AY 2008-09 ||Punjab & Haryana High Court Chandigarh |
| || ||2656796.00 ||AY 2009-10 ||ITAT New Delhi |
| || ||861515.00 ||AY 2005-06 ||ITAT New Delhi |
|Finance Act 1994 (Service Tax) and rules made there under ||Under Sec 77 78 and Rule 15(3) ||13201385.00 ||FY 2008-12 ||CESTAT New Delhi |
|Punjab Sales Tax ||Dispute of taxation on material seized on Shambu Check Post at Punjab Border ||187500.00 ||2016-17 ||Appellate Authority Patiala Punjab |
Further the company has not reversed the Input Credit on invoices issued by suppliersto whom the payment has not been made in 6 months from the date of issuance. Hence theCompany has availed input credit to the extent of such reversal and violated theprovisions of GST Act and rules / regulations made thereunder.
(viii) According to the records of the Company examined by us and the information andexplanations given to us the Company has defaulted in repayment of loans or borrowingfrom bank the details are as under
|Particulars ||Amount of default as at the Balance Sheet Date Rs ||Period of delay ||Remarks if any |
|Indian Overseas Bank || || || |
|Term Loan ||31061458.00 ||Since Jan 2018 ||Non-payment of Interest and installment |
|Working Capital Loan || || ||Due to non-payment of interest and non-adjustment of overdrafts. |
|Textiles-Division ||67309145.54 ||Since Oct 2017 || |
|PEB-Division ||338781505.55 ||Since Dec 2017 ||Due to non-adjustment of interchangeability of Fund Based to Non Fund Based of Rs 23.00 Crore and balance of devolvement of Letter of Credit and interest on the WCL including above |
|Corporation Bank || || || |
|Working Capital Loan ||177135986.35 ||Since Dec 2017 ||Due to non-payment of adhoc WCL of Rs 3.00 Crore and balance of devolvement of Letter of Credit and interest on the WCL including above |
|Term Loan ||692692.00 ||Since Jan-2018 ||Non-payment of Interest and |
| || || ||instalment |
Both of the above banks has classified the funding facilities as on 31-March-2018 assub-standard and declared the account to be Non-Performing Asset (NPA).
Further the default in case of other lenders is as follows:
|Particulars ||Amount of default as at the Balance Sheet Date Rs ||Period of delay ||Remarks if any |
|Reliance Commercial Finance Ltd || || || |
|Working Capital Demand Loan ||2733069.00 ||Since Oct 2017 ||Non Repayment of interest and installment |
|Jainsons Finlease Limited || || || |
|Term Loan ||6885995.00 ||Since Dec 2017 ||Non-payment of Interest |
During the year under consideration the Company has issued debentures the default ofinterest payable as on 31-03-2018 is as follows:
|Particulars ||Amount of default as at the Balance Sheet Date Rs ||Period of delay ||Remarks if any |
|AAVSARL(Luxembourg) through its Indian Custodian Deutsche Bank AG Mumbai Branch || || || |
|NCD ||5444753.00 ||Since Dec 2017 ||Non-payment of Interest |
The Company has not availed any financial facilities from any financial institutionduring the year under consideration.
(ix) a) The Company has raised money by way of debt instruments namely Non-ConvertibleDebentures during the year under consideration and has been applied for the purpose forwhich those were raised. The Company has defaulted in interest / other payment ofRs.5444753.00on the same since dec-2017. Further the Company has not made any debenturesredemption reserve as per the provisions of law / rules for the time being in forceduring the year under consideration.
b) The Company has raised money by term loans (from banks) during the year under reviewand the funds raised are applied for the purpose for which those were raised. The Companyhas defaulted in interest payment of Rs.2978152.00 on the same since February 2018.
c) The Company has not raised any money by way of initial public offer or furtherpublic offer. Hence the Para 3(ix) of the order is not applicable to the extent.
(x) During the course of our examination of the books and records of the Companycarried on in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstances of material fraud on or by the Company or by its officers or employees or hasbeen noticed or reported during the year nor have we been informed of any such case bythe Management.
(xi)The Company has paid managerial remuneration during the year under considerationand is in accordance with the requisite approvals mandated by the provisions of Section197 read with the Schedule V of the Companies Act 2013.
(xii) As the Company is not a Nidhi Company and the Nidhi Rules 2014 are notapplicable to it the provisions of Clause 3(xii) of the order are not applicable to theCompany.
(xiii) The Company has entered into transaction with the related parties in Compliancewith the provisions of Section 177 and 188 of the Act. The details of such related partytransaction have been disclosed in the financial statements as required under AccountingStandard (AS) 18 Related Party Disclosures specified under Section 133 of the Act readwith Rule 7 of the Companies (Accounts) Rules 2014.
(xiv)The Company has not made any preferential allotment during the year under reviewaccordingly the provisions of Clause 3(xiv) of the Order are not applicable to theCompany.
(xv) The Company has not entered into any non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934 Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.
ANNEXURE - B' TO INDEPENDENT AUDITOR'S REPORT 31-March-2018 on the StandaloneFinancial Statements (referred in our audit report of even date and subject to comments innotes to accounts and summery of accounting policies)
Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section143 of the Companies Act 2013 (the Act')
We have audited the internal financial controls over financial reporting of RichaIndustries Limited (the Company') as of 31 March 2018 in conjunction with our auditof the standalone financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin Guidance Note on Audit of Internal Financial Controls over Financial Reporting issuedby 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 of the Company's policies the safeguarding of its assetsthe prevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the Guidance Note') and the Standards on Auditing issued by ICAI and deemed to beprescribed under Section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both 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 over financial reporting were established and the maintained and ifsuch controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial control system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgment including the assessment of the risk ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over the financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of the financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control over thefinancial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transaction and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorizations of the 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 Control Over Financial Reporting
Because of the inherent limitation of internal financial control over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of change the conditions or thatthe degree of compliance with the policies or procedure may deteriorate.
In our opinion and subject to
(i) the notes to accounts and summery of significant accounting policies;
(ii) and non- appointment of any of the internal auditor as mandated by the CompaniesAct 2013the Company hasin all material respects an adequate internal financialcontrols system over financial reporting and such internal financial control overfinancial reporting were operating effectively as at 31 March 2018 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Control Over Financial Reporting issued by the Institute Chartered Accountantsof India.