To the members of
THE RUBY MILLS LIMITED
Report on the audit of the Financial Statements
We have audited the accompanying financial statements of The Ruby Mills Limited (the Company) which comprise the balance sheet as at 31st March 2019 the statement of Profit and Loss (including Other comprehensive Income) statement of changes in equity and statement 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 the aforesaid financial statements give the information required by the Companies Act 2013 (the Act) in the manner so required and 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 the accounting principles generally accepted in India of the state of affairs of the Company (financial position) as at 31st March 2019 the profit and total Comprehensive Income (financial performance) changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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.
|Sr. Key Audit Matters No.||How the matter was addressed in our audit|
|1 IT Systems and controls|
|The Company uses different IT systems for different functions. These systems are not very user-friendly are not fully integrated and require manual intervention to determine the final figures for financial reporting.||Audit procedures followed by us include:|
|We identified IT system as a KAM since:||- Assessment of the design and implementation of the Company's control over the IT system especially those related to financial reporting;|
|- In audit plan we put significant reliance on the||- Testing / walk through of manual control implemented by the management to overcome the weakness in the IT system;|
|IT system which impacts account balances reflected in the Financial statements (FS) of the Company.||- Assessment of management's remedial plan in form of manual control to address our concern;|
|- Management's remedial plan in form of manual intervention is prone to risk of misstatement on account of complexity of the business functions.||- Extending scope of our substantive audit procedures wherever manual controls were used to integrate the various IT systems which affect financial reporting.|
|2 Development agreement|
|In an earlier year the Company entered into||Audit procedures followed by us include:|
|Development Agreement (the DA) with a Developer whereby the Company granted the development rights to develop approximate 36000 square meters of constructed area (the Development Rights) on 12204 square meters out of its Freehold Land At Dadar. We identified DA as a KAM since:||- Understanding of the arrangement entered for the Development of the property;|
|- Understanding of various terms of the DA and amendments thereto;|
|- As per the DA cost of construction incurred by the Company for the development of property covered under the DA agreement is reimbursed by the Developer. The Company has incurred huge amount of expenses / taken loan for the Construction of the property which has resulted in the significant amount receivable from the Developer;||- Co-relation of terms of the agreement with the entries made in the books of accounts by the Company for accounting of Income and amounts receivable from the Developer;|
|- Review of procedures followed / steps taken by the Company / Developer for obtaining approval from the authorities;|
|- Review of legal opinion taken by the Company and decision taken on that basis for any dispute arises on account of DA;|
|- The amount receivable from the developer represents a major portion of the total assets of the Company;||- Obtaining of balance confirmation from the Developer at each period end / year end;|
|- Recoverability of the said amount depends on obtaining of the various approval from competent authorities timeline of which are not within the control of the Company / Developer.||- Assessment of recoverability of outstanding amount from developer on the basis of:|
| valuation report obtained by the Company for the vacant property covered by the DA; and|
|Refer Note No. 10 and 18 to the accompanying financial statements.|| Sharing arrangement entered between the Company and the Developer in the DA for sharing of gross revenue arises from the property covered under DA.|
|3 Evaluation of uncertain tax and other litigations|
|The Company has various pending litigations which include litigation on account of Income Tax Indirect Taxes development activities FEMA etc. the outcome of which is uncertain and requires significant judgement.||Audit procedures followed by us include:|
|- Obtained details of various pending litigations and outstanding demands for the year ended March 31 2019 from management;|
|Refer Note No. 31 and 50(a) to the accompanying financial statements.||- Read and analysed orders key correspondence external legal opinions/ consultation by management for key legal disputes;|
|- Discussed with appropriate senior management and evaluate management's underlying key assumptions in estimating the likely demand/ possible outcome of the various litigations.|
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's management and Board of Directors are responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis Director's Report including Annexures to Director's Report Corporate Governance Report but does not include the financial statements and our auditor's report thereon. The Management Discussion and Analysis Director's Report including Annexures to Director's Report and Corporate Governance Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the 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 financial statements our responsibility is to read the other information identified above when it becomes available and in doing so consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we conclude that there is a material misstatement therein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act 2013 (the Act) with respect to the preparation of these financial statements that give a true and fair view of the financial position financial performance 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 and Board of Directors are 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 Board of Directors either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
Those Board of Directors 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. Misstatements 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 scepticism 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 with reference to financial statements 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.
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.
Report on Other Legal and Regulatory Requirements
1. As required by Section 197(16) of the Act we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under Section 197 read with Schedule V to the Act.
2. 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 statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
3. 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) 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 Cash Flow Statement dealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors 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.
(f) With respect to the adequacy of the internal financial controls system with reference to financial statements of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure B. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to financial statements.
(g) 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 50(a) 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 as required under the applicable law or accounting standards.
iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.
For C N K & Associates LLP
ICAI FRN. 101961W/W-100036
Membership No.: 37391
Date: 30th May 2019
ANNEXURE A TO INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' in the Independent Auditor's Report of even date to the members of The Ruby Mills Limited (the Company) on the financial statements for the year ended 31st March 2019]
(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of property plant and equipment;
(b) The fixed assets have been physically verified by the management according to a phased programme designed to cover all the fixed assets over a period of three years which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. Pursuant to the programme fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.
(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company we report that the title deeds of immovable properties which are freehold are held in the name of the Company as at the balance sheet date except the following where the documents are lodged with the relevant bankers IDBI who have communicated that the same are not traceable at their end.
|Particulars||Number of Cases||Gross Block (Rs. In Lakhs)||Net Block (Rs. In Lakhs)|
(ii) Inventories other than stocks lying with third parties have been physically verified by the Management on half yearly basis. In respect of inventory lying with third parties these have substantially been confirmed by them. In our opinion the frequency of such verification is reasonable and no material discrepancies were noticed on such physical verification.
(iii) According to the information and explanation given to us the Company has not granted any loans secured or unsecured to companies firms and limited liability partnerships or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraphs 3(iii)(a) 3(iii)(b) and 3(iii)(c) of the Order are not applicable;
(iv) In our opinion and according to the information and explanations given to us the Company has complied with the provisions of Section 185 and Section 186 of the Act with respect to grant of loans making investments providing guarantees and securities as applicable;
(v) In our opinion and according to the information and explanations given to us the Company has not accepted any deposits from public within the provisions of Sections 73 to 76 of the Act read with The Companies (Acceptance of Deposits) Rules 2014 and other relevant provisions of the Act and therefore the provision of the clause 3(v) of the Order are not applicable to the Company;
(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 as specified by the Central Government under section 148(1) of the Act in respect of the Company's product and are of the opinion that prima-facie the prescribed account and records have been made and maintained. We have not however made a detailed examination of the same with a view to determining whether they are accurate or complete;
(vii) (a) According to the information and explanations given to us and on the basis of the books and records examined by us the Company has been regular in depositing undisputed statutory dues including Provident fund Employees' State Insurance Income-tax Sales-tax Service tax Goods and Service tax duty of Customs duty of Excise Value added tax Cess and any other material statutory dues applicable to it with appropriate authorities;
There were no undisputed amounts payable in respect of Provident fund Employees' State Insurance Income-tax Sales-tax Service tax Goods and Service tax duty of Customs duty of Excise Value Added tax Cess and any other material statutory dues applicable to it were outstanding as on the last day of the financial year for a period of more than six months from the date they became payable;
(b) According to the information and explanation given to us the dues outstanding with respect to Income- tax Sales-tax Service tax Goods and Service tax duty of Customs duty of Excise Value Added tax have not been deposited on account of any dispute are as under;
|Name of the Statute||Nature of dues||Forum where dispute is pending||Period to which the amount is relates||Amount (In Rs. Lakhs)|
|The Income Tax Act 1961||Income Tax and Interest||Commissioner of Income Tax (Appeal)||Assessment Year 2007- 08 2008- 09 2014-15 2015-16 and 2016-17||342.64|
|Finance Act1994 (Service Tax)||Service Tax||Principal Commissioner CGST & Excise||Financial Year 2011-12||260.07|
|The Central Excise Act 1944||Excise Duty||Assistant Commissioner of Central Excise||Financial Year 1st April 1993 to 31st October 1993 2001-01 and 2001-02||9.76|
|Customs Act 1962||Custom Duty||Commissioner of Appeals (Customs)||Financial Year 2012-13||16.21|
(viii) According to the information and explanations given to us as also on the basis of the books of accounts and records examined by us the Company has not defaulted in the repayment of loans or borrowing to financial institutions and banks. The Company does not have any loans and borrowings from government and has not issued any debentures;
(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly paragraph 3(ix) of the Order in respect thereof is not applicable. Money raised by way of term loans during the year have been applied for the purpose for which those were raised;
(x) During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us no instances of fraud by the Company or on the Company by its officers or employees have been noticed or reported during the year;
(xi) According to the information and explanations given to us and based on our examination of the records of the Company the Company has paid / provided for managerial remuneration 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 3(xii) of the Order is not applicable;
(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 the provisions of Sections 177 and 188 of the Act where applicable and the details of such transactions have been disclosed in the financial statements as required by the applicable accounting standard;
(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. Accordingly paragraph 3(xiv) of the Order is not applicable;
(xv) According to the information and explanations given to us and based on our examination of the records the Company has not entered during the year into non-cash transactions with directors or persons connected with them. Accordingly paragraph 3(xv) of the Order is not applicable;
(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934. Accordingly paragraph 3(xvi) of the Order is not applicable.
For C N K & Associates LLP
ICAI FRN 101961W/W-100036
Membership No.: 37391
Place : Mumbai
Date: 30th May 2019