To the Members of SEL Manufacturing Company Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of SELManufacturing Company Limited ("the Company") which comprise the BalanceSheet as at March 31 2019 the Statement of Profit and Loss (including othercomprehensive income) the Statement of Changes in Equity and the Statement of Cash Flowsfor the year ended on that date and a summary of significant accounting policies and otherexplanatory information (hereinafter referred as "the Standalone FinancialStatements") .
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of our observations described in the Basisfor Qualified Opinion Pargraph below the aforesaid Standalone financial statements readwith Paragraph Material Uncertainty relating to Going Concern and paragraph Emphasis ofMatters described below 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 withthe Indian Accounting Standards prescribed under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules2015 as amended ("Ind AS") andother accounting principles generally accepted in India of the state of affairs of theCompany as at March 31 2019 the loss and total Comprehensive loss changes in equityand its cash flows for the year ended on that date.
Basis for Qualified Opinion
We conducted our audit of the Standalone Financial Statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the Standalone financial statements underthe provisions of the Act and the Rules made there under and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the Standalone Financial Statements.
We refer to:
1) Note No. 37 to the Standalone financial statements in respect of non provision ofinterest on borrowings from banks (classified as NPA) amounting Rs.53478 lakhs & Rs.54084 lakhs (amount calculated after considering the rates and terms and conditionsstipulated originally as per CDR package) for the year ended 31st March 2019 & 31stMarch 2018 respectively. The same is not in compliance with the requirements of para 27 ofthe Ind AS 1-Presentation of Financial Statements w.r.t. preparation of financialstatements on accrual basis. Consequently borrowings are not reflected at fair value instandalone financial statements as required by Ind AS 109 Financial Instruments.
2) Note no. 12 (Other Financial Assets) to the Standalone financial statements includesinterest subsidy receivable amounting to Rs.26621 Lakhs which consists of interest subsidy(i) under TUFS from Ministry of Textiles and (ii) Subsidy under Textile Policy ofGovernment of Madhya Pradesh for the Financial years 2013-14 to 2016-17 for which noconfirmation was available The company has not provided for any allowance under ECL thereagainst this amount.
3) The company has not provided to us for our review any working regarding impairmenttesting being conducted to assess recoverable amount of Capital work in progress ofRs16940 lakhs outstanding as at 31st March 2019. We are unable to comment on whether thecompany needs to make a provision in respect of impairment losses on above as requiredunder Ind AS 36.
4) Note no. 17 19 and 21 to the Standalone financial statements in respect ofBorrowings (Non Current) Short Term Borrowings and other Financial Liabilities (Current)contains secured loans from banks. There is shortfall in the carrying value of thesecurity against the secured loans consequently the loans are not fully secured.
We further report that had the impact of our observations made in paragraph 1 of Basisfor qualified opinion paragraph been considered the net loss for the year ended 31stMarch 2019 would have been increased by Rs. 53478 lakhs and the borrowings for the yearended 31st March 2019 and 31st March 2018 would have been increased by Rs. 143463 lakhs& Rs. 89985 lakhs and Equity would have been reduced by the same amount for the yearsended 31.3.2019 and 31.3.2018 respectively. The financial impact of matters stated inparagraphs 23 &4 to the Basis for Qualified Opinion can't be measured reliably.
Material Uncertainty Related to Going Concern
Note no. 36 of the Standalone financial results stating thereto that the terms andconditions of the sanctioned CDR package w.r.t. interest and principal repayment were notcomplied with. Consequently State Bank of India in its capacity as financial creditorhad filed a petition under Insolvency and Bankruptcy Code 2016 (IBC) against the companywith Hon'ble National Company Law Tribunal Chandigarh Bench (NCLT) which was admitted on11th April 2018 and Corporate Insolvency Resolution Process (CIRP) has been initiated interms of IBC. The company has preferred an appeal against the admission of petition andappointment of IRP with NCLAT. The CIRP has since been kept in abeyance vide order dated22.06.2018 of Hon'ble High Court of Punjab and Haryana. The matter has since beentransferred to Hon'ble Supreme Court of India and is pending for adjudication. The companyhas incurred net loss of Rs. 23596 lakhs resulting into accumulated losses of Rs. 320909lakhs leading to erosion of entire net worth and current liabilities have exceeded thecurrent assets of the company Further concerning the company's ability to realize thevalue of inventories trade receivables and other financial assets meet its contractual/financial obligations w.r.t. repayment of overdue principal and accrued interest onsecured borrowings arranging working capital for ensuring normal operations furtherinvestments required towards ongoing projects under construction and the Corporateguarantee given on the behalf of its subsidiary namely SEL Textiles Limited. Due tofinancial constraints the company has started job work operations in major spinningplants instead of pursuing its own manufacturing activities since November 2017 and majorsource of operating income during the year under consideration is from job work. Thiscondition indicate the existence of a material uncertainty that may cast significant doubton the company's ability to continue as going concern and therefore the company may beunable to realize its assets and discharge its liabilities in the normal course ofbusiness.
Emphasis of Matter
We draw attention to the following matters:
(1) Note No. 36(c) of the Standalone financial statements in respect of Contingencyrelated to 'compensation payable in lieu of bank sacrifice' the outcome of which ismaterially uncertain and cannot be determined currently.
(2) Note No. 33 A (iii) of the Standalone financial statements in respect ofcontingency related to export incentives obligation refundable amounting Rs. 3855 lakhs inrespect of allowance for foreign trade receivables which is further subject to interestand penalties. The amount of such obligation cannot be determined currently.
(3) Note no. 38 to the Standalone financial statements regarding the balanceconfirmations of Trade Receivables Capital/Trade Advances & Trade Payables. Duringthe course of preparation of Standalone financial statements e-mails/letters have beensent to various parties by the company with a request to confirm their balances as on 31stMarch 2019 out of which few parties have confirmed their balances direct to us or to thecompany.
(4) As reported vide note 39 (a) and (b) to the Standalone financial statements thecompany has made an allowance/impairment of Rs. 17057 lakhs in compliance of Ind AS 109under Expected credit losses (under ECL Model) in respect of Trade Receivables andCapital/Trade Advances given to suppliers.
Our Opinion is not modified in respect of the matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements of the current period.These matters were addressed in the context of our audit of the Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
Key Audit Matters
|Contingency related to Income Tax ||Auditor's Response |
|The disputed Income Tax Demands raised by the Income Tax Authorities amounting to Rs. 27854 lakhs (subject to Further Interest and Penalty Proceedings) was pending at ITAT Chandigarh. The ITAT Chandigarh passed an order in favour of the company and vacated the said demand. However the Income Tax Department has further right to appeal in Hon'ble High Court within 120 days of order received. The period of 120 days has not expired on 31st March 2019. ||Obtained details of completed tax assessments and demands for the year ended March 31 2019 from management. We involved our internal experts to challenge the management's underlying assumptions in estimating the possible outcome of the disputes. Our internal experts also considered legal precedence and other rulings in evaluating management's position on these uncertain tax positions. |
| ||Additionally we considered the effect of new information in respect of uncertain tax positions as at April 1 2018 to evaluate whether any change was required to management's position on these uncertainties. |
|The Company has material uncertain tax positions which involves significant judgment to determine the possible outcome of this dispute ||We used our tax specialists to gain an understanding of the current status of the tax cases and monitored changes in the disputes where relevant to establish that the tax provisions had been appropriately adjusted to reflect the latest external developments |
| ||For legal regulatory and tax matter sour procedures included the following: |
| ||-testing key controls surrounding litigation regulatory and tax procedures; |
| ||- performing substantive procedures on the underlying calculations supporting the provisions recorded; |
| ||- where relevant reading external legal opinions obtained by the management; |
| ||-meeting with regional and local management and reading subsequent Group corres pondence; |
| ||-discussing open matters with the Group regulatory general counsel and tax teams; |
| ||-assessing management's conclusions through under standing precedents set in similar cases ; and |
| ||-circularization where appro priate of relevant third party legal representatives and direct discussion with them regarding certain material cases. |
| ||Based on the evidence obtained while noting the inherent uncertainty with such legal regulatory and tax matters we determined the said matter at 31 March 2019 to be appropriate. |
Information Other than the Standalone Financial Statements and Auditor's ReportThereon
The Company's Board of Directors is responsible for the preparation and presentation ofits report herein after called the Management Discussion and Analysis Board's Reportincluding Annexure to Board's Report Business Responsibility Report Corporate Governanceand Shareholder's Information but does not include the Standalone Financial Statements andour Auditor's Report thereon. The Management Discussion and Analysis Board's Reportincluding Annexure to Board's Report Business Responsibility Report Corporate Governanceand Shareholder's Information is expected to be made available to us after the date ofthis auditor's report.
Our opinion on the standalone financial statements does not cover the ManagementDiscussion and Analysis Board's Report including Annexure to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information and we do notexpress any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the Management Discussion and Analysis Board's Report including Annexure toBoard's Report Business Responsibility Report Corporate Governance and Shareholder'sInformation and in doing so consider whether the Management Discussion and AnalysisBoard's Report including Annexure to Board's Report Business Responsibility ReportCorporate Governance and Shareholder's Information is materially inconsistent with thestandalone financial statements or our knowledge obtained during the course of our auditor otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is material misstatementof this other information we are required to report the fact.
When we read the Management Discussion and Analysis Board's Report including Annexureto Board's Report Business Responsibility Report Corporate Governance and Shareholder'sInformation if we conclude that there is a material misstatement therein we are requiredto communicate the matter to those charged with governance and describe actions applicablein the applicable laws and regulations.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matter stated in Section 134(5)of the Act with respect to the preparation of these Standalone financial statements thatgive a true and fair view of the financial position financial performance totalcomprehensive loss changes in equity and cash flows of the Company in accordance with theInd As and other accounting principles generally accepted in India. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding the assets of the Company and for preventing and detectingfrauds and other irregularities selection and application of appropriate accountingpolicies making judgments and estimates that are reasonable and prudent and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors are also responsible for overseeing the company's financialreporting process.
The Hon'ble National Company Law Tribunal Chandigarh ("NCLT") on April 11th2018 admitted the Corporate Insolvency Resolution Process ("CIRP") applicationfiled against the Company and appointed Mr. Navneet Kumar Gupta having IP Registration No.IBBI/IPA-001/IP-P00001/2016-17/10009 as Interim Resolution Professional ("IRP")in terms of the Insolvency and Bankruptcy Code 2016 ("Code")vide order dated25th April 2018 to manage the affairs business and assets of the company. The company haspreferred an appeal against the admission of petition and appointment of IRP with NationalCompany Law Appellate Tribunal (NCLAT). The CIRP has since been kept in abeyance videorder date 22nd June 2018 of Hon'ble High Court of Punjab & Haryana. The matter hassince been transferred to Hon'ble Supreme Court of India and is pending for adjudication.In view of the abovesaid order of Hon'ble High Court of Punjab & Haryana the powersand responsibilities to manage the affairs business and assets of the company is vestedwith the Board of Directors of the company.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
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 Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
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.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub- section (11) of section 143 ofthe Act we give in the Annexure A a statement on the matters specified in the paragraph3 and 4 of the order.
2. As required by Section 143 (3) of the Act based on our audit 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 those books.
c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) Statement of Changes in Equity and the statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d. In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act read with rule 7 of the Companies (Accounts) Rules2014.
e. On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct ;
f. In our opinion the matters described in the " Basis of Qualified Opinion"and "Emphasis of Matter" paragraphs above may have an adverse impact on thefunctioning of the Company.
g. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"
h. 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 explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
i. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - Refer Note no. 33 to the standalonefinancial statements;
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
| ||FOR MALHOTRA MANIK & ASSOCIATES |
| ||CHARTERED ACCOUNTANTS |
| ||FRN.: 015848N |
| ||(CA. MANIK MALHOTRA) |
|PLACE: LUDHIANA ||PROPRIETOR |
|DATED: 23.05.2019 ||M.No.: 094604 |
Annexure-A to the Independent Auditor's Report
The Annexure-A referred to the Independent Auditors' Report to the members of thecompany on the Standalone financial statements for the year ended on March 31 2019. Wereport that:
(i) (a)The Company has maintained proper records showing particulars includingquantitative details and situation of fixed assets except for certain items of fixedassets the quantitative details of which are in the process of being compiled. Asexplained to us the same will be compiled by the management in due course of time.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Asexplained to us in accordance with this programme certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification. In ouropinion this periodicity of physical verification is reasonable having regard to the sizeof the Company and the nature of its assets.
(c) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
(ii) In our opinion and according to the information and explanation given to us thephysical verification of inventories has been conducted at reasonable interval by themanagement and no material discrepancy was noticed on physical verification of inventoriescarried out by the management as compared to the book records.
(iii) In our opinion and according to the information and explanation given to us theCompany has not granted any loans secured or unsecured to Companies Firms and otherparties covered in the register maintained section 189 of the Companies Act 2013.
(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of loans investments guarantees and security.
(v) The Company has not accepted deposits from the public within the meaning ofprovisions of sections 73 to 76 or any other relevant provisions of the Companies Act2013 and the rules framed there under. No order under the aforesaid sections has beenpassed by the Company Law Board or National Company Law Tribunal or Reserve Bank of Indiaor any court or any other Tribunal .
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of Cost records undersection 148 of the Companies Act 2013 and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have however not madea detailed examination of such records with a view to determine whether they are accurateor complete.
(vii) (a) According to the information and explanations given to us and the books andrecords examined by us we state that the company is regular in depositing undisputedstatutory dues including income tax provident fund employees state insurance customduty Goods & services taxcess and other statutory dues except The Punjab StateDevelopment Tax to the appropriate authorities. According to the information andexplanations given to us there were no undisputed amounts payable in respect of incometax provident fund employees state insurance custom duty Goods & services taxcess and other material statutory dues except The Punjab State Development Tax amountingRs. 254480 in arrears as at 31st March 2019 for a period of more than six months fromthe date the became payable.
(b) According to the information and explanations given to us there are no dues ofincome tax provident fund employees state insurance custom duty goods & servicestax The Punjab State Development Tax and other statutory dues which have not beendeposited on account of any dispute except disclosed as under:
|Name of the statute ||Nature of dues ||Amount (In Lakhs) ||Period to which the amount relates (Assesment Year) ||Forum where dispute is pending |
|Income Tax Act 1961 ||Tax ||2139.47 ||2011-12 ||CIT (Appeals) Ludhiana |
|Income Tax Act 1961 ||Penalty ||698.66 ||2013-14 ||CIT(Appeals) Ludhiana |
|Income Tax Act 1961 ||Penalty ||16.26 ||2014-15 ||ITAT Chandigarh |
|Income Tax Act 1961 ||Penalty ||54.07 ||2014-15 ||CIT(Appeals) Ludhiana |
|Income Tax Act 1961 ||Tax Deducted at Source ||3.52 ||2007-08 to 2012-13 ||Centralized Processing Cell (TDS) |
(viii) In our opinion and according to the information and explanations given to usthe company has defaulted in repayment of loans / borrowings and interest thereon tobanks/Financial Institution as given below:
|Bank Name ||Nature of Amount ||Amount ||Overdue Since |
|State Bank of India ||Interest ||12959490152 ||31.07.2016 |
| ||Principle ||2886857877 ||30.06.2016 |
|Karur Vysya Bank ||Interest ||23468535 ||30.04.2018 |
| ||Principle ||18494566 ||30.06.2018 |
|Punjab & Sind Bank ||Interest ||448989712.1 ||31.12.2015 |
| ||Principle ||237680064 ||31.12.2015 |
|Bank of Maharashtra ||Interest ||319862392.4 ||30.11.2015 |
| ||Principle ||279047214.1 ||31.09.2015 |
|Punjab National Bank ||Interest ||1492194887 ||28.02.2016 |
| ||Principle ||591774483.1 ||31.01.2016 |
|Indian Bank ||Interest ||971302354.2 ||30.06.2015 |
| ||Principle ||226591510.2 ||31.07.2015 |
|Sber Bank ||Interest ||295416634.2 ||31.03.2016 |
|United Bank ||Interest ||494999598.3 ||30.06.2015 |
| ||Principle ||458978200.6 ||31.07.2015 |
|Union Bank of India ||Interest ||763033808.7 ||30.04.2015 |
| ||Principle ||205478666.8 ||30.04.2015 |
|UCO Bank ||Interest ||994902162.7 ||30.09.2015 |
| ||Principle ||412032902 ||31.08.2015 |
|Corporation Bank ||Interest ||2882024455 ||31.01.2016 |
| ||Principle ||459023265.5 ||31.03.2016 |
|Allahabad Bank ||Interest ||4872004849 ||31.10.2015 |
| ||Principle ||1385584908 ||30.11.2015 |
|Dena Bank ||Interest ||467515889.5 ||31.10.2015 |
| ||Principle ||351253383.9 ||31.10.2015 |
|Indian Overseas Bank ||Interest ||1744530505 ||31.01.2016 |
| ||Principle ||130193857.2 ||31.03.2016 |
|Vijaya Bank ||Interest ||29256073.4 ||31.03.2016 |
| ||Principle ||28565630.05 ||31.03.2016 |
|Andhra Bank ||Interest ||1169851772 ||28.02.2016 |
| ||Principle ||109303172 ||31.03.2016 |
|Exim Bank ||Interest ||13160345.24 ||31.05.2016 |
| ||Principle ||10288926.65 ||31.01.2016 |
(ix) In our opinion and according to the information and explanations given to us nomoney was raised by way of initial public offer or further public offer (including debtinstruments) and term loans during the year.
(x) To the best of our knowledge and belief and according to the information andexplanations given to us no material fraud on or by the Company by its officers oremployees has been noticed or reported during the year.
(xi) According to the information and explanations given to us and the audit proceduresconducted by us managerial remuneration paid or provided was in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theCompanies Act 2013.
(xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 3 (xii) of the Companies (Auditor's Report) Order 2016 are not applicable to theCompany.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the company all transactions with the related parties arein compliance with Section 177 and 188 of Companies Act 2013 where applicable and thedetails of the transactions have been disclosed in the standalone financial statements asrequired by the applicable accounting standards.
(xiv) According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review and therefore the provisions ofclause 3 (xiv) of the Companies (Auditor's Report) Order 2016 are not applicable to theCompany.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the company the Company has not entered into any non-cashtransactions with directors or persons connected with the directors and therefore theprovisions of clause 3 (xv) of the Companies (Auditor's Report) Order 2016 are notapplicable to the Company.
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934
| ||FOR MALHOTRA MANIK & ASSOCIATES |
| ||CHARTERED ACCOUNTANTS |
| ||FRN. 015848N |
|PLACE: LUDHIANA ||(CA. MANIK MALHOTRA) |
|DATED: 23.05.2019 ||PROPRIETOR |
| ||M.No. 094604 |
ANNEXURE- B TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph (g) under the "Report on other legal and regulatoryrequirements" section of our report to the members of SEL Manufacturing CompanyLimited of even date)
Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the Internal Financial Control over financial reporting of SELManufacturing Company Limited ("the Company") as of March 31 2019 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. 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 was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls 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 auditor's judgement including the assessment of the risks 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 internal financial controls system overfinancial reporting of the Company.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial controls over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's Internal financial controls over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and(3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany'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 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 internal financial controls overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
Disclaimer of Opinion
The system of internal financial controls over Financial reporting with regard to thecompany were not made available to us to enable us to determine if the company hasestablished adequate internal financial control over financial reporting and whether suchinternal financial controls operating effectively as on March 31 2019.
Basis for Qualified Opinion
In our opinion and according to the information and explanations given to us and basedon our audit of Standalone Financial Statements in respect of the matters disclosed inparagraphs under "Basis of Qualified Opinion" and "Emphasis of Matter"of our main Independent Auditor's Report which came to our notice during the course ofaudit of standalone financial statements indicates material weaknesses in the internalfinancial controls over financial reporting as at March 31 2019.
A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the company's annual or interim financial statements willnot be prevented or detected on timely basis.
In our opinion the matters disclosed in above paragraphs under "Basis ofQualified Opinion" indicates material weaknesses in the internal financial controlsover financial reporting.
We have considered the disclaimer of opinion as well as material weaknesses identifiedand reported in Qualified Opinion paragraph in determining the nature timing and extentof audit tests applied in our audit of the financial statements of the Company for theyear ended March 31 2019 and the disclaimer and material weaknesses do not affect ouropinion on the standalone financial statements of the Company.
| ||FOR MALHOTRA MANIK & ASSOCIATES |
| ||CHARTERED ACCOUNTANTS |
| ||FRN. 015848N |
| ||(CA. MANIK MALHOTRA) |
|PLACE: LUDHIANA ||PROPRIETOR |
|DATED: 23.05.2019 ||M.No.:094604 |