To the Members of Shekhawati Poly-Yarn Limited
Report on the Audit of the Ind AS Financial Statements
We have audited the accompanying Ind AS financial statements of Shekhawati Poly-YarnLimited ("the Company") which comprise the Balance Sheet as at 31st March 2019the Statement of Profit and Loss (including other comprehensive income) the Statement ofCash Flows and the Statement of Changes in Equity for the year ended on that date andnotes to financial statements a summary of the significant accounting policies and otherexplanatory information (herein after referred to as "Ind AS financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us except the possible effects of the matter described in the Basis forQualified Opinion paragraph the aforesaid Ind AS financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the company as at 31st March 2019 the loss and other comprehensive incomethe changes in equity and its cash flow for the year ended on that date.
Basis for Qualified Opinion
The company has not provided for Interest Expenses amounting to Rs 2273.15 lakhs(P.Y.Rs. 2256.99 lakhs) (derived on simple interest basis) which should have been provided asper the principle of prudence on the borrowings which have been classified as"Non-performing assets" (NPA) by the banks as referred in Note 41 ofaccompanying notes to financial statement. The company has also not provided penalinterest and other bank charges as the same are not ascertainable. Had these InterestExpenses been debited to the Statement of Profit and Loss Account loss for the year endedand debit balance of Other Equity would have been higher by Rs. 2273.15 lakhs and Rs.6903.87 lakhs.
Key Audit Matters
We have determined that there are no key audit matters to be communicated in ourreport.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's management Board of Directors is responsible for the other information.The other information comprises the information included in the management discussion andanalysis Board's Report annexure to board report report on corporate governance andBusiness Responsibility report but does not include the financial statements and ourauditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated. If based on the workwe have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the Ind ASFinancial Statements
The Company's Board of Directors is responsible for the matters stated in sub-section 5of Section 134 of the Companies Act 2013 ("the Act") with respect to thepreparation of these Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with IndAS and accounting principlesgenerally accepted in India including the Indian Accounting Standards ("IndAS") prescribed under Section 133 of the Act read with relevant rules issuedthereunder. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Ind AS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
1. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
2. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also :
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
3. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
4. We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
5. From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Emphasis of Matters
During the year the company has suffered heavy losses its net worth has beencompletely eroded. These conditions along with other matters set forth in Note 42 in theaccompanying financials statements indicate the existence of an uncertainty on theCompany's ability to continue as a going concern. However the financial statements of theCompany have been prepared on a going concern basis for the reasons stated in theaforesaid Note. Our opinion is not modified in respect of these matter.
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 we further 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) Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of accounts as required by law havebeen kept by the Company so as far as it appears from our examination of those books.
c) The Balance Sheet Statement of Profit and Loss (including other comprehensiveincome) the Statement of Cash Flows and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account;
d) Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph above in our opinion the aforesaid Ind AS financial statements complywith the Indian Accounting Standards prescribed under Section 133 of the Act read withrelevant rules issued thereunder.
e) The matters described under the Basis for Qualified Opinion paragraph and theEmphasis of Matters paragraph above in our opinion may have a negative effect on thefunctioning of the Company.
f) On the basis of written representations received from the directors as on March 312019 and 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 subsection 2 ofSection 164 of the Act;
g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.
h) 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"; and
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 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed pending litigation in its financial statements (refer noteno 36).
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. The company is not required to transfer any amounts as required by the law toInvestor Education and Protection Fund.
j) With respect to the matter to be included in the Auditors' Report under section197(16): In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
For Ajay Shobha & Co. Chartered Accountants Firm's Reg. No. 317031E
Ajaykumar Gupta Partner Mem. No. 53071
Place : Mumbai
Date : May 30 2019
Annexure A' to the Independent Auditors Report
Annexure referred to in Paragraph 1 of "Report on Other Legal and RegulatoryRequirements" of our Report of even date on the accounts of Shekhawati Poly- YarnLimited for the year ended 31st March 2019.
As required by the Companies (Auditors Report) Order 2016 and according to theinformation and explanations given to us during the course of the audit and on the basisof such checks of the books and records as were considered appropriate we report that:
(i) a) The company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
b) As explained to us the fixed assets have been physically verified by the managementin accordance with a phased programme of verification which in our opinion is reasonableconsidering the size of the company and the nature of its assets. In accordance with thisprogram certain fixed assets were verified during the year. The frequency of verificationis reasonable and no discrepancies have been noticed on such physical verification.
c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds are held in the name of thecompany.
(ii) The inventories have been physically verified by the management during the year atreasonable intervals. No material discrepancies were noticed on physical verification ofinventories by the management.
(iii) a) During the year the Company has not granted any Loan secured or unsecured toany party covered in the registered maintained under section 189 of the Companies Act2013 b) In view of our comments in para (iii) (a) above clauses 3 (iii) (a) (b) and (c)of the said Order are not applicable to the Company.
(iv) In our opinion and according to the information and explanation given to ussection 185 and section 186 of the Companies Act 2013 is not applicable since theCompany has not granted any loan made any investments and provided any guarantee &security.
(v) According to the information and explanations given to us and on the basis of ourexamination of records the company has not accepted any deposits from public.
(vi) The Central Government has prescribed the maintenance of cost record under Section148(1) of the Act. We have not reviewed the cost records maintained by the Company butbased on the information submitted by the Company we are of the view that such accountsand records have been made and duly maintained.
(vii) a) According to the records of the Company amount deducted/accrued in the booksof accounts in respect of the undisputed statutory dues including Provident FundEmployee's State Insurance Income tax Sales tax Service tax Duty of Customs Duty ofExcise Value Added Tax Cess and other Statutory Dues to the extent applicable to theCompany have been regularly deposited with the appropriate authorities except in fewcases of Provident Fund Profession Tax TDS and Service tax there is slight delay inpayment. According to the information and explanations given to us there are noundisputed amount payable in respect of such statutory dues which have remainedoutstanding as at 31st March 2019 for a period more than six months from the date theybecame payable.
b) According to the record of the company Income Tax Wealth Tax Sales Tax ServiceTax Duty of Custom Duty of Excise and Value Added Tax which have not been deposited onaccount of any dispute with the appropriate authorities are given below:
| || || || || ||Amount (Rs. In Lakhs) |
|Name of the statute ||Nature of dues ||Amount ||Amount Paid* ||Period to which the amount relates ||Forum where dispute is pending |
|The Income Tax Act 1961 ||Income Tax ||31351950 ||6270390 ||F.Y. 2015-16 ||CIT (Appeals) |
| || ||2185920 ||437184 ||F.Y. 2013-14 ||CIT (Appeals) |
| || ||220 ||- ||F.Y. 2012-13 ||CIT (Appeals) |
| || ||27270 ||5454 ||F.Y. 2009-10 ||CIT (Appeals) |
* Amount paid under protest.
(viii) Based on our audit procedure and as per the information and explanation given bythe management the Company had defaulted in repayment of its dues to Banks. Accordinglyduring the financial year 2015-16 the bank accounts of the company had been classified as"Non-Performing asset" (NPA) by State bank of India Union Bank of India andAxis Bank and during the financial year 2016-17 Allahabad bank and Dena bank has alsodeclared the company accounts as NPA. In respect of above loans the total principaloutstanding is Rs. 18971.46 Lakhs (P.Y. Rs. 19126.63 Lakhs) and Interest Outstanding isRs. 1132.21 lakhs (P.Y. Rs. 1132.21 Lakhs). Also during the year the company has notprovided for interest of Rs 2273.15. lakhs (P.Y. Rs. 2256.99 Lakhs) (Refer Note 41).
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 (ix) of the Order is not applicable.
(x) According to the information & explanations given to us no material fraud bythe company or on the company by its officers or employees has been noticed or reportedduring the course of our audit.
(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexaminations of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable. The details of suchrelated party transactions have been disclosed in the Ind AS financial statements asrequired by applicable accounting standards.
(xiv) According to the information and explanations given to us and based on ourexamination of the records the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
For Ajay Shobha & Co.
Firm's Reg. No. 317031E
Place : Mumbai
Date : May 30 2019
Annexure "B" to the Independent Auditor's Report of even date on thefinancial statements of Shekhawati
Poly- Yarn Limited for the year ended 31st March 2019.
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 ShekhawatiPoly- Yarn Limited ("the Company") as of March 31 2019 in conjunction with ouraudit of the 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 the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that We comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system 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 Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control 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 control 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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 the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
According to the information and explanation given to us and based on our audit thefollowing material weakness has been identified in the operating effectiveness of theCompany's internal financial controls over financial reporting as at 31st March 2019:
The documentation in respect of specific policies and procedures and the IT Controlspertaining to internal financial controls over financial reporting are not adequate andneeds to be further strengthened.
A "material weakness" is a deficiency or a combination of deficiencies ininternal 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 a timely basis.
In our opinion except for the possible effect of the material weakness described aboveon the achievement of the objectives of the control Criteria the Company has maintainedin all material respects an adequate internal financial controls system over financialreporting and such internal financial controls over financial reporting were operatingeffectively as at March 31 2019 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.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and audit tests applied in our audit of the financial statements of theCompany and these material weaknesses above does not affect our opinion on the financialstatements of the Company.
For Ajay Shobha & Co.
Firm's Reg. No. 317031E
Ajay Kumar Gupta
Mem. No. 53071
Place : Mumbai
Date : May 30 2019