To The Members of Sonal Adhesives Limited
Report on the Audit of the Standalone IND AS Financial Statements Opinion
I have audited the accompanying standalone IND AS financial statements of SonalAdhesives Limited (the Company') which comprise the Balance Sheet as at 31stMarch 2019 the Statement of Profit and Loss(including Other Comprehensive Income) CashFlow Statement and Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information.
In my opinion and to the best of my information and according to the explanations givento me the aforesaid standalone IND
AS financial statements give the information required by the Companies Act 2013 (theAct') in the manner so required and give a true and fair view inconformity with theaccounting principles generally accepted in India including Indian Accounting
Standards(Ind AS') specified under Section 133 of the Act of the state ofaffairs (financial position) of the Company as at 31st March 2019 and its profit(financial performance including other comprehensive income) its cash flows and thechanges inequity for the year ended on that date.
Basis of Qualified Opinion i. The banking facility availed from SBI have become NPAas per RBI guidelines and consequently the said bank has stopped charging interest. Duringthe year under review no provisions have been made for unapplied interest on account ofNPA not charged by the bank which is not in accordance with the generally acceptedaccounting principles. ii. The balance of SBI Term Loan Cash Credit and other creditfacilities appearing in the books of accounts are not in accordance with the bankstatement and are subject to reconciliation process. iii. The Company has received noticeunder section 13(2) of the SARFAESI Act for attachment of its assets from State Bank ofIndia. Pursuant to this the Company has been intimated of the symbolic possession takenby the State Bank of India on 22nd Feb 2016 Matter is pending in Debts RecoveryTribunal Mumbai and Debt Recovery Appellate Tribunal Mumbai. As . on 27th March 19 SBIhas assigned companies loan account to ASREC (India) Limited (Asset ReconstructionCompany). iv. As informed to me the Company had given corporate guarantee of Rs.38262938/- for credit facilities availed by M/S Sonal Impex Ltd. The same has beenclassified as NPA by the bank the guarantee been has invoked and company has been calledupon by the bank to repay the entire amount. v. As told by management Rs. 47017093Worth of Debtors are more than 3 years old the same being time barred should have beenwritten off but no provision for the same had been provided in books of accounts. Thesame is the case with Sundry creditors as per management the same is under settlementprocess.
Basis of Opinion
I conducted my audit in accordance with the Standards on Auditing (SAs) specified undersection 143(10) of the Companies Act 2013. My responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of my report. I am independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to my audit of the financial statements under theprovisions of the Companies Act 2013 and the Rules thereunder and I have fulfilled myother ethical responsibilities in accordance with these requirements and the Code ofEthics. I believe that the audit evidence I have obtained is sufficient and appropriate toprovide a basis for my Qualified opinion.
Material Uncertainty Related to Going Concern
The Company's net worth is negative and the borrowings from banks and financialinstitutions have been classified by the lenders as non-performing assets. I was informedthat the Company is also in the process to initiate a One Time Settlement (OTS) with thebanks. The above factors cast a significant uncertainty on the Company's ability tocontinue as a going concern.
Pending the resolution of the above uncertainties the Company has prepared theaforesaid statement on a going concern basis.
Key Audit Matters
Key audit matters are those matters that in my professional judgment were of mostsignificance in my audit of the financial statements of the current period. These matterswere addressed in the context of my audit of the financial statements as a whole and informing my opinion thereon and I do not provide a separate opinion on these matters.
I have determined the matters described below to be the key audit matters to becommunicated in my report. i. Note No. 14.1 and 28 to the standalone IND AS FinancialStatements which inter-alia describes the uncertainty related to the outcome of thecases/notices filed/given against the Company.
ii. The Company has represented that it has advanced amounts aggregating to Rs 3.01crores towards purchase of raw material to M/s Kalpataru Papers Limited in the previousyears. I have relied on the Management representation in this regard. iii. The accumulatedlosses of the Company exceed its net worth as at the financial year end. Also the Companyhas incurred cash losses during the year.
iv. Considering the overall financial health of the Company it may require furtherfund infusion for growth and expansion.
Information other than the Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and my auditor's report thereon.
My opinion on the financial statements does not cover the other information and I donot express any form of assurance conclusion thereon.
In connection with my audit of the financial statements my responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or my knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work I haveperformed I conclude that there is a material misstatement of this other information Iam required to report that fact. I have nothing to report in this regard.
Responsibility of Management for the Standalone IND AS Financial Statements
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 preparationand presentation of these standalone IND AS financial statements that give a true and fairview of the financial position financial performance including other comprehensiveincome cash flows and changes in equity of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards (Ind AS)specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone INDAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error. In preparing the financial statementsmanagement is responsible for assessing the Company's ability to continue as a concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the company's financialreporting process.
My objective is to obtain reasonable assurance about whether the financial statementsas a whole are free from misstatement whether due to fraud or error and to issue anauditor's report that includes my opinion. Reasonable assurance is a high level ofassurance but is not a guarantee that an audit conducted in accordance with Standards onAuditing 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 financial statements.
As part of an audit in accordance with Standards on Auditing I exercise professionaljudgment and maintain professional skepticism throughout the audit. I also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis formy opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from erroras fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of theAct I am also responsible for explaining my opinion on whether the
Company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 I conclude that a material uncertainty existsI am required to draw attention in my auditor's report to the financial statements orif such related disclosures the are inadequate to modify my opinion. Myconclusions are based on the audit evidence obtained up to the date of my 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
I 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 I identify during my audit.
I also provide those charged with governance with a statement that I have complied withrelevant ethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on my independenceand where applicable related safeguards.
From the matters communicated with those charged with governance I determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. I describe these matters in myauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances I determine that a matter should not becommunicated in my report because the adverse consequences of doing so would reasonably beexpected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
i. As required by The Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of subsection(11) ofsection 143 of the Act I give in the Annexure A a statement on the matters specified inparagraphs 3 and 4 of the said order.
ii. As required by section 143(3) of the Companies Act 2013 based on my audit I reportto the extent applicable that: a. As described in the Basis of Qualification of OpinionParagraph I was unable to obtain all the information and explanations which to the bestof my knowledge and belief were necessary for the purpose of my audit;
b. In my opinion proper books of account as required by law have been kept by theCompany so far as appears from my examination of those books;
c. The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of
Cash Flow and Statement of Changes in Equity dealt with by this Report are in agreementwith the relevant books of account; d. Except for the effects of the matter described inthe Basis for Qualified / Disclaimer Opinion / Key Audit Matters paragraphs in my opinionthe aforesaid standalone Ind AS financial statements comply with the Accounting Standardsspecified under section 133 of the Act;
e. On the basis of written representations received from the directors as on 31stMarch 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms ofSection 164(2) of the Act.
f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer toseparate report in "Annexure B" and
g. 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 my opinionand to the best of my information and according to the explanations given to me:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone IND AS financial statements- Refer Note 28 to the standaloneIND AS financial statements;
ii. The Company does not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses iii. The amounts which were requiredto be transferred to the Investor Education and Protection Fund by the Company have beentransferred.
Rohan Agrawal & Co
M. No. 123127
Place: Khopoli Date:28th May 2019
ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT
The annexure referred to my Independent Auditor's report to the members of the Companyon the Standalone IND AS financial statements for the year ended 31st March 2019 Ireport that :
1. 1) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
2) Fixed assets have been physically verified by the management at reasonableintervals. I have been informed that no material discrepancies were noticed on suchverification.
3) According to the information and explanations given to me and on the basis of myexamination of the records of the Company all the title deeds of immovable properties areheld in the name of the Company..
2. As explained to me the inventory of the company has been physically verified by themanagement during the year at reasonable intervals and no material discrepancies werenoticed on physical verification.
3. As per the information and explanations given to me and the records produced beforeme for my verificationthe Company has not granted unsecured loan to companies firmsLLPs or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly clause 3 (iii) (a) & (b) of the Order is notapplicable to the Company.
4. The Company has not given any loans guarantees or made any investments undersection 185 of the Companies Act 2013. However it had given guarantee against loanto M/s Sonal Impex Ltd. the same has been classifiedas NPA by the bank during the yearand the company has been called upon to discharge in full the liability by paying to thebank. The guarantee amount does not exceed the limit as per provisions of section 186.
5. The company has not accepted loans & deposits u/s 73 to 76 or any other relevantprovisions of the Companies Act 2013 and the rules framed there under.
6. As per the information and explanations given to me the cost records as prescribedunder sub-section (1) of section 148 of the Companies Act 2013 are maintained.
7. 1) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income-tax Goods & Service TaxSales Tax Service Tax Custom Duty Excise Duty Value Added Tax Cess and other materialstatutory dues applicable to it to the appropriate authorities.
2) There were no undisputed amounts payables in respect of Provident Fund Employees'State Insurance Income-taxGoods & Service Tax Sales Tax Service Tax Customs DutyExcise Duty Value Added Tax Cess and other material statutory dues in arrears as at 31March 2019 for a period of more than six months from the date they became payable.
3) The Company has no disputed statutory dues pending to be deposited as on 31st March2019 except as reported below in respect of Provident fund Employees State InsuranceIncome Tax Good and Service Tax Sales Tax Wealth Tax Service Tax custom duty exciseduty cess and other statutory dues applicable to it.
|Name OfStatute ||Nature of Dues ||Period to Which Amount Relates ||Forum Where Dispute is Pending ||Amounts |
|1 Sales Tax (CST) ||Wrong Calculation of CST liability & interest thereon. ||FY 2011-12 ||Deputy Commissioner (Appeals) ||236694.00* |
8. The Company has defaulted in payment of loans to banks during the year the previousfinancial period. The details of such default are as under:
|Bank Name ||Total Amount Defaulted ||Date default started |
|State Bank of India ||Rs. 233661442 ||Feb 2015 |
Rs. 233661442.00 does not include unapplied interest for F.Y 2016- 17 to 18-19
9. The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence this clause is not applicable10. Based upon the audit procedures performed and information and explanations given bythe management I report that no fraud on or by the company has been noticed or reportedby its officers or employees during the year.
11. Managerial Remuneration has been paid in accordance with section 197 of schedule Vof Companies Act 2013. 12. This clause is not applicable since the company is not a NIDHIcompany.
13. 1) Transactions with related parties are in accordance with the provisions ofsection 177 & 188.
2) Details of the same have been disclosed in the standalone IND AS financialstatements.
14. The company has not made any preferential allotment or private placement of sharesor convertible debentures; hence this clause is not applicable.
15. The Company has not entered into any non-cash transactions with directors orconnected persons; hence this clause is not applicable.
16. The company is not required to get registration u/s 45-IA of RBI Act 1934.
Rohan Agrawal & Co
M. No. 123127
Date:28th May 2019
Annexure - B to the Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
I have audited the internal financial Sonal Adhesives Limitedcontrols ("theCompany") as of over financial 31st March 2019 in conjunction with my audit ofthe 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 the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). 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 company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
My responsibility is to express an opinion on the Company's internal financial controlsover financial reporting based on my audit. I conducted audit in accordance with theGuidance 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 to financialcontrols both applicable to an audit of audit of internal Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that I comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.
My audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. My 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 judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
I believe that the audit evidence I have obtained is sufficient and appropriate toprovide a basis for my 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 that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould 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.
In my opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2019 based on theinternal control overfinancialreporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
Rohan Agrawal & Co
M. No. 123127
Date:28th May 2019