TO THE MEMBERS OF SRS LIMITED
Report on the Audit of the Standalone Ind AS Financial Statements
1. Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code 2016 (IBC)
The Hon'ble National Company Law Tribunal Chandigarh Bench (NCLT) admittedan insolvency and bankruptcy petition led by a lender against SRS Limited (theCompany) and appointed Mr. Ashok Kumar Gulla to act as Interim ResolutionProfessional (IRP) with direction to initiate appropriate action contemplated under extantprovisions of the Insolvency and Bankruptcy Code 2016 and other related rules. In theirmeeting held on 20thSeptember 2018 Committee of Creditors (CoC) approved appointment ofIRP as Resolution Professional (RP).
2. Quali ed Opinion
We have audited the accompanying standalone Ind AS financial statements of SRS
Limited(the Company)which comprise the Balance sheet as at 31stMarch2019 theStatement of Profitand Loss including the statement ofOther ComprehensiveIncome the Cash Flow Statement andthe Statement of Changes in Equity for the year thenendedand notes to the standalone Ind AS financial statementsincluding a summary ofsignificant accounting policies andother explanatory information (hereinafter referred toas thestandalone Ind AS financial statements).
In our opinion and to the best of our information and according to the explanationsgiven to us except for thee ects of the matters described in the Basis for QualiedOpinion' section of our report the aforesaid standaloneInd AS financial statements givethe information requiredby the Companies Act 2013 as amended (the Act) inthemanner so required and give a true and fair view in conformitywith the accountingprinciples generally accepted in India of the state of a airs of the Company as at31stMarch 2019 its loss including other comprehensive income its cash flows and thechanges in equity for the year ended on that date.
3. Basis for Quali ed Opinion
We draw attention to the following:
(a) Material Uncertainty relating to Going Concern: We refer Note 1 to the standalonefinancial statements in respect of preparation of financial statements of the Company ongoing concern basis for the reasons stated therein. As on 31st March 2019 the Companyhas negative net worth of Rs. 103167 lakhs and the Current Liabilities exceed CurrentAssets by Rs. 118838 lakhs. The Company has obligations towards fund-based borrowingsaggregating Rs.105670lakhs that are due/overdue and are payable to the bankers. Furtherthere are liabilities towards public deposits amounting to Rs. 9225 lakhs operationalcreditors and statutory dues. Above stated liabilities are showing differences as statedin Note 36. These conditions indicate the existence of a material uncertainty that maycast significant doubt on the Company's ability to continue as going concern and thereforethe Company may be unable to realize its assets and discharge its liabilities in thenormal course of business. As a result of ongoing matters we are unable to determine asto whether any adjustment that would have been necessary and required to be made inrespect of trade receivable trade payables borrowings current liabilities loans andadvances and contingent liabilities as at 31st March 2019; and in respect of thecorresponding possible impact of such items and associated elements on the statement forthe year ended on that date should the Company be unable to continue as a going concern.The ultimate outcome of these matters is at present not ascertainable. Accordingly we areunable to comment on the consequential impact if any on the accompanying standalonefinancial statements.
(b) Note 36 to the statement in respect of various claims submitted by theoperational creditors employees and other creditors of the Company to ResolutionProfessional (RP) pursuant to the Insolvency and Bankruptcy Board of India (InsolvencyResolution Process for Corporate Persons) Regulation 2016thatare showing differenceswith book balances. We are unable to comment upon the adjustments required andconsequential impact on the accompanying statements.
We further refer Note 37 in respect of non-availability of con rmations of tradereceivables loans & advances and trade payables. Balance con rmations whereverreceived in case of trade receivables loans & advances and trade payables are underreconciliation and impact is pending to be given in books of account.
(c) We refer Note 38 to the standalone financial statements in respect of balancesavailable with statutory authorities and input credits aggregating Rs.9.93 lakhs that aresubject to reconciliation ling of return and admission by the respective statutoryauthorities and no provision has beenmade. Thus we are unable to comment whether anyprovision for impairment in the value of these balances is required.
(d) We refer Note 31 to the statement. As mentioned in the said Note no interestexpense has been booked on borrowings for the period after initiation ofCorporateInsolvency Resolution Process(CIRP) i.e. 21st August 2018 to the reporting period.Syndicate Bank and Oriental Bank of Commerce have charged interest aggregating Rs. 657lacs after initiation of CIRP i.e. 21st August 2018 to the reporting period however theeffect of such interest charged in the bank statements has not been given in the books ofaccount. In absence of necessary information we are unable to comment upon the shortfallin provision for interest and consequential impact on the accompanying standalonefinancial statements.
(e) We refer Note 31 to the statement. As mentioned in the said Note no interestexpense has been booked on public deposits for the period after 21st August 2018. We alsoobserved that on matured public deposits interest was being provided @11.75% p.a. As perRule 17 of Acceptance of Deposits Rules 2015 a company shall pay a penal rate ofinterest of eighteen per cent p.a. for the overdue period of deposits whether secured orunsecured matured and claimed but remaining unpaid. In absence of necessary informationwe are unable to comment upon the shortfall in provision for interest and consequentialimpact on the accompanying standalone financial statements.
(f) The Company has investment of Rs. 2676 lakhs in wholly owned subsidiary companiesRs. 2666 lakhs in SRS Entertainment India Ltd and Rs. 10 lakhs in SRS Smart Retail Ltd.Additionally the Company has to recover Rs. 22 lakhs from SRS Smart Retail Ltd onaccount of sales/ advance given. As per information and explanation given to us net worthof wholly owned subsidiary companies is below the Company's exposure to them. No provisionfor diminution/ doubtful amount has been made in investments made and/or other amountsrecoverable. We are unable to commenton the appropriateness of the carrying value ofsuchinvestments and other amounts recoverable and theirconsequential impact on the financialresults for theyear and the financial position of the Company as at 31st March 2019.
(g) We refer Note 3 to the standalone financial statements. Property Plant andEquipment (PPE) amounting to Rs. 217 lakhs (WDV) were written o and Loss amounting to Rs.738 lakhs was incurred on sale of PPE (Prior to CIRP). Further Provision for doubtfulTrade Receivables and Loans & Advances was made and Receivables/ Loans & Advanceswere written o aggregating Rs. 127.62 lakhs during the year ended 31stMarch 2019. In thisrespect management's representation was received that the write o s/ provisions were madeand losses were incurred since the assets were found short or were discarded or weredoubtful of recovery due to lack of proper controls and follow-up. Also Provision fordoubtful Trade Receivables and Loans & Advances no longer required was written backaggregating Rs. 86.15lakhs during the year ended 31stMarch 2019.
Foreign Trade Receivables aggregating Rs. 14653 lakhs* as on 31st March 2019(including Rs.14191 lakhs out of sale to parties from inventories sent by NSEZ unit of theCompany located in India to UAE Branch through Branch transfer) on account of sale duringthe FY
2015-16 and FY 2016-17 in UAE were not backed by any security. Furthermore in terms ofRBI regulations in case of delay in export realisations beyond the stipulated periodapplication though required was not made to the Bank. In absence of alternativecorroborative evidence we are unable to comment on the recoverability of foreignoutstanding.
*provided for in books of account.
(h) Certain debtors have claimed no dues' in their balance con rmations to theCompany for the year ended 31 March 2019 since as per them they had actually made salesto the Company or they were entitled to certain discounts. Based on such differences inbalance con rmations and/or balance con rmations not received over a longer period of timeand/or action taken for recovery but no results materializing in our opinion TradeReceivables (other than Foreign Trade Receivables) and Advances aggregating Rs.64282lakhs though provided for are yet to be written o .
(i) Rs. 7.86 lakhs (31.03.18: Rs. Nil) are recoverable on account of advance given/expenses from Ex-Directors pertaining to period before CIRP.
(j) As per settlement agreement dated 28th May 2018 the Company sold its multiplexproperty in Gorakhpur for Rs. 110 lakhs (including GST of Rs. 17 lakhs). The book value ofsuch property was Rs.865 lakhs and the sale resulted in loss of Rs. 772 lakhs. Also theCompany was to recover Rs. 60 lakhs (Net) towards security deposit which was also w/o inStatement of Profit and Loss. For the said transaction no valuation report was available.
The Company sold its multiplex property in Bareilly for Rs. 450 lakhs (including GST ofRs. 71 lakhs) as per settlement agreement dated 07th Aug 2018. The book value of suchproperty was Rs.338 lakhs and the sale resulted in profit of Rs. 41 lakhs. Amount receivedagainst the sale was Rs. 250 Lakhs and balance of Rs. 200 Lakhs is still outstanding. Forthe said transaction no valuation report was available
(k) The Company has been facing issues such as investigation by SFIO SEBI ED andother Authorities. Also as per lings made by the Company from time to time with stockexchanges there have been certain regulatory non-compliances w.r.t. the Companies Act2013 and the Listing Obligation and Disclosure Requirements (LODR) of Stock Exchanges.Various issues being involved and the matters having not been concluded yet the Companyis in the course of evaluating the impact to the extent ascertainable. Eventually inrespect of such matters no liability has been booked as on 31st March 2019.
(l) We refer Note 20 regarding the required disclosures and liability for interest ifany to Suppliers under the Micro Small and Medium Enterprises Development Act 2006. Inthis respect sufficient information is not available with the Company.
(m) Deposit Repayment Reserve Account for the Fixed deposits at the close of the yearrequired under Section 73(2)(c) of the Companies Act 2013 equal to 15% of the depositsmaturing in the year and in the year following were found short by Rs. 1082lakhs as on31st March 2019 (net of Fixed Deposit amounting to Rs. 37 lakhs with bank). We are unableto comment on the financial implications in respect of the same.
We conducted our audit of the standalone Ind AS nancialstatements in accordance withthe standards on Auditing(SAs) as specified under section 143(10) of the Act.Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit ofthe Standalone Ind AS Financial Statements' section ofourreport. We are independent of the Company inaccordancewith the Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirementsthat are relevant to our audit of the financial statementsunder the provisionsof the Act and the Rules thereunderand we have ful lled our other ethicalresponsibilitiesinaccordance with these requirements and the Code of Ethics.We believe that the auditevidence we have obtained issu cient and appropriate to provide a basis for our qualifiedaudit opinion on the standalone Ind AS
4. Emphasis of matter
As mentioned in Annual Report of the Company for the FY ended 31st March 2018 certaindivisions were closed down in that year and majority of employees left the Company.Certain Whole-Time Directors also left or their term of appointment expired. Full &nal settlement has not been made in all the cases and as explained to us was still inprocess. In this respect we have relied upon management's representation that thedifference between liability providedtowards retirement benefits &other dues andadditional liability that may arise shall not be material.
Our opinion is not qualified in respect of above matter.
5. Key Audit Matters
Key audit matters are those matters that in our professionaljudgment were of mostsignificance in our audit of thestandalone Ind AS financial statements for the nancialyearended March 31 2019. These matters were addressedin the context of our audit of thestandalone Ind AS nancialstatements as a whole and in forming our opinion thereonand wedo not provide a separate opinion on these matters.In addition to the matter described inthe Basis for Quali edOpinion' section we have determined the matters describedbelowto be the key audit matters to be communicated inour report. For each matter below ourdescription of howour audit addressed the matter is provided in that context.
We have ful lled the responsibilities described in theAuditor's responsibilities forthe audit of the standalone IndAS financial statements section of our report includinginrelation to these matters. Accordingly our audit includedthe performance of proceduresdesigned to respond to ourassessment of the risks of material misstatement of thestandalone Ind AS financial statements. The results of ouraudit procedures including theprocedures performed toaddress the matters described below provide the basis forour auditopinion on the accompanying standalone Ind AS financial statements.
|Key Audit Matter || |
How the matter was addressed in our audit
|1. Revenue Recognition The Company mainly derives its revenue from sale of movie tickets (Box office revenue) sale of food items advertisement income and convenience fees. ||Principal Audit Procedure In view of the significance of the matter we applied following audit procedures in this area among others to obtain sufficient appropriate audit evidence : We assessed and tested the effectiveness of relevant controls including automated controls over revenue within each of the revenue streams. We inspected the terms of significant revenue contracts and assessed whether they were consistent with the basis of revenue recognized by the Company. We matched the data underlying the calculation of admission revenue to sales records and other systems having assessed the relevant controls relating to the recording of that revenue. |
|1. Litigations Contingencies The Company has ongoing litigations with various authorities and third parties which could have a significant impact on the results if the potential exposures were to materialise. The amounts involved are significant and the application of accounting standards to determinethe amount if any to be provided as a liability ordisclosed as a contingent liability is inherentlysubjective. Claims against the Company not acknowledged as debts are disclosed in the Financial Statementsby the Company after a careful evaluation of thefacts and legal aspects of the matters involved.The outcome of such litigation is uncertain and theposition taken bymanagement involves significantjudgment and estimation to determine the likelihoodand/or timing of cash out flows and the interpretation of preliminary and pending court rulings. Refer Note 25to the Standalone Financial Statements ||Principal Audit Procedures Our audit approach was a combination of test of internalcontrols and substantive procedures including: Assessing the appropriateness of the design andimplementation of the Company's controls over theassessment of litigations and completeness ofdisclosures. Supporting documentation are tested forthe positions taken by the management meetings areconducted with legalteam to con rm the operating e ectiveness of these controls. Additionally considering the effect of new informationin respect of contingencies as at 1st April 2018 toevaluate whether any change was required in themanagement's position on these contingencies as at31st March 2019. |
6. Information Other than the standalone Ind AS Financial Statements and Auditor'sReport Thereon
The Company's Board of Directors is responsible for theother information. The otherinformation comprises theinformation included in the Annual report but does notincludethe standalone Ind AS financial statements and ourauditor's report thereon.
Our opinion on the standalone Ind AS financial statementsdoes not cover the otherinformation and we do not expressany form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the otherinformation and in doing so consider whether suchotherinformation is materiallyinconsistent with the nancialstatements or our knowledgeobtained in the audit orotherwise appears to be materially misstated. If based onthe workwe have performed we conclude that there is a
material misstatement of this other information we arerequired to report that fact. Wehave nothing to reportin this regard.
7. Responsibilities of the Management and those Charged with Governance for theStandalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 responsible for overseeing the Company's financial reportingprocess.
We refer Note 50to the standalone financial statements. As mentioned in the said Notepursuant to ongoing Corporate Insolvency Resolution Process (CIRP) powers of the Board ofDirectors stand suspended and such powers are exercisable by Resolution Professional (RP).
8. 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 standalone 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 financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(I) of the Act we are also responsible for expressing our opinion on whether theCompany 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 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 standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent 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 ndings including anysignificant de ciencies in internal control that we identify during our audit.
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.
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.
9. Other Matter
In terms of the Joint Responsibility Statement (as per Standards on Auditing-299)forming part of the Engagement Letter:
i. Audit of Cinema Business Retail Business (discontinued operations) and part ofunallocable Business whose financial statements reflect total assets ofRs. 7199 lakhs asat 31st March 2019 and total revenue of Rs. 9090 lakhs for the year ended on that datehas been carried out by M/s SVP & Associates; and
ii. Audit of Corporate & Other Business Gold & Jewellery Business(discontinued operations) and part of un-allocable Business whose financial statementsreflect total assets of Rs.12033lakhs as at 31st March 2019 and total revenue of Rs. 91lakhs for the year ended on that date has been carried out by M/s Oswal Sunil & Co.
Our opinion is not modified in respect of above matter.
10. Report on Other Legal and Regulatory Requirements
(i) As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of sub-section (11) of section 143 of the Act (theOrder) and on the basis of such checks of the books and records of the Company aswe considered appropriate and according to the information and explanations given to uswe give in the Annexure A' a statement on the matters specified in paragraphs 3 and4 of the Order.
(ii) Subject to matters stated in Basis for Quali ed Opinion' as required bySection 143 (3) of the Act 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 purposes of our audit; (b) In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books; (c) The Balance Sheet the Statement ofProfit and Loss (including other comprehensive income) the Cash Flow Statement and theStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account; (d) In our opinion the aforesaid standalone financial statements comply withthe Indian Accounting Standards specified under Section 133 of the Act; (e) The mattersdescribed under Basis for Quali ed Opinion and Emphasis of Matterparagraph in our opinion may have an adverse effect on the functioning of the Company;(f) In terms of section 17 (1) (b) of the Insolvency and Bankruptcy Code 2016 (theCode) the powers of the Board of Directors have been suspended and are exercised bythe Resolution Professional. Hence written representation from directors have not beentaken on record by the Board of Directors. Accordingly we are unable to comment whethernone of the directors is disquali ed as on March 31 2019 from being appointed as adirector in the terms of Section 164 (2) of the Act; (g) With respect to the adequacy ofthe internal financial controls over financial reporting of the Company and the operatingeffectiveness of such controls refer to our separate Report in Annexure B. Our reportexpresses a qualified opinion on the adequacy and operating effectiveness ofthe Company'sinternal financial control over financial reporting; (h) With respect to the other mattersto be included in the Auditor's Report in accordance with the requirements of section197(16) of the Act as amended: In our opinion and to the best of our information andaccording to the explanations given to us the remuneration paid by the Company to itsdirectors during the year is in accordance with the provisions of section 197 of the Act.
(i) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our knowledge and belief and according to the information andexplanations given to us: i. We have relied on management's representation that theCompany has disclosed the impact of pending litigations as at 31st March 2019 on itsfinancial position in its standalone financial statements (refer Note 25). ii. Except forthe effects/possible effects of matters described under basis of qualified opinionparagraph the Company has made provision as required under the applicable laworaccounting standards for material foreseeable losses if any on long-term contracts.The Company did not have any derivative contracts iii. There were delays in transferringamounts required to be transferred to the Investor Education and Protection Fund by theCompany.
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT
(As referred to in paragraph (i) under the heading Report on Other Legal andRegulatory Requirements' of our report to the members of SRS Limited on the accounts forthe year ended 31st March 2019)
(I) (a)The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Excepting fixed assets aggregating Rs. 28.62 lakhs (WDV) the fixed assets werephysically veri ed by the Management and discrepancies noticed on veri cation between thephysical assets and the book records were dealt with in books of account. As on 31stMarch 2019 Fixed assets have been written o amounting to Rs. 217 lakhs (WDV)- refer para3(g) of Basis for Quali ed Opinion' forming part of this Report and Note 3 to thestandalone financial statements. Other than Leasehold Improvements Electrical FittingsFurniture & Fittings etc. Fixed Assets written o consisted of Plant & MachineryO ce Equipment Computers and Vehicles.
(c) According to the information and explanations given to us title deeds of theimmovable properties have been mortgaged with lenders i.e. bankers towards security of theborrowings raised by the Company. On the basis of our examination of the records of theCompany and the copies of the title deeds available with the Company the title deeds ofimmovable properties are held in the name of the Company.
The Company sent a mail to bankers seeking con rmation of the original title deeds ofimmovable properties held by them. However con rmation from the bankers was not receivedas on the date of our Report.
(ii) The inventory has been physically veri ed by the management at reasonableintervals during the year. According to the information and explanations given to us forinventory physically veri ed during the year the discrepancies between the physicalstocks and the books were not material and have been properly dealt with in the books ofaccount.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies rms Limited Liability Partnershipsor other parties covered in the register maintained under Section 189 of the CompaniesAct 2013. Accordingly the provisions of clause 3(iii) (a) 3(iii) (b) and 3(iii) (c) ofthe Order are not applicable to the Company.
(iv) As mentioned in para 3(i) of Basis for Quali ed Opinion' forming part ofthis report Rs. 7.86 lakhs are recoverable on account of advance given/ expenses fromEx-Directors. Except for the amount recoverable from Ex-Directors in our opinion andaccording to the information and explanations given to us the Company has complied withthe provisions of section 185 and 186 of the Act with respect to the loans andinvestments made.
(v) In our opinion and according to the information and explanations given to us theCompany has not complied with the directives (to the extent applicable) issued by theReserve Bank of India and the provisions of Section 73 to 76 or any other relevantprovisions of the Companies Act 2013 and the rules framed there under with regard todeposits accepted from the public in respect of maintenance of liquid assets (refer para3(m) ) of Basis for Quali ed Opinion' forming part of this report) and in respect ofprovisions regarding acceptance repayment of deposits and payment of interest.
No order has been passed by Company Law Board or Reserve Bank of India or any Court orany other Tribunal. However the Order/s (including Final Order dated 21st December 2017)for extension in repayment of deposits and payment of interest issued by National CompanyLaw Tribunal were not complied with fully. The amount involved thereof is notascertainable as the Order/s provided for staggered payments over a period of time.
(vi) According to information and explanations given to us the Central Government hasnot prescribed maintenance of cost records under sub-section (1) of section 148 of theCompanies Act 2013. Therefore provisions of Clause 3 (vi) of the order are notapplicable to the company.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax goods and service tax (GST) cess and other material statutory dues asapplicable have not been regularly deposited to the appropriate authorities and therehave been significant delays in a large number of cases. Undisputed amounts payable inrespect thereof which were outstanding at the year-end for a period of more than sixmonths from the date they became payable are as follows:
|Name of the Statute ||Nature of the dues ||Amount (Rs. in lakhs) ||Period to which it relates ||Date of Payment |
|Income Tax Act 1961 ||TDS ||390 || ||- |
| || || || |
March 2017 to June 2018
|Income Tax Act 1961 ||TDS as per ||9.40 ||Up to FY 2018-19 ||- |
| ||Traces Website || || || |
|CGST Act 2017 & IGST ||GST (HP) ||27.94 ||July 2017 to ||- |
|Act 2017 || || ||September 2018 || |
|CGST Act 2017 & IGST ||GST (HR) ||533.39 ||July 2017 to ||Payment of |
|Act 2017 || || ||September 2018 ||Rs.19.21 Lakhs pertaining to Aug'18 and Sept'18 made on 6th July 2019 |
|CGST Act 2017 & IGST ||GST (UP) ||608.34 ||July 2017 to August 2018 ||- |
|A || || || || |
|ct 2017 || || || || |
|CGST Act 2017 & IGST ||GST (PB) ||273.91 ||July 2017 to ||Payment of |
|Act 2017 || || ||September 2018 ||Rs.59.55 Lakhs pertaining to Aug'18 and Sept'18 made on 28th June2019 |
|CGST Act 2017 & IGST Act 2017 ||GST (DL) ||49.62 ||July 2017 to March 2018 ||- |
|Finance Act 1994 ||Service Tax ||125.90 ||April 2016 to June 2017 ||- |
|The Delhi Value Added Tax Act 2004 ||VAT (Delhi) ||133.28 || |
April 2017 to June 2017
|The Employees Provident ||EPF ||101.09 ||August 2017 to ||- |
|Fund and Miscellaneous || || || || |
| || || || |
|Provisions Act 1952 || || || || |
|The Employees' State ||ESI ||64.78 ||August 2017 to ||Payment of |
| || || || ||Rs.2.56 Lakhs |
|Insurance Act 1948 || || || |
| || || || ||pertaining to |
| || || || ||Aug'18 and Sep'18 |
| || || || ||made on 09th 12th |
| || || || ||& 25th of April |
| || || || ||2019 |
| || || || ||- |
|UP Vat Act 2008 ||VAT and Interest ||801.94 ||FY 2014-15 || |
| || || || ||- |
|UP Vat Act 2008 ||VAT and Interest ||682.47 ||FY 2015-16 || |
|Companies Act 2013 ||Investor Education & Protection Fund ||1.79 ||FY 2011-12 ||- |
(b) According to the information and explanations given to us and records of theCompany examined by us particulars of statutory dues including provident fund employees'state insurance income-tax sales-tax service tax duty of customs duty of excisevalue added taxgoods and service tax (GST) cess and other material statutory dues asapplicable which have not been deposited on account of any dispute are as under:
|Name of the Statute ||Nature of the dues* ||Amount* (Rs. in lacs) ||Period to which it relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax and ||4189.76 ||AY 2010-11 ||CIT Appeals Gurugram |
| || |
| || || |
|-do- ||-do- ||7555.68 ||AY 2011-12 ||-do- |
|-do- ||-do- ||733.19 ||AY 2012-13 ||-do- |
|-do- ||-do- ||795.41 ||AY 2013-14 ||-do- |
*net of tax paid under protest/ refund adjusted
(viii) As stated in Note 19 to the standalone financial statements the amounts ofborrowings from banks including interest are overdue and there is continuing default as on31stMarch 2019. While referring to repayment schedule stipulated in the sanction letterand subsequent developments we are unable to provide periods of default. Details ofdefaults in repayment of borrowing and interest are given below:
| ||Principal (Rs. in lakhs) || |
|Particulars || ||Interest (Rs. in lakhs) |
|Cash Credit ||73555 ||17825 |
|Demand Loan ||10000 ||3654 |
|Corporate Loan ||475 ||161 |
|Total ||84030 ||21640 |
The Company does not have any debentures issued loans or borrowings from thegovernment.
(ix) The Company has not raised money by way of initial public o er or further public oer (including debt instruments) during the year. The term loans were applied for thepurposes for which they were raised.
(x) Based upon the audit procedure performed for the purpose of reporting the true andfair view and on the basis of the information and explanations given by the management weare unable to comment whether or not there was any fraud by the Company or on the Companyby its officers or employees.
(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 Companies 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) As per our examination of the records of the Company all transactions with therelated parties are in compliance with Section 177 and 188 of the Companies Act 2013wherever applicable and the details have been disclosed in the Financial Statements etc.as required by the applicable accounting standards except disclosure of corporateguarantee given by M/s SRS Knowledge & Technologies Pvt. Ltd. in which Ex-ExecutiveChairman of the Company is a director (also Refer footnote to Note 19 of FinancialStatements). In this respect working and information is as provided by the managementfor which we have relied on the management representation.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe 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 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 ReserveBank of India Act 1934.
ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIALSTATEMENTS OF SRS LIMITED
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 SRS Limited(the Company) as of 31stMarch 2019 in conjunction with our audit of thestandalone 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 the cientconduct 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.
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 auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness.
Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement 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 qualified audit opinion on the Company's internal financialcontrols system over 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 of records that in reasonable detail accuratelyand fairly reflect the transactions and dispositions of the assets of the company; (2)provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisitionuse or disposition of the company's assets that could have a material effect on thefinancial 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.
Basis for Quali ed Opinion
In our opinion and according to the information and explanations given to us and basedon our audit the following material weaknesses have been identified as at March 31 2019:
The Company did not have appropriate internal financial controls over:
(a) The Company did not have appropriate internal financial controls as mentioned inpara 3(g) of Basis for Quali ed Opinion' forming part of this Report.
(b) Possible Impairment Losses - The Company's internal financial controls over use ofassumptions for analysis of asset impairments were not operating effectively which couldpotentially result in the Company not recognizing possible impairment losses.
(c) We refer para 3(j) of Basis for Quali ed Opinion' forming part of thisReport. Internal financial controls were lacking for sale of Property Plant and Equipment(PPE).
Further the company did not have any internal audit system during the year.
The inadequate supervisory and review control over Company's process in respect ofaforesaid assessment in accordance with the accounting principles generally accepted inIndia could potentially result in a material misstatement in preparation and presentationof financial statement including the profit/loss after tax.
A material weakness' is a de ciency or a combination of de ciencies 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 a timely basis.
Quali ed Opinion
In our opinion except for the possible effects of material weaknesses described inbasis of qualified opinion paragraph above the Company has in all materialrespects an adequate internal financial controls system over financial reporting and suchinternal financial controls over financial reporting were operating effectively as at31stMarch 2019 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. We have considered the materialweaknesses identifiedand reported above in determining the nature timing and extent ofaudit tests applied in our audit of the standalone financial statements of the Company forthe year ended on 31stMarch 2019
and these material weaknesses have affected our opinion on the standalone financialstatements of the Company and we have issued a qualified opinion on the standalonefinancial statements.