Sterling Biotech Ltd.
|BSE: 512299||Sector: Industrials|
|NSE: STERLINBIO||ISIN Code: INE324C01038|
|BSE 00:00 | 05 Nov||Sterling Biotech Ltd|
|NSE 05:30 | 01 Jan||Sterling Biotech Ltd|
|BSE: 512299||Sector: Industrials|
|NSE: STERLINBIO||ISIN Code: INE324C01038|
|BSE 00:00 | 05 Nov||Sterling Biotech Ltd|
|NSE 05:30 | 01 Jan||Sterling Biotech Ltd|
To the Liquidator of Sterling Biotech Limited
Report on the Audit of the Standalone Financial Statements Disclaimer of Opinion
We were engaged to audit the accompanying standalone financial statements of SterlingBiotech Limited ("the Company") which comprise the Balance Sheet as at March31 2021 the Statement of Profit and Loss (including Other Comprehensive Income) theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the financial statements including a summary of the significant accountingpolicies and other explanatory information (hereinafter referred to as 'StandaloneFinancial Statements').
We do not express an opinion on the accompanying Standalone Financial Statements of theCompany because of the significance of the matters described in the Basis for Disclaimerof Opinion section of this report we have not been able to obtain sufficient appropriateaudit evidence to provide a basis for an audit opinion on these Standalone FinancialStatements.
Basis for Disclaimer of Opinion
We are unable to determine the consequential impact certain specific transactions /matters and disclosures on the Standalone Financial Statements. Such specific transactions/ matters include:
1. Material uncertainty relating to Going Concern
We draw attention to Notes No. 1 and 15 read with Notes No. 21 of the Standalonefinancial statements which indicate that -
a) As explained in the Note No. 1 of the Standalone Financial Statements the Companywas admitted to corporate insolvency resolution process ('CIRP') vide order of theNational Company Law Tribunal ("NCLT") Mumbai Bench dated June 11 2018. Theclaims of financials creditors admitted under CIRP were Rs. 903077 lakhs.
The promoters made an application for One Time settlement ('OTS') of dues payable tofinancial creditors of the Company amounting to Rs. 310920 Lakhs. Andhra Bank (leadbanker for the Consortium for Financial Creditors) has made an application to NationalCompany Law Tribunal Mumbai Bench (NCLT) to withdraw Corporate Insolvency ResolutionProcess (CIRP) and accept the One Time Settlement offer made by the promoters and approvedby the Committee of creditors. The Hon'ble NCLT Mumbai Bench vide Order dated May 82019 rejected the withdrawal of CIRP under section 12A and ordered liquidation of thecompany on a going concern basis as per the provisions of the IBC as there was noresolution plan persisting for the company at that point in time.
Being aggrieved and dissatisfied by the said Order various affected parties approachedthe Hon'ble National Company Law Appellate Tribunal New Delhi Bench against the Orderdated May 8 2019. The Hon'ble NCLAT vide Order dated August 28 2019 has set aside theOrder dated May 8 2019 passed by the Hon'ble NCLT Mumbai Bench and approved withdrawalof CIRP subject to the compliance of Terms and Conditions under
Section J2A of the Code.
The Hon'ble NCLAT made further clarifications on November 18 2019 to its order datedAugust 28 2019 providing 30 days to give effect to the settlement offer under Sec. 12A bythe promoters of the company failing which the order of Hon'ble NCLAT dated August 282019 shall be recalled and the order dated May 8 2019 by Hon'ble NCLT Mumbai shall standrestored and directed the Resolution Professional to continue till the process iscompleted under Section 12A.
The 30 days' time limit was extended up to March 31 2020 by the Supreme Court.Subsequently the matter was taken up by the Hon'ble Supreme Court on January 11 2021wherein the case was directed to be listed in the First week of February 2021.Consequently the case was taken up after few adjournments finally on February 22 2021wherein the Hon'ble Supreme Court inter-alia dismissed the Miscellaneous Application filedby Richmond Investments Private Limited.
Therefore the status quo granted by the Hon'ble Supreme Court also came to an end andpursuant to the order passed by the Hon'ble NCLAT dated November 18 2019 the order ofNCLAT dated August 28 2019 stands recalled and the order of liquidation dated May 082019 passed by the Adjudicating Authority stands restored and the Liquidator appointed bythe Adjudicating Authority stands reinstated on February 22 2021 and the LiquidationProcess under the Insolvency & Bankruptcy Code 2016 has begun.
As per the latest list of stakeholders (Updated Version 1) dated June 7 2021 issued bythe liquidator the claim of all the creditors amounting to Rs. 982089.36 Lakhs has beenadmitted.
As on the date of signing of these standalone financials statement the liquidator hasput a newspaper advertisement on July 21 2021 in local & national newspapers invitingbids for acquisition of the Company as a whole on a going concern basis through anE-Auction process at reserve price of Rs. 548.46 crore. The last day for Submission of EOIalong with Supporting Documents and EMD by the Bidder was on August 5 2021. The last dayfor Verification of EOI Supporting Documents and EMD by the Liquidator was on August 202021. Liquidator has Declared Name of Qualified Bidders on August 21 2021 same is hostedon company websites and Commencement of Site visit and accessing Data Room by QualifiedBidders will take place from August 23 2021. The detailed process is listed in theprocess document dated July 21 2021 hosted on company's websites.
b) Although the company has positive cash profits the Company has incurred net lossduring the current and the previous year and has a negative net worth at the end of March31 2021.
c) The Company's current liabilities exceed the current assets as at the balance sheetdate.
d) The Government of India Ministry of Corporate affairs vide order F No 3/107/2018-CLII (WR) dated April 10 2018 has ordered Investigation into the affairs of the Companyunder Sec 212(1) (c) of the Companies Act 2013 by Serious Fraud Investigation Office andthe Director SFIO wide order no SFIO 2017-18/V/13513/2018 dated April 13 2018 and hasappointed Shri Dheeraj Kumar (Senior Assistant Director) as Investigation Officer underSec 212(4) of Companies Act 2013. Further the Enforcement Directorate has made anallegation against directors for criminal conspiracy with dishonest intention to cheatAndhra Bank and other public sector banks as per applicable provisions of Prevention ofMoney Laundering Act 2002 and has attached the assets of the company. This matter issub-judice and the impact if any of the enquiry is unascertainable till the date of theadoption of these Standalone Financial Statements.
e) The company has extended corporate guarantee for borrowings included in claimsadmitted Rs. 903077 lakhs as per point (a) above. However the matter is sub judice andthe outcome is unascertainable till the date of adoption of these Standalone FinancialStatements.
f) The manufacturing activities of the Ooty plant ofthe Company have been temporarilydiscontinued with effect from June 28 2018 due to alleged non-compliance of environmentalnorms after a change in stipulation of laws in the state of Tamil Nadu. The matter iscurrently under trial with the Environmental Pollution Control Board of Tamil Nadu and theplant is closed till the date of the adoption of these Standalone Financial Statements.
Pending the outcome of the matters described in the paragraph 1 to 17 and the mattersdisclosed in (a) to (f) above and possible impact thereof we are unable to obtainsufficient appropriate audit evidence as to whether the Company will be able to serviceits debts realize its assets and discharge its liabilities as and when they become dueover the period of next 12 months. Accordingly we are unable to comment on whether theCompany will be able to continue as Going Concern.
2. Corporate Guarantees and claims admitted
We draw attention to Note No. 21 read with Note No. 1 and 16 which indicates that:
a) The borrowings from Banks and financial Institutions as per Standalone financialstatement is Rs. 607040.38 lakhs as on March 31 2021 after considering Foreign CurrencyLoan/ECB. No Interest provision is made after June 11 2018 i.e. after commencement ofCorporate Insolvency Resolution Process (CIRP).
b) As mentioned in paragraph 1 (a) above and based on the records available in publicdomain as of February 11 2019 the claims admitted as per "List of Claims" isRs. 903077 lakhs against total claims received from financial creditors Rs.1501373lakhs against outstanding liabilities during the CIRP.
c) These claims include claims admitted in relation to corporate guarantee provided bythe company on behalf of the group companies which are not accounted for in the books ofaccounts. The matter is still pending.
d) As mentioned in paragraph 1 (a) above and based on the records available in publicdomain as of June 7 2021 the claims admitted as per "List of Claims (UpdatedVersion 1)" dated June 7 2021 is Rs. 982089.36 lakhs against total claims receivedfrom all the creditors Rs. 1603883.76 lakhs against outstanding liabilities during theLiquidation Process.
3. Carrying Value of Plant Property and Equipment ("PPE")
a) We draw attention to Note No. 3 that we have not been provided with the fixed assetsregister disclosing full particulars including quantitative details asset's physicallocation gross value and net block value of the property plant and equipment owned by theCompany.
b) As informed by Company it had not carried out the assessment ofProvision/Impairment of Property Plant and Equipment as required under "Ind /lS36-lmpalrment of Assets" and Accordingly we are unable to conclude on the carryingvalue of Property Plant and Equipment and the consequential impact if any on theStandalone Financial Statement.
c) We draw attention to Note No. 4 of the Standalone Financial Statement that Companyhas received termination letter dated 20th July 2021 for SEZ Lease agreement for BaruchGujarat dated 26th March 2010 and Facility Agreement dated 29th March 2012 from theResolution Professional of Sterling SEZ Infrastructure Limited. The Company through itsLiquidator has challenged the same before the Hon'ble NCLT Mumbai Bench on 9th August2021 and matter is sub-judice. Accordingly we are unable to comment on the possiblefinancial impact presentation and disclosures if any that may arise.
4. Investment of Property
Disclosure of Fair Value of Investment Property is not made as the latest fair valuereport is not available with the management.
We draw attention to Note No.6 read with Note No. 35 of the Standalone FinancialStatements which indicates the investment of Rs. 158402 lakhs of the Company inunquoted equity shares of various companies. The company has recorded an impairmentadjustment of Rs. 158402 lakhs against this amount FY 2018-2019. In absence ofdocumentation market-based assumptions and adequate valuation we are unable to commenton the completeness existence valuation rights and obligation and presentation anddisclosure of the equity shares (unquoted) and impairment adjustment recorded in theStandalone Financial Statements.
6. Deferred Tax Assets
We draw attention to Note No. 7 of the Standalone Financial Statements in respect ofrecognition of deferred tax asset of Rs. 55113.79 Lakhs (March 31 2020 Rs. 126247.60lakhs).
During the year company has made reversal of deferred tax asset of Rs. 71126.55 lakhsfrom brought forward deferred tax assets of Rs. 126247.60 lakhs. Accuracy of deferredtax assets could not be ascertained due to incomplete details of FAR (as mentioned inparagraph 3 of our report).
At this point of time and in absence of convincing evidence we cannot ascertain thatsufficient future taxable income will be available against which such deferred tax assetscan be realized such recognition is not in accordance with Ind 12 "IncomeTaxes". Had the aforesaid deferred tax assets not been recognised loss after tax forthe year ended March 31 2021 would have been higher by Rs. 55113.79 Lakhs and otherequity would have been lower by Rs. 55113.79 Lakhs.
7. Cash and Bank Balances
During our audit we have sent balance confirmation to banks/financial institutions forMarch 31 2021. We have not received response to our request for such balanceconfirmations towards Bank Balances of Rs. 191.90 lakhs (March 31 2020 Rs. 4443.89lakhs) and Fixed Deposit of Rs. 8.39 Lakhs (March 31 2020 Rs. 509.66 lakhs).
*1n absence of confirmations we are unable to determine whether any adjustments arerequired to the said balances as on March 31 2021 and related disclosures in StandaloneFinancial Statements.
** In absence of detailed Bank Statement (Only Bank Balance Confirmation received) theCompany has not made any adjustments to the Bank Balance and Fixed Deposit as on March 312021.
# Includes Bank Balance and Fixed Deposits held outside India of Rs. 249.21 Lakhs(March 31 2020 Rs. 252.83 Lakhs).
8. Contingent Liabilities
We draw attention to Note No. 21 of the Standalone Financial Statements the Governmentof India Ministry of Corporate Affairs have instructed Serious Fraud Investigation Officeand the Director SFIO to initiate investigation into the affairs of the company.
First Information Report under Sec 154 of The Code of Criminal Procedure 1973suspecting criminal conspiracy and abuse of official position during the period 2005-2011has been filed against Income Tax officers and Directors of the Company.
Further Enforcement Directorate have made an allegation against directors for criminalconspiracy with dishonest intention to cheat Andhra Bank and other public sector banks asper applicable provisions of Prevention of Money Laundering Act 2002 and has attached theassets of the company.
Pending outcome of the investigation we are unable to determine the potential impactof non-compliance with applicable laws and determine whether any further adjustments thatmay be necessary to these Standalone Financial Statements.
9. Major Regulatory Non-Compliances
We are unable to comment on the impact if any on the Standalone Financial Statementsfor Non compliances relating to Holding of Annual General Meetings Appointment ofInternal Auditors and Secretarial Auditors and regulation 33 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
Due to continuation of liquidation process we have not received latest Bank LoanStatement and their confirmations from respective Banks and Financial Institution. In theabsence of such direct confirmations from the banks / lenders or sufficient andappropriate alternate audit evidence we are unable to comment on the adjustments andchanges in classification of balances in accordance with the principles of Ind Afi 1Presentation of Standalone Financial Statements if any that may be required to thecarrying value of the aforementioned balances in the accompanying Standalone FinancialStatements.
11. Compliance with IND Afi
The Company has generally complied with the Indian Accounting Standards prescribedunder Section 133 of the Companies Act 2013 Subject to IND Afi 1 IND Afi 12 IND Afi16 IND Afi 40 and IND Afi 105 as observed in this Report at various places.
12. Non-Moving Inventories
We draw attention to Note No. 9 of the Standalone Financial Statements regardingnon-moving Inventories of Rs. 91.52 lakhs (As at March 31 2020: Rs. 95.16 lakhs) atfactory located at Ooty Tamilnadu. There is no movement in the stock since the operationsis closed at factory as mentioned in Paragraph 1 of our report as Management believesthat no adjustments to the carrying value of the inventories is required as those areregularly monitored maintained and in usable/ saleable condition. As per Ind Afi - 2'Inventories' are to be.Valued at the lower of cost
and net realisable value. However we are unable to comment on the realisable value ofthese Inventories together with consequential impact.
13. Information pertaining to Committee of Creditors
We have been informed by Liquidators that certain information; including the minutes ofmeetings of the Committee of Creditors and the outcome of valuation exercise carried outunder the CIRP and Liquidation part of the Liquidation are confidential in nature andcould not be shared with anyone other than the Committee of Creditors and NCLT.Accordingly we are unable to comment on the possible financial impact presentation anddisclosures if any that may arise.
14. Advances for Capital goods & Advance to suppliers
We draw attention to Note No. 8 & 12 which includes the balance of Advances forcapital goods of Rs. 33.45 Lakhs (March 31 2020 Rs. 33.45 Lakhs) & Advance tosuppliers of Rs. 74.84 Lakhs (March 31 2020 Rs. 74.84 Lakhs) are
receivable for a substantial period. The balances are subject to confirmations andreconciliations. The reported Standalone Financial Statement may have consequential impactupon the receipt of confirmations and reconciliation if any is made.
15. Assets Held for Sale
We draw attention to Note no. 13(a) that the company has reclassified the land situatedat Vadodara Gujarat from "Property Plant and Equipment" to "Assets heldfor sale". As per Ind AS 105 'Non-current assets held for sale and discontinuedoperations' an entity shall measure a non-current asset classified as held for sale at thelower of its carrying amount and fair value less costs to sell/costs to distribute.
The Company has not determined the fair value as at the date of reclassification andhas classified the land at its carrying value of Rs. 34.64 lakhs (March 31 2020 Rs. 34.64Lakhs). The same is not in compliance with Ind AS 105 and we are unable to ascertain onthe financial impact of the same if any.
16. Advances to staff and Other Payables
We draw attention to Note No. 12 which includes Staff Advance of Rs. 63.37 lakhs as onMarch 31 2021 in absence of complete information of persons from whom it is receivablemanagement has not ascertained its recoverability. In absence of provision there againstthe loss for the year is understated to that extent Standalone Financial Statements.
Further we draw attention to Note No. 20 which includes other Payable of Rs. 37.29Lakhs as on March 31 2021 in absence of complete information of persons to whom it ispayable we can't ascertain the financial impact if any on the Standalone FinancialStatements.
17. Unpaid dividend
We draw attention to Note No. 39 of the Standalone Financial Statements with respect toUnpaid Dividend of Rs. 4289045/- pertaining to financial year ended December 2010 isnot yet transferred to Investor Education and Protection Fund by the Company as on thedate of signing of the Standalone Financial Statements.
As per section 124(6) of the Companies Act 2013 (Act) provides that all shares inrespect of which dividend has not been paid or claimed for 7 consecutive years or moreshall be transferred to Investor Education and Protection fund compliance for the samehas not been done for Unpaid Dividend pertaining to financial year ended December 2009.
Key Audit Matter
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements of the current period.These matters were addressed in the context of our audit of the Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
We have determined that there are no key audit matters to communicate in our reportexcept the matters described in Basis of Disclaimer of Opinion paragraph.
Information Other than the Financial Statements and Auditor's Report Thereon
In v\ew of ongoing Liquidation process the Liquidator is responsible for thepreparation of the other information. The other information comprises the informationincluded in the management Discussion and Analysis Board's Report including Annexure toBoard's Report Corporate Governance and Shareholder's Information but does not includethe Standalone Financial Statements and our auditor's report there on. These reports arenot made available to us.
Our opinion on the Standalone Financial Statements does not cover the other informationand we do not express any form of assurance conclusion there on.
In connection with our audit of the Standalone Financial Statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the financial statements or our knowledge obtained duringthe course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Hon'ble Supreme Court ("SC") has passed its Order dated February 22 2021for Liquidation of M/s Sterling Biotech Limited "as going concern". Dr. MamtaBinani who has already been appointed as the liquidator of the company by NCLT order noCP(IB) 490/MB/2018/457 dated May 13 2019 will continues to be liquidator of the company.
The Liquidator shall exercise the powers and duties as enumerated in sections 35 to 5052 to 54 of the Insolvency and Bankruptcy Code 2016 read with Insolvency and BankruptcyBoard of India (Liquidation Process) Regulations 2016.
In view of ongoing liquidation process The Liquidator is responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation and presentation of these Standalone Financial Statements that give a trueand fair view of the financial position financial performance (including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards specified 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 and
completeness of the accounting records relevant to the preparation and presentation ofthe 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. Under sections 35 to 50 52 to 54 of the Insolvency andBankruptcy Code 2016 read with Insolvency and Bankruptcy Board of India (LiquidationProcess) Regulations 2016 it is incumbent upon liquidator to manage the operations ofthe Company as a going concern and the statements have been prepared on going concernbasis.
Auditors Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the IND AS 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 IND AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the IND AS 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 control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinionon whether the company has adequate internal financial controls system in place and theoperating effectiveness 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 IND AS 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 IND AS financialstatements including the disclosures and whether the IND AS financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the IND AS financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirementsregardingindependence and to communicate with them allrelationships 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 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.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 (the Order") issued bythe Central Government of India in terms of Section 143(11) of the Act we give in the"Annexure A" a statement on the matters specified in the paragraph 3 and 4 ofthe Order to the extent applicable.
I. As required by Section 143(3) of the Act we report that:
a) Due to the possible effects of the matters described in Basis for Disclaimer ofOpinion paragraph we are unable to obtain all the information and explanations which tothe best of our knowledge and belief which were necessary for the purpose of our audit;
b) Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether proper books of account as required bylaw have been kept by the Company so far as appears from our examination of chose books;
c) In our opinion we conclude that the Balance Sheet Statement of Profit and Loss andCash Flow Statement dealt with by this Report are in agreement with the books of accounts;
d) Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the aforesaid Standalone FinancialStatements comply with the Accounting Standards specified under Section 133 of the Actread with Companies (Indian Accounting Standards) Rules 2015 as amended
e) Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether such matters have any adverse effect onthe functioning of the Company.
f) In the term of section 17 (1) (b) of the Insolvency and Bankruptcy Code 2016("the Code") the powers of the board of directors have been suspended and beexercised by the Liquidator of the Company. Hence written
representation from directors have not been taken on record by the Board of Directors.Accordingly we are unable to comment whether none of the director is disqualified as onMarch 31 2021 from being appointed as a director in the terms of Section 164 (2) of theAct.
g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Disclaimer of Opinion paragraph;
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".
II. 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 information and explanations givento us.
i. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion we are unable to state whether the Standalone Financial Statements disclose thecomplete impact of pending litigations on its financial position.
ii. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the Company has made provision asrequired under the applicable law or accounting standards for material foreseeablelosses if any on long-term contracts.
iii. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion (Paragraph 17) we are unable to state whether there were any amounts which wererequired to be transferred during the year to the Investor Education and Protection Fundby the Company apart from the matter disclosed in the Emphasis of Matter paragraph.
Ill. As required by Section 197 (16) of The Companies Act 2013 we report that theCompany has not paid remuneration to its directors. The compliances under theaforementioned section are not applicable.
Annexure-A to the Independent Auditor's Report
The annexure referred to in our report to the members of Sterling Biotech Limited("the company") for the year ended March 31 2021. We report that:
1. In respect of its fixed assets:
a. In absence of sufficient and appropriate audit evidence we are unable to commentwhether the Company has maintained proper records of fixed assets showing fullparticulars including quantitative details and situation of fixed assets.
b. We have not been provided reports of physical verification of fixed assets conductedby the management during the financial year 2020-21 or any of the preceding years. We havenot been provided with the Company's policy on physical verification of fixed assets itsfrequency and its reasonableness having regard to the size of the Company and nature ofits assets. Accordingly we are unable to comment on this Clause.
c. We have only been provided with title deed of Land held at Ooty Jambusar & Karakhadi. Title deed provided and verified by us are in the name of the Company. However inthe absence of proper records of the fixed assets available with the Company it is notpossible for us to comment on the completeness of the title deeds for other immovableproperty if any.
2. In respect of Inventory
The inventory has been physically verified by the management during the year atreasonable intervals. In our opinion the frequency of such verification is reasonable. Thediscrepancies noticed on verification between the physical stocks and the book recordswere not material having regard to the size of the operation of the Company and the samehave been properly dealt with in the books of account.
3. In respect of Loans given by company
In respect of loans secured or unsecured granted by the Company to companies firmslimited liability partnership or other parties covered in the register maintained underSection 189 of the Companies Act 2013 (the Act) we have not been provided with therequired details. Further we have not been provided with the updated Register undersection 189 of the Act. Accordingly we are unable to comment on the completenessaccuracy & relevant legal compliance & provisions of clauses 3(i)(a) 3(iii)(b)and 3(iii)(c) of the Order.
4. In respect of Loan to Directors and Investments by the Company
As no information relating to the interests of the Directors in other companies asrequired under section 185 of the Act are made available to us we are unable to commenton the compliance with the provisions of the said section for the loans and investments bythe Company.
5. In respect of Deposits
According to the information and explanations given to us the Company has not acceptedany deposits within the meaning of sections 73 to 76 of the Act or any other relevantprovisions of the Companies Act 2013 and the rules framed there under. Accordingly theprovisions of Clause 3 (V) of the Order are not applicable.
6. In respect of Cost Records
We have broadly reviewed the books of accounts maintained by the Company pursuant tothe Rules made by the Central Government for the maintenance of cost records under section148 of the Companies Act 2013 and we comment that prima facie the prescribed accountsand records have been made and maintained.
7. In respect of Statutory Dues
a. According to the information and explanations given to us and records of the Companyexamined by us in our opinion the Company is generally regular in depositing theundisputed statutory dues including Provident Fund Employees' State Insurance IncomeTax Sales Tax Service Tax Cess Goods and Service Tax duty of custom duty of exciseValue Added Tax and other material statutory dues as applicable with the appropriateauthorities.
b. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no undisputed statutory duesincluding Provident Fund Employees State Insurance and Goods & service tax Incometax and Custom Duty outstanding as at the year-end for a period of more than six monthsfrom the date they became payable. Except unpaid dividend of Rs. 42.89 Lakhs pertaining tothe financial year ended December 2010 is not yet transferred to Investor Education andProtection Fund by the Company.
c. According to the information and explanations given to us and as per the records ofthe Company the details of disputed dues of Income Tax Sales Tax Service Tax CustomsDuty Excise Duty and Value Added Tax as at March 31 2021 are as follows:
Against the Sr. No. 22 the company has already paid Rs. 3130.15 Lakhs to Income TaxDepartment under Protest and for Balance of Rs. 58.74 lakhs company has already providedLiability for the same in the Standalone Financial Statements.
Against the Sr. No. 23 and 24 the company has already paid Rs. 824.27 Lakhs to IncomeTax Departments under Protest.
Against the Sr. No. 11 the Company has received the notice U/S 32/34/35 of GujaratValue Added Tax dated March 27 2019 of Rs. 103.90 Lakhs for the Assessment Year2014-2015 against which the department on sue moto recovered Rs. 123.93 Lakhs from theCompany's Bank Account on June 15 2020. Against the recovery the company has filed anappeal with Hon'ble National Company Law Tribunal (Mumbai Bench) as the recovery is inviolation of Sec 14 of Insolvency and Bankruptcy Code.
Further Hon'ble NCLT by order dated September 22 2020 has directed the AssistantCommissioner of State Tax to refund the sum of Rs. 123.93 Lakhs to the company. Furthercompany has received mail dated February 5 2021 from the department stating that they aregoing to file Appeal against the Order of Hon'ble NCLT dated Sept 22 2020. The AssistantCommissioner of State Tax has filed Memorandum of Appeal on February 16 2021 beforeHon'ble NCLAT and the said matter is still pending with Hon'ble NCLAT.
** The above figures exclude interest and penalty liability up to the reporting dateunder various statutes.
8. In respect of repayment of Loans
As matters described in Note No. 16 to the Standalone Financial Statements andpursuance of repayment schedule stipulated in the sanction letter the entire amount ofborrowing including interest are overdue and continuing default as on March 31 2021therefore we are unable to provided periods of default.
The details of outstanding amounts as on March 31 2021 (inclusive of interest) as perbooks of account are as given below
We have not been provided latest bank balance statement to verify the o/s balance ofthe loans as listed above as on March 31 2021. As per Management the company iscontinuously following up with the Banks for the latest balance confirmation and statementof loan.
With Respect to Sr. No. 54 the amount of Rs. 506.21 L.akhs which is Debit balance withthe Banks the details with respect to this amount to consortium Partners details of thebalance and distribution of the amount is subject to confirmation.
9. In respect of utilization of funds
According to the information and explanations given to us the Company did not raisemoney by way of initial public offer or further public offer (including debt instruments)and term loans during the year. Accordingly the provisions of Clause 3 (ix) of the Orderare not applicable.
10. In respect of reporting of Frauds
The Government of India Ministry of Corporate affairs has ordered Investigation intothe affairs of the Company by Serious Fraud Investigation Office and the Director SFIO.First Information Report under Sec 154 of The Code of Criminal Procedure 1973 suspectingcriminal conspiracy and abuse of official position during the period 2005-2011 has beenfiled against Income Tax officers and Directors of the Company. Consequent toinvestigations by Directorate of Enforcement a Supplementary Prosecution Complaint hasbeen filed on October 23 2018 by Assistant Director Directorate of Enforcement againstthe Company its Promoters and others. As the final outcome of all these investigationsare pending with various agencies we are unable to comment on the implication of thesefrauds on the Standalone Financial Statements of the Company.
11. In respect of approval of managerial remuneration
As required by Section 197 (16) of the Act we report that the Company has not paidremuneration to its directors. The compliances under the aforementioned section are notapplicable and hence reporting under paragraph 3(xi) of the Order is not applicable to theCompany.
In our opinion the Company is not a Nidhi Company and hence reporting under paragraph3(xii) of the Order is not applicable to the Company.
13. In respect of Related Party Transaction
In our opinion and according to the information and explanations given to us we areunable to obtain sufficient and appropriate audit evidence to comment whether alltransactions with the related parties as disclosed in Note No. 34 to the StandaloneFinancial Statements are in compliance with section 177 and 188 of Companies Act 2013.Further where applicable the details have been disclosed in the Standalone FinancialStatements as required by the applicable accounting standards.
14. In respect of Private Placement of Preferential Issues
The Company has not made any private placement during the year. Hence Clause 3 (xiv)is not applicable.
15. In respect of Non-Cash Transactions
Due to the possible effects of matters stated in Basis of Disclaimer of Opinionparagraph we are unable to comment on any non-cash transactions entered into with thedirectors or persons connected with them.
16. In respect of Registration under RBI Act
According to the information and explanation given to us and to best of our knowledgeand belief the company is not required to obtain any registration under Section 45-IA ofthe Reserve Bank of India Act 1934.
Annexure - B to the Independent Auditors' Report
INDEPENDENT AUDITORS REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (I) OFSUB-SECTION 3 OF SECTION 143 OF THE COMPANIES ACT 2013 (THE ACT).
We were engaged to audit the internal financial controls over financial reporting ofSterling Biotech Limited ("the Company") as at and for the year ended March 312021 in conjunction with our audit of Standalone Financial Statements of the Company forthe year ended on that date.
Managements 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 to the extent applicable toan audit of internal financial controls both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate 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 judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified audit opinion on the Company's internal financial controlssystem 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 accurately andfairly 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 in accordance with authorisations of management anddirectors of the company; and
(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Basis for Disclaimer of Opinion
According to the information and explanations given to us the Company has notestablished its internal financial control over financial reporting on criteria based onor considering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India.
Disclaimer of Opinion
Because of the significance of the matter described in the Basis for Disclaimer Opinionparagraph above and in our main audit report we are unable to obtain sufficientappropriate audit evidence to provide a basis for our opinion whether the Company hadadequate internal financial controls over financial reporting and whether such internalfinancial controls were operating effectively as at March 31 2021. Accordingly we do notexpress an opinion on the Company's internal financial controls over financial reporting.
We have considered the disclaimer reported above in determining the nature timing andextent of audit tests applied in our audit of the IND AS financial statements of theCompany for the year ended March 31 2021 and the disclaimer does not affect our opinionon the said IND AS financial statements of the Company.
For MRB & Associates Chartered Accountants
on Number: 136306W