TO ALL THE MEMBERS OF
TREE HOUSE EDUCATION & ACCESSORIES LIMITED
Report on the Standalone Indian AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of TREEHOUSEEDUCATION & ACCESSORIES LIMITED ("the Company") which comprise the BalanceSheet as at March 312020 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and a summary of significant accounting policies and other explanatoryinformation..
Management's Responsibility for the Standalone AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to preparation ofthese standalone Ind AS financial statements to give a true and fair view of the financialposition financial performance (including other comprehensive income) cash flows andchanges in equity of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting standards specified in the Companies(Indian Accounting Standards) Rules 2015 (as amended) under Section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of 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 Ind As financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit.
We have taken into account the provisions of the Act and the Rules made thereunderincluding the accounting and auditing standards and matters which are required to beincluded in the audit report under the provisions of the Act and the Rules madethereunder.
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act and other applicableauthoritative pronouncements issued by the Institute of Chartered Accountants of India.Those standards and pronouncements require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether the standalone IndAS financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the standalone Ind AS financial statements. The procedures selected dependon the auditor's judgment including the assessment of the risks of material misstatementof the standalone Ind AS financial statements whether due to fraud or error. In makingthose risk assessments the auditor considers internal financial control relevant to theCompany's preparation of the standalone Ind AS financial statements that give a true andfair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the standalone Ind AS financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.
Basis of Forming an Opinion
1. We draw your attention to the Standalone Ind AS Financial Statements with regard toFixed Assets. The Company has discontinued most of the centres operated by the Companyduring F.Y. 2016-17 and have converted some of them into franchisee during F.Y. 2016-17& 2017-18. The Company has informed us that it has identified Furniture & Fixturesand Leasehold Improvements into those lying at closed centres franchise centres and owncentres in a phased manner.
2. During the year the company has allotted new franchise to 1 centre. There were inall 131 centres operative during the year 2019-20.
3. We draw attention to the Standalone Ind AS Financial Statements with regards toTrade Receivables. In our opinion the deliverables and receipts are outstanding for alonger period of time.
4. The Company has defaulted in repayment of loans availed from financial institutionsdue to which these borrowings have been classified as short term borrowings. Themanagement has informed us that the Company has received notices from financialinstitutions under "SARFAESI Act". The amount classified as short termborrowings is at Rs. 2832.72 lakhs.
5. The Company had received an advance of Rs. 260.00 lakhs against sale of schoolbuilding at Baroda which is utilized by HDFC Bank in payment of OD Interest. Rs. 30 lakhsreceived from sale of investments in M.T. Infrastructure Pvt Ltd and Rs. 300 lakhs as anadvance against sale of Goregaon land during F.Y 2018-19 has been adjusted againstrepayment of HDFC loan. Balance Rs. 2700.00 lakhs received from sale of goregaon land hasalso been adjusted against repayment of HDFC loan.
Rs. 867.85 lakhs received from sale of office at Morya House Andheri has been utilizedfor repayment of loan from Kotak Mahindra Bank. Rs. 375.00 lakhs received from sale ofoffice at Vile Parle has been utilized for repayment of loan from ICICI Bank.
6. The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on physicalverification of stocks as compared to book records. However during the year under auditthe company has bifurcated the inventory into non-moving obsolete redundant.
7. Confirmation letters have been sent by the Company to sundry creditors and partiesto whom loans & advances deposits have been granted for confirming the balances lyingin their ledger accounts in books of the Company. In view of confirmations having beenreceived from only few of the parties the balance under these heads have been shown asper books of accounts and are subject to reconciliation and adjustment if any.
8. SEBI has appointed Forensic Auditor for conducting Forensic Audit of the Company forthe period beginning from F.Y. 2011-12 to 2017-18. The Company is defending / pursuinglegal cases on various Forums against itself and its past directors.
9. Some landlords and creditors have initiated legal proceedings against the Companywhich may result in compensation interest and other penalties.
10. Impact of COVID-19 on the financials
In March 2020 the WHO declared the COVID-19 outbreak as a pandemic which continues tospread across the country. On 25th March 2020 the Government of India has declared thispandemic a health emergency ordered temporary closure of all non-essential businessesimposed restrictions on movement of goods/material travel etc. As the nature of businessperformed by the Company fell under non-essential category these restrictions had stoppedits operations at its owned and various franchise centres.
Registered Office of the Company was under lockdown (closed) for almost two and halfmonths however staff was permitted to work from home as per the policy adopted by theCompany of "Work from home " and all essential and required functions were beingperformed with limited access.
As Company's owned and franchise centres are closed due to lockdown and theuncertainity prevailing for re-opening of the centres the admissions of the students havebeen effected badly for the academic year 2020-2021.
The pandemic has effected badly on the liquidity flow of the Company.
Some of the severe impact which company estimates COVID-19 will have on it's financialsin future are:
1) Cash flow crunch;
2) Significant reduction in numbers of centres;
3) Reduction in collection of royalty;
4) Reduction in number of students;
5) Reduction in fees structure;
6) Delay in serving debt to the banks;
It is worthwhile to mention that Corporate Governance and legal compliances have alwaysbeen the topmost priority of the Company and Company ensures that all availableinformation about the impact of these events on the company and its operations iscommunicated in a timely and cogent manner to its investors and stakeholders.
In our opinion and to the best of our information and according to the explanationsgiven to us the afore said standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the standalone state ofaffairs of the Company as at March 312020 and its loss (including other comprehensiveincome) its cash flows and the changes in Equity for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of section 143(11) of the Act ("The Order") andon the basis of such checks of the books and records of the Company as we consideredappropriate and according to the information and explanations given to us we give in theAnnexure B statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by section 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 purpose of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss(including other comprehensiveincome) and the Cash Flow Statement and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act.
e) Ms. Amita Karia Non Executive Independent woman director has resigned from theBoard and committees with effect from 12.03.2020. Further Ms. Babita Bhatia has beenappointed as Non Executive Non Independent woman director with effect from 23.06.2020.
f) 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 A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the company's financial controls overfinancial reporting.
g) With respect to other matters to be included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us:
i. The Company has numerous pending litigations and suits filed against the company andits directors which may impact its financial position. The Company has not disclosed theimpact of such pending litigations.
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There are no amounts required to be transferred to the Investor Education andProtection Fund by the Company during the year ended March 312020.
For S. Dedhia & Co
Chartered Accountants F.R.N. 117695W
CA Sandeep Dedhia
Proprietor M. No.102606
UDIN : 20102606AAAAAJ3396
Date : 09/07/2020
Place : Mumbai
Annexure "A" to Independent Auditors' Report on the Standalone FinancialStatements of "TREE HOUSE EDUCATION & ACCESSORIES LIMITED"
Referred to in paragraph 11(f) of the Independent Auditors Report of even date to themembers of Tree House Education & Accessories Limited on the standalone Ind ASfinancial statement for the year ended March 312020.
We have audited the internal financial controls over financial reporting of"TREEHOUSE EDUCATION & ACCESSORIES LIMITED" ("the Company") as ofMarch 312020 in conjunction with our audit of the standalone Ind AS financial statementsof 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 Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the 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 Notes") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing deemed to be prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsboth applicable to an audit of internal financial controls and both issued by the ICAI.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit and evidence about theadequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
Because of the matter described in Disclaimer of opinion paragraph below we were notable to obtain sufficient and appropriate audit evidence to provide a basis for our auditopinion on the Company's internal financial controls 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 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 inaccordance with authorizations of management and directors of the company and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projection 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.
DISCLAIMER OF OPINION
According to information and explanation given to us and based on our audit theCompany's internal financial control over financial reporting in the current financialyear to cover the essential components of Internal controls stated in Guidance Note onAudit of Internal Financial controls over Financial Reporting issued by ICAI are notcommensurate to the size of the Company.
The Internal Audit carried out by an independent firm on areas required to be coveredas per the Guidance Note on Audit of Internal Financial Controls over Financial Reportingreports that the internal controls operating in the company are not commensurate to thesize of the Company.
We have considered the disclaimer report above in determining the nature timing andextent of audit tests applied in our audit of standalone financial statements of thecompany and the disclaimer does not affect our opinion on the standalone financialstatements of the company.
For S. Dedhia & Co.
Chartered Accountants F.R.N. 117695W
CA Sandeep Dedhia
Proprietor M. No.102606
UDIN : 20102606AAAAAK3497
Annexure "B" to Independent Auditors' Report on the Standalone FinancialStatements of "TREE HOUSE EDUCATION & ACCESSORIES LIMITED"
Referred to in paragraph 1 under the heading "Report and Other Legal RegulatoryRequirements" of Independent Auditors' Report of even date to the Members ofTreeHouse Education & Accessories Limited on the Standalone Ind AS financialstatements as of and for the year ended March 312020.
i. a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. The management has identified thefixed assets consisting of furniture & fixtures and leasehold improvements into thoselying at closed centres franchise centres and own centres.
b) As explained to us by the management it is known that the company has carried out aphased programme of verification of fixed assets consisting of furniture & fixturesleasehold improvements and teaching aids &equipments located at franchise centres andno material discrepancies were noticed on such verification. It is further explained bythe management that the fixed assets consisting of furniture & fixtures and leaseholdimprovements lying at the centres closed during F.Y. 2015-16 & 2016-17 could not bephysically verified as the company did not have access to those centres. However we areunable to verify the reasonableness of the same as necessary documentary evidences werenot made available for our verification.
c) The title deeds of immovable properties are held in the name of the Company howeverall such Immovable properties are pledged with banks & financial institutions.
ii. The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on physicalverification of stocks as compared to book records. However during the year under auditthe company has bifurcated the inventory into non-moving obsolete redundant. The saidnonmoving obsolete redundant inventory is of scrap value however in the absence ofexact scrap realisation value the same is valued at cost.
iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties during the year covered in the registermaintained u/s 189 of the Act. Accordingly the provisions of Clause 3(iii) of the Orderare not applicable to the Company.
iv. In our opinion and according to the information and explanation given to us theCompany has complied with the provisions of section 186 of the Companies Act 2013 inrespect of the loans and investments made and guarantees and security provided by it.
v. The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank of India and the provisions of sections 73 to 76 or any otherrelevant provisions of the Act and the rules framed there under are not applicable.
vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. We have broadly reviewed the same and are of the opinion that prima faciethe prescribed accounts and records have been made and maintained. We have not howevermade a detailed examination of the records with a view to determine whether they areaccurate or complete.
vii. a) As per records of the Company and according to the information and explanationsgiven to us the Company is not regular in depositing in undisputed applicable statutorydues including Provident Fund ESI Income-tax MVAT/CST GST and any other statutory duesto the appropriate authorities though there has been a delay in few cases. As on 31stMarch 2020 following are the amounts in arrears for a periods of more than six monthsfrom the date they became payable:
|Sr No ||Name of the Statue ||Nature of Dues ||Unpaid Liabilities > 6 months |
|1 ||Income Tax Act 1961 ||TDS ||25545970/- |
|2 ||Goods & Service Tax Act 2017 ||GST ||131691/- |
|3 ||Maharashtra Vat Act 2002 ||MVAT & CST ||2975786/- |
| || || || |
|4 ||The Employees' Provident Funds And Miscellaneous Provisions Act 1952 ||PF ||2561814/- |
|5 ||Employees' State Insurance Act 1948 ||ESIC ||111270/- |
|6 ||Profession tax Act under respective states ||Profession Tax ||343160/- |
| ||TOTAL || ||31669691/- |
viii. According to the records of the Company examined by us and the information andexplanations given to us the Company has defaulted in the repayment of loans orborrowings to financial Institutions banks or government during the year. The Company didnot have any outstanding debentures at the balance sheet date.
ix. According to the information ad explanation given to us the Company has not raisedmoneys by way of initial public offer further public offer including debt instrumentsduring the year. In our opinion and according to the information and explanations given tous the company has applied the term loans for the purposes for which they were obtained.
x. During the course of examination of the books and records of the Company carried outin accordance with the generally accepted auditing practices in India and according to theinformation and explanations given to us we have neither come across any instance ofmaterial fraud by the Company or on the Company by its officers or employees noticed orreported during the year nor have we been informed of any such case by the Management.
xi. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.
xii. Ms. Amita Karia Non Executive Independent woman director has resigned from theBoard and committees with effect from 12.03.2020. Further Ms. Babita Bhatia has beenappointed as Non Executive Non Independent woman director with effect from 23.06.2020.
xiii. In view of the losses managerial remuneration has not been paid or provided inaccordance with the requisite approvals as mandated by the provisions of Section 197 readwith Schedule V of the Act.
xiv. Based upon the audit procedures performed and the information and explanationsgiven by the management no such transactions as specified in section 177 and 188 of theAct have been entered by the company during the year. Therefore the provisions of Clause3(xiii) of the Order are not applicable to the Company.
xv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.
xvi. The company has not entered into any non-cash transactions with its directors orpersons connected with him as specified in section 192 of the Act. Accordingly theprovisions of Clause 3(xv) of the Order are not applicable to the Company.
xvii. The Company is not required to be registered under Section 45-1A of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.
For S. Dedhia & Co.
CA Sandeep Dedhia
UDIN : 20102606AAAAAK3497