the Members of
U. P. Hotels Limited
Report on the Ind AS Financial Statements
We have audited the accompanying Ind AS financial statements of U. P. Hotels Limited("the Company") which comprises the Balance Sheet as at March 31 2018 theStatement of Profit and Loss (including Other Comprehensive income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "the Ind AS financial statements").
Management's responsibility for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Ind AS financial statements that 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 ("Ind AS")prescribed under section 133 of the Act read with relevant rules issued thereunder.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities selection and application ofappropriate accounting policies making judgements and estimates that are reasonable andprudent and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the adequacy and completeness ofthe accounting records relevant to the preparation and presentation of the Ind ASfinancial statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Our responsibility is to express an opinion on these Ind AS financial statements basedon our audit.
In conducting our audit we have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe Ind AS financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Ind AS financial statements. The procedure selected depends on theauditor's Judgement including the assessment of the risk of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of Ind AS financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company's Directors as well as evaluating theoverall presentation of the 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 Ind AS financial statements.
Basis of Qualified Opinion
Attention is drawn to the following notes:
(i) Note 39.1 to 39.3 regarding non-compliance of Minimum Public Shareholding by way ofissue of bonus shares in terms of shareholders resolution dated 23.07.2013 on account ofvarious litigations delisting etc. as explained in the said notes. As such the Companyis yet to comply with the Listing Regulation as regards Minimum Public ShareholdingSecurities & Exchange Board of India directives etc.
(ii) Note 40.1 to 40.3 regarding concerns raised by the two Joint Managing Directorsregarding working of the hotels and certain/various aspects of management and othermatters petition filed by one Joint Managing Director under Sections 397/398 402 403and 237 of the Companies Act 1956 and Sections 219 & 220 of the Companies Act 2013for oppression & mismanagement and raising of various concerns before the Company LawBoard (now the National Company Law Tribunal) and contesting of the petition by the otherJoint Managing Director which is explained in the said notes on which we are unable tomake any comment. Due to ongoing disputes and internal differences there are differencesof opinion/disagreement in the manner in which the internal financial controls need to bestrengthened further and certain discrepancies / non compliances relating to various ActsListing Regulations etc. Further the Company could not put into an operation the policyon risk management during the year and is in the process to introduce /implement internalfinancial controls along with risk matrix / management system. The said note alsoindicates the uncertainty related to the outcome of the above legal matter i.e. petitionfiled.
(iii) Note 41regarding non-compliance of various provisions of SEBI (Listing Obligationand Disclosure Requirement) Regulations 2015 (viz. Publication of financial results forany of the quarter ending during the year Minimum Public Shareholding 100%dematerialisation of promoters shareholding)Provisions of Companies Act 2013(viz.Approval of Related Party Transaction under Section 188 by the Audit Committee & theBoard of Directors and recording of such transaction in the register under Section189etc.) as explained in said notes on account of various disputes/litigationsdifferences of opinion/disagreements etc. As such appropriate discussions / supervision /review / flow of information / monitoring could not take place. These defaults andnon-compliances in current and previous years may result in penalties etc. which are notquantifiable at this stage.
(iv) The ultimate outcome of the matter specified in paras (i) to (iii) cannotpresently be determined and its consequential impact on these financial statements cannotbe ascertained.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effect of the matters described in the Basis of QualifiedOpinion paragraph the financial statements give the information so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia including the Ind AS of the state of affairs of the Company as at March 31 2018and its financial performance including other comprehensive income its cash flows and thechanges in equity for the year ended on that date.
Emphasis of Matters
Without qualifying our opinion we draw attention to the Note no. 42 as regardsimposition of fine of Rs. 19.95 lakhs by BSE Limited for various non- compliances.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
(i) As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act and on the basis of such checks of the books and records of theCompany as we considered appropriate and as per information and explanations given to usduring the course of audit we give in the Annexure A a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
(ii) 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 purposes of our audit.
b) Except for the matters described in the Basis of Qualified Opinion paragraph in ouropinion proper books of accounts 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 of Profit and Loss (including other comprehensiveincome) the Statement of Cash Flows and the Statement of the Changes in Equity dealt withby this report are in agreement with the books of accounts.
d) In our Opinion the aforesaid Ind AS financial statements comply with the IndianAccounting Standards prescribed under section 133 of the Act read with relevant rulesissues thereunder.
e) On the basis of the written representations received from the directors as on 31stMarch 2018 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2018 from being appointed as director in terms of section164(2) of the Act.
f) Based on the checking of the books and records of the Company as we consideredappropriate and as per information and explanations given to us our separate report withrespect to the adequacy of the internal financial controls over financial reporting of thecompany and the operating effectiveness of such controls is as per Annexure B.
g) 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 information and according to the explanations given to us:
The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note no. 24 to the financial statements;
The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.
There is no delay in transferring amounts to the Investor Education andProtection Fund.
For Satinder Goyal & Co.
Firm's Regn. No: 027334N
Membership No. : 084613
Date: 29th May 2018
Place: New Delhi
Annexure A to the Independent Auditors' Report
(Referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date on the standalone IndAS financialstatements of U. P. Hotels Limited for the year ended 31st March 2018
(i) (a) The Company is maintaining proper records showing full particulars includingQuantitative details and situation of its fixed assets.
(b) According to the explanation and information given to us the Company has a regularprogramme of physical verification of its fixed assets. In our opinion the frequency ofphysical verification is reasonable having regard to the size and the nature of itsassets. As informed to us the discrepancies noticed on such verification were notmaterial and have been properly dealt with in the books of accounts.
(c) According to the information and explanations given to us and on the basis of ourexamination of the books of accounts the title deeds of immovable property are held inthe name of the Company.
(ii) As explained to us the inventories were physically verified during the year bythe Management at reasonable intervals and no material discrepancies were noticed onphysical verification. The discrepancies noticed on physical verification of inventory ascompared to books of accounts were not material.
(iii) During the year the Company has not granted any loans secured or unsecured toCompanies firms or other parties covered in the Register maintained under Section 189 ofthe Act. Loan amount of Rs.8.70 lakhs outstanding on 1.4.2017 has been recovered by thecompany during the year i.e. on 30th June 2017.
(iv) According to the information and explanations given to us in respect ofguarantee security loans and investments made by the Company the provisions of section185 and 186 of the Act have been complied with. Loan amount of Rs. 8.70 lakhs given in theyear ending 31.03.2017 to two relatives of directors has been recovered during the year.
(v) The Company has not accepted any deposits from the public. As such requirement ofclause (v) of paragraph 3 of the aforesaid order is not applicable.
(vi) The Central Government has not prescribed the maintenance of cost records undersection 148(i) of the Companies Act 2013 in respect of services carried out by theCompany.
(vii) a) According to records of the Company the Company is generally regular indepositing undisputed statutory dues including provident fund investor education andprotection fund employees' state insurance income tax sales tax wealth tax servicetax custom duty excise duty cess and other statutory dues applicable to it with theappropriate authorities.
According to information and explanations given to us except for the cases statedbelow there are no other undisputed amount payable in respect of provident fund investoreducation & protection fund income tax employees state insurance wealth tax salestax custom duty service tax excise duty cess and other statutory dues which wereoutstanding at the year end for period of more than six months from the date they becomepayable.
| ||Amount in lakhs |
|House Tax/ Municipal Tax & Water tax /cess ||48.3 |
b) According to the information and explanations given to us there are no duesoutstanding of custom duty excise duty income tax wealth tax and cess on account of anydispute which have not been deposited except for:
|Name of statute ||Nature of dues ||Assessment Years ||Forum where dispute is pending ||Amount in lakhs |
|Income tax Act 1961 ||Income Tax ||2014-15 ||Commissioner of Income Tax Appeal Lucknow ||9.11 |
| || ||1989-90 to 1991-92 ||Hon'ble High Court of Allahabad* ||58.59 |
*Please refer Note no. 24(a) to the Financial Statements.
(viii) As per books and records maintained by the Company and according to theinformation and explanations given to us the Company has no dues to the financialinstitution/bank as there was no loans outstanding as on 31.3.2018 from them. The Companyhas no debenture holder and loan from government. As such requirement of para 3 (viii) ofthe Order is applicable to the Company.
(ix) The Company has not raised moneys byway of initial public offer or further publicoffer (including debts instruments) or term loan. As such requirement of para 3 (ix) ofthe Order is not applicable to the Company.
(x) We have neither come across any instance of fraud on or by the Company nor have webeen informed of any such case by the Management.
(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid / provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3 (xii) of the Order is notapplicable.
(xiii) In our opinion and according to the information and explanations given to usall transactions with the related parties are not in compliance with Section 177 and 188of the Companies Act 2013. The details of such transactions have however been disclosedin the financial statements as required by the applicable standards and all related partytransactions except one are also not recorded in the register under Section 189 of theCompanies Act 2013. (Refer Note 30 to the financial statements)
(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) In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith him. 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.
For Satinder Goyal & Co.
Firm's Regn. No: 027334N
Membership No. : 084613
Date: 29th May 2018
Place: New Delhi
(Referred to in paragraph 2(f) under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date on the Ind AS financialstatements of U P. Hotels Limited for the year ended 31st March 2018
Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of U. P.Hotels Limited ("the Company") as of March 312018 in conjunction with our auditof the Ind AS 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 Control over Financial Reportingissued by the Institute of Chartered accountant of India ("ICAI"). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its 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 and the Standards on auditing prescribed under section 143(10) ofthe Companies Act 2013 to the extent applicable to an audit of internal financialcontrols. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedure 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 judgments including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedure that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance that thegenerally accepted accounting principles and that receipts and expenditure of the Companyare being made only in accordance with authorisations of management and directors of theCompany; 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 misstatement due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the internal financial controls overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
According to information and explanations given to us and based on our audit thefollowing weaknesses have been identified as at 31st March 2018:
(i) Attention is invited to Note 40.1 to 40.3
(a) Both the Joint Managing Directors have raised concerns regarding working of hotelscertain/various aspects of management and on the matter pending before National CompanyLaw Tribunal for Oppression and Mismanagement. Due to the ongoing disputes and internaldifferences there are differences of opinion / disagreement in the manner the internalfinancial controls needs to be strengthened and certain discrepancies / non compliancesrelating to various Acts Listing Agreements etc.
(b) A petition has been filed on 15 May 2015 by one of the Joint Managing Directorstitled as Rupak Gupta Vs. UPHL & Ors. before the Company Law Board (now the NationalCompany Law Tribunal) New Delhi against the Company and others under Sections 397/398402 403 and 237 of the Companies Act 1956 and Section 219 & Section 220 of theCompanies Act 2013 for oppression and mismanagement. The other Joint Managing Directorhas filed a reply to the petition on 09.05.2016 on behalf of the respondents - himself andhas contested the petition and denied all the allegations. The petition is currentlypending adjudication.
(c) The risk management policy could not be fully implemented during the year. Furtherappropriate discussion /supervision /review/ flow of information /monitoring could nottake place during the year at Board and Audit Committee Meetings. Due to the differencesand disagreements between the management and ongoing suits which have been filed at theHon'ble Civil Court Lucknow and in the Hon'ble NCLT New Delhi. However the AuditCommittee discuss and takes note of the Internal Audit Report at appropriate intervals andissue verbal advise to the Internal Auditors and units for better control.
(ii) Based on the representation and information and explanations provided to us theCompany did not have an appropriate internal financial control system over financialreporting since the internal controls adopted by the Company did not adequately considerassessment which is one of the components of internal control with regard to thepotential for fraud when performing risk assessment.
A material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual financial statements willnot be prevented or detected on a timely basis.
In our opinion because of the possible effect of the material weakness described aboveon the achievement of the objectives of the control criteria the Company has notmaintained adequate and effective internal financial controls over financial reporting asof March 312018 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 material weakness identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 312018financial statements of the Company and these material weakness does not affect ouropinion on the financial statements of the Company.
For Satinder Goyal & Co.
Firm's Regn. No: 027334N
Membership No. : 084613
Date: 29th May 2018
Place: New Delhi