Vardhman Industries Ltd.
|BSE: 513534||Sector: Metals & Mining|
|NSE: N.A.||ISIN Code: INE458E01014|
|BSE 00:00 | 24 Dec||Vardhman Industries Ltd|
|NSE 05:30 | 01 Jan||Vardhman Industries Ltd|
|BSE: 513534||Sector: Metals & Mining|
|NSE: N.A.||ISIN Code: INE458E01014|
|BSE 00:00 | 24 Dec||Vardhman Industries Ltd|
|NSE 05:30 | 01 Jan||Vardhman Industries Ltd|
To the Members of VARDHMAN INDUSTRIES LTD.
Report on the Standalone Financial statements Qualified
We have audited the accompanying Standalone Financial Statements of VARDHMANINDUSTRIES LTD. ("the Company"] which comprise the Balance Sheet as atMarch 31 2019 and the Statement of Profit and Loss (including other comprehensiveincome] Cash Flow Statement and the statement of changes in equity for the year thenended and a summary of significant accounting policies and other explanatory information(herein after referred to as "Standalone Financial Statements"].
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matters described in Basis for QualifiedOpinion section of our report the standalone financial statements give the informationrequired by the Companies Act 2013 in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at 31 March 2019 and its Profit and Loss (including othercomprehensive income] Cash Flow Statement and its statement of changes in equity for theyear ended.
Basis for Qualified Opinion
Significant amount is receivable from related parties under the head loans and capitaladvances which have been standing in the books of account since long whose recoverabilityis also doubtful as one of the parties has also went into CIRP process no provision forsuch doubtful receivables has been made by the company.
Emphasis of Matter
We draw attention to the following:
1. The company has gone into Corporate Insolvency Resolution Process ("CIRP"]vide order of the National Company Law Tribunal New Delhi Bench ("NCLT"] datedNovember 16 2017 under the provision of the Insolvency & Bankruptcy Code 2016("Code"]. Pursuant to the Order the powers of the Board of Directors standsuspended and such powers are exercisable by Mr. Ashok Gulla who has been appointed asResolution Professional ("RP"] by NCLT.
Accordingly Mr. Ashok Gulla took control of management and operations of the company.As the powers of the Board of Directors had been suspended the financial statements havenot been adopted by Board of Directors however the same have been signed by Mr. RahulJain Managing Director of Company and Mr. Anil Kumar Surya Chief Financial Officer andMrs. Reema Company Secretary confirming accuracy and completeness of the results. TheseStandalone Ind AS financial statements have thereafter been taken on record by the RP onMay 30 2019.
Vardhman Industries Limited which is under Corporate Insolvency Resolution Processinvited Expression of Interest for the Submission of Resolution Plan as per the provisionof Insolvency and Bankruptcy Code 2016. In response to the Expression of Interest JSWSteels Limited ("Resolution Applicant"] had submitted its Resolution Plan whichhas been unanimously approved by Committee of Creditors. The Resolution Plan approved byCommittee of Creditors has been submitted to Hon'ble National Company Law Board Tribunal -Delhi. The Hon'ble NCLT had pronounced its order on December 19 2018 approving theResolution Plan and subsequently a clarification order on the application of JSW SteelLimited was pronounced on April 16 2019 by Hon'ble NCLT. The resolution applicant hasfiled an appeal challenging the said NCLT order before NCLAT in which an interim order waspassed on 30 April 2019 suggesting that the resolution plan as approved by the COC may beimplemented. The resolution applicant has further filed an Appeal before the Hon'bleSupreme Court against the interim order of NCLAT in which the Hon'ble Supreme Court videan order dated 10 May 2019 has ordered status quo and also requested the Hon'ble NCLAT totake up the matter on 28 May 2019 and dispose it off.
2. The company is undergoing the Corporate Insolvency Resolution Process pending thecompletion of the CIRP the financials statements of the company have been prepared ongoing concern basis.
3. As per "Indian Accounting Standard 36" which talks about impairment ofasset if the carrying amount of the asset is more than recoverable amount then asset needto be impaired.
4. Trade receivables loans & advances and other recoverable at March 31 2019 aresubject to confirmation and reconciliation.
5. In the absence of any information on interest on outstanding dues to the bank inrespect to sub-standard accounts bank balances are subject to confirmation from bankstatement.
6. No interest expense has been booked during the period ended March 31 2019. HoweverIDBI Bank charged interest on working capital Rs.533.98 lakhs & interest on term loanRs.23.54 lakhs which is not considered.
Key Audit Matters
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 financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
We have determined the matter described below to be the key audit matter to becommunicated in our report.
Company was having investment of amounting Rs. 4.25 crore in Vallabh Textile CompanyLimited Net worth of investee company was eroded in FY 2017-18 as well as investeecompany went into CIRP (Corporate Insolvency Resolution Process) in Financial Year2018-19. Accordingly the management has taken a decision to get the investment at itsfair value considering the on going scenario of the investee company and its net worth.Hence a loss of amounting Rs. 14322500/- has been booked in FY 2017-18 & amountingRs. 28177500 was booked in the Current Year.
Information other than the financial statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. Our opinion on the financialstatements does not cover the other information and we do not express any form ofassurance conclusion thereon. In connection with our audit of the financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
Management and Those Charged with Governance's Responsibility for the Standalone Ind ASfinancial statements
The Management and board of directors of the company are responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ('the act') with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Companies (Indian Accounting Standards)Rules 2015.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial 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.
Our objectives are to obtain reasonable assurance about whether the 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
As part of an audit in accordance with Standards on Auditing we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act we are also responsible for explaining our opinion on whether the Companyhas adequate internal financial controls system in place and the operating effectivenessof 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the 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
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section143 ofthe Act we give in the Annexure A statement on the matters Specified in paragraphs 3 and4 of the Order.
As required by section 143(3) of the Act we report that:
a) Except for the matters described in the Basis of Qualified Section we have soughtand obtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit;
b) In our opinion except for the matters stated in the Basis of Qualified Sectionproper books of account as required by law have been kept by the Company so far as appearsfrom our examination of those books.
c) The Balance Sheet Statement of Profit and loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisreport are in agreement with the books of account.
d) In our opinion except for the matters stated in the Basis of Qualified Section theaforesaid standalone Ind AS financial statements comply with the applicable IndianAccounting Standards specified under Section 133 of the Act.
e) On the basis of written representations received from the directors as on March 312019 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164(2) of theAct.
f) Except for the matters stated in the Basis of Qualified Section there is no anyother observations or comments of the auditors on financial transactions or matters whichhave any adverse effect on the functioning of the company;
g) Except for the matters stated in the Basis of Qualified Section there is no anyother qualification reservation or adverse remark relating to the maintenance of accountsand other matters connected therewith;
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"; and
i) In our opinion and to the best of our information and according to the explanationsgiven to us we report as under with respect to other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014:
i. The company has disclosed the impact of pending litigations on its financialposition in its standalone IND AS financial statements [Refer Note no. 26]
ii. The Company did not have any long-term contracts including derivative contracts; assuch the question of commenting on any material foreseeable losses thereon does not arise.
iii. There has been an occasion in case of the Company during the year under report totransfer unpaid dividend amounting Rs 432079 related to year 2009-10 to the InvestorEducation and Protection Fund. The same has not been deposited as is under the process tobe paid.
ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT
On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we report that:
I. In respect offixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) According to the information and explanation given to us the company has a regularprogram of physical verification of fixed assets by which all fixed assets are verified.
c) According to information and explanation given to us the title deeds of immovableProperties are held in the name of the company.
On scrutiny of ROC charge record & board minutes it was found that two immovableproperty held in the name of a company has been pledged as security to Punjab NationalBank in favour of Vallabh Steel Limited. However the company has not availed any creditfacility from Punjab National Bank.
II. In respect of Inventories: -
a) According to information and explanations given to us the inventories have beenphysical verified during the year by the management. In our opinion the frequency ofverification is reasonable.
b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the company and the nature of itsbusiness.
c) The company has maintained proper records of inventory. As explained to us thediscrepancies noticed on physical verification were not material. However thediscrepancies noticed have been properly dealt with in the books of account.
According to the information and explanations given to us the Company has grantedsecured or unsecured loans to companies firms Limited Liability partnerships or otherparties covered in the Register maintained under section 189 of the Act. Following are theunsecured loans which have been given by company to its related parties:
(a) Whether terms and conditions of the grant of such loan are not prejudicial to thecompany's interest?
(b) Whether the schedule of repayment of principal and payment of interest has beenstipulated and whether the repayments and receipts are regular?
(c) If the amount is overdue state the total amount overdue state the total amountoverdue for more than 90 days and whether reasonable steps have been taken by the companyfor recovery of principal?
As the required information have not been provided to us. So we are not able tocomment on the same. Ind as impact on such are not ascertainable.
IV. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act inrespect of grant of loans making investments and providing guarantees and securities asapplicable.
However on scrutiny of ROC charge record & board minutes it was found that twoimmovable property held in the name of a company has been pledged as security to PunjabNational Bank in favour of Vallabh Steel Limited.
V. In our opinion and according to the information and explanations given to us thecompany has not accepted any deposit from the public covered under Section 73 to 76 of theCompanies Act 2013. Therefore the provisions of the clause 3 (v) of the Order are notapplicable to the Company.
VI. We have broadly reviewed the records maintained by the company pursuant to therules prescribed by the central government for maintenance of cost records undersub-section (l) of section 148 of the act and are of the opinion that prima facie theprescribed accounts have been prepared and maintained. However we have not made thedetailed examination of records.
VII. According to the information and explanations given to us and based on the recordsof the company examined by us the company is regular in depositing the undisputedstatutory dues including Provident Fund Employees' State Insurance Income-taxSales-tax Service Tax Custom Duty Excise Duty and other material statutory dues asapplicable with the appropriate authorities in India.
According to the information and explanation given to us and based on the records ofthe company examined by us there are no dues of Provident Fund Employees' StateInsurance Income-tax Sales-tax Service Tax Custom Duty Excise Duty and other materialstatutory dues which have not been deposited on account of any disputes.
VIII. According to the records of the Company examined by us and the information andexplanations given to us the Company has defaulted in repayment of loans or borrowings tobank and has gone into Corporate Insolvency Resolution Process ("CIRP") videorder of the National Company Law Tribunal New Delhi Bench ("NCLT") datedNovember 16 2017. Mr. Ashok Gulla who has been appointed as Resolution Professional("RP") by NCLT & powers of the Board of Directors stands suspended and suchpowers are exercisable by him. The company has also not issued debentures during the yearand has not taken any fresh loans or borrowings from Government.
IX. The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 (ix) of the Order is not applicable.
X. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or no material fraud on the Company by its officers oremployees has been noticed or reported during the year.
XI. In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 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 us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.
XIV. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.
XV. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of section 192 of theCompanies Act 2013 are not applicable to the Company.
XVI. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
Annexure - B to Independent Auditors' Report (Referred to in our report of even date)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act") We have audited the internalfinancial controls over financial reporting of VARDHMAN INDUSTRIES LTD. as of 31st March2019 in conjunction with our audit of the standalone Ind AS financial statements of theCompany for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI').
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 Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia.
Those Standards and the Guidance Note require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch 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 standalone Ind AS financial statements whether due to fraudor 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 standalone Ind AS financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standaloneInd AS financial statements in accordance with generally accepted accounting principlesand that receipts and expenditures of the company are being made only in accordance withAuthorizations of management and directors of the company; and (3) provide reasonableAssurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on the standaloneInd AS financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.
Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the company Except for the matters stated in the Basis of Qualified Section has anadequate internal financial controls system over financial reporting and such internalfinancial controls over financial reporting were operating effectively as at 31st March2019 based on the internal control over financial reporting criteria established by thecompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.