The Members of Velan Hotels Limited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the standalone financial statements of Velan Hotels Limited ("theCompany") which comprise the balance sheet as at March 312019 and the statement ofProfit and Loss Statement of changes in equity and statement of cash flows for the yearthen ended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 312019 and profit/loss changes in equity and its cash flows for the yearended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
Without qualifying our opinion we draw attention to Note No. 35 of the attachedFinancial Statements for the year ended 31st March 2019. The Company's borrowings wastaken over by M/s. RARE Asset Reconstruction Company Limited ("ARC") commencingfrom April 1 2017 and as of the year ended March 31 2019 a final settlement amount ofRs. 97.50 Crores was agreed between the Company and the ARC by way of a 'One-timeSettlement' ("OTS") offer with certain conditions and milestones for the saidrepayment. There were delays in adhering to the agreed milestones and the Company is inthe process of re-negotiation with the ARC for revised conditions to meet the commitmentsas per the original OTS offer. As informed by the management the Company is takingnecessary steps to meet the debt obligations as per the OTS and revised terms if anyarising out of suchre-negotiations. Accordingly no adjustments have been made in thesefinancial statements for the revision of the outstanding debt which is under negotiation.Pending conclusion of the negotiations as represented by the management these financialstatements have been prepared on a going concern basis as the extinguishment of the debtcan be made from the sale of such of those assets linked to the debt which does not have abearing on the revenue-generating assets of the Company. Any shortfall arising out of suchsale will be dealt with on realisation basis which in the opinion of the managementshall not have a bearing on the going concern assumption. In view of the above ouropinion is not modified.
Management's Responsibility for the Standalone 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 standalone financial statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.
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.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
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 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 financial statements.
Report on Other Legal and Regulatory Requirements
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 section 143 ofthe Companies Act 2013 we give in the Annexure a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.As required by Section 143(3) ofthe Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In 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 and the Cash Flow Statementdealt with by this 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 read with Rule 7 of theCompanies (Accounts) Rules 2014.
e) On the basis of the written representations received from the Directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (2) of the Act.
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 B".
g) 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 explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 36 to the financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Place : Tirupur
Dated : May 30 2019
Annexure - A to the Independent Auditors' Report
The Annexure referred to in our Independent Auditors' Report to the members of theCompany on the standalone financial statements for the year ended 31 March 2019 we reportthat:
On the basis of such checks as we considered appropriate and according to theinformation and explanation given to us during the course of our audit we report that:
i) a) The Company has maintained proper records showing full particulars includingquantitative details
and situation of fixed assets.
b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Inaccordance with this programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.
c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
ii) a) As explained to us inventories have been physically verified during the year bythe management at
b) On the basis of our examination of the inventory records in our opinion theCompany is maintaining proper records of inventory. The discrepancies noticed on physicalverification of inventory as compared to book records were not material which have beenproperly dealt with in the books of account.
iii) According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has not granted any loans secured orunsecured to companies firms LLPs or other parties covered in the register maintainedunder Section 189 of the Companies Act 2013. Consequently the provisions of clauses iii(a) iii (b) and iii (c) of the order are not applicable to the Company.
iv) The Company has not granted any loans made investments issued guarantees orprovided any security to any Director or any other person as specified in the Act andhence this clause is not applicable to the Company for this year.
v) The Company has not accepted any deposits from the public covered under Section 73to 76 of the Companies Act 2013.
vi) As per information and explanation given by the management the Central Governmenthas not prescribed the maintenance of cost records under Section 148(1) of the Act.
vii) a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income tax valued added taxes/GST sales tax wealth tax excise duty servicetax duty of customs value added tax cess and other material statutory dues have beengenerally regularly deposited during the year by the Company with the appropriateauthorities.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax sales taxwealth tax excise duty duty of customs value added tax/GST cess and other materialstatutory dues were in arrears as at 31 March 2019 for a period of more than six monthsfrom the date they became payable except service tax dues amounting to Rs. 50.51 lakhsupto June 30 2017 and Goods and Services Tax dues from August 2018 amounting to Rs. 40.63lakhs which have not been deposited till date.
b) According to the information and explanations given to us and also based on theManagement representation there are no disputed statutory dues that have not beendeposited as at the year-end other than:
|Statue ||Nature of Dues ||Amount |
|Period to which the Amount relates ||Forum where the dispute is pending |
|Employees Provident Fund and Miscellaneous Provisions Act 1952 ||Damages on delayed payment Employees Provident Fund ||5.99 Lakhs ||2015- 16 |
2016- 17 and
|Labour Court Chennai |
|Income Tax Act 1961 ||Income Tax (*) ||2.15 Lakhs ||AY 2010-11 ||Assessing Officer |
|Income Tax Act 1961 ||Income Tax(*) ||2.73 Lakhs ||AY 2011-12 ||Assessing Officer |
|Income Tax Act 1961 ||Income Tax(*) ||0.03 Lakhs ||AY 2012-13 ||Assessing Officer |
(*) - response filed on Income Tax Portal pending rectification
viii) According to the information and explanations given to us the Company has notdefaulted in repayment of dues to financial institutions banks or debenture holdersduring the year however the Company could not meet the repayment obligations as per theOne-time Settlement Offer received from the Asset Reconstruction Company (ARC) for thedues to the ARC vide Note No. 35 to these financial statements.
ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and no term loans have been raised during theyear.
x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit.
xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not paid / provided anymanagerial remuneration to managerial personnal.
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) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableAccounting Standards.
xiv) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
Place : Tirupur
Dated : May 30 2019 (Membership No. : 208431)
KRISHAAN & CO
Chartered Accountants FRN : 001453S
ANNEXURE - B TO THE INDEPENDENT AUDITOR'S REPORT
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies
Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of VELANHOTELS LIMITED ("the Company") as of March 312019 in conjunction with our auditof the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. 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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our 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 judgement 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 procedures 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 thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and Directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material 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 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 the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
Place : Tirupur
Dated : May 30 2019