The Members of Velan Hotels Limited
Report on the Audit of the Standalone Financial Statements Qualified Opinion
We have audited the standalone financial statements of Velan Hotels Limited ("theCompany") which comprise the Balance Sheet as at March 312021 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 312021 and Profit/Loss Changes in Equity and its Cash Flows for the yearended on that date subject to the notes given below with regard to Going Concern otherKey Audit Matters.
Basis for Qualified 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.
We draw attention to Note No. 36 of the attached Financial Statements for the yearended 31st March 2021. The Company's borrowings were taken over by M/s. RARE AssetReconstruction Company Limited ("ARC") commencing from April 12017 and as ofthe year ended March 312021 a final One-time settlement amount has been arrived at withthe ARC.Based on such proposal the Company has executed the sale of one of the assets witha view to repay the ARC refer Note No. 35 to these financial statements. Further withthe Company having suspended all business operations and with no revenue being generatedto meet the debt obligations there exists a concern on the ability of the Companycontinuing as a Going Concern. In view of the above our opinion is Qualified.
In view of the lockdown and travel restrictions due to outbreak of COVID-19 whereverphysical access was not possible necessary records / reports / documents were verifiedthrough digital medium email etc. on a sample basis and were relied upon as auditevidence for carrying out the audit for the current year. This has been carried out basedon the advisory on "Specific Considerations while conducting Distance Audit / RemoteAudit / Online
Audit under current Covid-19 situation" issued by the Auditing and AssuranceStandards Board of ICAI. We have been represented by the management that the data providedfor our audit purposes is correct complete reliable and are directly generated by theaccounting system of the Company without any further manual modifications. We bring to theattention of the users that the audit of the financial statements has been performed inthe aforesaid conditions.
In view of above Our opinion is Not Qualified.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Financial Statements for the financial year ended March312021. These matters were addressed in the context of our audit of the FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. For each matter below our description of how our auditaddressed the matter is provided in that context.
Key audit matters identified in our audit are summarized as follows:
- Ability of the Company Continuing as a Going Concern
- Confirmation of balance of Outstanding Debt
- Impairment of Assets
- Delays in remittance of statutory dues
- Gratuity and Leave Encashment accounted on estimated basis
|Key Audit Matter ||How our audit addressed the Key Audit Matter |
|Ability of the Company Continuing as a Goina Concern ||Our audit procedures in relation to assessment of going concern included: |
|As at 31stMarch 2021 the Company has suspended all operations of the Company and there exists no revenue generation to meet the debt obligations and to continue the operations. ||- Obtaining an understanding of and assessing the design implementation and operating effectiveness of key internal controls over the existence and performance of Revenue and Receivables activities; |
|Accordingly it has been determined as a key audit matter. ||- Audit of debt obligations as at the year ended March 312021; |
| ||- Estimating the extent of revenue to continue the operations on a Going Concern Basis |
| ||- Assessment of the revenue-generating capacity of the company to reasonably meet its debt obligations. |
| ||Key Observation: |
| ||We draw attention to Note No. 36 of the attached Financial Statements for the year ended 31st March 2021. The Company's borrowings were taken over by M/s. RARE Asset Reconstruction Limited ("ARC") commencing from April 1 2017 and as of the year ended March 312021 a final One-time settlement amount has been arrived at with the ARC. |
| ||Based on such proposal the Company has executed the sale of one of the assets with a view to repay the ARC refer Note No. 35 to these financial statements. Further with the Company having suspended all business operations and with no revenue being generated to meet the debt obligations there exists a concern on the ability of the Company continuing as a Going Concern. In view of the above our opinion is Qualified. |
|Confirmation of balance of Outstanding Debt: ||Our audit procedures in relation to assessment of outstanding balance of debt as on 31.03.2021: |
|As on the date of Balance Sheet the company has not obtained confirmation statement from ARC for Outstanding Debt. ||- Tested the information used by management for outstanding debts. |
| ||- Obtained necessary evidences to confirm the transfer of closing outstanding debts with Banks to ARC. |
| ||Key Observation: |
| ||With the final OTS offer provided by the ARC and accepted by the Company such communication has been considered for the confirmation of the Outstanding Debt. |
|Impairment of Assets ||Our audit procedures in relation Impairment of Assets: |
|For the Assets which are taken over by ARC against the amount due has been not tested for Impairment. ||- Obtained list of Fixed Assets by Carrying Amount which is original book value less depreciation. - Tested the Carrying amount for impairment using discounted cashflows. |
| ||- Adjusted the fixed assets for reduction in carrying value and recognized the loss. |
| ||Key Observation: |
| ||The test for the impairment of the assets tied to the borrowings have not been carried out as only a portion of the assets have been sold as at the year end. With the other assets still in the possession of the Company impairment if any shall be quantifiable only on completion of the sale of the assets of the Company and extinguishments of the Debt. Therefore no loss is recognised on account of potential impairment. |
|Delays in remittance of statutory dues: ||There has been significant delay in the remittance of Tax Deducted at Source Goods and Service Tax Value Added tax Service Tax Provident Fund and Employees' State Insurance to appropriate authorities. |
|Company is delay in remittance of statutory dues to various statutory authorities. ||The outstanding dues are yet to be remitted with the statutory authorities as at the year end. There were no amount outstanding pertaining to the accounting year 2020-21 |
|Gratuity and Leave Encashment accounted on estimated basis ||Our audit procedures in relation accounting of Gratuity and Leave Encashment on Actuarial Basis: |
|As on the balance sheet date the company has not made provision for gratuity and leave encashment on Actuarial Basis. ||- Tested the accuracy and completeness of data sent by management to Actuaries in computing the provision for Gratuity and Leave Encashment; - Tested the appropriateness of methods other inputs and significant assumptions used by the Actuary. |
| ||Key Observation: |
| ||As all the operations of the company has been suspended all the employees except KMP have resigned no further provision Gratuity and Leave Encashment is required. The Company shall have to re-assess the carrying liability of Gratuity and Leave Encashment to arrive at the appropriate liability. |
| ||Till such time no revisions in the carrying value of Gratuity and Leave Encashment has been considered. The impact of change in profitability could not ascertained. |
Information Other than the Financial Statements and Auditor's Report Thereon:
The Company's Board of Directors is responsible for other information. The otherinformation comprises the information included in the financial highlights board's reportbut does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In Connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we performedwe conclude that there is a material misstatement of this other information we arerequired to report that fact. We have nothing to report in this regard.
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 withthe 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.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatements whether due to fraud orerror design and perform audit procedures responsive to those risks and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of the management's use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on thecompany's ability continue as going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditor's report to the relateddisclosures in the financial statements or if such disclosures are inadequate to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor's report. However future events or conditions may cause the company to ceaseto continue as 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 them allrelationships and other matters that may reasonably be thought to bear on our independenceand where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourAuditor's Report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued 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)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) 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 2021taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2021 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 37 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.
KRISHAAN & CO
Chartered Accountants FRN : 001453S
|Place : Tirupur ||(K. SUNDARRAJAN) |
| ||Partner |
|Dated : June 292021 ||(Membership No. : 208431) |
| ||UDIN : 21208431AAAACN3258 |
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 2021 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 registered title deeds of all the immovable properties of land andbuilding are held in the name of the company as at the balance sheet date; Immovableproperties of land and building whose title deeds have been pledged as security for loansguarantees etc. are held in the name of the Company as per Memorandum of Entry executedby the company and confirmed by the banker/ARC as on the balance sheet date.
ii) a) As explained to us inventories have been physically verified during the year bythe management at reasonable intervals. No inventory is lying at the end of the year.
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 beendeposited with delays during the year by the Company with the appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of statutory dues were in arrears as at 31 March 2021 for a period ofmore than six months from the date they became payable is as follows :
|Nature of Due ||Amount Outstanding (in Lacs) ||Period |
|Goods and Service Tax ||43.64 ||From Jan 2019 |
|Service Tax ||50.51 ||Upto June 2017 |
|Value Added Tax ||8.52 ||From Jan 2019 |
|Employees Provident Fund ||5.27 ||From Nov 2019 |
|Employees State Insurance ||0.63 ||From Nov 2019 |
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 involved [Rs.] ||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 2017- 18 ||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. Refer Note No. 36 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 give to us and based on ourexamination of the records of the Company no remuneration was paid to Managing Directorand Executive Director of the company for the year.
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.
KRISHAAN & CO
Chartered Accountants FRN : 001453S
|Place : Tirupur ||(K. SUNDARRAJAN) Partner |
|Dated : June 292021 ||(Membership No. : 208431) |
| ||UDIN : 21208431AAAACN3258 |
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 312021 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 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 authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
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 2021 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.
KRISHAAN & CO
Chartered Accountants FRN : 001453S
|Place : Tirupur ||(K. SUNDARRAJAN) Partner |
|Dated : June 292021 ||(Membership No. : 208431) |
| ||UDIN : 21208431AAAACN3258 |
Statement on Impact of Audit Qualifications for the Financial Year ended March 312021
[See Regulation 33/ 52 of the SEBI (LODR) (Amendment) Regulations 2016]
|Sl. No. Particulars ||Audited Figures (as reported before adjusting for qualifications) ||Audited Figures (audited figures after adjusting for qualifications) |
|1. Turnover / Total income ||12.39 ||12.39 |
|2. Total Expenditure ||292.25 ||292.25 |
|3. Net Profit/(Loss) ||7.13 ||7.13 |
|4. Earnings Per Share ||0.02 ||0.02 |
|S. Total Assets ||10846.76 ||10846.76 |
|6. Total Liabilities ||9281.13 ||9281.13 |
|7. Net Worth ||1565.63 ||1565.63 |
|8. Any other financial item(s) (as felt appropriate by the management) ||NIL ||NIL |
Audit Qualification (each audit qualification separately): a. Details of AuditQualification:
i) Going Concern
The Company's borrowings were taken over by M/s. RARE Asset Reconstruction CompanyLimited ("ARC") commencing from April 12017 and as of the year ended March312021 a final One-time settlement amount has been arrived at with the ARC. Based on suchproposal the Company has executed the sale of one of the assets with a view to repay theARC. Further with the Company having suspended all business operations and with norevenue being generated to meet the debt obligations there exists a concern on theability of the Company continuing as a Going Concern.
ii) Pending Confirmation of balance of Outstanding Debt:
Due to non-availability of confirmations in respect of loan taken over by ARC. In theabsence of such confirmations any provisions to be made for the variations in carryingamounts of outstanding balance of debt cannot be quantified as well as the quantum ofadjustment if any required to be made remains unascertained.
iii) Impairment of Assets
The test for the impairment of the assets tied to the borrowings have not been carriedout as only a portion of the assets have been sold as at the year end. With the otherassets still in the possession of the Company impairment if any shall be quantifiableonly on completion of the sale of the assets of the Company and extinguishment of theDebt. Therefore no loss is recognised on account of potential impairment.
iv) Delays in remittance of statutory dues:
There has been significant delay in the remittance of Tax Deducted at Source Goods andService Tax Value Added tax Service Tax Provident Fund and Employees' State Insuranceto appropriate authorities. There were no amount outstanding pertaining to the accountingyear 2020-21.
v) Gratuity and Leave Encashment accounted on estimated basis
The company has not made provision for gratuity and leave encashment on ActuarialBasis.
b. Type of Audit Qualification : Qualified Opinion/Disclaimer of Opinion/AdverseOpinion
d. For Audit Qualification(s) where the impact is quantified by the auditorManagement's Views:
The Company's account was categorized as NPA by Allahabad Bank and Andhara Bank duringthe year 2014. In April 2017 the said Banks assigned the entire debts of the Companyalong with all underlying security interest all rights title & benefits to M/s.RAREAsset Reconstruction Limited (previously known as Raytheon Asset Reconstruction PrivateLimited) under the applicable provisions of the SARFAESI Act. The Company opted forOne-Time Settlement offer with the said ARC and obtained in-principle approval from themduring March 2021 and the final approval of OTS has now been received.
The Company entered into a Memorandum of Understanding (MoU) on 10th November 2020with M/s. Avenue Supermarts Limited Mumbai non-related party for sale of Company'sShopping Mall and part of Multiplex properties with the consent of M/s.RARE AssetReconstruction Limited ("RARE" or "ARC") which was assigned theCompany's debt together with all security interest and all rights of the Company by theBanks and has the symbolic possession of the entire properties of the Company for a totalconsideration of Rs. 354375000. The assets for this sale constitutes land to the extentof 84474 sq. ft. and the building constructed on the said land. Based on the finalconfirmation received from the ARC the sale was completed prior to the year ended March31 2021 and has resulted in the Company receiving the final One-Time- Settlement("OTS") offer from the ARC. In addition to the above properties the Companyowns Hotel properties at Tirupur and Coonoor properties of Biomass based Renewable energyplant and vacant land of convention hall all of which are non functional as of now andare located in Tirupur Tamilnadu. After deducting the property tax dues Electricity Billdues and other statutory dues that are only directly associated with this property(Shopping Mall) the entire sale proceeds will be adjusted towards our proposed revisedOne-Time Settlement (OTS) agreed with M/s. RARE Asset Reconstruction Limited.
As per terms of in-priniple approval the initial payment of Rs.30 crores was alreadypaid to the said ARC on 30th March 2021 from the proceeds of sale of Shopping Mall andpart of Multiplex properties.
The revenues of the Velan Greenfields Hotel Tirupur was severely impacted due to theongoing Covid-19 Novel Corona Virus pandemic forcing the closure of operations. With thisclosure all revenue generating operations of the Company has been suspended. The companyis exploring options of selling a part or all of its revenue generating assets to settleall liabilities. In view of the above the Company's ability of continuing as a Goingconcern is dependent on the value that can be generated by the sale of assets and thesurplus if any available subsequent to the settlement of all liabilities. In view of theuncertainty on the realisable values the impairment to the value of assets is notascertainable at this juncture.
As per the final OTS offer provided by the ARC and accepted by the Company suchcommunication has been considered for the confirmation of the Outstanding Debt.
The Company is taking necessary steps to regularise the Statutory Dues.
e. For Audit Qualification(s) where the impact is not quantified by theauditor:
i) Management's estimation on the impact of auditqualification:
Management is unable to estimate the impact on the above audit qualification. Reason isfor same is stated below.
ii) If management is unable to estimate the impact reasons for thesame:
Impact on Audit qualification is not estimable due to the following reasons
a) Only a portion of the assets have been sold as at the year end. With the otherassets still in the possession of the Company impairment if any shall be quantifiableonly on completion of the sale of the assets of the Company and extinguishments of theDebt therefore no loss is recognised on account of potential impairment of Fixed Assetstied to the borrowings.
b) Due to COVID-19 the business operation of the company has been forced to ClosureWith this closure all revenue generating operations of the Company has been suspended. Thecompany is exploring options of selling a part or all of its revenue generating assets tosettle all liabilities including Statutory Liabilities. In view of the above theCompany's going Concern is affected.
c) No Provision for Gratuity /Leave encashment has been considered during the perioddue to all the employees of the company except KMP have resigned and there are no eligibleemployees during the year under review.
iii) Auditors' Comments on (i) or (ii)above:
a) In the opinion of the management and also due to Uncertainty in realizable values ofremaining Fixed Assets by the management no loss is recognised on account of potentialimpairment of Fixed Assets.
b) In respect of Going Concern the company's ability to run business as going concernis dependent on the value that can be generated by the sale of assets and the surplus ifany available subsequent to the settlement of all liabilities.
|Managing Director ||: (Sd.) |
|CFO ||: (Sd.) |
|Audit Committee Chairman ||: (Sd.) |
|Statutory Auditor ||: (Sd.) |
|Place : Tirupur |
|Date : 29.06.2021 |