The Members of
CASTEX TECHNOLOGIES LIMITED
Report on the audit of Standalone Financial statements
We have audited the accompanying Standalone Financial Statements of CASTEXTECHNOLOGIES LTD. ("the Company") which comprise the Balance Sheet as atMarch 31 2019 and the Statement of Profit and Loss (including other comprehensiveincome) the statement of cash Flows and the statement of changes in equity for the yearthen ended and a summary of significant accounting policies and other explanatoryinformation (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 Ind AS financial statements give theinformation required by the Companies Act 2013 in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at 31 March 2019 and its Profit and Loss(including other comprehensive income) Cash Flow Statement and its statement of changesin equity for the year ended.
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 we have fulfilledour other ethical responsibilities in accordance with these requirements and the ICAI'sCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified opinion.
1. As per "Indian Accounting Standard 36" which talks about impairmentof asset if the carrying amount of the asset is more than recoverable amount then assetneed to be impaired and as per "Indian Accounting Standard 109" onfinancial instruments which also contains provisions of impairment of financials assetsthrough expected credit loss method basis these provisions we were required to seek forany impairment obligations from management but since the corporate debtors is still underthe process CIRP and resolution professional and committee of creditors are in the processof finalization successful resolution applicant and the management has not determinedvalue in use thus impairment of Fixed Assets including Capital Work In Progress (Rs.5037.13 Crores) advances given to related parties(Rs. 551.32 Crores) in the absence ofinformation we are unable to ascertain the effect of the same on the financial statements.
2. As per "Indian Accounting Standard 109" company was required to getthe Investment (Rs. 564.29 Crores) at fair value but the same has not been done by thecompany accordingly we are unable to ascertain the effect of the same on the Financialstatements.
Emphasis of Matter
We draw attention to the following:
a) Note No. 2.1 regarding Corporate Insolvency Resolution Process (CIRP) initiatedunder Insolvency and Bankruptcy Code 2016 (the Code') and the outcome of the ClRPis subject to decision of APEX Court / NCLT.
b) Considering the current operating levels of the Company and the ongoing corporateinsolvency resolution process company has not made any Impairment in the value of Toolsand Dies accordingly we are unable to comment upon the effect of the same on theFinancial Statements.
c) The Company has been continuously making losses consequently its net worth isnegative and the Company's total liabilities exceeded its total assets. This indicates theexistence of material uncertainty that may cast significant doubt on the Company's abilityto continue as a going concern. However in view of the CIRP in respect of the Companywhich is in progress the accounts have been prepared on a going concern basis [Refer NoteNo. 2.1 of financial Notes];
d) Considering the ongoing corporate insolvency resolution process (as mentioned inNote No 2.2.2) the certainty as to the realization of unused tax losses and MAT creditavailable cannot be ascertained at this stage. Consequently adjustment to deferred tax(net) and MAT credit available have not been given effect to.
e) As per the Code the RP has to receive collate and all the claims submitted by thecreditors of the company. The RP has verified and admitted the claims submitted by thecreditors against the company as per the Code. Pending finalization of resolution planthe impact of such claims if any that also has not been considered in the preparation ofthe financial statements. Further interest on the financial debt from the date ofcommencement of CIRP (i.e. from 20th December 2017 till 31st March 2019) has not beenprovided in the books of accounts and charged to the Profit and Loss account.
f) The Exceptional items for the year ended March 31st 2019 comprises provision forbad & doubtful debts as well as bad debts. It also includes Group companies whoseresolution plans have been approved under the Insolvency & Bankruptcy code with NCLT.
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.
Except for the matters described in the Basis for qualified opinion and emphasis ofmatter we have determined that there are no other key audit matters to communicate in ourreport.
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.
A corporate insolvency resolution process ("CIRP") has been initiated againstthe company vide an order of Chandigarh bench of the National Company Law Tribunal (NCLT)dated December 20 2017 under the provisions of the insolvency and bankruptcy code 2016(Code). Pursuant to the order the power of the Board of directors stands suspended andare exercisable by Mr. Dinkar T. Venkatasubramanian who was appointed as interimresolution professional (IRP) by the NCLT vide order dated December 22 2017 and wasconsequently confirmed as Resolution Professional (RP) by the Committee of Creditors (COC)in its meeting held on January 12 2018.Hon'able National Company Law Tribunal""Chandigarh Bench"" vide their order No CP (IB)No.116/Chd/Hry/2017dated 13th June 2018 approved the extension of CIRP period by 90days(i.e. from 180 days to 270 days).
Further the Committee of Creditors of CTL had approved the resolution plan submittedby Liberty House Group Pte Ltd (LHG) through e-voting process on August 30 2018. Theresolution plan as approved by the Committee of Creditors of CTL had also beensubsequently submitted to Hon'ble National Company Law Tribunal "Chandigarh Bench'for consideration and approval as per the provision of the Code.
However in view of the failure by LHG to comply with steps envisaged in the processmemorandum post COC approved its Resolution Plan as well as continuing default by Libertyin implementing NCLT approved Resolution plans in other CIRPs the COC filed anapplication on 6th of December 2018 to withdraw Liberty's Resolution Plan and soughtdirections for exclusion of time spent with LHG for negotiating and finalizing ResolutionPlan and allow a fresh process to identify new resolution applicants for CTL.
Adjudicating Authority vide its Order dated March 15 2019 has permitted theapplication for approval of the resolution plan to be withdrawn. Adjudicating Authorityhas also directed that the period from the date of acceptance of LHG as the preferredbidder i.e. May 18 2018 till the receipt of the certified copy of the Order dated March15 2019 shall be excluded for counting the 270 days permitted for completion of theinsolvency resolution process. The Order has also allowed CoC to proceed with invitingfresh expression of interest from prospective investors. Accordingly in terms of the saiddirection the RP has invited a fresh expression of interest as on March 29 2019 and hasreceived six expressions of interests in response till date. The Company is presentlyundergoing CIRP and the Resolution process is underway in line with the provisions of theIBC Code".
As the power of the Board of Directors has been suspended the financials has not beenadopted by the Board of Director. However the same have been signed by Mr. Sanjay AroraWhole Time Director Ms. Anuradha kapoor Director Mr. Ajay Kumar Chief FinancialOfficer and Ms. Jyoti Sharma Company secretary of the company confirming accuracy andcompleteness of the results. These Standalone Ind AS financial statements have not beensigned but taken on record by the RP.
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 concernbasis 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) 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 except for thematters described in the Basis for Qualified opinion Paragraph.
b) Except for the effects of the matters described in the Basis for Qualified opinionParagraph in our opinion proper books of account as required by law have been kept bythe company so far as it appears from our examination of those books;
c) Except for the matters described in the Basis for Qualified opinion Paragraph inour opinion the aforesaid standalone IND AS financial statements comply with the IndianAccounting Standards specified under section 133 of the Act read with the relevant rulesthere under;
d) 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.
e) The matter described in the Basis for Qualified Opinion' paragraph above inour opinion may have an adverse effect on the functioning of the Company.
f) 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. But the power of board of directors stands suspended as the company is in NCLT.
g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above; and
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". Our report expresses a Qualified opinion on theadequacy and the operating effectiveness of the company's internal financial controls overfinancial reporting; and internal audit has also not been taken place by company.
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. 3.27.5]
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 no any occasion in case of the Company during the year under reportto the Investor Education and Protection Fund.
For Raj Gupta & Co
Firm's Registration Number: 000203N
CA Abhishek Gupta
Membership Number: 530433
Place : New Delhi
Dated : 28/05/2019
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 of fixed assets:
a) According to the information and explanation given to us and on the basis ofexamination of books and records the Company has maintained the records however the samewas not showing full particulars including quantitative details and situation of fixedassets and as informed the company is in the process of updating the same.
b) According to the information and explanation given to us the company has a regularprogram of physical verification of fixed assets on selective basis.
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.
However none is made available to us as they are pledged with the financialinstitutions.
II. In respect of Inventories:- We have been informed by the management that theinventories are physically verified by external agency during the period appointed by theRP (Resolution Professional) at each quarter end and no major discrepancies have beenpointed out by them. However physical verification of stock of Dies & Fixtures hasnot been conducted neither by management nor by third agency. The valuation of inventoryhas been certified by the management.
III. The company during the year has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under section 189 of the Companies Act 2013 (the Act'). Accordinglyparagraph 3(iii) of the Order is not applicable to the company.
IV. In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans investments guarantees and security during the year.
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 not reviewed the records maintained by the company pursuant to the rulesprescribed by the central government for maintenance of cost records under sub-section (l)of section 148 of the act as we have not been provided with the same Moreover as informedby the company cost audit is under process.
VII. According to the information and explanations given to us and based on the recordsof the company examined by us the company has not been regular in depositing theundisputed statutory dues including Provident Fund Employees' State InsuranceIncome-tax Sales-tax Service Tax Custom Duty Excise Duty Value added tax Goods andservice tax and other material statutory dues as applicable with the appropriateauthorities in India during the year ended 31st March 2019. According to the informationand explanation given to us arrears of undisputed statutory dues outstanding for a periodof more than 6 months as on 31st March 2019 were Rs. 2207.17 Lakhs.
According to the information and explanation given to us and based on the records ofthe company examined by us the company has not paid/deposited following statutory dues onaccount of any disputes.
|Name of Statute ||Period to which it pertains ||Forum where dispute is pending ||Amount |
| || || ||(Rs. In Lakh) |
|1 Excise/Service Tax ||2008 to 2018 ||Commissioner Central Excise Appeals/Tribunal ||165.89 |
|2 Income Tax ||2006 to 2016 ||Income Tax Appellate Tribunals ||1688.53 |
|Total || || ||1854.42 |
VIII. Based on our audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to information and explanations givenby the management A corporate insolvency resolution process ("CIRP") has beeninitiated against the company vide an order of Chandigarh bench of the National CompanyLaw Tribunal (NCLT) dated December20 2017 under the provisions of the insolvency andbankruptcy code 2016 (Code). Pursuant to the order the power of the Board of directorsstands suspended and are exercisable by Mr Dinkar T. Venkatasubramanian who was appointedas interim resolution professional (IRP) by the NCLT vide order dated December22 2017 andwas consequently confirmed as Resolution Professional (RP) by the Committee of Creditors(CoC) in its meeting held on January 12 2018.
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 internal financial controls over financial reporting of CASTEXTECHNOLOGIES LTD. as of 31st March 2019 in conjunction with our audit of the standaloneInd 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 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 has except for the matters as described in basis for qualifiedopinion emphasis of matter other points reported in the Companies (AuditorsReport) order2016 and under section 143(3) in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31st March 2019 basedon the internal control over financial reporting criteria established by the companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
For Raj Gupta & Co
Firm's Registration Number: 000203N
CA Abhishek Gupta
Membership Number: 530433
Place : New Delhi
Dated : 28/05/2019