To the Members of Harrisons Malayalam Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of Harrisons Malayalam Limited (`the Company') which comprise the Balance Sheet as at 31 March 2019 the Statement of Profit and Loss (including Other Comprehensive Loss) the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and a summary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 (`Act') in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards (`Ind AS') specified under section 133 of the Act of the state of affairs (financial position) of the Company as at 31 March 2019 and its loss (financial performance including other comprehensive loss) its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (`ICAI') together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have . obtainedissufficient and appropriateto provide a basisfor our opinion
Key Audit Matters
4. Key audit matters are those matters that in our professional judgment were of most significance 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 a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.
5. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Key audit matter||How our audit addressed the key audit matter|
|(a) Land Litigations||Our audit procedures included but were not limited to the following:|
|The Plantation Companies holds significant land for their operations as disclosed in note 3 to the standalone financial statements. The significant inherently prone to litigation risk.|| We obtained an understanding of the management process for ascertaining the outcome of landholdings are the land litigations and process performed by the management for its assessment.|
|As disclosed in Note No.43(A) of the Standalone financial statements the Company has pending land related litigations with various courtswhich is significant considering the total area of cultivable land.The land litigations involve interpretation of various land laws applicable in the State of Kerala and Tamil Nadu. || We obtained an understanding evaluated and tested controls around management's assessment of the outcome of the land litigations and the testing performed.|
| Obtained an understanding of the nature of litigations pending against the company and discussed the key developments during the year for key litigations with the management and respective legal counsels handling such cases on behalf of the Company. Tested the independence objectivity and competence of such management experts involved.|
|We focused on this area as the eventual outcome of the litigations is uncertain and the positions taken by the management are based on the application of the material judgement and reliance on legal opinions obtained. Accordingly unexpected adverse outcomes may significantly impact the operations of the Company and hence it has been considered as a key audit matter.|
| We also monitored and considered the external information sources to conform our understanding of litigations.|
| On a sample basis obtained and reviewed the necessary evidence which includes correspondence with the external legal counsels and where necessary inspected minutes of case proceedings available to support the decisions and rationale of such litigation selected for testing.|
| Reviewed each attorney response obtained as above to ensure that the conclusions reached our supported by sufficient legal rationale and adequate information is included for the management to determine the appropriate accounting treatment of such cases in the financial statements.|
| Evaluated the disclosures made relating to provisions and contingent liabilities for their appropriateness.|
|(b) Valuation of Finished goods||Our audit procedures in relation to valuation of inventory included but were not limited to the following:|
|Refer to note 2(j) of Summary of significant accounting policies and other explanatory information for accounting policy for valuation of Inventory and significant assumptions related thereto and the note 8 of the standalone financial statements of the Company for the year ended 31 March 2019.|| We obtained an understanding of the management process for valuation of Finished goods and ensured that the same is consistently applied. accounting judgements estimates and|
| Tested the design and operating effectiveness of the internal controls relating to the valuation of Inventories.|
|At the balance sheet date 31 March 2019 the Company held Rs 2947.30 lacs of Inventories. Inventories mainly consists of finished goods which is valued at lower of cost or net realizable value.|| Obtained an understanding on the computation of the net realizable values of the finished goods and tested the reasonableness of the significant judgements applied by the management.|
|The Company values its Finished goods inventory of tea and rubber at lower of cost and net realizable value (estimated selling price less estimated cost to sell). Considering that there is always a volatility in the selling price of tea and rubber which is dependent upon various market conditions determination of the net realizable value for these commodities involves significant management judgement. Moreover the selling price fetched by tea produced at different estates are different.|| Compared the estate wise actual realization subsequent to reporting date and assessed the reasonableness of the net realizable value that was estimated and considered by the management.|
| Verified end and assessed the reasonableness of the cost to sell that was estimated and considered by the management.|
|Owing to the significance of the carrying value of inventories the complexities discussed above and the fact that any changes in the management's judgement or assumptions is likely to have a significant impact on the ascertainment of carrying values of inventories we have considered this area as a key audit matter.|| Compared the cost of the finished goods with the estimated net realizable value and checked if the finished goods were recorded at net realizable value where the cost was higher than the net realizable value.|
| Further we assessed whether the disclosures related to inventory were appropriate presented in accordance with the applicable accounting standards..|
Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the financial statements and our auditor's report thereon. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to read the other information identified when it becomes available and in doing so consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Annual Report if we conclude that there is a material misstatement therein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs (financial position) profit or loss (financial performance including other comprehensive income) changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Ind AS specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenanceofadequateinternalfinancialcontrols that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.
8. In preparing the financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
9. The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the financial disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financial statements including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication
Report on Other Legal and Regulatory Requirements
15. As required by section 197(16) of the Act we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 (`the Order') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.
17. Further to our comments in Annexure I 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 best of our knowledge and belief were necessary for the purpose of our audit;
b) in our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) the standalone financial statements dealt with by this report are in agreement with the books of account;
d) in our opinion the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken on record by the Board of Directors none of the directors is disqualified as on 31 March 2019 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls over financial reporting (IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of the standalone financialstatements of the Company for the year ended on that date and our report dated 29 May 2019 as per Annexure II expressed an unmodified opinion;
g) with respect to the other matters to be included in the Auditor's Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) in our opinion and to the best of our information and according to the explanations given to us:
i. the Company as detailed in notes 34 and 43 to the standalone financial statements has disclosed the impact of pending litigations on its financial position as at 31 March 2019;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2019;
iii. there has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2019 and;
iv. the disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from 8 November 2016 to 30 December 2016 which are not relevant to these standalone financial statements. Hence reporting under this clause is not applicable.
Annexure I to the Independent Auditor's Report of even date to the members of Harrisons Malayalam Limited on the standalone financial statements for the year ended 31 March 2019
Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit and to the best of our knowledge and belief we report that:
i. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets under which fixed assets are verified phased manner over a period of 3 years which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this program certain fixed assets were verified during the year and no material discrepancies were noticed on such verification.
(c) According to the information and explanations provided by the Company and the records of the Company produced to us the title deed of immovable properties as disclosed in Note 3 on Property plant and equipment to the standalone financial statements are held in the name of the Malayalam Plantations Limited/Harrisons & Crossfield than as set out below which are in the name of the Company:
|Gross Block||Net Block|
|Land and Building||Rs 136.72 Lakhs||Rs 27.52 Lakhs|
ii. In our opinion the management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies between physical inventory and book records were noticed on physical verification.
iii. The Company has not granted any loan secured or unsecured to companies firms Limited Liability Partnerships (LLPs) or other parties covered in the register maintained under Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b) and 3(iii)(c) of the Order are not applicable.
iv. In our opinion the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of loans investments guarantees and security.
v. In our opinion the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
vi. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Company's product and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
vii. a) Undisputed statutory dues including provident fund employees' state insurance income-tax duty of customs goods and service tax cess and other material statutory dues as applicable have generally been regularly deposited to the appropriate authorities though there has been a slight delay in a few cases. Further no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they became payable (other than arrears of. Rs 259.46 Lakhs relating to plantation tax (under the Kerala Plantations (Additional Tax) Act 1960) arrears of Rs 276.03 lakhs relating to land tax (under the Kerala Land Tax Act 1961) which are outstanding for a period of more than six months as on the Balance Sheet date).
b) There are no dues in respect of income-tax sales-tax service tax duty of customs duty of excise and value added tax that have not been deposited with the appropriate authorities on account of any dispute other than those disclosed below:
Statement of Disputed Dues
|Name of the statute||Nature of dues||Amount in(Rs Lakhs)||Period to which the amount relates||Forum where the dispute is pending|
|Income - tax Act 1961||Income tax and interest thereon||63.02||Year 2006 to 2009||Income tax Appellate Tribunal|
|1284.54||Year 2003 to 2015||Assessing Officer Commissioner of Income Tax (Appeals) Assessing Officer|
|Kerala Agricultural Income Tax Act 1950/1991||Tax on Agricultural income interest and penalty thereon||503.90||Year 1980 to 1999||Assessing Officer|
|6.03||Year 1995 to 1996||Inspecting Assistant Commissioner Department of Commercial Taxes|
|Tamil Nadu Agricultural Income Tax Act 1955||Tax on agricultural income||3.66||Year 1988 to 2000||Assessing Officer|
|Kerala Value Added Tax Act 2003||KVAT and interest thereon||2963.05||Year 2012 to 2015||Assessing Officer/Assistant Commissioner (Assessment) VAT Special Circle(Produce)|
viii. The Company has not defaulted in repayment of loans or borrowings to any bank or financial institution during the year. The Company did not have any borrowings from government and did not have any outstanding debentures during the year.
ix. The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments). In our opinion the term loans were applied for the purposes for which the loans were obtained.
x. No fraud by the Company or on the company by its officers or employees has been noticed or reported during the period covered by our audit. xi. Managerial remuneration has been paid / provided by the company in accordance with the requisite approvals mandated by the provisions of Section 197 of the Act read with Schedule V to the Act.
xii. In our opinion the Company is not a Nidhi Company. Accordingly provisions of clause 3(xii) of the Order are not applicable.
xiii. In our opinion all transactions with the related parties are in compliance with Sections 177 and 188 of Act where applicable and the requisite details have been disclosed in the standalone financial statements etc. as required by the applicable Ind AS.
xiv. During the year the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.
xv. In our opinion the company has not entered into any non-cash transactions with the directors or persons connected with them covered under Section 192 of the Act.
xvi. The company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
Annexure II to the Independent Auditor's Report of even date to the members of Harrisons Malayalam Limited on the standalone financial statements for the year ended 31 March 2019
Independent Auditor's Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (`the Act')
1. In conjunction with our audit of the standalone financial statements of Harrisons Malayalam Limited (`the Company') as at and for the year ended 31 March 2019 we have audited the internal financial controls over financial the Company as at that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the `Guidance Note') issued by the Institute of Chartered Accountants of India (`ICAI') (`the framework'). These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of the Company's business including adherence to the Company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India (`ICAI') and deemed to be prescribed under Section 143(10) of the Act to the extent applicable to an audit of IFCoFR and the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (`the Guidance Note') issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate IFCoFR were established and maintained and if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining an understanding of IFCoFR assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's IFCoFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's IFCoFR include those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
7. Because of the inherent limitations of IFCoFR including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the IFCoFR to future periods are subject to the risk that the IFCoFR may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
8. In our opinion the Company has in all material respects adequate internal financial controls over financial reporting and such controls were operating effectively as at 31 March 2019 based on the framework.
|For Walker Chandiok & Co LLP|
|Firm's Registration No.: 001076N/N500013|
|Date: 29 May 2019||Membership No: 206229|