M/s Setubandhan Infrastructure Limited (Formerly Known as Prakash Constrowell Limited)
(A Company Under Corporate Insolvency Resolution Process vide NCLT, Mumbai Bench order dated 28.11.2022 )
Report on the Audit of Standalone Financial Statements
Opinion
We have audited the accompanying Standalone financial statements of SETUBANDHAN INFRASTRUCTURE LIMITED (Formerly Known as Prakash Constrowell Limited) which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss (including Statement of Other Comprehensive Income), Statement of changes in equity and Statement of cash flows for the financial year 1st April 2022 to 31st March 2023, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matters described in the Basis for Qualified Opinion below, the aforesaid Ind AS standalone financial statements give the information required by the Companies Act, 2013 ('the act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the act read with Companies (Indian Accounting Standard Rules, 2015, as amended ('Ind AS') and other accounting principles generally accepted in India, of the state of affairs of the Company as at 28th November 2022, and its profit total comprehensive income, its cash flows and changes in equity for the period ended on that date.
Basis for Qualified opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. 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 together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 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 obtained is sufficient and appropriate to provide a basis for Qualified opinion on the standalone financial statements.
Qualified Opinion: -
i. We have been appointed as statutory auditor for the period 29th November 2022 t< 31st March, 2023, however, we have audited financial statement for this period and wt have also authenticated combined financial statements for the year 2022-23 relying oi the audited figures of previous auditors for the period ended 28.11.2022. Further wt have also incorporated the audit report of erstwhile auditor while forming the audi report for the year ended 31st March, 2023.
ii. Balance Confirmation of Assets and liabilities along with other documentary evidenc has not been made available to us and also the liabilities and assets has not beei restated according to claim received and accepted during the CIRP period and th< balance of various assets and liabilities has been taken solely on the basis of auditei financial statement as on 28.11.2022. The same has also been mentioned in th< Significant accounting policies by Resolution professional while preparing the financia statement.
Key Audit Matters
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Sr. No.
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Key Audit Matters
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Auditor's Response
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1
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Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with Customers " (new revenue Accounting standard)
The application of the new revenue accounting standard involves certain key judgments relating to identification of
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Principal Audit Procedures We assessed the Company's process to identify the impact of adoption of the new revenue accounting standard. Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
• Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.
• Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, re-performance and inspection of evidence in respect of operation of these controls.
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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 standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We don't have any key audit matters which is required to be reported except the key audit matters reported by erstwhile auditor in the report dated 28th November 2022, we are incorporating the same in our audit report as below:-_
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distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognized overall period. Additionally, new revenue accounting Standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
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• Tested the relevant information technology systems' access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.
• Selected a sample of continuing and new contracts and performed the following procedures:
• Read, analyzed and identified the distinct performance obligations in these contracts.
• Compared these performance obligations with that identified and recorded by the Group.
• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration.
• Samples in respect of revenue recorded for time and material contracts were tested using a combination of approved time sheets including customer acceptances, subsequent invoicing and historical trend of collections and dispute.
• In respect of samples relating to fixed price contracts, progress towards satisfaction of performance obligation used to compute recorded revenue was verified with actual and estimated efforts from the time recording and budgeting systems. We also tested the access and change management controls relating to these systems.
• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
• Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
• We reviewed the collation of information and the logic of the report generated from the budgeting system used to prepare the disclosure relating to the periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
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2.
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Accuracy of revenues and onerous obligations in respect of fixed price contracts
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Principal Audit Procedures Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
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involves critical estimates.
Estimated effort is a critical estimate to determine revenues and liability for onerous obligations. This estimate has a high inherent uncertainty as it requires consideration of progress of the contracts, efforts incurred till date and efforts required to complete the remaining contract performance obligations.
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• Evaluated the design of internal controls relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations.
• Tested the access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorized changes to recording of efforts incurred.
• Selected a sample of contracts and through inspection of evidence of performance of these controls, tested the operating effectiveness of the internal controls relating to efforts incurred and estimated.
• Selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations have been considered in estimating the remaining efforts to complete the contract.
• Reviewed a sample of contracts with unbilled revenues to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.
• Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts.
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3
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Evaluation of Uncertain Tax Position - The Group has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes.
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Principal Audit Procedures Obtained details of completed tax assessments and demands for the period ended November 28th, 2022 from management. We involved our internal experts to challenge the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. Our internal experts also considered legal precedence and other rulings in evaluating management's position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1st, 2022 to evaluate whether any change was required to management's position on these uncertainties.
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Information other than the Financial Statements and Auditor report thereon.
I. The Company's Management is responsible for the preparation of other information. The other information comprises the information included in the
management discussion and analysis, Board's report including Annexures to Board's report but does not include the standalone financial statements and our auditor's report thereon.
2. Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
3. In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
4. Based on the work we have performed, if we conclude that there is material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.
Responsibility of Management for the Standalone Financial Statements
The Company's Management is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act”) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, 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 accounting Standards specified under section 133 of the Act, and Companies (Indian Accounting Standards) Rules, 2015, as amended.
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 implementation and maintenance of accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
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 bas no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone 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 SAs 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 standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone 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 for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• 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 ability of the Group 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 standalone 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's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group t express an opinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the standalone financial statements.
• Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
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.
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.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone 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
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 section 143 of the Companies Act, 2013, we give in the Annexure- A statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. (A) 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 purposes 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 Balance Sheet, the Statement of Profit and Loss including Other Comprehensive income and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
d. In our opinion, the aforesaid Standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
e. No written representations received from the directors hence we cannot comment on the qualification/disqualification of directors in terms of Section 164 (2) of the Act.
f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting; and
(B) 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, in our opinion and to the best of our information and according to the explanations given to us:
• The Company has not disclosed the impact of pending litigations on its financial position in its financial statements, No such details are available.
• The Company does not have any long-term Contract. The Company was not required to make any provisions for material foreseeable losses.
• There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the reporting period.
• i. We have not received any representation from the management regarding loans or advance or guarantee through intermediaries, however on the basis of audit report of erstwhile auditor dated 28.11.2022 we report that management has represented that, to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:
> Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Company; or
> Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
ii. The management has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities ("Fund Parties") with the understanding, whether recorded in writing or otherwise that the Company shall:
> Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Funding Party; or
> Provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries; and
iii. Based on such audit procedures as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under subclause d (i) and d (ii) contain any material misstatement.
• During the reporting period, the Company has not declared or paid any dividend. 1
Section 7 of the Insolvency and Bankruptcy Code, 2016 ( herein referred as "IBC, 2016”) and Mr. Sandeep Devdas Maheshwari (herein referred as "IRP") (Reg No.:- IBBI/IPA-001/IP-P00640/2017-18/110 has been appointed as Interim Resolution professional of the Corporate Debtor(the company). Consequently, Powers of Board of Directors has been suspended and company is under supervision and management of IRP under the Provision of Insolvency and Bankruptcy Code, 2016. The Hon'ble NCLT, Mumbai has also declared moratorium vide "clause d" of CIRP order prohibiting initiation/continuation of any proceedings against the company during CIRP Period.
(C) With respect to the matter to be included in the Auditor's Report under Section 197(16) of the Act: In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current reporting period is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act.
The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.
For J A M P R S & Co.
Chartered Accountants FRN:019026C
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CA Sandeep Kumar
Partner
M. No. 514470
Place: Delhi
Date: 02/08/2023
UDIN: 23514470BGWGBZ4879
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Corporate Insolvency Resolution Process (herein referred as "CIRP") has been initiated against the company i.e. SETUBANDHAN INFRASTRUCTURE LIMITED w.e.f. 28th November 2022 vide order of the National Company Law Tribunal, Mumbai Bench under
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