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Kwality Ltd.

BSE: 531882 | NSE: KWALITY | Series: NA | ISIN: INE775B01025 | SECTOR: Food Processing

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Kwality is not traded on BSE in the last 30 days

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Kwality is not traded on NSE in the last 30 days

Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Auditor's Report

Report on the StandaloneInd AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Kwality Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standaloneInd AS 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), cash fiows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Indian Accounting Standards) Rules, 2015, as amended, and the accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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 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 standaloneInd AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standaloneInd AS financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standaloneInd AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standaloneInd AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the state of affairs (financial position) of the Company as at March 31, 2018, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matters

We draw attention to the following matters in the Notes to the standalone Ind AS financial statements:

a) Note 46 of the financial statement regarding delays in payment of direct taxes as per requirements of Income Tax Act, 1961. Tax amounting to INR 17,929.09 lakhs includes income tax payable for earlier years (Also refer clause VII(a) of Annexure B to this report). The amounts along with interest have been fully provided in the books of accounts of the Company.

b) Note 47 of the financial statement regarding foreign currency receivables and payable outstanding over the respective time limit prescribed under the Foreign Exchange Management Act (FEMA), 1999. The Company is currently in process of initiating settlement proceedings in respect of such dues. Pending outcome of such proceedings, we are unable to comment on its impact on the financial statements.

c) Note 48 of the financial statement regarding proceedings initiated under section 132 of Income Tax Act, 1961 on the Company and some Directors. As part of routine process the Company has received notices under section 153 and section 148. Since the assessment proceedings have not yet started the Company currently is not in a position to evaluate consequential impact, if any of possible tax adjustments.

Our opinion is not qualified in respect of these matters.

Other Matter

The standalone Ind AS financial statements of the Company for the year ended March 31, 2017, were audited by another auditor whose report dated May 26, 2017 expressed an unmodified opinion on those financial statements.

Report on Other Legal and Regulatory Requirements

1. 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, the Statement of Cash Flow and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standaloneInd 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 and the Companies (Indian Accounting Standards) Rules, 2015, as amended.

(e) The matters described in Annexure A to this report under ‘Material Weaknesses’ paragraph, in our opinion, may have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from the directors as on March 31, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 from being appointed as a director in terms of Section 164 (2) of the Act.

(g) 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 A’

(h) 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:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 38 and 48 to the standaloneInd AS financial statements.

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of sub-section 11 of section 143 of the Act, we give in the ‘Annexure B’, a statement on the matters specified in paragraphs 3 and 4 of the Order.

ANNEXURE A TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL

STATEMENTS OF KWALITY LIMITED

[Referred to in paragraph 1(g) under ‘Report on Other Legal and Regulatory Requirements’ in the Independent Auditors’ Report]

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of Kwality Limited (“the Company”) as of March 31, 2018 in conjunction with our audit of the standalone 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 internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI) (the “Guidance Note”). 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 its business, including adherence to 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. 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 internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, 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.

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 internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company’s internal financial control over financial reporting 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 internal financial control over financial reporting includes 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 authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized 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

Because of the inherent limitations of internal financial controls over financial reporting, 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 internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified as at March 31, 2018:

a) The Company did not have a mechanism to reconcile the ‘cheque receipt and deposit register’ with bank book. In the absence of such reconciliation, actual date of receipt of cheques cannot be ascertained (Cut Off). We have verified the date of receipt of cheque from date of posting in the bank book further their subsequent clearance verified from bank statement.

b) Debit/ credit note pertaining to procurement of material, recording of trading sales and journal entries are not authorised in the automated system. Further no competitive quotations are obtained for purchase of fixed assets. Absence of above controls may have an impact on the accuracy of relevant account balance. Absence of comparative quotation may have impact on the purchase price. We have performed other corroborative procedures such as verification of manual authorisation along with necessary supporting document besides obtaining independent year end balance confirmation from select vendors.

A ‘material weakness’ is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In our opinion, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audittests applied in our audit of the March 31, 2018 standalone financial statements of the Company, and these material weaknesses does not affect our opinion on the standalone financial statements of the Company.

ANNEXURE B TO INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF KWALITY LIMITED FOR THE YEAR ENDED MARCH 31, 2018

[Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ in the Independent Auditors’ Report]

i.

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets except assets were not tagged with any unique identification number.

(b) The Management has verified fixed assets during the year as per the regular program of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

ii. The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. No material discrepancies were noticed on verification between the physical stock and the book records.

iii. The Company has not granted any loans, secured or unsecured to Companies, Firms, Limited Liability Partnerships (LLP) or other parties covered in the register maintained under section 189 of the Companies Act, 2013 (‘the Act’). Accordingly, the provisions stated in paragraph 3 (iii)(a),3 (iii)(b) and 3 (iii)(c) of the Order are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, in respect of loans, investments, guarantees and security made.

v. In our opinion and according to the information and explanations given to us, there are no amounts outstanding which are in the nature of deposits as on March 31, 2018 and the Company has not accepted any deposits during the year.

vi. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant as specified by the Central Government for the maintenance of cost records under sub-section (1) of section 148 of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete

vii.

(a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, undisputed statutory dues including provident fund, employees’ state insurance, service tax, duty of customs, duty of excise, value added tax, cess have been regularly deposited with the appropriate authorities. The Company has been generally regular in payment of goods and service tax. Further there are serious delays in payment of withholding tax, Income tax during the year.

Undisputed statutory dues outstanding as at March 31, 2018 for a period of more than six months from the date they became payable are given below. Also refer paragraph (a) under paragraph “Emphasis of Matters” of our Independent Auditor’s report.

(Amount in Lakhs)

Name of the statue

Name of the dues

Net amount payable

Period to which the amount relates (financial year)

Due Date

Date of Payment

Remarks, if any

Income tax act, 1961

Income tax

4,255.79

2015 - 16

November 30,2016

Not Paid

Refer Note 1

Income tax act, 1961

Income tax

4,902.93

2016 - 17

November 30,2017

Not Paid

Refer Note 1

Income tax act, 1961

Payment of Advance tax

2,854.50

2017 - 18

Represents advance tax payable till September 15, 2017.

Not Paid

N e t t a x payable for the year INR 6,343.32 lakhs. Also, refer Note 1

Income tax act, 1961

Interest on Income Tax

47.45

2014 - 15

March 07, 2018

Not Paid

Rectification application under section 154 has been filed on April 12, 2018.

Note 1 : Excludes interest on unpaid income tax amounting to INR 2,379.60 Lakhs

(b) According to the information and explanation given to us and examination of records of the Company, the outstanding dues of income-tax, sales-tax, service tax, customs duty, excise duty and value added tax dues on account of any dispute, are as follows: (Amount in Lakhs)

Name of the statue

Name of the dues

Amount (Note 1)

Period to which the amount relates

Forum where dispute is pending

Remarks, if any

Uttar Pradesh VAT

VAT

5.00

2012 - 13

Addl. Comm. (Appeal), Ghaziabad

Uttar Pradesh VAT

VAT & CST

53.06

2013 - 14

Joint commissioner (Appeal), Bulandshahar

Uttar Pradesh VAT

VAT

30.11

2014 - 15

Tribunal (2nd Appeal), Aligarh

Haryan VAT

VAT

0.44

2012 - 13

DETC Cum Assessing Authority, Palwal

Haryan VAT

VAT

340.86

2013 - 14

Appellate Authority, Palwal

Rajasthan

VAT

VAT

18.45

2014 - 15

Appellate Authority, Jaipur

Delhi VAT

VAT

10.87

2012 - 13

Commissioner (VAT), Appeals, Delhi

Punjab VAT

VAT

16.08

2012 - 13

DETC(Appeals) cum JD (Appeals) Patiala

Punjab VAT

VAT

5.96

2012 - 13

DETC(Appeals) cum JD (Appeals) Patiala

Punjab VAT

VAT

7.85

2016 - 17

AETC, Mobile Wing, Amritsar

Note 1: The above amount exclude impact of amount paid under protest amounting to INR 72.74 lakhs.

viii. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to the financial institution, bank or debenture holders.

ix) In our opinion, according to the information explanation provided to us, money raised by way of term loans during the year have been applied for the purpose for which they were raised. The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year.

x. During the course of our audit, examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees.

xi. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has paid/ provided for managerial remuneration in accordance with the requisite approvals 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, the Company is not a Nidhi Company. Accordingly, the provisions stated in paragraph 3(xii) of the Order are not applicable to the Company.

xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

xiv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has made preferential allotment of shares during the year under the ‘Employee Stock Option Plan 2014’. Further, the Company has not made any private placement of Shares or allotted any partly or fully convertible debenture during the year. Accordingly, requirements of Section 42 of the Act are not applicable to the Company.

xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, provisions stated in paragraph 3(xv) of the Order are not applicable to the Company.

xvi. In our opinion, the Company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934 and accordingly, the provisions stated in paragraph clause 3 (xvi) of the Order are not applicable to the Company.

For MSKA & Associates

Chartered Accountants

Firm Registration No. 105047W

Sd/

Amit Mitra

Partner

Membership No. 094518

Place : New Delhi

Date : May 28, 2018