Winsome Yarns Ltd Auditor Reports

To

The Resolution professional Winsome Yarn Limited

(A company under Corporate Insolvency Resolution Process vide NCLT order)

Report on the Audit of the Standalone Financial Statement.

1) Qualified Opinion.

We have audited the accompanying Standalone Ind AS financial statements of Winsome Yarns Limited ("the Company under CIRP process"), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Income), 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.

The Honble National Company Law Tribunal ("NCLT"), Chandigarh Bench, admitted the Corporate Insolvency Resolution Process ("CIRP") application filed by an financial creditor of Winsome Yarn Ltd ("the Company") and appointed Mr. Sanjay Gupta (IBBI Registration No .IBBI/IPA-002/IP-N00982-C01/2017-2018/10354, as Interim Resolution Professional ("IRP"), in terms of the Insolvency and Bankruptcy Code, 2016 ("the Code") to manage the affairs of the Company vide CP (IB) No. 291/Chd /Chd /2018 dated 22.12.2023. Further Honble National Company Law Tribunal ("NCLT"), Chandigarh Bench, vide order dated 14.03.2024 appointed M/s ARCK Resolution Professionals LLP having IBBI Registration No. IBBI/IPE-0030/IPA-1/2022-23/50013as the new RP of Winsome Yarns Ltd ("the Company").

In view of pendency of the CIRP, and in view of suspension of the powers of Board of Directors and as explained to us, the powers of adoption of the Standalone Financial statements for the year ended 31st March,2024 vest with the RP.

In our opinion and to the best of our information and according to the explanations given to us, except for the effects/possible effects of the matters described in paragraph under Basis of Qualified Opinion, the aforesaid Ind AS 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 accounting principles generally accepted in India including the Ind AS, State of affairs of the Company as at March 31, 2024, and profit/loss including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

2) Basis for Qualified Opinion.

1. In view of accumulated losses of the Company as at the end of March 31, 2024, the net worth of the Company as at that date being negative, continuous losses, negative cash flows and due to financial constraints, resignation of KMP and non-deposit of statutory dues on time, material uncertainty exists about the company ability to continue as going concern. The decision of management (Power suspended) and RP of the Company to prepare the accounts of the Company on going concern basis for reasons that mentioned in standalone financial statement note no 3.2 (e) there would arise a need to adjust the realizable value of assets and liabilities in the event of failure of assumptions as to going concern, and in the absence of impact of aforesaid assumptions having been un-ascertained, we are unable to comment thereon.

2. The Financial statement for the year ended on March 31, 2024 are understated due to: i) Non-provisioning of interest expenses, of Rs 22,850.78 Lakhs on borrowings for the year ended on March 31, 2024 (Rs 19,662.06 lakhs for the year ended on March 31, 2023) and Rs 1,26,851.35 Lakhs being aggregate amount of interest un-provided till the year ended March 31, 2024 (Rs 1,04,000.57 Lakhs till the year ended March 31, 2023), and further amount towards penal interest, penalty, etc. as may be charged by the lenders. (In the absence of statement of account, the above amount has been arrived at as per estimates of the Company, and the aggregate un-provided amount in books of account of the Company is not ascertainable with accuracy).

ii) Non-provisioning against long outstanding receivables of Rs. 128.17 Lakhs which is overdue for more than 365 days. Further Re-instatement of few debtors, advance from customers, creditors for export, etc. on exchange fluctuation is not recognized in line with Ind AS - 21

"The Effects of changes in Foreign Exchange Rates" the effect of which we are unable to comment.

3. The Internal Control Systems need to be further strengthened in order that they are commensurate with the size of the Company and the nature of its business, more particularly in areas of, purchases and consumption of materials, charging of expenses, set-off of balances, and invoicing of sale of goods and services.

4. As per the information given to us, the carrying value of investments have not been marked to realizable value, which if accounted would result in Investments reducing by Rs. 2568.41 Lakhs and Loss of the year ended 31.03.2024 increasing by Rs. 2568.41 Lakhs.

5. Confirmation of balances and reconciliation thereof with respective parties are pending, which include balances pertaining to, accounts receivable and accounts payable, bank balances (including FDR), other current assets, advance for leasing, security deposit with government, loans and advances recoverable, secured loans, other liabilities, provisions, and contingent liabilities. All balances have been certified by the management of the Company. In the absence of the Company having aforementioned details and confirmations, the impact thereof is unascertainable, and therefore, not being commented. Further strengthening of internal controls by the Company will provide greater reliability.

6. As per the information given to us, In reference to note no. 13 of financial Statements, we draw attention to the users of the financial statement for the year ended on 31st March, 2024. Fixed Deposit with Canara Bank Amount of Rs 30.66 lakhs had been made for Margin Money for issuing Bank Guarantee, which was adjusted against the dues of working capital outstanding at the time of Account becoming NPA, has not been accounted for as it will change note in Financials of the borrowing amount as per books. We are unable to comment upon possible impact in the standalone financial statements for the year 31^st March, 2024.

We conducted our audit in accordance with the standard on auditing ("SA") specified under section

143(10) of the Act. Our responsibilities under those standards are further describes in the Auditors Responsibilities for the audit of the standalone financialstatement 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 ("the 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 obtained by us is sufficient and appropriate to provide a basis for our qualified opinion.

3. Emphasis of matter

i) As per information given to us, the company has made advance payment of Rs. 2268.50 Lakhs to Edelweiss Assets Reconstruction Company as an advance against restructuring of loan. Loan outstanding from Edelweiss Assets Reconstruction Company amounting of Rs. 47071.08 Lakhs as on 31.03.2024. ii) The company has not made provision for the demand raised by various authorities as the matters are pending before various appellate forum. We are unable to comment upon possible impact in the standalone financial statements for the year 31^st March, 2024. iii) In reference to note no. 3.2 (e) of financial statements, we draw attention to the users of the financial statement for the year ended on 31st March, 2024, The Petition of Edelweiss Assets Reconstruction Company Ltd. (EARC), an Asset Reconstruction Company, under Section 7 of the Insolvency and Bankruptcy Code, 2016, (the Code) filed before the Honble National Company Law Tribunal, Chandigarh Bench, ("NCLT") was allowed by the Honble NCLT vide its Order dated 22nd December, 2023. An Interim Resolution Professional (IRP), Sh. Sanjay Gupta is appointed by the Honble NCLT. Further Honble National Company Law Tribunal ("NCLT"),

Chandigarh Bench, vide order dated 14.03.2024 appointed M/s ARCK Resolution Professionals LLP having IBBI Registration No. IBBI/IPE-0030/IPA-1/2022-23/50013as the new RP of the Winsome Yarns Ltd ("the Company"). and has since taken control of management and affairs of the Company. With the appointment of the RP, the powers of the board is now vested with RP and thus the powers of existing board is suspended. iv) In reference to note no. 14 of financial statements, we draw attention to the users of the financial statement for the year ended on 31st March, 2024. The Provisions may be modified on further reconciliation and evaluation of the recoverability of the Current Assets. The other Non Current assets have reduced from Rs 250.44 Lacs to Rs 47.66. The main reduction is due to change in the Advance against Imprest account by Rs 215.83 lacs. However, We are unable to comment upon possible impact in the standalone financial statements for the year 31^st March, 2024. v) As per the information given to us. CIRP cost of Rs. 345.76 Lakh for the quarter ended 31.03.2024 (Rs.406.61 Lakh as at 31.03.2024) has been accounted, and CIRP cost of Rs. Nil for the quarter ended 31.03.2024 (Rs. Nil as at 31.03.2024) is unaccounted. The aggregate CIRP cost of Rs. 142.54 lakh will be required to be discharged in priority as per Insolvency and Bankruptcy Code, 2016. The liability will be discharged on implementation of approved Resolution Plan, failing which during liquidation of the Company. We are unable to comment upon possible impact in the standalone financial statements for the year 31st March, 2024 Our opinion is not modified in respect of these matters

4. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. There 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. In addition, the matters described in the basis for qualified opinion and emphasis of matter paragraph are by their nature are key audit matters.

5. Information Other than the Financial Statement and Auditors Report

The Companys Board of Directors is responsible for the other information but does not include the financial statements and our auditors report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In Connection with our audit of the financial statements, our responsibilities is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statement or our Knowledge obtained in the audit or otherwise appears to be materially misstate. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

6. Responsibilities of Management and Those Charged with Governance for the standalone Financial Statements.

The company is under CIRP process vide CP (IB) No.291/chd/chd/2018 by Honble NCLT Chandigarh Bench dated 22.12.2023 and all management responsibilities vested with Resolution professional. The Companys 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 standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows 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 the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other 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 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. In preparing the financial statement, management is responsible for assessing the companys ability to continue as a going concern, disclosing, as application, 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.

Those board of directors are also responsible for overseeing the companys financial reporting process.

7. Auditors Responsibilities for the Audit of Financial Statements

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 auditors 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 financial statements. As part of an audit in accordance with the 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 Statement, 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 ? 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 in place adequate internal financial controls with reference to financial statements 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 the management.

? Conclude on the appropriateness of the managements 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 Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the Statement 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 auditors 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 Statement, including the disclosures, and whether the Statement represents the underlying transactions and events in a manner that achieves fair presentation. ? Obtain sufficient appropriate audit evidence regarding the financial information of the Company to express an opinion on the Statement. We are responsible for the direction, supervision and performance of the audit of financial information of the Company of which we are the independent auditors. For the subsidiaries included in the Statement, which have been audited by other auditors or not have been audited by other auditors, such other auditors or management remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

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.

8. Report on Other Legal and Regulatory Requirement

i) As required by the Companies (Auditors Report) Order, 2020 (the Order) issued by the Central Government of India in terms of section 143(11) of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order. ii) 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, except as stated in para under the head "Basis of Qualified Opinion". b) Except for the effects/possible effects of the matters described in the "Basis of Qualified Opinion" paragraph above, in our opinion, proper books of account as required by law have been kept by the Company in so far as it appears from our examination of those books. c) The Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account. d) Except for the matter described in para under the "Basis for Qualified Opinion", in our opinion, the aforesaid Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act. e) The matters described in the "Basis of Qualified Opinion" paragraph above, in our opinion, may have an adverse effect on the functioning of the Company. f) The company is under corporate Insolvency Resolution process vide the order of

Honble NCLT, Chandigarh Bench dated 22.12.2023 and all management responsibilities vest with the Resolution professional, Hence the requirement to comment upon the Directors qualification is not Applicable g) The matters described in the "Basis of Qualified Opinion" paragraph above, in our opinion, may have an adverse Impact Relating to maintenance of Accounts and other matters connected therewith. h) 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". i) With respect to the other matters to be included in the Auditors 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 financial statements Refer Note no. 3.2 to the standalone financial statement. II. Except as matter described under paragraph of "basis for qualified opinion" as required under the applicable law or Accounting Standards, The Company has made provision, for material foreseeable losses, if any, on long term contracts including derivative contracts; III. There were no amounts which were required to be transferred to the Investor

Education and Protection Fund by the Company. IV. a) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the Accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kinds of funds ) by the company to or in any other person(s) or entities including foreign entities ("intermediaries"), with the understanding whether recorded in writing or otherwise, that the intermediary shall, whether directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company ("ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

b) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity (ies) including foreign entities

("Funding parties"), with the understanding whether recorded in writing or otherwise, that the company shall, whether directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding parties ("ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the ultimate beneficiaries; and

c) Based on the audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representation under sub point (a) and (b) contain any misstatement.

V. The company does not declare or paid any dividend during the year

VI. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books if account for the financial year ended 31st March 2024 which has a feature of recording audit trail (edit Log) facility and same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with

As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from 1st April, 2023 reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the Financial Year ended 31st March, 2024.

"ANNEXURE A" TO INDEPENDENT AUDITORS REPORT

(Annexure referred to in paragraph 7 on Report on Other Legal and Regulatory Requirements)

i) a) As per information and explanation given to us, the Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. b) As per information and explanation given to us, the fixed assets have been physically verified by the management at reasonable intervals. However, we have not been provided complete physical verification report. 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 freehold properties are held in the name of the Company. However, we have not been provided complete title deed of immovable property situated at Derabassi (Punjab) location. d) According to the information given to us the Company has not revalued its property plant, and equipment during the year e) According to the information and explanation given to us, no proceedings have been initiated or are pending against the company for holding any Benami property under the benami Transactions (prohibition) Act 1988. ii) a) According to the information, explanation and representation provided by the management, physical verification of inventory has been conducted at reasonable intervals by the management. But, in our opinion the coverage and procedure of such verification by the management is not appropriate. Further, according to information and explanation given to us no material discrepancy was noticed in such verification by management. b) According to the information, explanation and representation provided by the management, during any point of time of the year, the company has not been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current Assets.

iii) According to the information, explanation given to us, the Company has not made investment in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured to companies, firms, limited liability partnerships or other parties. Accordingly, sub-clause (a),(b),(c),(d),(e) of clause (iii) para 3 of the order is not applicable to the company. iv) According to the information, explanation and representation provided by the management and based upon audit procedures performed, the Company has not given any loans, provided any guarantee or security in connection with any loan and/ or acquiring securities of any other body corporate. v) As explanation given to us and on the basis of our examination of the records, the Company has accepted deemed deposits in violation of provisions of section 73 to 76 of companies act 2013 read with rule 3 of companies (acceptance of deposits) Rules, 2014. The nature of the contraventions is trade advance for supply of goods which is not appropriated against supply of goods within a period of 365 days from the date of acceptance of such advances. 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 the Companys products to which the said Rules apply and are of the opinion that prima facie, the prescribed records have been made and maintained. However; we have not made a detailed examination of the said records with a view to determine whether they are accurate or complete.

vii) a) According to the information and explanations given to us, the company is not regular in depositing undisputed statutory dues including provident fund, employees state insurance, income-tax, sales- tax, service tax, goods and service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authority. However, the arrear of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date, they became payable, are not provided.

Name of the statue	Nature of the dues	Amount(Rs.)	Period to which amount relates	Due date	Date of payment
Employee State	Employee State	Full Information	Full Information	Full Information	Full Information
Insurance Act, 1948	Insurance Fund	Not Provided	Not Provided	Not Provided	Not Provided
Employees	Employees	Full Information	Full Information	Full Information	Full Information
Provident Funds & miscellaneous	Provident Fund	Not Provided	Not Provided	Not Provided	Not Provided
Provisions Act,1952
Income Tax Act, 1961	Tax Deducted at Source	Full Information Not Provided	Full Information Not Provided	Full Information Not Provided	Full Information Not Provided
Punjab Labor	Labor Welfare fund	Full Information	Full Information	Full Information	Full Information
Welfare Fund Act, 1965		Not Provided	Not Provided	Not Provided	Not Provided

b) According to the information and explanations given to us, the following dues of income tax, sales tax, service tax, duty of excise and Value added tax have not been deposited by the company on account of disputes:

Name of the Statute	Nature of Dues	Amount (Rs. in Lakhs)	Period to which relates	Forum where dispute is pending
Income Tax Act, 1961	Income Tax	182.71	2005-2007	ITAT, Chandigarh
Central/State Sales Tax	-do-	111.81	2014-2015	Asstt .Excise & Taxation commissioner, Mohali
	-do-	1759.65	2015-2016	Asstt .Excise & Taxation commissioner, Mohali
	-do-	3.87	2016-2017	Asstt .Excise & Taxation commissioner, Mohali
	-do-	2.98	2017-2018	Asstt .Excise & Taxation commissioner, Mohali
	-do-	53.50	2008-2009	Sales Tax tribunal
	-do-	1.84	2017-18	DETC cum Joint Director (Enf.), Patiala

 

	-do-	10.34	2010-11	DETC cum Joint Director (Enf.), Patiala
Central Excise Act	Excise Duty	7.63	2008-09	CESTAT, New Delhi
	-do-	5.04	2010-11	CESTAT, New Delhi
	-do-	13.42	2011-12	CESTAT, New Delhi
Goods and Service Tax	GST	423.53	2018-19	DTC Appeals
	GST	6.43	2017-18	DTC Appeals

*This para to be read with note no. 3.1(A) and 3.1(B) to the financial statements.

viii) According to information and explanation given to us, there is not any transactions which have been surrender or disclosed as income during the year in the tax assessment under the income Tax 1961 and not recorded in the books of accounts.

ix) a) In our opinion based on audit procedures performed and according the information and explanation given to us, the Company has defaulted in repayment of loans and borrowings to bank. However, the Company has not taken loans from any bank, financial institution, and Government or debenture holders during the year. The lender wise details of default is as under;

SI No. Name of Bank	Total Default Amount* (Rs. Lakhs)	Maximum Delay (in days)	Remark
1. Bank of India	2514.00	3925	Term Loan
2. Bank of Maharashtra	2506.00	3835	Term Loan
3. Indian Overseas Bank	2045.00	3743	Term Loan
4. ICICI Bank Ltd.	611.00	3925	Working Capital Term Loan and FITL
5. Oriental Bank of Commerce	1965.00	3925	Term Loan
6. Canara Bank	12782.66	3650	Term Loan and Working Capital Loan Assigned to EARC
7. Punjab National Bank	14813.88	3726	Term Loan and Working Capital Loan Assigned to EARC
8. State Bank of Patiala	9789.44	3594	Term Loan and Working Capital Loan Assigned to EARC
9. Dena Bank	3973.01	3833	Term Loan Assigned to EARC
10. UCO Bank	4244.62	3652	Term Loan Assigned to EARC
11. United Bank of India	1467.46	3833	Term Loan Assigned to EARC

EARC = Edelweiss Asset Reconstruction Company Ltd

*Total default amount excludes the interest that is not provided in the book

b) According to information given to us, the company appears as a willful defaulter as per RBI guidelines refer note no 3.2C of Financial statement. c) According to information and explanation given to us, term loans were Applied for the purposes for the purpose for which the loans were obtained. d) According to information and explanation given to us, the company has not utilized funds for long term purposes for those funds which were raised for short term basis e) According to information and explanation given to us, the company has not taken funds from any entity or persons on account of or to meet the obligations of its subsidiaries, associates or joint ventures. f) According to information and explanation given to us, the company has not raised loans raised loans during the year on the pledge of securities in its subsidiaries, associates or joint ventures. x) a) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly, sub-clause (a) of clause (x) of para 3 of the order is not applicable. b) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible) during the year. Accordingly, sub-clause (b) of clause (x) of para 3 of the order is not applicable. xi) a) According to the information and explanations given to us, no material fraud by the company or on the company has been noticed or reported during the year. b) According to the information and explanations given to us, no report under sub- section (12) of section 143 of the companys act has been filed by auditors in Form ADT-4 as prescribed under rule 13 of companies (audit or auditors) rules,2014 with the central government. c) According to information and Explanation given to us, there is no whistle-blower complaints, received by the company during the year.

xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, sub clause (a), (b) and (c) clause (xii) of para 3 of the order is not applicable.

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 Ind AS standalone financial statements as required by the applicable accounting standards. xiv) a) The internal Audit system of the company not commensurate with the size and nature of its business. b) Internal audit report for the period under audit not provided to us, hence the internal audit reports have not been considered by us.

xv) According to the information and explanations given to us, the company has not entered into any non-cash transactions with directors or persons connected with him. xvi) a) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. b) According to information and explanation given to us, the company has not conducted any non- banking or Housing financial activities. Accordingly, sub-clause (b) of clause (xvi) of para 3 of the order is not applicable. c) According to information and explanation given to us the company is not a core investment company (CIC) as defined in the regulation made by the Reverse Bank of India. Accordingly, sub-clause (c) of clause (xvi) para 3 of the order is not applicable to the company. d) According to information and explanation given to us, there have not any CIC in the group. Accordingly, sub-clause (d) of clause (xvi) para 3 of the order is not applicable to the company.

xvii) According to information and explanation given to us, the company has not incurred any cash losses in the current financial year but they have incurred cash losses in immediately preceding financial year.

xviii) According to information and Explanation given to us, there has been no resignation of the statutory auditor during the year and accordingly this clause is not applicable.

xix) According to information and explanation given to us and on the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, auditors knowledge of boards of directors and managements plan, our opinion is that there is material uncertainty exists as on the date of audit report that company is capable is meeting its liability existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.

xx) According to information and explanation given to us, section 135 of companys act is not applicable on the company. Accordingly, clause (xx) of paragraph 3 of the order is not applicable. xxi) According to information and explanation given to us, the company does not have joint venture, subsidiary and Associates and has not required prepared consolidated financial statement. Accordingly, clause (xxi) of paragraph 3 of the order is not applicable to the company.

ANNEXURE B TO INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF WINSOME YARNS LTD.

Report on the Internal Financial Controls under Clause (i) of sub-section 3 of the section 143 of the Act.

We have audited the internal financial controls over financial reporting of Winsome Yarns Limited ("the Company under CIRP process") as of March 31, 2024, in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for laying down 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 (Guidance Note) issued by the Institute Chartered Accountants of India (ICAI). 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 Companys 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 Companies Act, 2013 (the Act).

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit.

We conducted our audit in accordance with the Standards of Auditing, to the extent applicable to an audit of internal financial controls and the Guidance Note, both 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 the 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 auditors judgment, including the assessment of the risks of material misstatement of the Ind AS 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 internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Companys 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 Companys internal financial control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of Ind AS 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 (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the Ind AS financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of its 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 to 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.

Basis of Qualified Opinion

We draw attention to the paragraph 2 "Basis for Qualified Opinion" of our main report and the same to be read with our comments as stated below: According to the information and explanation given to us and based on our audit, the following material weaknesses have been identified as at March 31, 2024:

1. The Company did not have appropriate internal control system for- a) Adjustment/Set off and written off/write back, payment of receivables/payables. b) Credit control policy and procedure c) No policy or procedure for receipt of balance confirmation of receivables, particularly overseas overdue receivables, bank balances, payables (including of an associate company), secured loans and other liabilities and loans and advances.

2. The company did not have any extensive internal control system for follow up/recovery/adjustment of old outstanding receivables and payables including balance confirmation and reconciliation.

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 Companys annual financial statements will not be prevented or deleted on a timely basis. In our opinion, except for the effects/possible effects of the material weaknesses described above and on the achievement of the objectives of control criteria, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 202, 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 ICAI.

We have considered the material weaknesses identified and reported above in determining the nature, timing and extent of audit tests applied in our audit of the March 31, 2024 standalone financial statements of the Company and these material weaknesses does not affect our opinion on the standalone financial statements of the Company.

STATEMENT OF IMPACT OF AUDIT QUALIFICATIONS (FOR AUDIT REPORT WITH MODIFIED OPINION) SUBMITTED ALONG-WITH ANNUAL AUDITED FINANCIAL RESULTS WINSOME YARNS LIMITED

Statement of Impact of Audit Qualifications for the Financial Year ended March 31, 2024 [See Regulation 33/52 of the SEBI (LODR) (Amendment) Regulations 2016]

(Rs. in Lakhs)

I. Sl. Particulars No.	Audited Figure (as reported before adjusting for qualifications)	Adjusted Figures (audited figures after adjusting for qualifications)*
1 Turnover/ Total income	3006	3006
2 Total Expenditure	4100	27079
3 Net Profit/(Loss)	(1094)	(24073)
4 Earnings Per Share	(1.55)	(34.04)
5 Total Assets	19915	19986
6 Total Liabilities	61907	188758
7 Net Worth	(41992)	(168843)
8 Any other financial item(s) (as felt appropriate by the management)	-	-

* all adjustments are without tax effect.

II. Audit Qualifications
(a) Details of Audit qualification	Reference is invited to Para (4) of Independent Auditors Report on Standalone audited financial results:
	i. In view of accumulated losses of the company as at the end of March 31, 2024, the net worth of the company as at that date being negative, continuous losses, negative cash flows and due to financial constraints, resignation of KMP and non-deposit of statutory dues on time, material uncertainty exists about the company ability to continue as going concern. The decision of management and RP of the company to prepare the accounts of the company on going concern basis for the reason mentioned in standalone financial result note no 4 there would arise a need to adjust the realizable value of assets and liabilities in the event of failure of assumptions as to going concern, and in the absence of impact of aforesaid assumptions having been un-ascertained, we are unable to comment thereon.
	ii. Non-provisioning of interest expenses, of Rs 22,850.78 Lakhs on borrowings for the year ended on March 31, 2024 (Rs 19,662.06 lakhs for the year ended on March 31, 2023) and Rs 1,26,851.35 Lakhs being aggregate amount of interest un-provided till the year ended March 31, 2024 (Rs 1,04,000.57 Lakhs till the year ended March 31, 2023), and further amount towards penal interest, penalty, etc. as may be charged by the lenders. (In the absence of statement of account, the above amount has been arrived at as per estimates of the Company, and the aggregate un-provided amount in books of account of the Company is not ascertainable with accuracy).
	b) Non-provisioning against long outstanding receivables of Rs. 128.17 Lakhs which is overdue for more than 365 days. Further Re-instatement of few debtors, advance from customers, creditors for export, etc. on exchange fluctuation is not recognized in line with Ind AS - 21 "The

 

	Effects of changes in Foreign Exchange Rates" the effect of which we are unable to comment.
	iii. The Internal Control Systems need to be further strengthened in order that they are commensurate with the size of the Company and the nature of its business, more particularly in areas of, purchases and consumption of materials, charging of expenses, set-off of balances, and invoicing of sale of goods and services.
	iv. As per the information given to us, the carrying value of investments have not been marked to realizable value, which if accounted would result in Investments reducing by Rs. 2568.41 Lakhs and Loss of the year ended 31.03.2024 increasing by Rs. 2568.41 Lakhs.
	v. Confirmation of balances and reconciliation thereof with respective parties are pending, which include balances pertaining to, accounts receivable and accounts payable, bank balances (including FDR), other current and non- current assets, advance for leasing, security deposit, secured loans, other liabilities, provisions, and contingent liabilities. All balances and disclosures have been certified by the management of the Company. In the absence of the Company having aforementioned details and confirmations, the impact thereof is unascertainable, and therefore, not being commented. Further strengthening of internal controls by the Company will provide greater reliability.
	vi. As per the information given to us, In reference to note no. 13 of financial Statements, we draw attention to the users of the financial statement for the year ended on 31st March, 2024. Fixed Deposit with Canara Bank Amount of Rs 30.66 lakhs had been made for Margin Money for issuing Bank Guarantee, which was adjusted against the dues of working capital outstanding at the time of Account becoming NPA, has not been accounted for as it will change note in Financials of the borrowing amount as per books. We are unable to comment upon possible impact in the standalone financial statements for the year 31st March, 2024.
Type of Audit Qualification	Qualified Opinion
(c) Frequency of Qualification	? In case of point no (i), (iv) and (v) Appeared since F.Y. 2014-15
	? In case of point no (ii) Appeared since F.Y. 2013-14 (However, there is change in amount)
	? In case of point no (iii) Appeared since F.Y. 2013-14
(d) For Audit Qualification(s) where the impact is	? In case of point no (vi) Appeared since F.Y. 2003-04 With regard to Auditors Qualification No. (i)(ii), (iii), (iv),(v) and (vi) :-
quantified by the Auditor, Management views	(i) The management has prepared its Financial Statement on Going Concern basis- Refer Note No.6 of Results ???? Regarding non-provision of interest expenses, penal

 

	interest, penalty, etc. in respect of borrowings of the Company from banks - As stated in Note No. 3.15 of the Audited Financial Statement, The operating losses suffered by the Company for reasons beyond control of the Company, including due to non-performance of commitments and obligations by the lenders of the Company, consequently led to financial stress being faced by the Company. The unilateral recall of borrowings by the lenders and followed by lock downs to contain the spread of pandemic of Covid-19, resulted in an alleged claim of an unpaid principal and overdue interest .
	Provision for upto date interest ,has not been made in the books of account, and disputing the liability of the Company in its borrowings, it had filed a counter claim against the lenders, which is for an amount larger than the amount claimed by the lenders and the matter is pending adjudication before the Honble Debt Recovery Tribunal, Chandigarh.
	The Company will account the effects of payment of restructured liabilities on approval of resolution plan or otherwise on failure of insolvency proceedings and during liquidation of the Company.
	(iii) Regarding further strengthening the system of internal controls Necessary steps have been initiated by the Company to further strengthen the system of internal controls w.r.t. purchases and consumption of inventory, booking of expenses, set off of balances, for the sale of goods and services, etc.
	(iv) Regarding non provision of dimunition in carrying value of investment : Company response : The changes in value of investments will be accounted for after reconciliation.
	(v) The balances of certain Trade Receivables , Bank Balances including other bank balances, Investments, Trade Payables , Secured Borrowings, Other Financial Liabilities and Financial Assets including other current assets are subject to reconciliation. Contingent liabilities (read with note no.
	3.1) are as as certified by the management. Further, necessary steps have been initiated to further strengthen system of internal controls in this regard.
	(vi) This Fixed Deposit had been made for Margin Money for issuing Bank Guarantee, Which was adjusted against the dues of working capital outstanding at the time of Account becoming NPA, has not been accounted for as it will change note in Financials of the borrowing amount as per books.The above amount is not recoverable .
(iii) Auditors comments on (i) or (ii) above	Refer details of audit qualification [para II(a) above]

 

II. Signature
Director (Power suspended due to	Manish Bagrodia
CIRP)	DIN : 0046944
Chief Financial Officer	Sanjay Sharma
Chairman Audit Committee	Pankaj Mahajan
	DIN: 06994712
Resolution Professional	Anil Kohli
	Partner
	ARCK Resolution Professionals LLP
Statutory Auditors	For Dhana & Associates (Formerly- Khandelia & Sharma)
	Chartered Accountants, Firm Registration No. 510525C
	(Arun Khandelia)
	Partner (M.No. 089125)