CLC Industries Limited (Formerly Known as Spentex Industries Limited)

Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code, 2016 (IBC)

The Hon'ble Company Law Tribunal, New Delhi (“NCLT”) admitted the Corporate Insolvency Resolution Process (“CIRP”) application filed against CLC Industries Limited and appointed Mr. Subhash Kumar Kundra as the Interim Resolution Professional under Insolvency and Bankruptcy Code, 2016 (“Code”) vide order dated January 03, 2020. Further the Committee of Creditors (“COC”) constituted during the CIRP has confirmed the appointment of Mr. Subhash Kumar Kundra as the Resolution Professional (“RP”) on February 20, 2020 to manage the affairs of CLC Industries Limited as per the provisions of Insolvency and Bankruptcy Code, 2016, and the management of affairs of the company are continuing to be exercised by the Resolution Professional. Subsequently, on 20th April, 2021 the application for approval of the Resolution Plan under section 30(6) and section 31(1) of the Insolvency and Bankruptcy Code, 2016 read with regulation 39 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 was filed by the Resolution professional with the Hon'ble Principal Bench of the NCLT for its approval. The Hon'ble Principal Bench of the NCLT approved the said resolution plan vide its order dated 12th May 2023.

Report on the Audit of the Standalone Financial Statements

Disclaimer of Opinion

We have audited the accompanying standalone financial statements of CLC Industries Limited (Formerly known as Spentex Industries Limited) ('the Company'), which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and the notes to the Standalone Financial Statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”)

We do not express an opinion on the accompanying Standalone financial statements of the Company. Because of the significance of the matter described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these Standalone financial statements.

Basis for Disclaimer of Opinion

a. In Respect of Property, Plant and Equipment, Physical possession and verification report of Tangible and Intangible Assets and title deeds of Immovable Property has not been provided for by the Management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the balance of Property, Plant and Equipment as at March 31, 2023.

b. In respect of Inventories, during the reporting period, the management has not provided any report for undertaking of physical verification of Inventories at periodic intervals. The Company has neither provided adequate inventory records for physical verification of Inventory. Hence, we cannot comment on present status of Inventory and its carrying Valuation in books of accounts.

c. The Company has not computed and provided for penal interest on defaults under borrowings as per the contractual terms of the underlying agreements. We are unable to determine the possible impact thereof on the loss for the year and borrowings and equity as on such date.

d. As mentioned in Note No. 48 to the standalone financial statements, pursuant to commencement of CIRP of the Company under Insolvency and Bankruptcy Code, 2016, there are various claims submitted by the financial creditors, operational creditors, employees and other creditors to the RP The overall obligations and liabilities including interest, penalty on loans and the principal amount of loans/ liabilities shall be determined during the CIRP and reconciliation with books of accounts is pending. Pending final outcome of the CIRP, no accounting impact in the books of accounts has been made in respect of excess, short, or non-receipts of claims for operational and financial creditors. Hence, consequential impact, if any, is currently not ascertainable and we are unable to comment on possible financial impacts of the same.

e. We have not received Bank Reconciliation/ Bank Statement/ Direct confirmation for balance confirmation in current accounts amounting Rs. 137.48 Lakhs- and balance of margin money amounting Rs. 8.68 Lakhs, as at March 31, 2023. Cash amounting to Rs. 40.62 Lakhs has not shown to us for physical verification. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the balance of cash and cash equivalent and equity as at March 31, 2023.

f. During the year ended March 31, 2019, loans from State Bank of India and Indian Bank amounting to Rs. 261,49.61 Lakhs and Rs.39,42.63 Lakhs respectively has been assigned to Asset Reconstruction Company Private Limited (ARC) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFESI) Act,2002. Same loan is appearing in the name of State Bank of India and Indian Bank respectively. No confirmation from the ARC was received for assignment of the loan. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the balance of cash and cash equivalent and other equity as at March 31,2023.

g. We have neither got bank statements nor have been able to obtain direct confirmations for borrowings, Debentures and overdraft from banks, financial institutions and other parties amounting Rs. 48,167.34 Lakhs as at March 31, 2023. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and the balance of borrowings and other equity as at March 31, 2023.

h. We have neither got reconciliation nor have been able to obtain direct confirmations for Inter corporate loan amounting Rs. 4,695.90 Lakhs as at March 31, 2023. We requested for direct confirmation, but no response from management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and the balance of borrowings and other equity as at March 31, 2023.

i. We have neither got reconciliation nor have been able to obtain direct confirmations for Loans from related parties amounting to Rs. 665.92 Lakhs as at March 31, 2023. We requested for direct confirmation, but no response from management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and the balance of borrowings and other equity as at March 31, 2023.

j. Note No. 52 to the Standalone Financials for the year ended March 31,2023, regarding balances of parties under the head trade receivable, trade payable and loans & advances taken and given, Security Deposit, claim receivable, Investment, balances with Govt. Authorities, Employee Benefits Payables, Other payables, which are subject to confirmation, reconciliation. We requested for direct confirmation, but no response from management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and other equity as at March 31, 2023.

k. In the absence of information with respect to Provision for bonus, Ex-gratia, leave encashment and Gratuity not provided for by the Management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

l. No information/ Audit Evidence provided in respect of Revenue from operations, Other Income, Cost of raw material consumed, Purchase of Stock in Trade, Changes in inventories of finished goods, work-in-progress and Stock in Trade, Employee benefits expense, Finance Costs, Depreciation and amortization expense and other expenses. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the equity as at March 31, 2023.

m. Note No. 46 of the Standalone Financials for the year ended March 31, 2023, wherein the Company had made 100% provision of the value of long term Investments held in Amit Spinning Industries Limited (ASIL), erstwhile subsidiary of the Company during F.Y 2017-18. National Company Law Tribunal (NCLT) vide order dated 01.08.2017 had admitted ASIL's petition and had appointed Resolution Professional for ASIL under the Insolvency and Bankruptcy Code. The NCLT vide its order dated 31st July 2018, has approved the resolution plan as per which the Company was required to transfer its entire shareholding held in ASIL at a total consideration of Rs. One only in favour of Resolution Applicants. The Company was holding 2, 09,81,077 equity shares (50.96%) in ASIL. No further information provided to us, In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

Further we are unable to determine the amount of liability that may arise on account of Corporate Guarantee given on behalf of subsidiary, and compliance of IND-AS 109 in respect to accounting of corporate guarantee.

n. Note No. 21 of the Standalone Financials for the year ended March 31,2023, wherein the Company had not allotted shares against share application amount of Rs.1109.50 Lakhs which was brought in by the promoters in various instalments up to 30th December 2015 and accordingly not complied with the provision of Section 42 of the Companies Act, 2013. In FY 2018-19, such Share application money pending allotment amounting to Rs.1109.50 Lakhs has been treated as Deposits as per Companies (Acceptance of Deposits) Rules, 2014 made under Chapter V of the Companies Act,2013 at the Board Meeting held on 13th February 2019 vide resolution no.19(ii). Necessary compliances under Section 42 and Section 73 of Companies Act, 2013 read with Companies (Acceptance of Deposit) Rules and regularisation of continuing defaults thereof are pending by the Company.

o. Note No. 50 to the Standalone Financials for the year ended March 31, 2023, where the Company was required to deposit/ invest a sum of at least 15% of the amount of its Debentures maturing during the financial year 2018-19 in one or more of the prescribed methods vide circular no.04/2013 dated February 11, 2013 issued by Ministry of Corporate Affairs. However, the Company has failed to comply with the requirements of the said Circular.

p. Goods and Services Tax Return for the current period not filed and GST Audit for the FY 2017-18 and onward are pending. We are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

q. Company is in default to appoint Key Managerial personals as per Section 203 of Company Act, 2013. Further No Limited Review has been done for Quarter Ended June 30, 2022, September 30, 2022, December 31, 2022 and Year ended March 31, 2023. We are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

r. No details were being provided with respect to Inter-unit reconciliation, in the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31,2023.

s. No details were being provided in relation to related party name and transaction. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

t. Due to Non Compliance with various Laws and Regulations, e.g. Ministry of Corporate Affairs, Security Exchange Board of India, National Stock Exchange, Income tax Act, Good and Service Tax Act, The Foreign Exchange Management Act, Companies Act, 2013, The Employees' Provident Funds Scheme, 1952, Employees State Insurance Act, Gratuity Act, Labour Laws, The Micro, Small And Medium Enterprises Development Act, 2006 etc, the amount of penalty cannot be reliably estimated at this stage. Hence, consequential impact, if any, is currently not ascertainable and we are unable to comment on possible financial impacts of the same.

u. Company failed to redeem its debentures on the due date i.e. March 31,2018 and failed to pay interest due thereon and such failure to redeem debentures and payment of interest thereon continuing for one year or more, therefore directors shall not be eligible to be re-appointed as a director of the company.

v. Baramati Unit is inoperative since September 2017, Bootiburi and Pitampur units were inoperative since October, 2019, as per Ind AS 36, Impairment testing is required to be done for the units. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31,2023.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the 'Auditor's Responsibilities for the Audit of the Standalone 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 Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. However because of the matters described in the Basis of Disclaimer

of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.

Material uncertainty related to going concern

As mentioned in Note No. 47 to the standalone financial statements, the Company has been referred to National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, and there are persistent severe strains on the working capital and there is considerable decline in level of operations of the Company and net worth of the Company as on the reporting date is negative and it continues to incur losses. The Company has received invocation notices of corporate guarantees given by it and also the personal guarantees of promoter directors have been invoked. Since Corporate Insolvency Resolution Process (CIRP) is currently in progress, as per the Code, it is required that the Company be managed as going concern during CIRP. Accordingly, the standalone financial statements are continued to be prepared on going concern basis. However, there exists a material uncertainty about the ability of the Company to continue as a “Going Concern”. The same is dependent upon the resolution plan to be approved by NCLT. The appropriateness of the preparation of standalone financial statements on going concern basis is critically dependent upon CIRP as specified in the Code necessary adjustments required on the carrying amount of assets and liabilities are not ascertainable at this stage.

Information other than the Financial Statements and Auditor's Report thereon

The Company's Board of Directors/RP is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board's Report including Annexure to Board's Report, Business Responsibility Report, Corporate Governance and Shareholder's Information, but does not include the standalone financial statements and our auditor's 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 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 in the audit or otherwise appears to be materially misstated.

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.

Management's Responsibility and Those Charged with Governance for the Standalone Financial Statements

In view of the pendency of corporate insolvency resolution process (“CIRP”), pursuant to the order passed by National Company Law Tribunal (“NCLT”) dated January 03, 2020, the management of the affairs of the Company and powers of board of directors of the Company are now vested with Mr. Subhash Kumar Kundra as Resolution Professional (“RP”), who is appointed by the Committee of Creditors (“CoC”). These Standalone Ind AS Financial Statements have been prepared by the management of the Company and Signed by Mr. Subhash Kumar Kundra-Resolution Professional

The Company's Board of Directors/RP is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS 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 of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The management / RP is also responsible for overseeing the Company's financial reporting process.

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 Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the 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.

• 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 explaining our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the 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 Company 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 financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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 standalone 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 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

As required by the Companies (Auditor's Report) Order, 2020 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure A ”a statement on the matters specified in paragraphs 3 and 4 of the Order.

As required by section 143(3) of the Act, based on our audit we report that:

a) except for the matter described in the Basis for Disclaimer of Opinion paragraphs, 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) except for the possible effects of the matters described in the Basis for Disclaimer of opinion paragraph above, 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, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account,

d) Except for the effects of the matter described in the Basis for Disclaimer of opinion above, in our opinion, the aforesaid financial statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with Companies Rules, 2015, as amended,

e) In terms of section 17 (1) (b) of the Insolvency and Bankruptcy Code, 2016 (“the code”), the powers of the Board of Directors have been suspended and are exercised by the Resolution Professional. Hence, written representation from directors have not been taken on record by the Board of Directors, Accordingly, we are unable to comment whether none of the directors is disqualified as on March 31, 2023 from being appointed as a director in the 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 with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report.

g) As required by section 197(16) of the Act, we report that the company has not paid the remuneration to its directors during the year ended March 31, 2023.

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 (as amended), 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 35 to the standalone financial statements.

ii. Except for the possible effects of matters described under Basis for Disclaimer of Opinion paragraph, The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. In the absence of information provided, we are unable to determine whether there were amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. (a) The Resolution Professional has represented that the Company is under CIRP and Control of RP and to the best of

its knowledge and belief as fact mentioned in Disclaimer of Opinion, no funds (which are material either individually or in the aggregate) 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 person or entity, including foreign entity (“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 Resolution Professional has represented that the Company is under CIRP and Control of RP and to the best of its knowledge and belief as fact mentioned in Disclaimer of Opinion, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“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 Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

C) As company was under CIRP and nothing has been reported to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement

v. No dividend has been proposed in the current financial year.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31,2023.

For R.N Marwah& Co. LLP

Chartered Accountants

Firm's Registration No.: 001211N/N500019

Sunil Narwal

Partner

Membership No.: 511190

Place: New Delhi

Date: October 31, 2023