au ’M/s.M.Kuppuswamny PSG & Co LLP M/s.A.John Moris & Co M/s. Gopalaiyer and Subramanian. M/s. K. Gopal Rao & Co AIM/s. G. Natesan & Co Chartered accountants AUDITORS" REP‘ To The Members of M/s. TAMILNADU GENERATION AND DISTRIBUITION CORPORATIONLIMITED Report on the Standalone Financial Statements: ‘We have audited the accompanying Standalone Financial Statements of TAMILNADU GENERATION AND DISTRIBUTION CORPORATIONLIMITED(nerein after referred to as “the company") which comprise of the Balance Sheet as at March 31, 2018,Revenue Account and the Cash Flew Statement for the yeor then enced, ond a summery of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements: 1. The Management and Board of Directors of the company are responsible for the matters stated in Section 134 {5} of the Companies Act, 2013 (the act) with respect to the preparation of these Financial Statements thet cive a tue and fair view of the financial position, firancal performance and cash tlows of the company In accordance with the accounting principles generally accepted in India, including Indian accounting standards specified under section 133 of the Act, «aad with rule 7 of the Companies (Accounts) Rules, 2014. This responsibilty also Incudes mairtenance Of adequate acopunting 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 acccunting policies; making judgements and estimates thet are reasonable and prudent; design, implementation and maintarance of adequate internal financial controls, that are operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Financial Statements that give a true and fair view and are free from materlal misstatement, whether due to fraud or error. Auditors’ Responsibility: 2. Our responsibilty is to express an opinion on these Standalone Financial Statements based on our aud We have taken into account the provisions of the Act, the Indian accounting and auditing standards and matters which are required to be Includad in the aude report under te provisions of the Act ard the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under section 143 (10) of the Act. Those Stancards requre that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone Financial Statements are free fram material misstatement. 3. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Stardafone Financial Statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstetement of the Stondaione Financal Statements, whether due t3 fraud or error. In making those risk assessments, the auditor considers internal financial contro} relevant to the Company's preparation of the Standalone Firancial Statements that give a true and fair view in erder to design aucit procedures that are appropriate in ‘he circumstances. An aut also includes evaluating the appropriateness of accounting poicies used and the reasonableness of the accountieg estimates made ky management, as well ar avaleating the overail presentation of the Standelane Financial Statements. 4. We believe thet the audit evidence we have oblained Is sufficient and appropriate to provide @ basis ‘or cur adverse audit opinion. Basis for Adverse Opinion: 4, a. The financial statements have not been prepared in accordance with the Financial framework prescribed under the Companies Act, 2013 read with the stipulated Indian Accounting Standards but in accordance with the Electricity (Supply) Annual Accounts Rules, 1985 since inception. The said Rules relate to a State Electricity Board and not to a limited Company. Thus, in our opinion, the financial statements are materially mis-stated by following a different framework than the one prescribed under the Companies Act, 2013.Ea b, TANGEDCO bas a subsidiary viz, M/s.Udangudi Power Corporation Ltd, and has invested in Joint Venture companies viz, M/s.Mana Tamil Colllaries Ltd, M/s.NTPC : Tamilnadu Energy Company Ltd (NTECL), M/S.NLC Tamil Nadu Power Ltd. M/s.Mandakani B Coal Corporation itd., and M/s.dengal Sirbhum Coal fields Ltd... ‘The Company has not prepared a “Consolidated Financial Statements” for the TANGEDCO Group as stipulated in “IND AS-110" and has not complied with Ind AS- 28 “Investments in Associates and Joint Ventures” 2. The compilation process upto the financial year 2015-16, considered the opening baiances as maintained at the Head office alang with the audited transaction files as gathered from variaus circles and offices (after passing rectification entries) and the resulting figures were used for the preparation af the year end financial statements. From the Financial Year 2016-17 onwards, the final closing balances were compiled from “the audited statement of accounts received from the various circles and offices” along with *the rectification entries passed” at HO, for preparation of the year end financial statements. In the absence of proper reconciliation of the “balances as per the Annual Report for the financial year 2015-16" with the “opening balances adopted as on 01.04.2018" by the circles and ather offices, we are not in a position to comment on the impact of this on financial statements for the year under audit. 3. As per Rule 4(1)(ti)(c) of the Companies (Indian Accounting Standards) Rules, 2015, TANGEDCO, being a joint venture of the “NTPC Tamilnadu Energy Company Limited(NTECL)”, is required to prepare the financial statements as per the said rules (following Ind AS) as NTECL have complied with the said Rules from the Financial year 2016-17, as per information furnished. However, TANGEDCO has followed neither the Accounting framework as prescribed under the Companies Act, 2013 nor the applicable Indian Accounting Standards stipulated under the said Rules, which has resulted in non-compliance of the provisions of the Act and the Rules, (n this regard. Besides the above, the TANGEDCO has not been following the Accounting Standards since inception, which was a basic statutory requirement up till 34.03.2016. The following accounting policies are in contravention of the Indian Accounting Standards: 2. "The terminal benefits ..., are being accounted an Cash basis” (Ind AS 1-Presentation of Financial Statements/Ind AS 19-Employee Benefits / AS 15(Revised)-Employee Benefits) b. “Interest on Staff Loans and Advances are recognised as income on completion of the principal recovery only"(Ind AS 18-Revenue/AS 9 - Revenue Recognition) ¢. "Inventories are not stated at the lower of cost or net reatisable value.” (Ind AS 2-Inventories | AS 2-Valuation of Inventories) 4. "Waiver of any liability relating to revenue expenses of past years. wouldbe treated as prior period Income."(Ind AS 8-Accaunting Policies, Changes in Accounting Estimates and Errors / AS 5- Net profit or toss for the period, Prior period iterns and Changes in Accounting Policies) “own constructed assets are capitalised at cost including an appropriate share of overheads. . To adept an uniform method of capitalisation /apportionment of revenue expenditure at circle level and head office, the company is cepitalising its employees cost at 23.5%, administration &general expenses at 1%, Depreciation at 9.5% on yearly basis on work in progress. An additional 1% of Capital work 2a progress is capitalised towards commen expenses incurred at Head office for generating and common expenses incurred at Head Office for generating sections.. (Ind 4S 16- Property Plant and Equipment/AS 10} Further, the Company has not ascertained the impairment loss in respect of its Assets, in spite of having an appropriate accounting policy inthis regard,5. 3b The effect of the nc:-campliance of the Indian Accounting Standa-ds on the financial statements / resulis of the Company is not ascertainable, except for the matter reported in paragr: jh no.4 below, Ind AS 20-Acceunting for Gavernment Grants and Disclosuie of Government Ass stance : The Company hes not been following the Accounting Standards | Ind AS in respect of Grants -2ceived from the Tamil Nadu Government s nce inception. The entice Equity shares of TANGEDCO are controlled by the Government of Tamil Nadu throws the TNEB Ltd (wholly ewned by the Government af Tamil Nadu). The said Government has given grants during the preceding three years and also during tre year under audit in respect of debts taken aver by the Government of Ta nif Nadu. ‘The details of Grants are given belaw, which have been treated as income and credited to the Fevenue Account of various years in contravention of the Accounting stands rds 12 and Ind AS 20. Finan: al Year Grant Received (RS. 19 crores) 2014 Rs. 1.600 Rs.1009 Rs.2000 Rs.4563 Rs.$563__ The above Grants received Irom the Government of Tamil Nadu, in our apinion, should have been considered as “Capital Reserve” instead of treating them as Income. This treatrant in the books of account of TANGEDCO is nat in line with the arguments given in the AS 22 j Ind AS 20.As per the standards, treating the Grants as incyna neither comply with the argument “in support of the Capital Approach*{ being the amounts which are not earned, which arz not refundable and that there is “no related costs” for getting the grant) and nor the “Income Approach" (the ultimate control of TANGEDCO is with the Government of Tarril Nady which has sanctioned the grant and that there is no related matching csts)as stipulated in the Ind AS 20 (which is also in line with AS 20 in this regare) AS 2 Consequence, he loss for the year under audit is understated by Rs.4563 Crores and both the accumulated losses and the capital reserves are understated by Rs.£563 Crores, Other Matters Major Discrepancies were observed between the buoks of account and the billing software (HT \ LT) (due ta absence of proper integration) with respect to security deposit and the int2 est tierean which has not been reccnciled and corrected, the impact of which on “te financial results of the campany is not ascertainable. The Depreciation fo: additions in respect of Depreciable assets made since inception, has not been arovited sa far, for the yaar in which the asset was acquired / put to use. As per the Nole No.7 of the “Statement 4: Signiticant Accounting Policies”, it should have been p vided “in the year subsequent to the year in which the asset but to use”. The shart fall, in the provision in this regard, has not been quantified and funishe¢ for ou: erification, Investments in M,s.Maha Tamil Colliacies Lid, and M/s.Mandakani B Coal Corporation Itd., . TANGEDCO, being a commercial astablishment, has aot complied with the provisions of the Provident Fur and Miscellaneous provisions Act, 1952, which, in our opinion, 's applicable to the Company (except in respect af employees to whom anyt By Contributory Provident Fund scheme or old ‘age pension in accordance with any Scheme or rule framed by the Central Government or the State Government governing such benefits is applicable). The Company has not remitted the deductions made under the tiead "Provident Fund” fram the employees’ salary and interest thereon to any authority established for this purpose in violation of the Act referred above. The amount thus retained as itability In the books of TANGEDCO Is Rs. 1467.74 Crores besides the "Contributory Pension Scheme” of Rs.1630.98 Crores (being the total of Employces / TANGEDCO’s contribution and interest thereon as at 31.3.2018). Further, the said deduction from Employees’ Salary in respoct of Provident Fund is reckoned ag an ellgible deduction for compusting TOS Wability u/s. 192 of the Income Tax Act, 1961 which is against the provisions of the sald Act. Consequential ervors / liabllity under these Acts is also not quantifiable. The details of Losses on account of embazziements / thefts have not been furnished for our verification. TANGEDCO has not complied with Goods and Service Tax laws In respect of some of the items of its revenue, The Mabllity of the Company In this regard Is not ascertainable. Confirmation of Balances: i In the absence of confirmation of balances in respect of majority of values under Sundry creditors, Sundry debtors, Loans & Advances, Security Deposits etc,we are unable to certify the correctness or otherwise of the values reported under these heads. ii. Tt is observed that TANGEDCO maintains manval register also in respact of Poompuhar Shipping Corporation Ltd., {herein after referred to as PSC Ltd). There is a difference of a significant amount between the manual register and the computerized accounting records (in respect af Advance to PSC Ltd )as shown below which has not been explained to us: Rs, In croves [As per the manual register 46.49 Tas per the Accounting Software Cade No. 26500 Unexplained difference iid, In respect of the above, PSC Ltd has confirmed the balance as Rs.48.20 crores and the same has not been reconciled with the books of account of TANGEDCO, There are long pending differences in the inter unit / clrcie batances, the effect of which in the fmancial results of the Company for the year under audit is not Rieertainable. The unreconciied balances In this regard are Rs396.5% crores {Crest}. ‘The balance with TANTRANSCO of Rs.10896.48 crores (Debit) rema(tis unreconciied Gince inception the effect of which in the financial results of the Company for the year under audit Is not ascertainable, An adhot provision Is made towards unutitised Banking Wind Energy. In the absence of correct and complete data in respect of this, we are unable to comment upon the correctness or otherwise of the adhoc provisions made. “mere are long pending reconciliation items In the "bank reconciliation statements), the effect of whieh In the finandal results of the Company for the year under audit Is not ascertalniable, (Note No.6) Reconciliation hetween value of Inventory as per accounts and Stock records fias not been carried out In some units, the effects of which on the financial statements are not ascertainable. ‘A consolldated Bank account Is maintained (Instead of separate bank accounts) In 2 A nual register and also in the computer accounting software. The Reconciliaucn aaeeaye Bank balances are done using the Manual register, whereas the financial seer auenés considers the computerised accounting records, Total differance of Rs. sor 7a crores Is there between the Manual register and the accounting sofware {excass credit belng shown in the accounting sofware), which netds to Pe reconciled.no provision tas been made in respect of the following expenditures/lisbilities Hosses: ~ Interes claim of the parties for the delayed settlement of dues amounting to Rs.74; 81Crores,(Refer Note No.56) * Water ess payable to Tamilnadu Polfution Contra! Board upto 31.03.2018 amour ing to Rs. 686.39 Crores, (Refer Note NO.56) 7 Lease Hent payable to Tamiinadu Forest Department up to 31.03.2013 amounr-ing to Rs. 4.70Crores . Lease Rent for the period 2013-14 to 2037-18 are not yet quantified and furnished for our verification, (Refer Note NO.56) + The enuezziement of cash balance amounting to fs.2.76 Creres. (Refer Note No.6: ~ Centra excise | VAT / GST liability towards sale of fly ash / Liquidated amas collected the value of which is not ascertainable. + Cumuliive Coal shortages ef Rs.203.32 erores and absolete / Non-moving stores ¢ F Rs.41.21Crores. ~ A ketal sum of Re.1984.40 lakns, being deposits mae in several Banks for which c-edit has not been given by the Banks in TANGEDCO's Bank accounts, ve io wer an Beeordance with the applicable financial reporting frameme uae accordance with a fair oresemtation framewark generally accapted 7 trek’ (@) in the case of the Balance Sheet, of the state of affairs of the Company as at March 23, 20% (b) in the case ar the Revenue Account, of the defi Gate; and for the year ended on that (0) in the c13@ of the Cash Flow Statement, of the cash flows for the year ended on that dat: Report an other legal «wid Regulatory Requirements; 5 & seauited by the Companies (Auditors Report) Crcer, 2016(the 91-2) sesued by the Central Soveemert of Irie in tenms of section 143 of the Companies ncn 2013, we sive in the cata gi.8 et MENK On the matters specie in paragraphs Be ue fof acces Grder to the extent apphicable As required nds" section 143(5) of the Companies Aet 2013, we gre in the Annewre 8 our nda,” Me ONES and sub-drections issued by the Comptes ard Kae Gereral of India. S Ge segue by se: 0" 143 ofthe Ac, we report (except forthe pr i: effecs of tne matters Gescrioed in the 2335 for Adverse Opinion paragraph anavethar 2) We Nave obtei:ed al the information and explarations which © the best of our cnewtedge ane Belief wer= necessary for the purpose of our auc; 5) In our opinion mroper books of account as required By law have be 50 f2F 25 Bpp21's ftom our examination of these books, ©) The Balonce $ >t, Revenue Account and Cash Flow Stolenert ven: with by this Repo are im agreement wth the books of account2a © In ou: spinon, the Balance Sheet, Reverue Account, and Cath Flow Statement generaly do fot comply with the Tadin Accounting Standards reterced to in sector 3) Of the Companies Act. 2013 read with Rule ? of the Comparves (Act) Rules 2014 ©) Gp the basis of the written representarons receved fom the Directors as an March 34, 2016, and taken on record by the Board of Directors, none of the Ditacters are disqualifies 3 on march 51, 2018, from being appointed as a Sirecter In terms of Selon lot at re Companies Act, 2013, “1 ith respect to the adequacy ofthe intemal Financial controls over financial ‘epoting of the Company and the operating cffectieriess of such conliOk, refer to our Report in “Anmenee © 9) (}) The Company has nat appointed a duly qualified internal Auditor as stipulated LisA38 of the Companies Act, 2013 read with Rule No.13 of the Companies (Accounts) rules, 2014 Gi) Corporate Social responsibility committee has not been formed as stipulated u/8,235 of the Companies Act, 2033. Gil Independent directors have not been eppolnted which is in contravention of the provisions of S2c.189 of the Companies Act, 2013. h) In our opinion, the Employees State Insurance Act is applicable to the Company. The Company has nsither complied with the provisions of the Act nor has obtained exemption from the Government in this regard, as Per Information furnished. 7. with recpact to the other matters to be included ia the Auditor's Report in accordance with Rule ‘Mor Compenies (Auge and Auditors) Rules, 2014. in our opinien and to best of aur {nformation and according to the explanations given to us{subject to the effect af matters in “Bass for Adverse opinion” paragraph}: 9). The Company has disclosed Ue impact of pending litigation on the financiaé position in the financial statements, 2) The Company has made provision, as required under the applicable lave or ascounting Standards, for material foreseeable losses, if any. The provisions regarding transfer to Investor's Protection Fund is not applicable to the Company. For M.Kuppuswary PSG & Co LLP Fork. Gopal Rao & Co Chartered Accountants Chartared Accountants Firm Regn No.0O1616S. es Partner > CA K.WSadharajan No: 205332 For M/s Gopaiaiyer and Subramanian For G. Natesan& Co Chartered Accountants Chartered Accountants Firm Rag No0003 Flem Regn Nowpo2424¢ Partner-CA.S, Vasanth Raj Partner -CA.K. Mural + M.No: 020244 M.No: 024882 For A. John Mortsu co Chartered Accountants Firm Regn No.0072205 TAIHES Partnbe ~CA.2.Sebastin Ne o=scee-ai Gi. om. tm. we wo. wip. a) Annerure -A to the Independent Auditors’ Report {Reterred |= in Paragraph $ of cur report of even date to the metrbers of Tarriinadu Generation & Distribution Comaration Limited’ ‘The Company has not updated the Fixed Assets Registers (maintained in various >ices) AS per in‘ormation turtished, duting the year under audit, oroper physicat veriticavion of fixed assets of the Campany has nat been carted out. The Coriany és unable ta produce original Title Desde of the Immovable Prosertes tn verlly whether the some ara held it the name of the Company and hence we are unable to comment on the seine, However, the properties are in their passession and enjoyment af the Campany, 2s Ber fafe-rmation turaished, While tin Company ix maintaining records for invantory, the procedures of physizs! verification of inventory needs ta be properly decumented. The reconciliction between value of inventory as per accounts and Stock recordsis not carried out in some units, Further, n aur opinion, maintenance of stores ledger / records neede to ba strengthened. As infers ed, the comoany nas net granted any loans, secured cr unsecured 19 companies. firms, ‘imited Lisbilty partnerships cr other parties covered in the register recuired to be maintaiced under Saclon 189 af the Coravivies Aet. In view of the ab: +2, earagraph 3 [li of the Order is nat applicable, fs informe, the company has nok, drectly ar indirectly, advan zed any leans, giver any gui tees or provided any security, to any of Its directirs or to any cther De'son In v hom the director s interested as stipulated under Se-tisn 185 of the Ac. ‘The comy any has a'go not made any investment, given any loan 3* guarentee, #1 Provided ay securty ta any perser or other bady corporm's, or ecavired the seculitien ef any other body corporate dusing the year ax stipcated uncer Sectio 386 of he ct In view of the above, dause 3(lv) of the Order is nct apolicable, Aceo‘ding 1a the information and explanations given to us, the comeeny has nct accepted iy deposks (except security deposits from consumers arid suppliers) (10° the public view of the above, clause 3(¥) of the Order 1s not appicatle We have saadly reviewed the racords maintained by the Company pursuant to the rules mads by the Central Government for the maintenance of cast records and are ff the op rion thet pila fecie, the prescribed accaums ang recoras nave been made ond inaintened. We have not, however, race a detalles exsmination of th: records Wt a view fo determine whether these are accurete and complete, Based on our examination of books of account and sccording te the iformeti¢n ‘and expla ation given to us, in our opinion the Compeny Is generally regular in deposiirg undsputed statytory dues with the approgelate authorises except AL Cenirat Excise duty on transactions pertaining to fly ash te the extent Of Rs, $.09 Crores. BE: jay admitted as a itabiity by the company to the extent of Rs.29,48Cr0res, ©. the Provident Fund and the remittances to the “Contributory Pensier Schenre” (whether contributed by the employees or the Company } D. tax sfuducted at source and penalty thereon(which sre generally depos ted with the authorities, with come dalay in certain Circles).can) os. &) oa ay (xii) ? 3B 5) Details of disputed income tex and other statutory dues pertaining to this Company and erstwitle TNEB before demeiner Is as under Disallowance of Expendituee ac per Assessment Orders ‘Assessment Year | Financial Year | Total (Rs. in crore) erstwhile TED. 2008-08 3B+0s ES 2006-07 2005-05 1339 2006-07 2005-05 eres] 4 2007-08 2096.07 96.79 2008-09 7007-08 Tei, 2009-15 2008-05 263.19 2010-14 1009-10 385.60 DIO (us 763) 200910 28.98 t 20U-12 201051) T5899 2OiLz (ys 147), 201 575.49, : TANGEDCO, 205117 BIS FI 0-13 DL-F2 156.1 DIS14 2012-13 748.14 . Isis 201344 E37 + Snca then, the Compony has incuied ass@s and The dsallowanes 's only with regard to cairy forward losses, 7 Serike Tex on disposal of fly ash to the extent of Re2.25 Crores is dsputed In appecl * TREE So overdue amount of lana taken fim compere, frms or other paties ted in the Register requred to be manlained under Section 189 af the Compares Act, 2013, f2g00 o7 an examination of the books of account and according to the irrormation and explatitions given 10 us, the Company has made delaicd Freese ie Hitzin tastances to finandtal institutions /banks (the principal ord interest this repaid with 2 delay ware Ra Zétcrores and AED TS Cone respectively) Ty, Sameer as cbtsined Term Loang and utzed the same for the purposes for which ney were ralied. No micneys by way of Initial auc offer or further pubte ones éneucting Sabet Paes) Here Bad during the year. The Company as net ‘hsued are debentures, hance the question of default hn repayment of the same Goes not ares fase? on the audt procedures perfonmad for the purpose of reporting the true and fair te financal statements end as per the information and expanations gven to ie 7a materiat fraud by tha Company or on the Company by its offcers or employers fas Heo, Notced oF reported during te yea. Jie Company is @ Publ Sector company and tha appointment & reruneration of birectors 2 governed by Govt of Taminadu vide, Article <8 of the Artes of associstion Bi orion and according to the afarmation and exstanations given to us, the Company ‘Sota Nighi Company ard accordingly, paragraph 3[xi) of the arde isnot aopteabie, ‘ccorting to the Information and explanations glen to us and based cn our amination of Ee rere of the Company, transactions with the celated parties are n compliance winSe Gk} cording to the bfarmetion & explanations given 19 us ati based o# cu examination of 82 zecords of the company, i has allotted 336.74 Cras. shares ta the Geverrmant of “emilladu dering the year. 6x) ceoraing to the information and explenations glven tc 15 #4 bated on au’ axartination of 02 records of the Company, the Company has not enter2: into any non sash transaction Mh the drectors or persons connacted with them. fscerdinghy paragraat 3x) of the Order is rot applicable (ev) Te Company Is not required to be registered under Seet'on 45-IA cf the eservg Bank of Infact, 1934 . For M.kupputviamy PSG & Co LLP Fork. Gopal Rao & Co ChartrelResentrts Chortrsesecoutars Bom Regn eSoveass Praga meses yh Kup. me Partner - CA. K.Varadharajan Partner hasan Krishna Raju ie beste wns 205009 Fse/s oparyer ane Subramantn Ferg taterank co * Chortret fox entants Chortred secounants fem Regn He. 000605 Frm keg noagz4293 Partner-CA.S., Vasar Partner -CA.K. faural M. No: 029248 M.Na: 024842 dscwilf > eo ow! For A. John M3 4s8, Co Chartered Acccuntants Firm Regn No.{07220S e SS INE Patingy -CA2,Sebastin M, Nowea3082 2ST,33 ure ~B to the Auditors‘ Rei \with regard to the Directions issued by the Comptafe: and Auditor General of Indla on the basis of checks we consdered appropriate and according to the information and e¢planations given to us during the course of our audit, we report that ‘Sub-diroctions Issued under Section 443 (5) of the Companies Act, 2013. S.No. S Directors Adit Remarks. i 1 | In respect ef Tuticorin Thermat Power | As per the information Station, Mettur Thermal Power Station, | furrished, the Company has not North Chennai Power Station and Ennere | complied with the TNPCB new Thermal Power Station, compllanca of te | environment norms ard the various Pollution Control Acts and tie | TWPCB have given ume up to impact. thereon including utiiéation and | 06.12.2017for adherence to the disposal of ash and the policy of the | new norms. Ennore Thermal company in this regard may be checked | Power Station has been ‘and commented upcn. decommissioned as per information furnished, 2+ | Does the company have a proper system | The Compony has © system oF for reconctiation cf quanttyiquaity of { resondlation of quantiyiqualty coal videred and received and whether | of coal ordered and received ie grade of coat molsure content and | The grade. of coal, moisture emirrage charges paid are racoced in | cantare and demurroge charges the books of scaount? pid are recorded In the books of account, 3 | How much share of fee power was due | As per information furnished, to the Stete Goveriment and whether the | there is 0 agreoment in this same was calculated as per the agreed { regard with the state | terms and depicted in the accounts as per | government. accepted accountiig norms? 14 | Report on the efficacy of the system of | Discrepancies were observed tiling and caletion of revenue on the | Petweeh eta of aman sompany. {due to obsence of proper j fbuegation) with respect to security deposit and the interest thereon, 7 5 | Whether the teconcftatien ST receivables | ihe reasnoliaton oF reseuables and payables between TANGEDCO and | 3nd" payabiee Sexes | | TANTRANSCO hes been completed? The | SAigenct Soe” tatrTeenero Teasons far difference any, mey be| has not yet been completed and exemined. is pending since inception. | 6 | Whether” proper provisioning towards | The data regerding the 1; umutifeed “banked energy hes been | unutlised BANKING ENERGY are completed? The reasons for diference if | not compiled oroperly and any, may be examined. Further, proner | furnished to us In respect of acctunting of the prior period expenses in | various drcles. The provisions the current year which relating ta | made In this regard Jn the beaks Previous yeer Uh respect of purchase of | of account have been done cn over rray be examined adhor basis and not based on ectual figures. Due to this, the excess / shore prowsioring nas : been accounted under prior ! — betiod 3°; Wemay be verified whether Materials Cost | MCV relating to Captal Teme | Variance (MCW) relating to capital tems | have been charged to reserve L.__{ has been charged to fixed assets ‘capil | ror Matenal cost varence and |Bey i Twark Wh” “progress for competed T nat ts Fed Asse | worksjeapital werk in progress by the ! cites, 1 Whether the Provisions Othe Elecirnity | We hote absened Far these [a Rp anna crs ues on [hve Dean compa wh aa be sesetce oa | re Pe ar ae Hows, es "Sorat cepecuten on se tr | apa ono |r ese TaNGEDCO ee ye | our w nia TANSEDCO. oe TA ea tle Baas ay EF ticnad once Erle ean I a oun of | tn se estos soe by 2A tod eae and baste ono In respect of Sundry Debtors for Inter. The Cemaany is act having any state -sale of power, Confirmation of procedire of obtaining the | . Debtors may be obtained. For M.kuppuswe ry PSG & Co LLP Chartered Accour tants Firm Regn No.0C16165 Kecpe Partner - CA. K.Viradnarayan 4, No: 205132 For M/s Gopalaly 2x and Subramanian Chartered Accot rants. Firm Ragn No.0100950S, ber HS Partner-CA.S, Viianth Raj mNor 029340 For A, Joh Mor's& Co Chartered Accaiintants Firm Regn No.0372205 LoTR CP Pareney -CA.LSebastin | MM, Wor@38982 = confirmation cf Ualaress. trem | the Debtors including Inrer state sales. For K. Gopal Rao & Co Chartered Accountante Tirm Regn No.000956S lage. . No: 205929 For G. Natasan& Co Chartered Accountants Firm Regn 0,0024245 4 beer Partner -CA.K, Murali M.No: 024842 £8 an cOngEL eS aAnnexure “C- to the Independent Auditors’ Report of M/s.Tamiinad Generation and Distribution Corporation [fmited for the vear ended March 31. 2018 (referred to in our report of even date) Repart on the Internal Fitancial Controls under Clause (i) of Su bsection 3 of Secti of the ani 2013 (7 We have audited. the internal finandal controls over financial reporting of M/s.Tamilnagy Generation And Distribution Corporation Limited Cthe Company’) a3 of March 31, 5018 in thos dee ith Ovr audit of tie Financial Statemérts of the Company fer the year ended on that dace, Management's Respon: ity for Internal Financial Contrals Cae gOmBanY's management fs ‘esporsible for establishing and maintaning internal inancil mis ‘based on the intemal contrel over financial repcrting enter, catabligh ed by Te Chartered Accountoots of Indla CICAI). "These responsiblities inelede te design, etectvely Favor maintenance of adequate irternal financial conerals that were operating Sfectively for ensuring tho orderly and efficent conduct ef its busines, including adherence to cro nh Bolties, the safeguarding ofits assets, che prevention and detectiov of feces ane Sopot me SeCUBCY anc Completeness ef the acccunting records, and the timely preparstor wy reliable financial information, as required under the Companies Act 2013 Auditors’ Responsibility Pa esPonsbllty s t0 express an opinion on the Company's intexnal finenvil contrals ever Enancal reporting based on our audi. We conducted Out aud Mm sctordanen vosh ee guidance note on aueit oF internal financial controls over financial reporting (the “Guidance Rete) afd te standards on auditing {the ‘Standerés) issued by IcAl eng deemed to be Prescribed under section 143 (10) of the Companies Act, 2013, to the extent applicable to an aude of internal financial controls, Those Standards and the Guideree Now Fequire that we SQMBY with ethical requirements ard plan and gerform the audit i obtar rea ae eatablshed ead nate Adequate internal financial controls over financial reporting wos established end mainiained anc it such controls operated effectively in all materiel espe Our audit involves performing procedures to obtain audit evidence about the adequacy of the Bae a mentlal Contols system over financial reporting and ther operating effectueress Cnr 3H0€ Of internal financial controls over financial reporting included obtaining an understanding Of internal fnencial controls over financial reporting, assessing the risk thot fees CEaRDSSS OMSES, and testing and evaluating the design ond operating effectiveness of intereat Caguel basee on the assessed iss. The procedures selected cepend on the audios midgemer, including the assessment of the rsks of material misstatement of the eaccay Statements, whether due to fraud or error, Cae taleve thatthe Buc evidence we have cbtained is sufficient and appropiate 10 Provide a basis Tor our audit opinion on the Cempany’s internal finarclal controls over fnarial reporting Meaning of Internal Financial Controls over Financial Reporting Acepeny’s internal financiat control over financial reporting is a process designed to provide Fancy eyssurance regarding the velahilty of financial reporting and the preperation oF Finaacial Statements for extemal purposes in accordance with generally accepted accountingPrincip.es. & com2a7y’s internal Fnancial contiai over financial repart:ng ineiudes those paicies ard procedures = vst ()) pertain te the maintenance of recoros ‘at, in reasonable cate | accurately end fat: motlect the transactions ard dispostions of the siwets of tre company; (i) Provide ‘easona2: ossurance that transaclone are recoiet es necessary to perm Preparaiion of “irancia! statements in accordance with genraiy acceoted acccunting annciples, and che receipts and expenditures of tre compuny é-2 berg made any it eccordznce with nm, Ferzations of management and ‘rectors cf th canpany: and fil) provide reasonable assuray:e regarcing prevention or timey detection if -nauthonzed acquisition, use, cr disposition of ne company’s assets thet could heve a mare" effect on the Financial Statements. Inherent Limitations of Internal Financial Controis over Financial Reporting Because of the «herent limitations of internat financial controls ver financie) reporting, Wluding the poss tility of collusion or improper management overtide of contro, materal inlsstatements CUE 0 error of fraud may eccur and net be detectec. Also, projections of any evaluation of the irt2rnal firancial controls ever Financial reporting 10 Future perioels are subject to the risk thet tne: “ternal financial control over financial reporting may become nadequate because of chances i= conditions, or that the dagree of compliance with the policies or procedures may devcriovate Adverse Opinion According to the information and explanations given to us and based on our audit, the following matzrial weaknesses / control lapses have bean identified / observed asat March 31, 218: (Ineffective oversight of the company’s external financial reporting and internal fixancial controls over financial reporting by those charged with governance (o}Four Bank accounts viz., 911201022238 (State Bank of India- RAPORP) 911201021268 (Canara Bank) 30920950792 (State Bank of India-IEX) and 30920956546 (State Bank of India — PXIL ) have not been recorded in the books of account and the same were corrected / accounted after the same has been itlentified and pointed out. This material error was not identified by the Compa vy’s internal financial control system. () The appointment of an internal auditor, as stipulated in the Companies Act, 2013, has not been done, Employees who lack the professional qualifications and trainira to fulfil their assigned functions are designated as internal auditors. {¢)The Financial reporting framework adopted, consistently over a period of time, by the Company is not a relevant one. In this regard, undue bias or lack Of objectivity by those responsible for accounting decisions is observed. Also, the Failure of the management or those charged with governance to assess the effect 2f this significant deficiency previously communicated to them (through the Independent audit reports of the Statutory Auditors, since inception) is a major control weakness, (a) The Account ng Software adopted by the Company is not appropriate encugh te generav: the accounting Information so as to prepare the financial statements i1 the formats prescribed in the Companies Act, 2013. (f) Many Accor siting Standards / Indian Accounting Standards applicable to the Company hzve not been complied with. There is no control over the selection and application of appropriate accounting standards (that are in conformity with generally accepted accounting principles). In a few cases, inappropriate accounting policies were observed / reported. (a) The Fixed Assets register has not been updated and hence, proper shysical verification has not been carried out by the Company in various Units /a7 Gircles/ Offices, There is a failure of controls designed to safeguard assets from toss, damage, or misappropriation. (h) Absence of the intemal process to report deficiencies in internal control to management on a timely basis is observed. The Internal auditors are Presently reporting to the Managing Director which is a control lapse. Instead they should be reporting to the Board of Directors, @) The Appointment of an Independent director, as stipulated in the Companies Act, 2013, has not been done, due to which the Audit Committee con't Perform its duties in a proper and an appropriate way, G) Failure to perform reconciliation of significant accounts. The Company has ‘ot reconciled the Inter unit / circia balances and the balances with, group companies since inception. (x) The Company has not been adopting an appropriate procedure, for obtaining confirmation of balances from vatious parties including sundry debtors and creditors etc,, since taception, (1) In our opinion, non-compliance of tha taw governing the Provident fund is a major lepse on the part of the management, which may haye financial implications in the farm of penalties and non-compliance of the provisions of Sec.192 of the Income Tax Act, 1961. This is one of the material internal > financial contro! tapses. A “material weakness’ is a deficiency, or a combination of deficiencies, in internal financial controt over financial reporting, such that there is a reasonable Possibility that 2 material misstatement of the company's annual financial statements will not be prevented or datacted on a timely basis. In our opinion, because of the collective effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained adequate and effective internal financial controls ver financiat reporting as of March 31, 2018, We have considered the material weaknesses identified and reported above in determining the nature, timing, and extant of audit tasts applied in our audit of the standalone financial statements of the Company as at March 31, 2018, These material weakness/es hava affected our opinion on the standalone financial statements of the Company and we have issued an adverse 0 the standalone financial statements, For s.xvppuswamy PSG 6 Co LLP For A John Moris C2 For K, Gael Rag & Co Shartered accourtants Chartered Accountants, Chartered dccountants FRN 0.016165, FRN No: 0072208 Firm No.0009565 \ ee SN ASENY Ch. kvarndharien SeAgeidand ANS ‘riehna Rays Partner Partner . ‘4 MN: 205132 Hor 023082 DST LM. NO: 205979 For M/s Gopataiyer and Subramanian For G, Natesan & Co Chartered Accountants Chartered Accountants FRI No, S005605. FRR Sa ‘S.Vasanth Raj Partner M. No: 029248FOLLOWING REPL | Be STA Replies to Hain Report — Tema Ref Cor eents of Statuary Auditors a: JES ARE OFFERED ON-THE OBSERVATIONS / COMMENTS OF THE RY AUDATORS ON THI TS FOR, 18 Tent REG T .TMe Financitt statements have not been prapared [In venanke 10" Te eS oF in 2qotlame with the Financis! framework | TANGECCO sesiing opinon chas heg Fran tee nGer the Componies Act, 2013 read | in ther Teter daled 0807 10:% opined with the stipsated Indian Accounting Standards | the following, ’ but tn accorsuince with the Electrielty (Suoply} Soqual fccoua's Rules, 3985 since inception (in| since the caman’es ace inerparnted ap repeated sepa et IS espe as teen | per the Companies ace the soroening company, TETEG, OY, ove auctor’ of me | Framework sroseres” tor coceecd fOmpany). The seid ules reaie to a State | challbe adocten, Elecliicty Boeri and not to a limited Company. RUE LOU orinion, the franca ctatements are | since the traci! tansactone for the materially mis stated by fellewing an altogether 3 efferent framework than the one prescribed under Finsrciat year and preparation cf accounts alst. have 17-18 are eready over te Companies ct, 2013. been completen under ESRAR LES, the arinual accounts cf 2017-18 shall eco be finalized in the att format 2¢ constantly adopted. D.TARGEDOO Ik @ Subsidiary viz, M/sUdangudl Power Corpora‘ion tcl, and has i Nerigg camber ec vie, M/a.Moha Tel Cottates| of subsdary ard I3iv venture coor Core ane rermimeds Energy Company Ltd | accounts were nat carried ext, Hovrecee (UTECL, ys TLC Tamil Ms.Mandakeni Not rep red “Investments Ventures” § Coal Corporation td, and | under merger recess andthe ly fs Bengal Girthum Coal feds Ltd. The Company | formaltes are gong ch ane Teeny “consolidated Financiel | Colores and Ys-vdatiri @ Coa ore TREN fOr Me TANGEDCO Group as stbulated | dormant companies only aad Ge Sy NEAS-LO' and has not copied with Ind 4S- | process. af winding up gaea’ Jen Associates and Joint ( Venture comparies- NTECL and NIPL Since the comiany” is adopuey USAR wested in Joint | accounting trenawsork, the censof ation Power Lid. | tdangudi Power Comporstion Lit is are having arnwal accounts under format of ‘comparies Aet, the same could not bo concalidated with FTANGEDCO accounts, Hence the consolidated ficaricial statement of 2ecounts are nat are pared The compiotier” process uplo the lnancal year [The entries) and the sutting figures were Used for the ‘Broperation of ths yearend financial statements, From the Financisi Year 2016-17 enwarus, the final sing balances vere complied from "the audited Statement of acicunts recehed trom the various Grcles and officx” along with “the rectifeation ‘entries passed” 2¢ HO, for preparation of the yeor end financial stater vents, In the absence CF proper reconciliation of the | “balances. as per 112 Anaual Report for the Mirena | Feconcliation of the Opening Fenatag omsbere! Wie opening balances! ac | Batance wll be caine” ou ar Ladle Concnceee Heid, Mee along with the | oppropriete ceaicacon any tequees Sygied Lansacten Aes as gathered from various | wit de Drought Fa actaune Ae ee Greles and oficas (ater passing vectitation | ole 19year 2015-16" wath The “opening balances adopted 5 on 01.04.2015", we are not in © position to GOmment on the impact of this process Inthe year fend finorcia statements, 4S per Rule 4(L YIN) of the Companies Cndan Accounting Standards) Rules, 2015, TANGEDCD, being joint venture of the “NTPC Taménady Energy Company United (NTEGL), is required to Prepare the Tinancal statements as por tha said mules (folowing Ind AS) as NTECL have compied with the said ules from the Financial year 2016 17,36 per Infermatien furnished, However, TANGEDCO has followed naither the ‘Accounting Framework 2% preserived uncer the. Comparies Act, 2013 cor the applicable Indian Accounting Standards stipulated under the seld Rules, which ras resutted ia nov-compllance of the Provisions of the Act and the Rules, in this recard. Besides the above, the TANGEDCO fas not been, fellowing the Accounting Standards since inception, which was & baste statutory-requrement up’ tl 31.03.2016, ‘Since, ESSAR secourting “poicy being adopted by TANGEDCD, the Accounting Standard prescribed by the Comperies Act 2013 has net been compked with. However, appropriate steps would be initiated tw comply with te Accounting ‘Skanderd, The Fotowi ing accounting policies are in contravention of the Indlan Accounting Standard ‘The terminal benefits ... ara beieg eocomted on Cash nasis” (Ind AS “-Preseniation. of Financial Sttementy/Ind AS is-employee Benefits 7 AS 45(Revised)-Employee Benefits) in View oF the’ pending approval of employees transfer scheme by GOTH and collation of employers dala for ‘ectueriel valuation Is under progress, all ‘the terminal benefits. are accounted on sh bass, as stated in the accounting policies tnieres: on Stal” Loans and Advances are {ecognised as incare on competion of the prindpal Tecovery only"(Ind AS 18-RevenuajAs 9 - Revenue Recognition) On closure Of principal recovery, entire lieerest due on ans to staff are teognized as revenue and booked 23 Fecehvable a5 a policy and adopted consistently followed. Invertories are not stated at the wer of cost OF et realisabie velue.” (Ind aS Z-21ventories | AS 2- Valuation of Invemvonies) Valuation of Inventories are trade ai per the. Accounting policies consistently followed and as proscribed in the ESSAR, “Walver of any liabittiy relating wo revevue expelnes OF pact years... would be tested as, prior period Incorre."(ind AS &-Accounting Polkces, Changes in Accounting Estimates and Errors / AS S- Net profit © loss for the period, Prior pevod items” and Changes in Accounting Policies) ‘Aociunting oF prior period Rema ara as ber the Accounting patlees consistently followed. Own constructed asses are caplalced at “cost ‘nduding an appropriate share of overneads. To adopt an uniforn method of captalsation fapporicnment of revenue exoenciture at cde! level and head offs, the company is capitalsing fs employees cost at 23.5%, administration &general expences ot 15%, Depreciation at 05% on yeary Capitaisation of revenue expenses Tor the capital works @ 25% and adaltional 1% for generation ‘capital works Is adopted In TANGEDCO, In order to ‘apportion the related revenue expenses wiz,, Empicyees cost, Administration & General Expenses ‘ard deprecation Headguatters Supervision charges to sapttal works. "The policy nas beenbasis on work in progress. An additional 1% of Capital “vor in progress is caplailsed towards ‘common =xpenses incutred at Head office for generate: and common expenses incurted at Head ‘Office fir generating sections...” (Ind AS 16+ Property Fant and Equipment/AS 10) + adopts conaeeny ; Further, the’ Company hes rot ascertained Ge Inmpaimmert ‘oss in respect of its Assets, in spe of having at appropriate accounting policy tn this regard, . | The effec: of the non-compliance of the Indian Accounting Standards on the financal statements } results 0” che Company is not ascertainable, except for the rater reperted in paragraph no.4 below. ‘Approprati: changes Will Ce made In the accounting policy of the ermpary, athe Company fas not been folowing te Accounting Stancards / Ind AS in respect of Grants ‘ecoived fram the Tamil Nadu Governn ent since inception The entire Equity shares of TANGEDCO are controlled by the Gevernment of “Tamuil Nadu through the TNEB Ltd (wholly owned by the Goverirent of Tamil Nadu}. The sald Government has given grants during the preceding three yeers and also during the year under anulit in respect of debts taken over by the Gove rament of Tamit Nadu. i The details of Grants are given below, which have be2) treated as income and eredited 10 the Revenue Acccumt of various years in contravention of the Accounting standards 12 and Ind 43 20: nancial | Grant Received (RS, Year In craves) 5.1000 Rs. 1000, i 5.2000, 2017-18 Rs.4563, i Rs. 0563) ‘the aluve Grants received from the Government of Tomi Nadu, in cut opinion, | stould have beer” considered as “capital Reserve’ instead of treating them as Income. This trea ment In the hooks of account of TANGED= ir not in line with the eeguments given in che AS 12) ind AS 20. AS pet the Standaras testing ‘the Grants. 9s ‘income neither cemply with the arguments "in support ofthe (pita! Approach", ‘being the moun Liking” ite consideration of the deterio-ating financal health of “DISCOMS" Ministry of Power | anngunces the FRP Scheme which was 2imiec at to carry out a strategy | in the form of FR? to ensure financial turnaround of Tangeces. The scheme provided tor funding 0° operstional losses and to meet vie Interest liability ct Tangedco. Subsequently UDAY SzFeme was announced during 2OL6-1? with a objective to improve the operational and financial efficiency of the Tangedo, 2. The Grant provided’ by GOTN under °RF and UDAY are not with Tegard :0 investment in ““angedco. It is also not for creating any Capital assets and fas been provided in anticipetion of the tulfilment of certain mandatory ang; Tecommensatory condition over a perioc, The Grant under UDAY is proviced with certain conditions, Hence it ir appropriate that they are secognfeed in the P & L account. 3, The JDAY grant do not have any characteristics which wil erable i to be irested as premotess’ contribution. UDAY grant 15 being provided to Tangecco as compensation for expenses and losses incurred cuting the previous acceunting periods and for the Durpose oF aiving Immediate financial support te Tangedca to act ae an ingentive to undertake specific expendiiura to attain me opjeative outlines in the Tripartite | MOU;which are not earned, which are not refundable ang that there 1: “no related costs" fer getting the grant) and nor the “Income approach” (the uitimate control of TANGEDCO is with the Government af Tamil Nadu which has sanctioned the grant and that there is no Felated matching costs) as stipulated in the Ind AS 20 (which s also in line with AS 20 in this regard). AS a consequence, the loss for the year under aucit is understated by Rs.4563 Crores and both the accumvlated losses and the capital reserves are understated by Rs.8563 Crores each Tartered into amorgat GOT, GOTH & | Tangedco. 14. However, the Grant received trom | 1GOTN under FRP & UDAY, were | treated as capitat reserve in zne first | instance, 5. Based on the concurrence of Govt. , , Of Tamil Nadu and as detaiiad in the ; i previous year Tacff Orders, the grants are being converted as Lrevenue grants every year so as to Jamertize the accumulatee — lass | i (Termed as Regulatory Assets by Hor’ble Commission}. ‘Other Naners: Major Discepandes were observed between the backs of account and the billing software (HT \ LT) (due to absence of proper Integration) with respect (o security deposit and the Interest thereon which | has not been reconclied and corrected, the impact j of which on the Manco results of the company is The Depreciation for adgitons In reaped of Depreciable assets made since inception, has not been provided so far, for the year in which the atset vias acquired / put to use. As per the Note No.7 of the “Statement 4: Significant Accounting Policies", it shoulé have been provided “in the yest subsequent to the year in which the asset is put 10 Use”. The short fall, in the provision in ths regard, has ot been quantified ard fumished tor our vervication. Efforts will be taken to sort out the ‘issue, so as to have uniform data in software and books of accounts, ‘As per ESAAR accounting _palicy, TANGEDCO 's adopting depreciation only from the year subsequent to the year of addition. This has been followed from inception of the company. which 1s widely adopted by several forums. However, for Income tax Return durposes, the depreaition on assets were dealt in the year of additor: ¢ [investments in Mis.Mata Tamil Coffaries Utd, and Mis Mandakani B Coat Corporation Itd., at book Value are RS.3,70,000/- ancl Rs, 207,84,300)- respectively. As per information furnished, the Mrnistry of coal has dedared both of the above companies as “Dorment” and hence, the investment in the said companies have ‘to he reviewed / revalued and the Impairment loss if any in the Investments has to be provided for, TANGEDCO, being @ commercial establishment, has ‘80k complied with the provisions of the Prowdent Fund and Miscellaneous provisions Act, 1952, which, sn our opinion, is applicabie to the Company {except In respect of employees to whom any Controutory Provident Fund scheme or old age Pension in accordance with any Scheme or rule Hfeamed by the Central Government or the State Government governing such benefits is applicable]. not ascertainable. | @ Even though these companies have been declored as Dormant, efforts are being taken to get back the investment mada and hence Impalrment loss does ; not arise. ‘Since the employees Wancfer scheme Is not yet finalised, this sue will be appropriately resolved at time of approval of Employees final trarsfer scheme, by the Government of Tarnil Nadu. As such, the General Provicent Fund (GPF) framed by Tam Nagu Government is avallable for theLet The “Coripaas “35 Set “emitted the deductions mace unde" che nead ‘Provident Fund" fram the empovers’ saloly anc interest thereon to any authonty evlm ined for ths purpose in violation af (re Act ref'rec above. Te amount thus retained ae habiimy + tre necks of TENCEDCO is Re. 2857 pesces tre “Contributory Pension Seseme’ ¢ ses :baing the tote? of Errciovees. ~ASFOCC'S contrbution and interest Usersgn acy $2. 4.29 Furtver, the eaic deducton from Employees’ Salary vn respect Interest claim of the parties for the delayed settlement of dues erounting Rs.745.81Creres.(Refer No.58) to Note Negotiation with the parties concemed | are in process for waiver of such Interest,ad Wiater cess payable to Tamilnadu Pol'ution Contrel Board upto 31.03.2018 amcunting to Rs. 686.39 Crores. (Refer Note No.55) Lease Rent payable to Tamilnadu Forest. Department up to 31.03.2013 amounting to RS. 4.70Crores_. Lease Rent for the period 2013-14 to 2017-18 are not yet quantified and fumished for ur verification.(Refer Note No.S6) The embezclement of cash ealence amounting to Rs.2.76 Crores. (Refer Note No.56) Central excise / VAT j GST liability towards sale of fly ash f Ciquieated damages collected the value of which «Snot ascertainable. y % Cumulative Coal shortages of s.203.32 crores and obsolete / Noa-moving stores. of Rs.41.31Crores, > A total sum of Rs.1984.40 lakhs, | being deposits made in several Barks for which credit_has not een given by. the Sanks in TANGEDCO's Sank accourts, Proposal sek’ exemption from water cess is under active consideration with Central Pollution Control Board. Efforts are being taken to reconcile the arrears o* ease rent, ith Forest Gepartmers * GOTN, | | Appropriat> the internal process to report deficiencies In intemal control te managenient on a timely basis is ‘observed The Internal audBors are presertly reporting to the Managing Director wrich is 2 contol lapce, Inetene ‘they snailId be reporting to the Board at Directors ‘The reporting by the existing internal audit wing | would ba farther oxpadites to encute timely acter to the managemer: m The Apicininent of an Independent director, a3 stioulated in the Companes Ad, 2013, has not hean done, due te ‘wich thi Suit Committee can't perform its cutes 11 a proper and an appropriate way. “The proppral To" ppoinunest_af_Indesecert | Director is uncer corsderation nth Government of oD Failure perform reccndiiation of signficant accounts. The Company has The process oF reconciliation Is consistantly carriedTrot reconcied the Inter unit / cide balances and the balances with group companies since inception. ‘aifferences are being narrowed cown, Ow) ‘The Company Tos net been adopting on appropriate procedure, for obtaining confirmation of ‘balances from various gartles. including sundry debtors and grelitors, since inception. The confirmation of balences for entite loan) accounts are being obtained proper'y. In respect of ‘other partics, the procedure of obtaining will be | reterated to all units. 1 Our opinion, non-compliance of the law governing the Provdent fund 6 a major lapse on the part of the management, which may have financial implications in the form of penalties ord non-compliance of the orvisions of Sec.192 of the Income Tax Act, 1961. This is one of the material internal | financial contra! lapses. Since the Employees transfer scheme has not been finalized and notifies from GOTH, the existing | benefits prevailing in erstwhile TNEB are continued. However, legal opinion in this regerd will be obtaines by the company,ke es G RAMACHANDRAN & ASSOCIATES COMPANY SECRETARIES FORMNO. MR-3 SECRETARIAL AUDIT REPORT FOR THE FINANCIAL YEAR ENDED 31° MARCH 2018 [Pursuant to section 204() of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration Personnel) Rules, 20/4) To, ‘The Members, ‘Tamil Nedu Generation and Distribution Corporation Limited CRN 040109TN29098GC073746 NPKRR Masligai (TNEB) Office 144, Anna Salat Chennai - 600001 Chennai We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by M's. Tamil Nadu Generation and Distribution Corporation Limited (hereinafter called the company). Secretariat Audit was conducted in a manner that provided us a reasonable tasis for evaluating the corporate conducls/statutory compliances and expressing our opinion therecn Based on aur verification of the books. papers. minute books. forms and retums filed and other records maintained by M/s. Tarail Nadu Generation and Distribution Corporation Limited and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, We hereby report that in our opinion, the company has, during the audit period covering the financial year ended on 31° Match, 2018 complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter: ‘We have examined the books, papers, minute books, forms and retums filed and other records maintained by Mis. Tamil Nadu Generation and Distribution Corporation Limited for the Ginancial year ended on 31* March, 2018 according to the provisions of: @ The Companies Act, 2013 (ihe Ast) and the rules made thereunder; Gi) The Securities Contracts (Regulation) Act, 1956 (*SCRA’) end the rules made thereunder; Gil) The Depositories Act, 1996 and the regulations and Bye-laws framed thereunder; Gv) SEBI (Issue and Listing of Debt Securities) Regulations, 2008 G) Foreign Exchange Management Act, 1999 and rules and regulations made thereunder with the extent (0 Foreign Direct Investment, Overseas Direct Investment and External Commercial Borowings, $10, Syndicate Resdancy, No. 3, Thomas N joog Rood. TNagee, Crema - 609 017, Prove : 644-2433 7456, 2492 1143/44, Eemeil er@y Ve SF femgcs@gmeitcom Websne : www.gramaxfirm.comG RAMACHANDRAN & ASSOCIATE} “ Continuation Sheet Count scares (si) Employees Pas dent Fund and Miscellaneous Provisions Act, U5? (vii) Fimployees Sit Insurance Act, 198 Geilly Indian Contr Act, 1877 {o0 Phe Eleceri: Aes, 2003 (2) Income Tax Net, IN61 and ladirect Tax Lawes (xi) Indiar Stamp 4e6, 194 (xil) Negotiable Inv ruments Act, 1885 (rill) Payracut oF Barus Ket, 1968 (xiv) Payment of G>stuss Act, 1972 (my Factories Ac. 218 (vi) Induscrial Disate Act, 1957 {asii) Maremity Ber fits Act. 1961 (8¥iHY Minimum Wsges Act, 1958 (cic) Paymemtof ies Act, 1936 and other applicable labour Lawes We have also examined .vmplignce with the applicable ctauses of the tole ing: (Secretarial Standards issued by The Instilule of Company Sec eticles of ledia (i) The Listing + reemem for Debr Securities entered into by ‘he Company wich BSE Limited and SEBI (Listing Obligations and Disclosure Requir:ments} Regulations, 2015. During the period under c-view the Company has complied with the provisions of the Act Rules, Regulations. Guidelines, ‘tandards, cfc. mentioned above. However, the Company Jas not complied with the following provisions as stipulated under the Companies Act, 2013, he Company has: 1. Not camplied wi't the provisions relating to appointment of Independent Directors. 2. Not filed certaii forms with Registrar of Companies including ¢-eation, modification or satisfaction «4 charges. Some of the Non-Fiting of the Fornws are compoundable, some require the zondonation of Regionat Director or the Central Government. 3. Not constitute: Nomination Remuneration Committee ni! Corporate Social Responsibitity Cemmittec. However, the Audit Committee constinnied by the Company ic not in Fine with the provisions of the Act. 4. Not appointed a Internal Auditor. 5. The company ims uppoiuted the same person as its Chieg Financial officer and Company secretary which i not in compliance with section 20 uf the Companies Act 2013. The neces' cry steps may be taken fo comply with the provisivns of the salu section a¢ the earliest. 6 The Annuat General meeting for the financial year ended 31% March, 2087 was not conducted within the time prescribed time under section 96 of the Companies Act 2013 nor within the ane extended by the Registrar of Compantes Cheenti.G RAMACHANDRAN & ASSOCIATES ne Comtiuntlon Sheet COMPANY SECIEIARIS We further report that ‘The Board of Directors of the Company is duly constituted with proper balance of Exeoutive Directors, Non-Executive Ditectors except the appointment of Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review svere carried out in compfiance with the provisions of the Act. Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed motes on agenda were sent al least seven days in advance, and a system exists for seeking anc ‘obtaining further information and clerifications on the agenda items before the meeting and for meeningful participation at the mecting. Majority decision is carried through while the dissenting members’ views are captured and recorded as part of the minutes. ‘We further report that there are adequate systems and processes in the company commensurate with the size and operations of the company to monitor and ensure complience with applicable laws, cules, regulations and guidelines. For G RAMACHANDRAN & ASSOCIATES Company Secretaries G, RAMACHANDRAN Proprietor FCS No.9687 CoP. No,3056 Date: 29" March, 2019 Place: Chennai Page 3of 4G RAMACHANDRAN & ASSOCIATES a ‘COMPANY SECHETARES ANNEXURF-A SECRETARIAL AUDIT REPORT OF EVEN DATE To, To, ‘The Mernbers, “Tamil Nadu Generation 2 Distribution Corporation Limited CINE Vdd 109TN2009SGC.073746 NPKRR Maaligai (TNES) Office 144, Anna Sala ‘Chennai - 609001 Our Report of even date ist» be real atong with this leter 1. Maintenance of Se 1etarial record is che responsibility of the manageinert of the company our responsibility {01:3 press an opinion on these secretarial recorcs based of: our audit 2. We have Zollowed the augit practices and processes as were appropriate to obtain resonable assurence abou: th: correctness of the contents of the secretarial records. The verification was done on test basis “© ensure thet correct facts are reflected in sacretarial records, We followed a reasonable basis fu" our opinion, 3. We have not verilied the correctness and appropriateness af tinancia) ecords and Books of Accounis of the Company. 4, Where evar requirsc, we have obtained the Management representation atseut the compliance of Jaws, rules and rog/ dations and happening of events ete 5. The compliance of the provistons of corporate and other applicable Insvs. rules, regt lations, standards is the ce: porsibility of management our examinetion wat linted to the verification of procedures on test o:sis. 6. ‘The Secretarial Aczit eeport is neither an assurance as to fixture viabili:y af the Company not of, the efficacy of elfcctiveness with which the management has conducted the affairs of the Company. For G RAMACHANDRAN & ASSOCIATES ! Company Spruwres . Lp? we RAMACHANDRAN } Proprietor PECS No.9687 CoP, N0.3056 | Fede CPN. ase Date: 29th March, 2019 Place: Chennai Page sofajons relating to Appointment of Independent Director. 2 Not filed certain forms with Registrar of Companies. | The Non-Filing of the Ferm is compoundable. Not constituted Nomination and Remuneration Cornmittee and Corporate Secial Resporsiviity Committee. However, the Audit Committee constituted by the company is not in line with tne _—_provisions of the Act. TNot appointed the Chief Financial” Officer and ______| Company Secretary as its Key Managerial Personnel... 3 Not agpointed an Internat Auditor. 6 "The ‘Annual General ‘me: the financial year ended 31% March, 2017 was not conducted within the time prescribed time under section 96 of the Companies Act 2013 not within the time extended by the Registrar of Companies Chennai. “Reply Since TANGEDCQ is an unlisted company this provision is not applicable. However, opinion from legal experts will be ebtained and decision will be taken on this issue, The Company is regularly filing forms with Registrar of Companies. However action is being taken to file certain left out forms._ The Nomination and Remuneration Committee and Corporate Social Responsibility Committee will be Formed within a month. The Company is in the process of appointing KMP. Appropriate action will be taken to appoint an intemal augicor - The finalising of 2016-17 Balance sheet at circle level was delayed due to involvement of finance staff in reporting effects of demonatisation, implementation of GST in TANGEDCO and ts, sudsequent, statutory compliances. However Steps will be taken avoid sucn detays during the current _finengal year,BB TANAL NADU GEVERATION AND DISTRIBUTION CORPORATION TTI TENE ACCU FORTHE TEARS STASEREN a ee yes Tana Re wae me HHS SLANT, Em as CORE ee Teams ET aa : Tee eee aan ‘aan sons wane fon a Sa oe =a ay Senne atpoatewot fees re a Seeteena ee Ba Sftescs € Nass Toes aa Snowe Tis se Blaser Soles ra ai Tee aire che ae as! a Tae aaa kee ae 7 Saar am aa Ta agen alia - nee oe Toa is Toa a a Tastee Soe aa aaa Shea ib ze Tiana Bees a5 za ee eae saa Ta ra iy ais attics RT aan a Tee : 2 atta a His Tapas age Te Ere powiteeenes aa Sia So eepeean eT gpemronnnpaneae son wa, Deena ane ane P Romakeonan — Metaaettcanstlece: . ‘ERA AP icteutconenntys Shconene a Casement reas Coun Sey a esa sp ef rend frsrinmnneicsct sw aimsacn tones crunnee Seeeipatihuiis ke menace Chaneed wearin smsnanits Frm yorzes “Stan smears amos Lazy, -Sposnwe A penal feax vanttani hy sam ortGahiasann cas vumife” enn we ane lene ane vo bua not Metre yin” weaw Setting __nemeatongewie NET REVENUE AND APPROPRIATION ACCOUNT STATEMENT? ‘Company Serreary ‘Ae per our report of even date (Chartered Accountants Soma No.OOLSUS. Fe ig No. 0099565 No 0072208 Merri FEO REALE FnSteA Jha leah, Pn Gop ah epee een No 0008405 St Thsyer Previois ver ‘No, |Farticolers 4 201718 2p1-17 (Ropees in Lakhs) 1} Gross Derick wroughe ym last year ssrzons | Accumulated Loss “27,37 316) Regulatory Ascet revised as por Trif Order -s3.70800| 208,000 IRevateation Reserve 9333%6| u7sttal 734ass| 6316236 [using the year 207-18 [Surplus before Amertisation 1232378) 634876 Jamortsation of Regulatory Astett 456300|_- 776078] 2oe0c0| 134,876) 2 Greoe Defice “527 13] “aia, a) Revaluation Reserve 2504 535336] el Credits Transfecced from Gereral Reserve : elapproprisions HContributions to Reserve end Reserve brands : : LidCantributjon to Development Fund - . 2] Balance carried forward atthe end of he year | Accumulated Losses, 81,75 626] 612.778 latory Assets to Ba amactised 223560] 7eost88 5,060] e176] i ln dane, Merton Wv-unta MaczSwant —RSUNDATAYADHANAM MA AEE VIKRAM KAPUR hel Financial Contalleriy)Dirctarfinance & etesDisaton CChaizsan coon Miniciae Diecge Firm No.0 woo Sask: Kone? canard? 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