Page 203 - CA Final PARAM Digital Book.

143(11) of the Companies Act, 2013.
The order applies to every company including a foreign company as defined in clause (42) of
section 2 of the Companies Act, 2013. However, the Order specifically exempts the following class
of companies
(i) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act,
1949;
(ii) an insurance company as defined under the Insurance Act,1938;
(iii) a company licensed to operate under section 8 of the Companies Act;
(iv) a One Person Company as defined under clause (62) of section 2 of the Companies Act;
(v) a small company as defined under clause (85) of section 2 of the Companies Act; and
(vi) a private limited company, not being a subsidiary or holding of a public company, with a
• paid up capital and reserves not more than one crore and
• which does not have total borrowings exceeding one crore from any bank or
financial institution and
• does not have a turnover exceeding rupees ten crore at any point of time during
the financial year.
Part III – Case Discussion
➢ In the given case, E-Tech Pvt. Ltd. has outstanding loan of ₹ 50 lakhs (20 lakhs + 30 lakhs) from
Banks and Financial Institutions together, which is not exceeding the limit prescribed under Order
for applicability of exemption.

Part IV – Conclusion
➢ Therefore, CARO, 2020 will not be applicable to E-Tech Pvt. Ltd. Thus, the period and amount of
default need not to be reported for default in repayment of dues to bank or financial institution
under clause (viii) of Para 3 of CARO, 2020.
Author’s Note
Here, even if CARO is not applicable, default in repayment of loan should be disclosed, as schedule III
requires such disclosure in the notes

QNO Applicability (Pvt Company Focus on Turnover) Old Course – (N07E, SM17, PM17, SM21)
386.000 TITANIUM CNO—CARO.020
Astha Pvt. Ltd. has fully paid capital of 40 lakh. During the year, the company had borrowed ` 75 lakh
from a bank and 15 lakh from financial institution independently. It has the turnover (Net of excise ` 50

lakh which is credited to a separate account) of `975 lakh. Will Companies (Auditor’s Report) Order, 2020
be applicable to Astha Pvt. Ltd.?
Answer Part I -- Relevant Standards & Laws
▪ CARO, 2020
Part II -- Requirements of Relevant Standards & Laws
➢ Applicability of CARO, 2020: The CARO, 2020 specifically exempts a private limited company, not
being a subsidiary or holding company of a public company, having a paid up capital and reserves
and surplus not more than ₹ 1 crore as on the balance sheet date and which does not have total
borrowings exceeding ₹ 1 crore from any bank or financial institution at any point of time during
the financial year and which does not have a total revenue as disclosed in Scheduled III to the
Companies Act, 2013 (including revenue from discontinuing operations) exceeding ₹ 10 crore
during the financial year as per the financial statements.

Part III – Case Discussion
➢ In the case of Astha Pvt. Ltd., it has paid capital of ` 40 lakh i.e. less than` 100 lakh, turnover is `
9.75 crore i.e. less than 10 crore since excise duty is not taken into account if it is credited
separately to excise duty account. However, it has outstanding loan of ` 90 lakh (` 75 lakh + `15
lakh) collectively from bank and financial institution.

Part IV – Conclusion
➢ Thus, CARO, 2020 will not be applicable to Astha Pvt. Ltd. As it fulfills the condition relating to
applicability of CARO 20.

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