Case Study: Background: Swash Infra Limited, incorporated in 2021 under the provisions of Companies Act 2013 is presently engaged solely in infrastructure-related activities in line with its existing object clause. The c

Case Study: Background: Swash Infra Limited, incorporated in 2021 under the provisions of Companies Act 2013 is presently engaged solely in infrastructure-related activities in line with its existing object clause. The company has built a strong market presence through high-quality products and robust post-sale services, resulting in consistent profits since inception. This operational success and evolving strategic outlook form the basis for the issues discussed in the subsequent paragraphs. I. Name Change Given its profitable operations, expanding business aspirations and also with the advice of one of the renowned astrologers the board of the directors of the company decided to change its name to reflect a broader business outlook. The company passed a special resolution and filed an application with the Registrar of Companies (ROC) on 25 May 2026 for approval of a change in its name to Swaarna Infra & Realty Limited. During examination of the application, the ROC noted that the company had not filed its annual return for FY 2024-25 in Form MGT-7, although the financial statements for the same year had been filed. The directors remain confident that the application will be approved. II. Future Projects Despite being profitable in the infrastructure sector, the promoters intend to diversify into the Renewable Energy Infrastructure business after three years. They have already developed certain intellectual properties for the proposed venture and also wish to purchase land now for use in the future project. However, the existing object clause of Swash Infra Limited does not permit such activities or holding assets relating to the renewable energy sector, and the promoters do not wish to alter the object clause at this stage. They also confirm that no accounting transaction or business activity relating to the proposed project will be undertaken at present and till the projects become operational. The promoters, however want the intellectual property and the proposed land to be held under a corporate structure rather than in their personal names and therefore seek advice from the Practising Company Secretary (PCS) on how this may be achieved without altering the existing object clause. III. Status as a Listed Company The Board of Directors is considering issuing non-convertible redeemable preference shares (NCRPS) to augment financial resources. During preliminary discussions, the Company Secretary suggested that the company could list the proposed issue of NCRPS on the National Stock Exchange of India (NSE). The Board seeks a legal opinion from the PCS on whether such a listing would confer the status of a "listed company". IV. Threat of a Trade Union A recognised trade union of the company is on strike, alleging unfair labour practices, including non-payment of bonus despite high profits. A workman of the union has created a video disk containing material that the company considers could be potentially defamatory and has also threatened to release it on social media. The Managing Director has instructed the Company Secretary to explore the possibility of obtaining legal measures to restrain the union and workmen from releasing the video. V. CARO 2020 For the financial year ending 31st March 2026, the statutory auditor submitted the Companies (Auditor's Report) Order, 2020 (CARO 2020) report. In relation to physical verification of inventory, the auditor noted that: The management has not conducted physical verification of inventory at reasonable intervals. No proper treatment of discrepancies of 10% or more has been made by the company. The auditor did not provide any explanation for these observations. The Board seeks clarification on the applicability of CARO 2020 to the company and whether the auditor's report complies with the reporting requirements, particularly in the light of the remarks on inventory verification. Based on the information provided above and with reference to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, answer the following: Explain the provisions relating to the applicability of CARO 2020 to companies and determine whether the statutory auditor's report issued in this case is complaint with CARO 2020.