Jupiter Hospitals Ltd., (JHL) is a renowned corporate house owning a famous hospital called "Jupiter Hospitals". Two family groups (L and M) controlled the majority of the shareholdings in the company. The hospital is op

Jupiter Hospitals Ltd., (JHL) is a renowned corporate house owning a famous hospital called "Jupiter Hospitals". Two family groups (L and M) controlled the majority of the shareholdings in the company. The hospital is operated in Coimbatore, a non-metro city, where electronic and cheque transactions were not much high and patients mostly were making payments in cash. The management of the company facing problems because of some disturbing events taken place during the financial year 2018-19. All these events are summarized as under: (i) Robbery in Pharmacy: A robbery took place in the pharmacy in the night of 29-3-2019 and cash of around ₹ 20 lakh was lost in the robbery. The robbers had entered through a window pane during 2 a.m. to 3 a.m. when none was present in the pharmacy. They decamped with all the cash in the cash chest, leaving nothing behind. No traces were found to have left behind by the robbers. Fingerprints were seen on the chest as they had not been wiped off. However, none belonged to an outsider (other than employees). The CC TV camera had turned defective a day earlier being 27-3-2019 and had been given for repairing and accordingly no help was available through CC TV recording. Two key personnel in the pharmacy, the manager and the cashier, were supposedly doing a good job, showing remarkable growth in the night sales of the pharmacy. It is further to be noted that in nights high priced medicines were sold in huge quantities. The sales in comparison during day time was found to be less. The increase in sales was also having issues and complaints from the patients that the bills issued by the pharmacy for the goods purchased by them and cash received when asked to be verified for onward transmission for making claims, were not authenticated by saying that the same were not issued by the pharmacy. It transpired to the management that the employees involved are being in the habit of issuing the duplicate bills. It was further reported by the internal stock auditor that there is collection of the expired goods in the pharmacy and why the same has not been got replaced or exchanged from the companies as per policy. The police who came for investigation hence concluded that the act of robbery might have been done by a North Indian gang who were committing similar crimes in the locality and area and thus closed the case file. Insurance policy for loss of cash in safe had expired on 20-3-2019 and was not been renewed, since it was felt that no robbery would take place in a hospital which is always having movement of patients. The management entrusted the work to a forensic auditor to investigate the issue. (ii) Related Party Transactions: There were complaints put in the suggestion box by the various persons that some directors were making money from the purchase contracts which the hospital was entering into with the concerns in which these persons were interested. Till 15th March, 2019, the hospital had made purchases of around ₹ 22 crore from such related parties. However, on comparison with the earlier year, this was marginally higher by 5% and was thus not taken care by the management of hospital. The allegations were that the prices paid were higher than the market prices and that some of the concerns were not reputed and have been earmarked by the drug authorities also. There was a Purchase Committee which monitored the purchases and so the allegations were initially ignored. However, when they started pouring in, the Audit committee decided to investigate the matter and entrusted the job of ascertaining the correctness of the allegations to the forensic auditor. (iii) Drop in Hospital Revenues: There is an arrangement between the two groups of the shareholders that each group will administer the hospital for three years on a rotational basis. Group L's tenure had ended on 31-3-2018 and during the current year, group M had taken over the administration. Despite the number of surgeries and of other patients had not been dropped, there was a sharp fall in the revenues of hospital in the year 2018-19, except from the pharmacy. The cashier desk was managed by a director or his relative for having control over the cash. Group 'L' desires a forensic audit of the affairs to be conducted and entrusts the same to an outside forensic auditor. In this backdrop you are being appointed as an 'Outside Forensic Auditor' to investigate all the three issues and required to give your report on the matters indicating: What are the consequences under the Companies Act, 2013 and Income-tax Act, 1961 when the cause of drop in revenue is being proved? State the steps to be taken by the company to remedy the situation so caused.