Timex Group India Ltd — Audit Report / Information 2021

Jun 11, 2021

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June 11, 2021

The Secretary BSE Ltd., P J Towers, Rotunda Bldg., Dalal Street, Fort Mumbai – 400 001

Scrip Code: 500414

Sub: Intimation of the outcome of the Board meeting held on June 11, 2021 and disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, as amended

Ref.: Our intimation letter dated April 8, 2021 on receipt of an anonymous whistleblower complaint

Dear Sir,

We refer to our letter dated April 8, 2021 intimating about receipt of an anonymous whistle blower complaint and initiation of a fact finding exercise into the allegations by the Audit Committee of the Company through an independent law firm.

The fact finding review has since been concluded and the Audit Committee and Board of Directors of the Company have, in their meetings held on June 11, 2021, taken on record the final report on fact finding review. In order not to disclose the personally identifiable information including names of individuals and other commercially sensitive information, a redacted version of Report is being submitted as Annexure I.

The management comments on the final Report on fact finding review are attached as Annexure II.

This is for your information and records. You are requested to take the above information on record.

Thanking you,

For Timex Group India Limited

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Dhiraj Kumar Maggo

Vice President – Legal, HR and Company Secretary

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Regd. Office: E-10, Lower Ground Floor, Lajpat Nagar-III, New Delhi-110024. Tel. : +91 11 410 21297

Annexure-I

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REPORT

FACT-FINDING REVIEW CONDUCTED PURSUANT TO THE INSTRUCTIONS OF THE AUDIT COMMITTEE, TIMEX GROUP INDIA LIMITED

Date: June 10,2021

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L&L PARTNERS law Oces

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INDEX

Sl. No.	Particulars	Page No.
I.	Executive Summary	1-2
2.	General Background	3-5
3.	Appointment & Scope	5-6
4.	Procedures undertaken during our Fact-Finding Review	6-8
5.	Allegations under Review and our Analysis	8-26
6.	Qualifcations & Disclaimers	27-29
7.	Annexure A	30-33

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Executive

On March 25, 2021, Timex Group USA Inc. received an anonymous whistleblower complaint ("Complaint") alleging commission of certain 'disturbing unethical practices' by some of the employees and members of the senior management of Timex Group India Limited ("TGIL", or the "Company"). The Complaint alleged that the accused officials were indulging in such practices for personal gains and that there were financial irregularities in the TGIL's business with - a proprietorship firm (in this report, is referred to as "Entity A"). We were instructed by the Audit Committee of TGIL to undertake a fact-finding review to assist in determination of the truth of the allegations. We further engaged Grant Thornton Bharat LLP ("GT"') for undertaking a financial review in the matter.

This report contains the findings of the fact-finding review undertaken by us into the allegations of financial irregularities made in the Complaint. Our procedures included a review of the relevant documents and information (as received from the Company) and interviewing the accused officials. We have also perused and relied upon the financial analysis undertaken by GT in respect of the commercial transactions between TGIL and Entity A.

Summmy of Conclusions

We did not find any evidence of the accused officials benefitting personally from the commercial relationship between TGIL and Entity A or of any diversion of funds on account of such relationship. We found substantive compliance of TGIL's internal processes and guidelines in relation to the appointment of Entity A as the marketer, distributor and franchisee of TGIL's products. Our analysis of the facts and explanations presented to us does not indicate that Entity A is a dummy entity, as alleged in the Complaint. The fact that the proprietor of Entity A is related to a non Key Managerial Personnel was found to be irrelevant to Entity A's appointment. The said proprietor was an existing business associate of TGIL with relevant sector experience, which was found to be an important consideration in the decision to offer it the distributorship, given that the online business channel for utilizing the entire warehouse inventory for sale was intended to be

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commenced by the Company in a short period of time in order to mitigate the effects of the lockdown imposed due to the Covid- 19 pandemic, on its sales and cash flow. We found that the decision to let Entity A conduct its business activities from TGIL's warehouse was driven by commercial considerations and in accordance with the business model adopted by the Company. Commercial transactions between TGIL and Entity A, as reviewed by GT, have also been found to be in order and no evidence of any undue benefits being passed on to Entity A or to any of the accused officials has come to light.

The results of our fact-finding review do not support the allegations made in the Complaint. An analysis of the various allegations made in the Complaint, and our observations and findings, are set out in detail in our accompanying report.

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Client: The Audit Committee, Timex Group India Limited

Subject: Report of the fact-finding review conducted pursuant to the instructions of the Audit Committee, Timex Group India Limited Date: June I 0, 2021

Pursuant to the instructions of the Audit Committee, Timex Group India Limited, ("TGIL" or "the Company"), we conducted a fact-finding review ("Review") into some of the allegations made in an anonymous whistleblower complaint against the members of senior management of TG I L.

This report encapsulates the findings of the Review and the procedures undertaken.

This report is based on the information and documents shared with us by Timex Group India Limited, until May 05, 2021, the various discussions/ interviews conducted with the official of the Company until May 01, 2021, and the findings of the review undertaken by Grant Thornton Bharat LLP ("GT"), submitted through their report dated May 25 , 2021.

1. GENERAL BACKGROUND

• 1.1. TGIL is a company incorporated under the provisions of lndian law and is listed on BSE Limited.

• 1.2. In the year 2020, TGIL entered into several agreements with 'Entity A', a sole proprietorship firm, for 'business to business' (B2B) sale of its products to Entity A and for re-sale of such products by Entity A to end consumers through e­ commerce channels. Apart from this, in early 2021, TGI L also entered into a franchise agreement with Entity A for operating a factory outlet as TOIL's franchisee. The business arrangement is such that TGIL sells its products to Entity A, which are in turn sold to end consumers by Entity A through the factory outlet,

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or through TGIL's websites hosted by Entity A, or through e-commerce marketplace platforms I ike etc. These aside, the proprietor of Entity A, • also has another proprietorship concern under the name of which has been operating a flagship store for TGIL's products under a separate franchise

arrangement.

1.3. On March 25, 202 I, an anonymous whistleblower complaint ("Complaint") was received by Timex Group USA, Inc. alleging the commission of 'disturbing unethical practices'. The whistleblowers, claiming to be ethical employees of

(collectively referred to as the "Accused Officials ") were involved in unethical practices to boost short term personal revenue and profits and that there were financial irregularities regarding TGIL's business with Entity A.

1.4. Specifically, it was alleged that for the last two years, been pushing the concept of 'Entity A', which was alleged to be a dummy entity within TGIL, to route the entire e-commerce and retail business of TGIL into Entity A. It was also alleged that the arrangement with Entity A was nothing but a setup to reap financial benefits at a flat rate of .(and more) on overall business value.

• 1.5. The Complaint also included certain allegations relating to human resources management issues, which were not within the scope of the Review.

1.6. Pursuant to this Complaint, three of the Accused Officials, being,

ubmitted a joint reply to the said allegations to the senior management of Timex Group.

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• 1.7. The Complaint was examined by the General Counsel of the Timex Group, in terms of the Whistle Blower Policy of TGIL. After a review of the Complaint and the joint response, the General Counsel concluded that the allegations other than those relating to the Entity A business did not require any further review and merited dismissal, however, the allegations relating to the Entity A business further review.

2. APPOINTMENT & SCOPE

• 2.1 Pursuant to the above-mentioned decision, the Complaint was placed for discussion before the Audit Committee of TGIL ("Audit Committee") in its meeting held on April 7, 2021. In the said meeting, the Audit Committee decided to appoint L&L Partners Litigation (the "Firm", "we", "us" or "L&L") to conduct an independent fact-finding review into the allegations of financial irregularities made in the Complaint pertaining to the business with Entity A. The Firm, with the approval of the Audit Committee, further engaged GT to assist it in ascet1aining certain facts to determine the truth (or otherwise) of the allegations made against the Accused Officials.

• 2.2 L&L has undertaken the Review to determine the veracity of the allegations of financial irregularity relating to the business arrangements with Entity A alleged in the Complaint and whether the Accused Officials have made personal revenue and profits therefrom. We have reported our findings on the basis of information/ documents provided by TGIL, preliminary discussions with and interviews of the Accused Officials and the report of the fact-finding exercise undertaken by GT.

• 2.3 The allegations made in the Complaint, in respect of which the Review was carried out, are as follows:

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• (a) The proprietor of Entity A, • is a blood relative of .

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• (b) Entity A is a dummy entity created to route the entire e-commerce and retail business of TGIL into this entity;

• (c) Entity A was formed without the knowledge or anyone in operational teams and is completely aimed at reaping financial benefits of flat • (and more) on overall business value;

• (d) The e-commerce business of Entity A is carried out of the warehouse of TGIL wherein the operations are handled by TGIL employees and still, a fixed commission and retail fee is being passed on to Entity A account every month; and

• (e) The Accused Officials are personally benefitting as a consequence or the above.

3. PROCEDURES UNDERTAKEN DURING OUR FACT-FINDING REVIEW

• 3.1. As part of our Review, we undertook the following procedures:

• (a) Preliminary discussions with

to understand the business arrangement with Entity A;

• (b) Review of the documents and information provided to us by TGIL;

• (c) Personal interviews of the Accused Officials;

• (d) Deliberations with GT on the findings of the fact-finding exercise undertaken by them, especially on the financial transactions between TG I L and Entity A.

• 3.2. Our principal point of contact for collecting information and documents was the Legal Head, TGIL. Other TGIL officials also assisted in the supply of information, as and when requested.

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• 3.3. As part of the Review, we have examined vanous documents, inter-alia, the business agreements between TGIL and Entity A, documents pertaining to internal approvals within TGIL for the business agreements entered into with Entity A, relevant e-mails between the officials of the Company, presentations made to the board of directors of TGIL by

• guidelines of TGI L and certain registrations in the name of Entity A.

3.4. Personal interviews he Accused

As part of the Review, we conducted personal interviews of the Accused Officials to elicit the truth of the allegations made against them in the Complaint. The interviews were conducted per the following schedule:

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----- Start of picture text -----

Name Designation Date oflnterview
April 30, 2021
April 30, 2021
May I, 2021
May I, 2021
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The interviews were conducted with the following procedure:

• (a) The interviews were conducted via video conferencing;

• (b) The interviewees were informed about the context of the interview;

• (c) Questions were put forth to the interviewees on a shared screen and they were asked to narrate their responses. The questions and answers were simultaneously transcribed on the shared screen visible to the interviewees throughout their interview;

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• (d) The interviewees were informed that they were expected to tell the truth and that they could refer to any materials they desired for answering the questions;

• {e) After the end of the interviews, transcripts of their interview were sent to each of the interviewees for confirmation and were confirmed by the interviewees by means of digital signatures (in case of or by e-mails (in case of the other Accused Officials).

4. ALLEGATIONS UNDER REVIEW AND OUR ANALYSIS

The analysis of the allegations made in the Complaint (as discussed in point 2.3 above), on the basis of the fact-finding review undertaken by us, is encapsulated below:

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It has been alleged in the Complaint that, "the current franchisee of- is

is the

at TGIL.

4.1.1.

• (a) informed us in his personal interview that - - is his sister-in-law (wife of his wife's brother).

(b) Therefore, while

is a relative of • she

is not his blood relative or a close relative.

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• 4.1.2. Whether a 'related TGIL under the 2013 am/ the SEBI

• aut/ Disclosure 2015

• (a) The Companies Act, 2013 and the LODR prescribe certain compliances to be undertaken in case companies propose to enter into transactions with their 'related party(ies)'.

• (h) Under the Companies Act, inter-alia, a key managerial personnel or his relative is a 'related party' of a company. The definition of 'related party' under the LODR refers to the definition of ·related party' under the Companies Act and the definition as contained under the applicable accounting standards. Further, under the Indian Accounting Standard 24 (Related Party Disclosures), which we believe is applicable to TGIL, a key management personnel of the company or of the parent of the company or a close member of the family of such key management personnel, is deemed to be a 'related party'.

• (c) It has been confirmed by in his interview that he is not

  • a key managerial personnel of TGIL. We have seen the Annual Report of TGIL for the financial year 2019-20 and as not listed as a key managerial personnel there. For ready reference, the definitions of 'key managerial personnel' and 'related parties' under the Companies Act, LODR and under the Indian Accounting Standard 24 are reproduced m Annexure A.

(d) Since

Since is not a key managerial personnel of TGIL is not a related party of TGIL under the Companies Act, LODR and the Indian Accounting Standard 24. Therefore, the provisions under the Companies Act applicable to related party transactions are not applicable to TOIL's dealings with Entity A.

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4.1.3.

was kuowu to the aud the Board TGJL aud whether the iutemal TGJL were ill the

• (a) According to-, his relationship with - has been known to the management of TGIL for the last three years. The disclosure about his relationship was also made by in the internal term sheet of TGIL for the - Agreement to be executed between TGIL and Entity A. His relationship with - was also disclosed to the Board of Directors ofTGIL before the appointment of Entity A as the franchisee of

• • factory outlet in January 2021.

• (b) We have been given to understand that TGIL has a set of internal guidelines,

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partners including franchisees/ distributors/ dealers, which we have seen. As per the guidelines, the on-boarding of a new trade partner requires the approval of the relevant business head 1, Sales Head, Finance Department, Legal Department and the Managing Director, in that order. Such approvals are given through sign offs on the relevant internal term sheets - ­ Agreement Term Sheet -I -greement Term Sheet ( ) I Agreement Term Sheet (-). In our

Review, we have reviewed the following term sheets:

• The term sheet for the .. Agreement dated 18 May 2020 entered into between Entity A and TGIL. The said term sheet was approved

1 The approving person is - the concerned Regional Sales Heads in case of Distribution channel (Distributor/Direct dealer), Business Head-Retail for Franchisee channel and Business Heads in other channels (example E-Commerce etc.).

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08 May 2020. The said term sheet contains a disclosure by - that • • is his relative.

• The term sheet for the

through emails dated 02 June

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1. The said term sheet bears a statement from the Sales Department declaring the relationship between • • and • • As part of the document set provided to us in relation to this term sheet, we have also come across the following declaration by �o1·king

with Timex Group India Limited is my relative. "

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2020 .

are disclosures about the relationship between

and and her existing business relationships with

2 We have been given to understand that 3 We have been given to understand sheet.

had also approved the term sheet. had also approved the term

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TGIL. The said term sheet bears signatures of the abovementioned officials, however, there are no dates appended to the signatures.

• (c) We have also reviewed e-mail correspondence between

- which shows that

in the knowledge of the senior management of TGIL.

4.1.4.

distributor TGIL?

(a) From the interviews of appears that of TGIL because:

it

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• In order to save time, and since it was going to be a short term arrangement, was chosen because as she was already associated with TGIL as a distributor and franchisee of the flagship store

chosen also because she had the experience of the business of online sale watches as she was already operating the online sale of TOIL's watches at a smaller scale. It is pertinent to mention here that �as operating TGIL's of her existing distributorship with TOIL.

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(b)

said in his interview that he did not propose

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as the online distributor.

4.1.5. L&L 's Remarks:

We have not come across any document or information, basis which it can be concluded that the appointment of Entity A for the business arrangements with TGIL was because (the proprietor) was related to On the basis of the information and documents available to us, it appears that it a commercial decision to choose for the business arrangement that has been

questioned in the Complaint as she was already a business associate of TGIL.

4.2. A is a

The anonymous complainants have alleged that Entity A is 'a dummy entity within TGIL to route the entire ecommerce and retail business ofTGIL into this entity ... '. As part of the Review, we have analyzed the legal form in which Entity A exists, its ownership details as well as certain registration documents/ licenses which throw light on the nature and form of Entity A.

4.2.1. A's Form &

• (a) As stated above, Entity A is the proprietorship concern of - - For Entity A, has duly obtained the following statutory registrations:

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• Goods and Services Tax (GST) Registration (bearing Number dated

• Registration under the U.P. Dookan Aur Vanijya Adhishthan Adhiniyam, 1962 (Uttar Pradesh Shops and Commercial Establishment Act, 1962), dated 18 May 2020;

4.2.2. Commercial between TGIL ami A

• (a) We have also perused the following agreements entered into between TGIL and Entity A :-

• .. Agreement dated 18 May 2020

Agreement dated 02 June 2020

• • Agreement dated 18 June 2020
• • Agreement dated 29 January 2021

• (b) The aforesaid agreements have been entered into on a principal-to-principal basis and after substantial compliance with the internal guidelines and procedures of TGIL. Further, disclosures regarding Entity A and its proprietorship were also made to the Board of Directors of TGIL.

• (c) Sample sale transactions between TGIL and Entity A have been reviewed by GT, who have also reviewed Entity A's ledgers (as maintained by TGIL) and Entity A's provisional accounts. GT, in its report, has not raised any apprehension about the veracity of transactions between TGIL and Entity A.

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• (d) We were also informed that Entity A has its own employees whose salaries are paid by it and that TGIL would not be responsible for any defaults committed by Entity A in its statutory obligations or obligations owed to a third party. According to the information given to us, TGIL does not control bank accounts of Entity A.

• (e) Further, as stated above, TGJL has sub-let a portion of its leased premises at Sector 58, Plot No A-47, Noida, to Entity A for carrying out its operations. Entity A duly pays rent for the said premises.

4.2.3. L&L 's Remarks:

It is also to be noted that in India, conduct of business through proprietorship firms is common and there is no legal impediment or bar on individuals to set up more than one proprietorship firm. The fact that Entity A has been granted its own Registration Certificate for the purposes of GST and is also independently registered under the Uttar Pradesh Shops and Commercial Establishment Act, 1962, depicts that it is not a dummy entity within TGIL. It is also pertinent to note that -

• is not an employee of TGIL and hence it would not be a correct position to state that Entity A is part and parcel of, or a segment within TGJL. Further, review of the agreements and commercial transactions between TGIL and Entity A show that they are in the nature of principal to principal In light of the above, we do not find Entity A to be a dummy entity within TGIL.

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4.3. Allegation - Tile entire setup (Entity A) was formed without tile knowledge of anyone in operational teams

It has been alleged in the Complaint that the entire setup (Entity A) was formed "without the knowledge of anyone in operational teams of TGIL ".

4.3.1.

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• (u) As stated hereinabove, TGIL has a set of internal guidelines, -

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new trade partners including Franchisee/ Distributors/ Dealers etc. The said guidelines lay down a detailed procedure for the appointment of, inter alia, new distributors/ franchisees.

• (b) As per the guidelines, "the process of canying out background check (financial/ legal) of the proposed partners shall be completed by all concerned departments such as Sales, Finance & Legal based on all necessmy documents and information's received from the party before its on-boarding. "

• (c) We have reviewed the internal term sheets of TGIL pertaining to appointment of Entity A as (i) the e-commerce and online sales distributor of TGIL and (ii) the franchisee of the .. factory outlet as well as the term sheet for executing the . Agreement with Entity A. In our review, we have found substantial compliance with the procedure laid out in TGIL's guidelines inasmuch as approvals from the various departments, as required under the said guidelines, have been obtained. Such approvals have been

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given by way of signatures of the department heads on the respective term sheets or by emails when TGIL was following 'work from home' policy due to the spread of the Covid-19 pandemic. We were informed by ­ n her interview that a detailed background check for . not required because she was already a business

associate of TG I L.

• (d) We were informed by in their

personal interviews that the concept of appointing a distributor on a B2B basis for online sales of TGIL's products through e-commerce marketplaces on a franchisee owned company operated ("FOCO") business model was first discussed with the Timex Group 1 and Timex Group .. during their India visit in July, 2019. At the advice of this concept was further developed internally by the senior management of TGIL. Thereafter, in the Board meeting of 30 January 2020, the concept was presented to TGIL's Board of Directors by the CEO.

s the online and e-commerce

marketplace distributor was a short-term plan necessitated by -

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• (e) We have been given to understand that regular updates on the commercial performance of Entity A have been given to TGIL's Board from time to time in the Board meetings on January 30, 2020, June 24, 2020, August 6, 2020, October 26, 2020 and February 3, 2021 and to the Group CEO in the monthly business review meetings.

• (f) also mentioned that the mini version of the concept, being e­ commerce distributorship through a B2B FOCO model, was also discussed

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(g)

in his personal interview explained in detail TGIL's Guidelines for on-boarding of partners and opening of New Customer Code and sanction of Credit Limit. In the response to question that whether TGIL followed the process contained in the above guidelines in the appointment of Entity A as a franchisee/ distributor, he confirmed that the said process was followed. Our review indicates that the process was substantively followed.

4.3.2. L&L 's Remarks:

We cannot say with certainty what the anonymous complainants mean by 'operational teams', but the appointment of Entity A was e f ected after obtaining approvals from all departments as per TGIL 's guidelines. It has also been confirmed by that TGIL 's guidelines for

appointment of trade partners were followed for approval of the business relationship with Entity A. Further, it is noted from the response of the

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• the

made aware of the concept in July 2019

and that the concept was again discussed with

of Directors of TGIL in January 2020. Further,

has

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been regularly updating the Board of Directors of TGIL on pe1jormance of Entity A through CEO presentations. In light of the above, it cannot be said that the commencement of business with Entity A was a surreptitious transaction.

4.4. Allegation -Entity A is completely aimed at reaping financial benefits of flat II (am/ more) 011 overall business value

• (a) We have reviewed the .. Agreement between TGIL and Entity A, the.

greement, the

-Agreement and the -Agreement, executed between TGIL and Entity A. We have also reviewed the term sheets that were approved internally at TGI L in relation to the aforesaid business agreements, along with certain e-mail correspondences where the commercial relationship with Entity A was discussed. In none of the abovementioned documents, we have come across a mention of commercial term of on overall II business value that is to be passed on to Entity A.

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• (b) As per the commercial terms agreed in the

• -Agreement dated June 2, 2020, TGIL has agreed to provide Entity A a net margin of certain percentage on the net sale prices of each product to the end customer with TGIL retaining the right to adjust the net margin upwards or downwards depending upon the business volume.

• (c) We have also come across an internal e-mail of May 4, 2020 that was sent by the to the recording further

by the

terms of trade with Entity A in addition to the aforesaid clause of the Agreement. These terms provided that Entity A would be entitled to retain net profit of a certain percentage on net sales

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subject to a specified minimum amount. Here also, there is no mention of Entity A being entitled to flat • (and more) of the overall business value.

• (d) The said terms were approved by the Managing Director on May 4, 2020 and were conveyed by on May 5, 2020 for further discussion with

on May 5, 2020

that the said terms were discussed by him with • and consented to by her. Her consent was further conveyed by - to We were further informed that it was after consenting to the abovementioned terms that took steps to set up a proprietorship under the name and style of - to kick-start the distribution of Timex products through e-commerce.

• (e) However, the portion of

However, the portion of e-mail dated May 4, 2020 mentioning the net profit entitlement of Entity A do not find a mention in Agreement or the -

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• (f) In their personal interviews,

have confirmed that the commercial terms contained in - ail of May 4, 2020 are binding on TGIL and TGJL shall abide by them.

• (g) Further,- informed us that the exclusion of the said commercial terms from the agreements is merely an oversight and inadvertent and if need be, will be corrected after discussions with Entity A.

informed us that the agreements have been drafted as per regular practice.

However, both agreed that TGIL is bound by the said commercial terms.

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• (h) None of the Accused Officials mentioned anything about a commercial term of . on overall business value nor is it reflected in any agreement between TG I L and Entity A.

• (i) In the

Agreement dated June 18, 2020, Clause

-states - " ... The Parties agree that SECOND PARTY shall purchase the Products as per Terms of Trade and other terms agreed in said • Agreement." We, therefore,

understand that the terms of trade contained in May 4, 2020 to the Managing Director also apply to the - Agreement.

• (j) Annexure C to the - Agreement dated January 29, 2021 contains the commercial terms on which Entity A is to conduct business under the said agreement. The Terms of Trade in this agreement envisage margin on MRP being given to Entity A by TGIL depending upon the brand and price­ range of the product. Such margin varies between .and ..

• (k) Under the Agreement dated May 18, 2020, as amended by the •

• Addendum dated January I, 2021, Entity A is required to pay monthly rent of -plus GST to TGIL subject to tax deduction at source and other charges and levies as may be applicable.

4.4.2. GT's

(a) GT in its report has observed that- "Further, the overall business model is in accordance with the terms and conditions laid out in the agreement between Timex, India and - " GT also notes that- "Based on above procedures, it was observed that all the transactions were accordance with the operating model of - and were backed up with adequate supporting documents and narrations. " and, "Based on the discussion with

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the Timex India and the review of the books and account , we could not identifY any financial or non-financial irregularities in the operating and the business model of - operation".

• (b) In their report, OT has not indicated that they have come across a commercial term of . (and more) on overall business value in their analysis or of any instance of such moneys being transferred to Entity A by TOIL.

4.4.3. L&L 's Remarks:

We did not find any material, document or information that pointed to Entity A reaping a financial benefit of ll (and more) on the overall business value.

• 4.5. - that the businesses A are carried out the warehouse TGIL wherein the are handled TGIL and a commission am/ retail is on to A account month which has mised serious concerns The that the Accused have in unethical

• It also that have taken measures to boost short-term

• revenue am/

4.5.1.

(a) During our Review, we were given to understand that Entity A's business model is on the lines of the FOCO model--nd - explained to us that TOIL has been engaged in B2B e-commerce business since a long

time. As per - the business arrangements with Entity A is an additional channel to an existing line of business.

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.. for its business operations. TGIL has a warehouse located at the Demised Premises. Under the -Agreement entered into between TGIL and Entity A read with its Addendum, TGIL has sub-let a portion of the Demised Premises to Entity A for carrying out its business as the E­ Commerce Re-Distribution Stockiest of TGIL as well as to operate a franchise factory outlet from within the sub-leased portion of the Demised Premises. It is from such sub-leased portion that Entity A operates. We have been given to understand that the e-commerce business of Entity A are carried out from a portion of the warehouse of TGIL, while the franchise outlet (factory outlet) is run by TGIL from a portion of the ground floor.

• (c) Basis the interviews conducted, it is observed that there is a commercial rationale on account of which it was decided to allow Entity A to run its operations from a portion of the Demised Premises (where the warehouse of TGIL is located). As per the interviewees, the idea was to use the complete inventory available at the warehouse, which could help Entity A in increasing the choices available to customers during sale of products on the marketplaces and the brand websites.

• explained that for the sub-lease of a portion of the Demised Premises, Entity A makes payment of rent pursuant to the invoices raised by TGIL through bank transfers/ cheques.

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and - in their interviews that

• (d) It was also made clear by

TGIL has not recruited/ employed any new employees for the purposes of business arrangements with Entity A. The business operations are managed

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by the e-commerce team of TOIL in conjunction with Entity A's team. Specifically, it is only those TOIL employees who were already working at TOIL's warehouse, who assist Entity A's team in execution of the orders received from the online marketplaces and brand websites. Further, we have been given to understand that Entity A has specifically employed two employees- one accountant and one customer care executive for handling Entity A operations.

• (e) has further explained that TOIL does not control the costs for - online marketplace and e-commerce operations of Entity A. However, TOIL controls the actual selling price fixed by Entity A for sales to end

==> picture [355 x 102] intentionally omitted <==

• (f) A question was put to • as to whether TOIL has reconciled its accounts with Entity A in order to effectuate the commercial understanding between the parties. - explained that the accounts team provides TOIL ledgers to Entity A's accountant every month for matching the accounts. He mentioned that in his understanding Entity A is yet to close its books of accounts for the year ending 31st March 2021.

• (g) mentioned during his interview that he has received a verbal request from Entity A for reconciliation and it was conveyed to Entity A that reconciliation would be done after Entity A has prepared its final accounts.

• (h) To a question that whether they have received any gifts or benefits from . the Accused Officials answered in the negative.

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4.5.2. GT's

(a) Pursuant to the review of the business and operating model of Entity A's operations (including review of ledgers and books of accounts), GT has remarked that they could not identify any financial or non-financial irregularities. Further, they have remarked that the overall business model is in accordance with the terms and conditions laid out in the agreement between TGIL and Entity A. GT's report also states that all the transactions were in accordance with the operating model of Entity A and were backed up with adequate supporting documents and narrations. Further, GT also reviewed the bank statement of Entity A, confirming the receipt of payments from Entity A to TGIL on a sample basis.

Basis its review of the provisional income statement of Entity A, GT has deduced that on the basis of the commercial terms recorded in ­ email of May 04, 2020, TGIL would need to pay certain amounts to . Entity A as its commission upon reconciliation of accounts. GT also notes in its report that they have been informed by that no commission has been paid till now to Entity A, and that the commission payable would be calculated once Entity A completes their debtor reconciliation and provides final accounts to TGIL for consideration.

• (c) GT in their financial analysis has not identified any unethical practices at the end of the Accused Officials, or any fact that depicts that any funds were diverted to the Accused Officials.

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4.5.3. L&L 's Remarks:

(a) Basis the personal interviews of the Accused Officials, we understand that it is correct that the work of fulfilment of orders is assisted by the warehouse employees of TGJL.

==> picture [387 x 90] intentionally omitted <==

(c) Lastly, the Accused Officials have emphatically put forth that they have

==> picture [93 x 21] intentionally omitted <==

never received any gifts or benefits from or on behalf of Nothing on record suggests any such unethical payment.

(d) On the basis of all of the above observations, it can be concluded that the business arrangements with Entity A are based on commercial rationale and that there is no evidence of unethical practices on part of the Accused Officials or of any undue payments having been received by them in relation to the business operations of Entity A.

H. h�ndhoke S�C (Senior Partner) L&L Partners Litigation

June I 0, 2021

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5. & DISCLAIMERS

• 5.1. This is only a prima facie information report based on the documents/ information! inputs provided to us by TGIL 's management. We shall not be deemed to have knowledge of any information merely on account of t he fact /hat the same has been published in the press or is in the news in any other media or other documents, publications, broadcast etc. of like nature.

• 5.2. We have assumed that the management representations and the documents/ information provided by the management are accurate and con·ec/. We have not independently verified the accuracy or correctness of the documents! information provided tv us other than those found suspicious or inc:vmplete.

• 5.3. This report is based solely on the facts, representations or assumptions as narrated herein and no other facts or assumptions, past, present or future may be imputed by anyone to be in our knowledge for the pwposes of this report.

• 5.4. We have undertaken the Review to determine the veracity of the allegations of f[inancial irregularity relating to the business arrangements with Entity A alleged ] in the Complaint, and whether the Accused Officials have made personal revenue and profit therefrom. Our Review has been from the perspective of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Indian Contract Act, 1872.

• 5.5. We wish to highlight /hat we have reported broadly on matters which we have noted and which appeared significant to us for examination of the allegations made in the Complaint, but our review may not have revealed matters which could have been identified by an investigation without paucity of time and resources. The level of materiality considered while preparing the report has been dictated by our understanding of what a party would normally do in similar circumstances. We

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express no views other than what have been stated in Par/ 4 of this report, and our views are not intended to imply or be an opinion on any other maller or aspect.

• 5.6. This report is based on materials which are governed by indian laws, unless otherwise indicated, and only to the extent described in this report. We express no opinion as to the implications under laws of any jurisdiction other than those of India which are in effect at the date of this report.

• 5.7. We have not peJformed any detailed independent procedure to validate the information I representations provided by the management of TGIL and have only relied upon the documents I information provided and the oral explanations given to us. No represenlulion is mude us to the accurucy or completeness of such information or documents unless expressly stated and nothing in this report is or shall be relied as a representation of the future.

• 5.8. We have not conducted any forensic analysis/ investigations! procedures in our fact-finding review. This is not a forensic report and should not be treated like one.

• 5.9. The report is based on our understanding of facts and the legal position prevailing as on the date of issue of the report.

• 5.10. Any incorrect statement or omission of any fact or a change or an amendment in any of the facts, assumptions or representations, which we have relied upon, may require a modification of all or a pari of the comments given above.

• 5.11. We assume no responsibility to update these comments for events and circumstances occurring after the date of this report, unless .specifically requested by the Audit Commillee of TGIL.

• 5.12. We would like to clarify that our report is not binding on any Authorities, Regulators, Enforcement Agencies or Courts in India. Thus, the possibility of

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Indian Authorities, Regulators, Enforcement Agencies or Courts taking a diferent[f] view cannot be ruled out. In case any person acts on the basis of this report, we shall not be responsible . for the losses, if any, suffered by him.

• 5.13. This report is addressed only to the addressee, may be relied upon only by the addressee, and must not be disclosed or quoted or referred to in any public document, without our prior written consent.

• 5.14. The aggregate liability of the Firm and the Firm 's Partners, Retainers, Counsel, Employees and off-Counsel, and/ or any of them, to the Client for any and all claims, losses, costs or damages of any nature whatsoever resultingji·om or in any way related tu the professional services rendered tu the Client shall nut exceed the total professional fees we have received from the Client for this Report. It is intended that this limitation shall apply to any and all liability or cause of action however alleged or arising, unless othe1wise prohibited by law.

• 5.15. If there is any factual inaccuracy in the report (which may be due to the time constraint and/or part information provided), the same may be communicated to us so that relevant modifications can be carried out.

• 5.16. This report includes information not available to the public. Accordingly, this report is strictly confidential, and no part thereof may be reproduced or used by any other party other than the Client for its intended use.

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ANNEXURE A

RELEVANT PROVISIONS OF THE COMPANIES ACT, 201 3

+ Section 2(76) defines "Related Par·ty" as the following:

• "(76) "related party", with reference to a company, means-

• {i) a director or his relative;

• (ii) a key nwnagerial personnel or his relative,·

• (i)[a firm, in which a director, manager or his relative is a partner,· ]

• (iv) a private company in which a director or manager 69[or his relative] is a member or director;

• (v) a public company in which a director or manager is a director [and] holds along with his relatives, more than two per cent of its paid-up share capital;

• (vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager,·

• (vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:

Provided that nothing in sub-clauses {vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;

• (viii) any body corporate which is-

• (A) a holding, subsidiGiy or an associate company of such company;

• (B) a subsidia1y of a holding company to which it is also a subsidiaJy; or

• (C) an investing company or the venturer of the company.

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Explanation.- For the pwpose of th;s clause, "the investing company or the venturer of a company" means a body c01porate whose investment in the company would result in the company becoming an associate company of the body co1porate.

• (ix) such other person as may be prescribed. "

+ Section 2(51) defines "Key Managerial Personnel" as the following:

"key managerial personnel", in relation to a company, means-

• (i) the Chief Executive Officer or the managing director or the manager;

• (ii) the company secret01y;

• (iii) the whole-time director;

• (iv) the Chief Financial Oicer;

• such other ocer, not more than one level below the directors who is in wholetime employment, designated as key managerial personnel by the Board; and

• (vi) such other ocer as may be prescribed; "

RELEVANT PROVISIONS OF THE SEBI (LISTING OBLIGATIONS & DISCLOSURE REQUIREMENTS) REGULATIONS, 2015

• Regulation 2(zb)- "related party means a related party as defined under sub-section (76) of section 2 of the Companies Act, 20 13 or under the applicable accounting standards: "

RELEVANT EXTRACT OF PARAGRAPH 9 OF THE INDIAN ACCOUNTING STANDARD 24 (RELATED PARTY DISCLOSURES)

"(a) A person or a close member of that person's family is related to a reporting entity if that person:

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(i) has control orjoint control of the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of t he key management personnel of t he reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of t he following conditions applies:

{i) The entity and the reporting entity are members of the same group (which means that each parent, subsidimy and fellow subsidimy is related to the other::,)

{ii) One entity is an associate or joint venture of the olher entity (or an associate or joint venture of a member of a group of which the other entity is a membe1).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the Lhird entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

{vi) The entity is con/rolled orjointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to lhe parent of the reporting entity.

A related party transaction is a tramfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity including: (a) that person's children, spouse or domestic partner, brother, sister, father and mother; (b)

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children of that person 's spouse or domestic partner; and (c) dependants of that person or that person 's !>pouse or domestic partner.

Key management personnel are those persons having authority and re!>ponsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. "

Annexure-II

TIMEX GROUP INDIA LIMITED

Management Comments

The Audit Committee had, in its meeting held on 7th April, 2021, considered the anonymous Whistle Blower Complaint received on March 25, 2021 by Timex Group and engaged M/s L & L Partners Litigation, an independent law firm for conducting a fact finding review into some of the allegations made therein. The other allegations made in the complaint were considered and closed as per the Whistle Blower Policy of the Company without requiring any further review.

M/s L & L Partners Litigation, in turn, engaged M/s Grant Thornton Bharat LLP to assist them in ascertaining certain facts.

The final report of M/s L & L Partners Litigation was placed before the Audit Committee and the Board of Directors in their meetings held on June 11, 2021.

M/s L&L Partners Litigation has concluded that the allegations referred to them for review were without merit. On perusal of the final report of M/s L & L Partners Litigation, the Audit Committee and the Board of Directors came to the conclusion that no further action is required on the complaint.

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