Balaji Hotels and Enterprises Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2014

We have audited the accompanying financial statements of BALAJI HOTELS & ENTERPRISES LTD (the "Company"), which comprise the Balance Sheet as at March 31,2014, Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

II. Management''s Responsibility forthe Financial Statements

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 of India (the "Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Company Affairs). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

III. Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

IV. Basis for Qualified Opinion:

i) The Company has subscribed to 6% Redeemable Preference Shares of a Corporate in the year 2009 at a cost of Rs. 15 Crores by way of Long Term Investment and the Investee Company, due to inadequacy of profits, has not paid dividends since the date of issue. As per its latest audited financial statements, the Investee Company has ceased to carry on any meaningful business operations and its outstanding creditors are substantially higher than its Net worth. As per the indications, the expected cash flows from the investment are uncertain and in our opinion, there is a permanent decline in the value of these Long Term Investments.

As per the Accounting Standard 13 issued by the Institute of Chartered Accountants of India, when there is a decline other than temporary in the value of any investment, the carrying amount (i. e. cost price) is to be reduced to recognise the decline. The company has not made any such provision for permanent decline in the value of investment and it is a departure from the requirements of the Accounting Standard referred above. An amount ofRs. 15 Crores would have been required to write down the investments to the realisable value and accordingly the investments would have decreased by Rs. 15 Crores and the Shares holders Funds would have decreased by Rs. 15 Crores.

ii) The Company has borrowed Rs. 15.12 crores at 12% interest per annum. For its failure to service the loan, the creditor has filed suit for recovery. The Company has not provided for the annual interest of Rs. 1.81 Crores and the accumulated interest of Rs. 20.82 Crores.

Non Provision for such an enforceable liability is against fundamental accounting principle of accrual and prudence. An amount ofRs. 20.82 Crores would have been required to increase the unsecured creditors and accordingly the unsecured creditors would have increased by Rs. 20.82 Crores, the loss for the year would have been higher by Rs. 1.81 Crores and the Share holders funds would have decreased by Rs. 20.82 Crores.

V. Qualified Opinion:

In our opinion, and to the best of our information and according to the explanations given to us, except for the possible effects as described in ''Basis of Qualified Opinion''paragraph, the accompanying financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the generally accepted accounting principles in India;

* in the case of the Balance Sheet, of the state of affairs of the company as at 31st March 2014;

* in the case ofthe Statement of Profit and Loss, oftheLoss for the year ended on that date; and

* in the case ofthe Cash Flow Statement, ofthe cash flows for the year ended on that date.

VI. Report on Other Legal and Regulatory Requirements

1. As required by ''the Companies (Auditor''s Report) Order, 2003'', as amended by ''the Companies (Auditor''s Report) (Amendment) Order, 2004'', issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act (hereinafter referred to as the "Order"), we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 ofthe Order.

2. As required by Section 227(3) of the Act, we report that:

a. We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit;

b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act (which continue to be applicable in respect of Section 133 ofthe Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 ofthe Ministry of Company Affairs) except as described in Basis of Qualified Opinion paragraph;

e. On the basis of written representations received from the directors as on March 31,2014, and taken on record by the Board of Directors, none ofthe directors is disqualified as on March 31,2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Based on the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:

i. In respect of fixed assets:

a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) Physical verification of fixed assets has been carried out by the Management at reasonable intervals. According to the information given to us, no material discrepancies were noticed on such verification.

c) No Fixed Assets are disposed off during the year so as to affect the going concern status of the company.

ii. In respect of inventories of finished goods, work-in-process, raw materials, stores and spares;

In the absence of any inventories, the provisions of paragraph 4(ii) of the Order are not applicable to the company.

iii. In respect of loans, secured or unsecured, granted or taken by the Company to / from Companies, firms or other parties covered in the Register maintained under section 301 of the Companies Act, 1956,

a) The Company had granted loan in earlier years to one party aggregating to Rs. 19.10 crores covered in the Register maintained under Section 301 of Companies Act, 1956. The company has made full recovery of the loan during the year and there is no balance outstanding at the end of the year.

b) The Company has not taken any loans from parties covered in the Register maintained under Section 301 of the Companies Act.

iv. In respect of internal control procedures

There is adequate Internal Control System commensurate with the size of the company and the nature of its business for the purchase of inventories, fixed assets and sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

v. In respect of transactions that need to be entered into a register in pursuance of section 301 of the Companies Act.

The particulars of transactions referred to in Section 301 of Companies Act, 1956, that need to be entered in the Register maintained under the said section, have been so entered.

vi. In respect of public deposits:

The Company has not accepted any deposits from the public. Therefore, the provisions of section 58A and 58AAof the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 are not applicable to the Company.

vii. In respect of internal audit system:

The Company has no internal audit system commensurate with the size and nature of its activities.

viii. In respect of cost records:

According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956, for any of the products of the Company.

ix. In respect of statutory dues:

a) The Company has been generally regular in depositing undisputed dues of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable Statutory dues with the appropriate authorities during the year.

b) In respect of Income Tax, Sales Tax, Service tax, Customs duty, Excise duty and Cess and applicable Statutory dues, there are no undisputed amounts outstanding as at March 31,2014 for a period of more than six months from the date they became payable.

c) The details of dues of income tax / wealth tax which have not been deposited due to disputes are as under

Period to which the Disputed Tax Forum where the dispute Demand relates Rs. Lakhs is pending (Assessment Year)

1990-91 to 1993-94 (wealth tax) 58.08 High Court, Chennai

2008-09 (Income tax) 1693.44 Commissioner of Income Tax, Chennai

x. In respect of losses:

The accumulated losses of the Company, as adjusted after taking in to account the qualifications in the audit report to the extent the qualifications are quantified, are more than 50% of its net worth. The company has incurred cash losses during the financial year covered by our audit and has not incurred cash losses in the preceding financial year.

xi. In respect of repayment of dues to financial institutions, banks and/or debenture holders:

During the year, there were no dues to debentures holders, banks and / or financial institutions.

xii. In respect of loans on the basis of security by way of pledge of shares, debentures and other securities:

The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. In respect of applicability of any special statutes:

In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society.

xiv. In respect of dealing in shares, securities, debentures and other investments:

The Company is holding Shares in other Body Corporate as investment. 885684 Equity Shares in a Body corporate, with a book value of Rs. 430.00 lakhs are yet to be transferred in the Company''s name (Refer Note: 19 to Financial Statements).

xv. In respect of guarantees given by the Company for the loan taken by others from banks or financial institutions:

During the year, the company has not given any guarantees for the loans taken by others from banks and financial institutions.

xvi. In respect of utilization of term loans:

During the year, the company has not raised any Term Loans.

xvii. In respect of utilization of short term funds:

According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the Company has not used funds raised on short term basis for long term investment.

xviii. In respect of preferential allotment of shares:

The Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix. In respect of security or charge created against the debentures:

The Company has not issued any debentures during the year.

xx. In respect of public issues:

The Company has not raised any money by public issues.

xxi. In respect of frauds:

In our opinion and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

For P A REDDY & CO For CNGSN & ASSOCIATES Chartered Accountants Chartered Accountants Registration No: 007368S Registration No: 004915S

P ASHOK REDDY C N GANGADARAN Partner Partner Membership No: 023202 Membership No: 011205

Place: Chennai Date : May 26, 2014

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Mar 31, 2011

1. We have audited the attached Balance Sheet of BALAJI HOTELSAND ENTERPRISES LIMITED as at March 31, 2011, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of section 227(4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs4and5ofthe said Order.

4. Further to our comments in the Annexure referredtoinparagraph3above,wereport that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. In our opinion, proper books of account as required by law have been kept by the company so far as it appears from our examination of those books ;

c. The Balance Sheet, Profit And Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. On the basis of the written representations received from the Directors as on March 31, 2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2011 from being appointed as a Director in terms of Section 274(1)(g) of the Companies Act, 1956.

e. In our opinion, the Balance Sheet, Profit And Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Sub-section (3c) of Section 211ofthe Companies Act, 1956 subject to:

(i) Non provision for diminution, if any, in the value of Preference Shares held as investments, which is not in accordance with AS-13 issued by the Institute of Chartered Accountants of India.

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the schedules and notes thereon, give the information required by the Companies Act, 1956, in the manner so required are in conformity with the accounting principles generally accepted in India subject to:

(i) Non provision for Interest aggregating to Rs.1.81 Crores (Rs.1.81 Crores in previous year) for the year in respect of a loan as a result of which the loss for the year is understated by Rs.1.81 crores and the loans are understated and the reserves are overstated by Rs.15.39 crores (Rs.13.58 crores up to previous year) respectively.

(ii) Non provision for permanent diminution if any in the value of investments and in the absence of full details, the effect of such non-provision if any on the value of investments and net worth of the Company could not be commented;

(iii) Had our observations made as above to the extent quantified been considered by the Company the Loss for the year would have been Rs.263.71 lakhs (as against the reported loss ofRs.82.71 lakhs), the accumulated losses would have been Rs.33690.09 lakhs (as against the reported figure of Rs.32151.09 lakhs), the Net worth would have been negative at Rs.1952.95 lakhs (as against the reported negative figure of Rs.413.95 lakhs) and the EPS would have been negative at Rs.9.42 (as against the reported negative figure of Rs.8.87) and give a true and fair view:

- in the case of the Balance Sheet, of the state of affairs of the company as at 31st March 2011;

- in the case of the Profit And Loss Account, of the Loss for the year ended on that date;

and

- in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT OF BALAJI HOTELS AND ENTERPRISES LIMITED

[referred to in Paragraph 3 of our report of even date]

Based on the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:

(i) In respect of Fixed Assets :

a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) Physical verification of fixed assets has been carried out by the Management at reasonable intervals. According to the information given to us, no material discrepancies were noticed on such verification.

c) No Fixed Assets have been disposed off during the year so as to affect the going concern status of the company.

(ii) In respect of inventories of finished goods, work-in-progress, raw materials, stores and spares ;

a) In the absence of any inventories, the provisions of paragraph 4(ii) of the Order are not applicable to the company.

(iii) In respect of loans, secured or unsecured, granted or taken by the Company to / from Companies, firms or other parties covered in the Register maintained under section 301 of the Companies Act, 1956,

a) The Company had granted loan in earlier years to one party aggregating to Rs.19.10 crores covered in the Register maintained under Section 301 of Companies Act, 1956. No recoveries have been made during the year and the balance outstanding at the end of the year amounts to Rs.19.10 crores.

b) As explained to us, such loan had been made to the said party in connection with Corporate Guarantee given by that Party to another Body Corporate on behalf of the Company. There are no terms and conditions with respect to the rate of interest and repayment. Therefore, we are unable to comment upon such terms and conditions of loan mentioned in(a)above.

c) The Company has taken a loan in earlier years to the tune of Rs.4.56 lakhs from one party covered in the Register maintained under Section 301 of the Companies Act, 1956. No repayment has been made during the year and the balance outstanding at the end of the year amounts to Rs. 4.56 lakhs.

d) There are no terms and conditions with respect to the rate of interest and repayment. Therefore, we are unable to comment upon such terms and conditions of loan mentioned in(c)above.

(iv) In respect of internal control procedures.

a) There is adequate Internal Control System commensurate with the size of the company and the nature of its business for the purchase of inventories, fixed assets and sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

(v) In respect of transactions that need to be entered into a register in pursuance of section 301 of the Companies Act.

a) The particulars of transactions referred to in Section 301 of Companies Act, 1956, that need to be entered in the Register maintained under the said section, have been so entered.

(vi) In respect of public deposits:

a) The Company has not accepted any deposits from the public within the meaning of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of deposits) Rules, 1975 and therefore the provisions of paragraph 4(vi) of the Order are not applicable to the Company.

(vii) In respect of internal audit system:

a) The Company has no internal audit system commensurate with the size and nature of its activities.

(viii) In respect of cost records:

a) According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, for any of the products of the Company.

(ix) In respect of statutory dues:

a) The Company has been generally regular in depositing undisputed dues of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable Statutory dues with the appropriate authorities during the year.

b) In respect of Income Tax, Sales Tax, Wealth Tax, Service tax, Customs duty, Excise duty and Cess, there are no undisputed amounts outstanding as at March 31, 2011 for a period of more than six months from the date they became payable.

c) The details of due so income tax/wealth tax which have not been deposited due to disputes are as under:

Period to which the Demand relates Disputed Tax Forum where the dispute (Assessment Year) Lakhs is pending

1990-91to1993-94 (wealth tax) 58.08 High Court, Chennai

2005-06 (income tax) 11.31 Commissioner (net of amount paid under protest) of Income Tax, Chennai

TOTAL 69.39

(x) In respect of losses:

a) The accumulated losses of the Company, as adjusted after taking into account the qualifications in the audit report to the extent the qualifications are quantified, are more than 50% of its net worth. The company has incurred cash losses during the financial year covered by our audit (before exceptional item) and has not incurred cash losses in the preceding financial year.

(xi) In respect of repayment of dues to financial institutions, banks and / or debenture holders:

a) During the year, there were no dues to debentures holders, banks and / or financial institutions.

(xii) In respect of loans on the basis of security by way of pledge of shares, debentures and other securities:

a) In our opinion, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In respect of applicability of any special statutes:

a) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society.

(xiv) In respect of dealing in shares, securities, debentures and other investments:

a) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments.

(xv) In respect of guarantees given by the Company for the loan taken by others from banks or financial institutions:

a) During the year, the company has not given any guarantees for the loans taken by others from banks and financial institutions.

(xvi) In respect of utilization of term loans:

a) During the year, the company has not raised any Term Loans.

(xvii) In respect of utilization of short term funds:

a) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the Company has not used funds raised on short term basis for long term investment.

(xviii)In respect of preferential allotment of shares:

a) According to the information and explanations given to us, during the period covered by our audit report, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301ofthe Companies Act, 1956.

(xix) In respect of issue of debentures:

a) According to the information and explanations given to us, the Company has not issued any debentures during the year.

(xx) In respect of public issues:

a) During the period covered by our audit report, the Company has not raised any money by public issues.

(xxi) In respect of frauds:

a) In our opinion and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.



For PAREDDY & CO For CNGSN & ASSOCIATES

Chartered Accountants Chartered Accountants

Registration No: 007368S Registration No: 004915S

P ASHOK REDDY C N GANGADARAN

Partner Partner

Membership No: 23202 Membership No: 11205

Place: Chennai

Date : July 30, 2011

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Mar 31, 2010

1. We have audited the attached Balance Sheet of BALAJI HOTELS AND ENTERPRISES LIMITED as at March 31, 2010, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on ouraudit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis forouropinion.

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraph 4 and 5 of the said order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. In our opinion, proper books of account as required by law have been kept by the company so far as it appears from our examination of those books;

c. The Balance Sheet, Profit And Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. The Company has defaulted in redemption of Preference shares a part of which were due for redemption in Jan 2004, Jan 2005 & in Jan 2006. Therefore all the Directors are disqualified from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

e. In our opinion, the Balance Sheet, Profit And Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Sub-section (3c) of Section 211 of the Companies Act, 1956 subject to:

(i) Non provision for diminution, if any, in the value of Preference Shares held as investments, which is not in accordance with AS-13 issued by the Institute of Chartered Accountants of India;

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the schedules and notes thereon, give the information required by the Companies Act, 1956, in the manner so required are in conformity with the accounting principles generally accepted in India subject to:

(i) Non provision for Interest aggregating toRs.1.81 Crores(Rs.1.81 Crores in previous year) for the year in respect of a loan as a result of which the profit for the year is overstated by¦ Rs.1.81 crores and the loans are understated and the reserves are overstated by Rs. 13.58 crores (X11.77 crores upto previous year) respectively.

(ii) Non provision for permanent diminution if any, in the value of investments and in the absence of full details, the effect of such non-provision if any, on the value of investments and net worth of the Company could not be commented;

(iii) Had our observations made as above been considered by the Company, the loss for the year would have been Rs. 15.31 lakhs (as against the reported profit ofRs. 165.69 lakhs), the accumulated losses would have been Rs.33426.38 lakhs (as against the reported figure of Rs.32068.38 lakhs), the Networth would have been negative atRs. 1689.24 lakhs (as against the reported negative figure ofRs. 331.24 lakhs) and the EPS would have been negative at Rs.7.80 (as against the reported negative figure of Rs. 7.24). and give a true and fair view: in the case of the Balance Sheet, ofthe state ofaffairs of the company as at 31st March 2010;

- in the case of the Profit And Loss Account, of the Profit for the year ended on that date; and

- in the case ofthe Cash Flow Statement, ofthe cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT OF BALAJI HOTELS AND ENTERPRISES LIMITED [referred to in Paragraph 3 of our report of even date]

Based on the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:

(i) In respect of fixed assets.

a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) Physical verification of fixed assets has been carried out by the Management at reasonable intervals. According to the information given to us, no material discrepancies were noticed on such verification.

c) No Fixed Assets have been disposed off during the year so as to affect the going concern status of the company.

(ii) In respect of inventories of finished goods, work-in-progress, raw materials, stores and spares;

a) In the absence of any inventories, the provisions of paragraph 4(ii) of the Order are not applicable to the company.

(iii) In respect of loans, secured or unsecured, granted or taken by the Company to / from Companies, firms or other parties covered in the Register maintained under section 301 of the Companies Act, 1956;

a) The Company has granted loan in earlier years to one party aggregating to Rs.19.11 crores covered in the Register maintained under Section 301 of Companies Act, 1956. The company has recovered a sum ofRs..1.25 lakhs and at the year end, the outstanding balance of such loan amounts to Rs.19.10 crores.

b) There are no terms and conditions with respect to the rate of interest and repayment. Therefore, we are unable to comment upon such terms and conditions of loan mentioned in (a) above.

c) The Company has taken loans in earlier years aggregating to Rs. 1.04 crores from three parties covered in the Register maintained under Section 301 of Companies Act, 1956. During the year the company has made repayment of such loans to the tune of Rs. 99.85 lakhs and the outstanding balance of such loan amounts to Rs. 4.56 lakhs.

d) There are no terms and conditions with respect to the rate of interest and repayment. Therefore, we are unable to comment upon such terms and conditions of loan mentioned in (a) above.

(iv) In respect of internal control procedures.

a) There is adequate Internal Control System commensurate with the size of the company and the nature of its business for the purchase of inventories, fixed assets and sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

(v) In respect of transactions that need to be entered into a register in pursuance of section 301 of the CompaniesAct.

a) The particulars of transactions referred to in Section 301 of Companies Act, 1956, that need to be entered in the Register maintained under the said section, have been so entered.

(vi) In respect of public deposits:

a) The Company has not accepted any deposits from the public within the meaning of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of deposits) Rules, 1975 and therefore the provisions of paragraph 4(vi) of the Order are not applicable to the Company.

(vii) In respect of internal auditsystem:

a) The Company has no internal audit system commensurate with the size and nature of its activities.

(viii) In respect of cost records:

a) According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956, for any of the products of the Company and therefore the provisions of paragraph 4(viii) of the Order are not applicable to the company.

(ix) In respect of statutory dues:

a) The Company has been generally regular in depositing undisputed dues of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable Statutory dues with the appropriate authorities during the year.

b) In respect of Income Tax, Sales Tax, Wealth Tax, Service tax, Customs duty, Excise duty and Cess, there are no undisputed amounts outstanding as at March 31, 2010 for a period of more than six months from the date they became payable.

c) The details of dues of income tax / wealth tax which have not been deposited due to disputes are asunder:

Period to which the Demand relates Disputed Tax Forum where the dispute (Assessment Year) Rs.Lakhs is pending

1990-91 to 1993-94 (wealth tax) 58.08 High Court, Chennai 2005-06 (income tax) 11.31 Commissioner of Income Tax, Chennai (net of amount paid under protest)

TOTAL 69.39

(x) In respect of losses:

a) The accumulated losses of the Company, as adjusted after taking in to account the qualifications in the audit report to the extent the qualifications are quantified, are more than 50% of its net worth. The company has not incurred cash losses during the financial year covered by our audit and in the preceding financial year.

(xi) In respect of repayment of dues to financial institutions, banks and / or debenture holders:

a) The company has neither debentures outstanding nor any dues to financial institutions & banks as at the end of the year.

(xii) In respect of loans on the basis of security by way of pledge of shares, debentures and other securities:

a) In our opinion, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of paragraph 4 (xii) of the Order are not applicable to the company.

(xiii) In respect of applicability of any special statutes:

a) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

(xiv) In respect of dealing in shares, securities, debentures and other investments:

a) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Order are not applicable to the Company.

(xv) In respect of guarantees given by the Company for the loan taken by others from banks or financial institutions:

a) During the year the company has not given any guarantees for the loans taken by others from banks and financial institutions. Therefore, the provisions of clause 4(xv) of the Order are not applicable to the company.

(xvi) In respect of utilization of term loans:

a) During the year, the company has not raised any Term Loans. Therefore, the provisions of clause 4(xvi) of the Order are not applicable to the company.

(xvii) In respect of utilization of shortterm funds:

a) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the Company has not used funds raised on short term basis for long term investment.

(xviii)In respect of preferential allotment of shares:

a) According to the information and explanations given to us, during the period covered by our audit report, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) In respect of issue of debentures:

a) According to the information and explanations given to us, the Company has not issued any debentures during the year.

(xx) Inrespect of public issues:

a) During the period covered by our audit report, the Company has not raised any money by public issues. Hence the matters to be reported as per paragraph 4(xx) of the Order are not applicable to the Company.

(xxi) In respect of frauds:

a) In our opinion and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

For P A REDDY & CO For CNGSN & ASSOCIATES

Chartered Accountants Chartered Accountants

Registration No: 007368S Registration No: 004915S

P ASHOK REDDY C N GANGADARAN

Partner Partner

Membership No: 23202 Membership No: 11205

Place: Chennai Date : July 31, 2010