CLC Industries Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2025

1. We have audited the accompanying standalone financial statements of CLC Industries Limited
having CIN: L74899DL1991PLC138153 (“the Company”), which comprise the Standalone Balance
Sheet as at 31^st March 2025, the Standalone Statement of Profit and Loss (including other
comprehensive income), Standalone Statement of Cash Flows and Standalone Statement of Changes
in Equity for the year then ended, and notes to the Standalone financial statements, including a
summary of material accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, the
aforesaid standalone financial statements give the information required by the Companies Act, 2013
(‘the Act’) in the manner so required and give a true and fair view in conformity with Indian
Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian
Accounting Standards) Rules, 2015, as amended (“Ind AS”) and the other accounting principles
generally accepted in India, of the state of affairs of the Company as at 31st March 2025 and its loss
(financial performance including other comprehensive income), the changes in equity and its cash
flows for the year ended on that date.

Basis for Qualified Opinion

3. We conducted our audit in accordance with Standards on Auditing (SAs) specified under section
143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s
Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are
independent of the Company in accordance with the Code of Ethics issued by the Institute of
Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our
audit of the Standalone financial statements under the provisions of the Act and the rules there under,
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified opinion.

4. The company has not provided/ paid interest on delayed payment to parties covered under the
provisions of Micro, Small and Medium Enterprises Development Act, 2006. Amount presently not
ascertainable. Refer note no 21.3 to the financial statements.

Emphasis of Matter

5. The company has provided for ?4002.59 Lakhs in respect of Subsidy Receivable, Security Deposits,
Fixed Deposits including interest receivable and Current bank account balances considered doubtful of
recovery and for want of certain details/confirmation.

Key Audit Matter

6. Application of Ind AS 116 - Leases
Description of the Key Audit Matter

During the year, the Company has applied Ind AS 116, Leases, which significantly impacts the
accounting treatment of lease contracts. This standard requires recognition of right-of-use assets and
corresponding lease liabilities for leases.

The implementation involved a detailed assessment of lease agreements, determination of lease term
including renewal/termination options and recognition of right-of-use assets. Due to the complexity
and judgments involved in these assessments, evaluation of lease terms, we considered this area to
be a key audit matter.

How the matter was addressed in the audit

Our audit procedures included, among others:

• Obtaining an understanding of the Company''s process for identifying and evaluating lease
contracts.

• Evaluating the accounting policies adopted for compliance with the requirements of Ind AS 116.

• Reviewing the lease agreements and verifying key terms including lease period, payment terms,
and renewal/termination options.

• Computing value of right-of-use assets for a lease to verify accuracy and appropriateness of the
calculations.

• Verifying the disclosures in the financial statements related to leases to assess compliance with
the disclosure requirements under Ind AS 116.

Information other than the Standalone Financial Statements and Auditor’s Report thereon

7. The Company’s Board of Directors is responsible for the other information. The other information
comprises the information included in the annual report but does not include the financial statements
and our auditor’s report thereon.

8. Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

9. In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is material misstatement
of this other information; we are required to report that fact. We have nothing to report in this regard.

10. The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act
with respect to the preparation of these standalone financial statements that give a true and fair view
of the financial position, financial performance (including other comprehensive income), changes in
equity and cash flows of the Company in accordance with the accounting principles generally
accepted in India, including the Ind AS specified under section 133 of the Act. This responsibility
also includes maintenance of adequate accounting records in accordance with the provisions of the
Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other
irregularities; selection and application of appropriate accounting policies; making judgments and
estimates that are reasonable and prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and presentation of the financial
statement that give a true and fair view and are free from material misstatement, whether due to
fraud or error.

11. In preparing the financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company
or to cease operations, or has no realistic alternative but to do so.

12. The Board of Directors is also responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Standalone Financial Statements

13. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Standards on Auditing will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.

14. As part of an audit in accordance with Standard on Auditing, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:

a. Identify and assess the risks of material misstatement of the standalone financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.

b. Obtain an understanding of internal financial controls relevant to the audit in order to design
audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act,
we are also responsible for expressing our opinion on whether the Company and its subsidiary
companies which are companies incorporated in India, has adequate internal financial controls
system in place and the operating effectiveness of such controls.

c. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

d. Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the ability of the Company to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the standalone financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.

e. Evaluate the overall presentation, structure and content of the standalone financial statements,
including the disclosures, and whether the standalone financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that,
individually or in aggregate, makes it probable that the economic decisions of a reasonably
knowledgeable user of the standalone financial statements may be influenced. We consider
quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in
evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements
in the standalone financial statements

15. We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

16. We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.

17. From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the standalone financial statements of the current period
and are therefore the key audit matte? We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.

Report on Other Legal and Regulatory Requirements

18. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”), issued by the Central
Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we
give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order,
to the extent applicable. As required by Section 143(3) of the Act, we report that:

(a) Subject to what is stated in qualified opinion paragraph, we have sought and obtained all the
information and explanations which to the best of our knowledge and belief were necessary for
the purposes of our audit.

(b) Subj ect to what is stated in qualified opinion paragraph, and also paragraph (h) (vi) below, 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, the Statement of Profit and Loss, and the Statement of Cash Flow dealt with
by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified
under Section 133 of the Act, read with the Companies (Accounting Standard) Rules, 2015 as
amended.

(e) On the basis of the written representations received from the directors as on 31st March, 2025
taken on record by the Board of Directors, none of the directors is disqualified as on 31st March,
2025 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the
Company and the operating effectiveness of such controls, refer to our separate Report in
“Annexure B”.

(g) To the best of our information and according to the explanations given to us, the company has
paid remuneration to its directors during the year within the provisions of section 197 of the Act.

(h) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule
11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our
information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its
standalone financial statements - Refer Note 36 to the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which
there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education and
Protection Fund by the Company.

iv. (a) the Management has represented that, to the best of its knowledge and belief, no funds
(which are material either individually or in the aggregate) have been advanced or loaned or
invested (either from borrowed funds or share premium or any other sources or kind of funds)
by the company to or in any other person or entity, including foreign entity (“Intermediaries”),
with the understanding, whether recorded in writing or otherwise, that the Intermediary shall,
whether, directly or indirectly lend or invest in other persons or entities identified in any
manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) the Management has represented, that, to the best of its knowledge and belief, no funds
(which are material either individually or in the aggregate) have been received by the
company from any person or entity, including foreign entities (“Funding Parties”), with the
understanding, whether recorded in writing or otherwise, that the company shall, whether,
directly or indirectly, lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries; and.

(c) Based on audit procedures that have been considered reasonable and appropriate in the
circumstances, nothing has come to our notice that has caused us to believe that the
representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b)
above, contain any material mis-statement.

v. The company has not declared a dividend including interim dividend -

vi. Based on our examination, which included test checks, the Company has used accounting
software for maintaining its books of accounts for the financial year ended 31st March 2025
which has a feature of recording audit trail (edit log) facility and the same has been made
operational throughout the year for all relevant transactions recorded in the software. Further,
during our audit we did not come across any instance of the audit trail feature being tampered
with.

For Ashok R Majethia
Chartered Accountants
FRN: 127769W
Sd/-

Ashok Majethia
Proprietor
M No: 124781
UDIN: 25124781BMILIM1664

Place: Khopoli Dist Raigad
Dated: 30-05-2025

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Mar 31, 2024

1. We have audited the accompanying standalone financial statements of CLC Industries Limited
having CIN: L74899DL1991PLC138153 (“the Company”), which comprise the Standalone Balance
Sheet as at 31^st March 2024, the Standalone Statement of Profit and Loss (including other
comprehensive income), Standalone Statement of Cash Flows and Standalone Statement of Changes
in Equity for the year then ended, and notes to the Standalone financial statements, including a
summary of material accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, the
aforesaid standalone financial statements give the information required by the Companies Act, 2013
(‘the Act'') in the manner so required and give a true and fair view in conformity with Indian Accounting
Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting
Standards) Rules, 2015, as amended (“Ind AS”) and the other accounting principles generally accepted
in India, of the state of affairs of the Company as at 31st March 2024 and its loss (financial
performance including other comprehensive income), the changes in equity and its cash flows for the
year ended on that date.

Basis for Qualifed Opinion

3. We conducted our audit in accordance with Standards on Auditing (SAs) specified under section
143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s
Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are
independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered
Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the
Standalone financial statements under the provisions of the Act and the rules there under, and we have
fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of
Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our qualified opinion.

Qualfication

4. Our report is qualified in respect of the following matters: -

a. No provision is made in respect of Security Deposit ?124.19 Lakhs, Balance with Government
Authorities ?3908.20 Lakhs considered doubtful of recovery in absence of aqequate details and
liability in respect of gratuity and compensated absenses for which liability has not been
ascertained.

b. The details in respect of Income tax refund receivable of ?113.21 Lakhs, and Balances with
Government Authorities of ?5402.98 Lakhs are not available with the company.

c. The company has written off cash balance of ?40.62 Lakhs in the books of account on the plea of
the present management that the same is not handed over to the new management.

d. The fixed deposits reciepts of ?340.51 Lakhs were not found on record and no confirmation was
made available for ?8.68 Lakhs from the bank.

e. The balances of Trade Receivable, bank balances including fixed deposits, Trade Payable,
Unsecured Loans, Employees, current and non-current Loans and Advances, and Liabilities are
subject to confirmations and reconciliation.

Key Audit Matters

5. Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the standalone financial statements of the current year. These matters were addressed in
the context of our audit of the standalone financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. We have determined the matters
described below to be the key audit matters to be communicated in our report.

Key Audit Matters	Audit Procedures
Implementation of resolution plan
The company has implemented the resolution plan as approved by National Company Law Tribunal, New Delhi (NCLT) w.r.t. various financial and operational liabilities extinguished and reduction & re-classification of equity share capital, slump sale of Butibori, Solapur and Pithampur units and various other matters as are required to be implenated in terms of order issued by NCLT.	We have performed the following principal audit procedures in relation to implementation of NCLT order:¬ - Evaluation and understanding of NCLT order and Resolution plan as approved by NCLT. - Verification and evaluation of the documents pertaiing to slump sale. - Verification of Board resolution for issue of equity shares. - Verification of payment made to secured financial creditors. - Evaluating the appropriateness of the adequate disclosures in accordance with the applicable accounting standards.

Information other than the Standalone Financial Statements and Auditor’s Report thereon

6. The Company''s Board of Directors is responsible for the other information. The other information
comprises the information included in the annual report but does not include the financial statements
and our auditor''s report thereon.

7. Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

8. In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is material misstatement
of this other information; we are required to report that fact. We have nothing to report in this regard.

Management’s Responsibility for the Standalone Financial Statements

9. The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Act
with respect to the preparation of these standalone financial statements that give a true and fair view
of the financial position, financial performance (including other comprehensive income), changes in
equity and cash flows of the Company in accordance with the accounting principles generally
accepted in India, including the Ind AS specified under section 133 of the Act. This responsibility also
includes maintenance of adequate accounting records in accordance with the provisions of the Act for
safeguarding of the assets of the Company and for preventing and detecting frauds and other
irregularities; selection and application of appropriate accounting policies; making judgments and
estimates that are reasonable and prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for ensuring the accuracy and completeness
of the accounting records, relevant to the preparation and presentation of the financial statement that
give a true and fair view and are free from material misstatement, whether due to fraud or error.

10. In preparing the financial statements, management is responsible for assessing the Company''s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.

11. The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor’s Responsibilities for the Audit of the Standalone Financial Statements

12. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Standards on Auditing will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.

13. As part of an audit in accordance with Standard on Auditing, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:

a. Identify and assess the risks of material misstatement of the standalone financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

b. Obtain an understanding of internal financial controls relevant to the audit in order to design audit
procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are
also responsible for expressing our opinion on whether the Company and its subsidiary
companies which are companies incorporated in India, has adequate internal financial controls
system in place and the operating effectiveness of such controls.

c. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

d. Conclude on the appropriateness of management''s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the ability of the Company to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor''s report to the related disclosures in the standalone financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor''s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.

e. Evaluate the overall presentation, structure and content of the standalone financial statements,
including the disclosures, and whether the standalone financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that,
individually or in aggregate, makes it probable that the economic decisions of a reasonably
knowledgeable user of the standalone financial statements may be influenced. We consider
quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in
evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in
the standalone financial statements

14. We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

15. We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.

16. From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the standalone financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor''s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication

Report on Other Legal and Regulatory Requirements

17. As required by the Companies (Auditor''s Report) Order, 2020 (“the Order”), issued by the Central
Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give
in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the
extent applicable. As required by Section 143(3) of the Act, we report that:

(a) Subject to what is stated in qualified opinion paragraph, we have sought and obtained all the
information and explanations which to the best of our knowledge and belief were necessary for
the purposes of our audit.

(b) Subject to what is stated in qualified opinion paragraph, and also paragraph (h) (vi) below, 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, the Statement of Profit and Loss, and the Statement of Cash Flow dealt with
by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified
under Section 133 of the Act, read with the Companies (Accounting Standard) Rules, 2015 as
amended.

(e) On the basis of the written representations received from the directors as on 31st March, 2024
taken on record by the Board of Directors, none of the directors is disqualified as on 31st March,
2024 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the
Company and the operating effectiveness of such controls, refer to our separate Report in
“Annexure B”.

(g) To the best of our information and according to the explanations given to us, the company has not
paid any remuneration to its directors during the year within the provisions of section 197 of the
Act.

(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule

11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our

information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its
standalone financial statements - Refer Note 28 to the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for
which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education
and Protection Fund by the Company.

iv. (a) the Management has represented that, to the best of its knowledge and belief, no
funds (which are material either individually or in the aggregate) have been advanced or
loaned or invested (either from borrowed funds or share premium or any other sources or
kind of funds) by the company to or in any other person or entity, including foreign entity
(“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that
the Intermediary shall, whether, directly or indirectly lend or invest in other persons or
entities identified in any manner whatsoever by or on behalf of the company (“Ultimate
Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate
Beneficiaries;

(b) the Management has represented, that, to the best of its knowledge and belief, no
funds (which are material either individually or in the aggregate) have been received by
the company from any person or entity, including foreign entities (“Funding Parties”), with
the understanding, whether recorded in writing or otherwise, that the company shall,
whether, directly or indirectly, lend or invest in other persons or entities identified in any
manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or
provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and.

(c) Based on audit procedures that have been considered reasonable and appropriate in
the circumstances, nothing has come to our notice that has caused us to believe that the
representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b)
above, contain any material mis-statement.

v. The company has not declared a dividend including interim dividend -

vi. As per the information and explanations given to us and based on our examination, which
included test checks, the accounting software of the company in which books of accounts
are maintained during the year does not have feature of recording audit trail (edit log)
facility.

For Ashok R Majethia
Chartered Accountants
FRN: 127769W

Sd/-

Ashok Majethia
Proprietor
M No:124781

UDIN: 24124781BKFTUH2719

Place: Khopoli Dist Raigad
Dated: 30-05-2024

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Mar 31, 2023

CLC Industries Limited (Formerly Known as Spentex Industries Limited)

Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code, 2016 (IBC)

The Hon''ble Company Law Tribunal, New Delhi (“NCLT”) admitted the Corporate Insolvency Resolution Process (“CIRP”) application filed against CLC Industries Limited and appointed Mr. Subhash Kumar Kundra as the Interim Resolution Professional under Insolvency and Bankruptcy Code, 2016 (“Code”) vide order dated January 03, 2020. Further the Committee of Creditors (“COC”) constituted during the CIRP has confirmed the appointment of Mr. Subhash Kumar Kundra as the Resolution Professional (“RP”) on February 20, 2020 to manage the affairs of CLC Industries Limited as per the provisions of Insolvency and Bankruptcy Code, 2016, and the management of affairs of the company are continuing to be exercised by the Resolution Professional. Subsequently, on 20th April, 2021 the application for approval of the Resolution Plan under section 30(6) and section 31(1) of the Insolvency and Bankruptcy Code, 2016 read with regulation 39 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 was filed by the Resolution professional with the Hon''ble Principal Bench of the NCLT for its approval. The Hon''ble Principal Bench of the NCLT approved the said resolution plan vide its order dated 12th May 2023.

Report on the Audit of the Standalone Financial Statements

Disclaimer of Opinion

We have audited the accompanying standalone financial statements of CLC Industries Limited (Formerly known as Spentex Industries Limited) (''the Company''), which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and the notes to the Standalone Financial Statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”)

We do not express an opinion on the accompanying Standalone financial statements of the Company. Because of the significance of the matter described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these Standalone financial statements.

Basis for Disclaimer of Opinion

a. In Respect of Property, Plant and Equipment, Physical possession and verification report of Tangible and Intangible Assets and title deeds of Immovable Property has not been provided for by the Management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the balance of Property, Plant and Equipment as at March 31, 2023.

b. In respect of Inventories, during the reporting period, the management has not provided any report for undertaking of physical verification of Inventories at periodic intervals. The Company has neither provided adequate inventory records for physical verification of Inventory. Hence, we cannot comment on present status of Inventory and its carrying Valuation in books of accounts.

c. The Company has not computed and provided for penal interest on defaults under borrowings as per the contractual terms of the underlying agreements. We are unable to determine the possible impact thereof on the loss for the year and borrowings and equity as on such date.

d. As mentioned in Note No. 48 to the standalone financial statements, pursuant to commencement of CIRP of the Company under Insolvency and Bankruptcy Code, 2016, there are various claims submitted by the financial creditors, operational creditors, employees and other creditors to the RP The overall obligations and liabilities including interest, penalty on loans and the principal amount of loans/ liabilities shall be determined during the CIRP and reconciliation with books of accounts is pending. Pending final outcome of the CIRP, no accounting impact in the books of accounts has been made in respect of excess, short, or non-receipts of claims for operational and financial creditors. Hence, consequential impact, if any, is currently not ascertainable and we are unable to comment on possible financial impacts of the same.

e. We have not received Bank Reconciliation/ Bank Statement/ Direct confirmation for balance confirmation in current accounts amounting Rs. 137.48 Lakhs- and balance of margin money amounting Rs. 8.68 Lakhs, as at March 31, 2023. Cash amounting to Rs. 40.62 Lakhs has not shown to us for physical verification. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the balance of cash and cash equivalent and equity as at March 31, 2023.

f. During the year ended March 31, 2019, loans from State Bank of India and Indian Bank amounting to Rs. 261,49.61 Lakhs and Rs.39,42.63 Lakhs respectively has been assigned to Asset Reconstruction Company Private Limited (ARC) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFESI) Act,2002. Same loan is appearing in the name of State Bank of India and Indian Bank respectively. No confirmation from the ARC was received for assignment of the loan. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the balance of cash and cash equivalent and other equity as at March 31,2023.

g. We have neither got bank statements nor have been able to obtain direct confirmations for borrowings, Debentures and overdraft from banks, financial institutions and other parties amounting Rs. 48,167.34 Lakhs as at March 31, 2023. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and the balance of borrowings and other equity as at March 31, 2023.

h. We have neither got reconciliation nor have been able to obtain direct confirmations for Inter corporate loan amounting Rs. 4,695.90 Lakhs as at March 31, 2023. We requested for direct confirmation, but no response from management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and the balance of borrowings and other equity as at March 31, 2023.

i. We have neither got reconciliation nor have been able to obtain direct confirmations for Loans from related parties amounting to Rs. 665.92 Lakhs as at March 31, 2023. We requested for direct confirmation, but no response from management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and the balance of borrowings and other equity as at March 31, 2023.

j. Note No. 52 to the Standalone Financials for the year ended March 31,2023, regarding balances of parties under the head trade receivable, trade payable and loans & advances taken and given, Security Deposit, claim receivable, Investment, balances with Govt. Authorities, Employee Benefits Payables, Other payables, which are subject to confirmation, reconciliation. We requested for direct confirmation, but no response from management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and other equity as at March 31, 2023.

k. In the absence of information with respect to Provision for bonus, Ex-gratia, leave encashment and Gratuity not provided for by the Management. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

l. No information/ Audit Evidence provided in respect of Revenue from operations, Other Income, Cost of raw material consumed, Purchase of Stock in Trade, Changes in inventories of finished goods, work-in-progress and Stock in Trade, Employee benefits expense, Finance Costs, Depreciation and amortization expense and other expenses. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the equity as at March 31, 2023.

m. Note No. 46 of the Standalone Financials for the year ended March 31, 2023, wherein the Company had made 100% provision of the value of long term Investments held in Amit Spinning Industries Limited (ASIL), erstwhile subsidiary of the Company during F.Y 2017-18. National Company Law Tribunal (NCLT) vide order dated 01.08.2017 had admitted ASIL''s petition and had appointed Resolution Professional for ASIL under the Insolvency and Bankruptcy Code. The NCLT vide its order dated 31st July 2018, has approved the resolution plan as per which the Company was required to transfer its entire shareholding held in ASIL at a total consideration of Rs. One only in favour of Resolution Applicants. The Company was holding 2, 09,81,077 equity shares (50.96%) in ASIL. No further information provided to us, In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

Further we are unable to determine the amount of liability that may arise on account of Corporate Guarantee given on behalf of subsidiary, and compliance of IND-AS 109 in respect to accounting of corporate guarantee.

n. Note No. 21 of the Standalone Financials for the year ended March 31,2023, wherein the Company had not allotted shares against share application amount of Rs.1109.50 Lakhs which was brought in by the promoters in various instalments up to 30th December 2015 and accordingly not complied with the provision of Section 42 of the Companies Act, 2013. In FY 2018-19, such Share application money pending allotment amounting to Rs.1109.50 Lakhs has been treated as Deposits as per Companies (Acceptance of Deposits) Rules, 2014 made under Chapter V of the Companies Act,2013 at the Board Meeting held on 13th February 2019 vide resolution no.19(ii). Necessary compliances under Section 42 and Section 73 of Companies Act, 2013 read with Companies (Acceptance of Deposit) Rules and regularisation of continuing defaults thereof are pending by the Company.

o. Note No. 50 to the Standalone Financials for the year ended March 31, 2023, where the Company was required to deposit/ invest a sum of at least 15% of the amount of its Debentures maturing during the financial year 2018-19 in one or more of the prescribed methods vide circular no.04/2013 dated February 11, 2013 issued by Ministry of Corporate Affairs. However, the Company has failed to comply with the requirements of the said Circular.

p. Goods and Services Tax Return for the current period not filed and GST Audit for the FY 2017-18 and onward are pending. We are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

q. Company is in default to appoint Key Managerial personals as per Section 203 of Company Act, 2013. Further No Limited Review has been done for Quarter Ended June 30, 2022, September 30, 2022, December 31, 2022 and Year ended March 31, 2023. We are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

r. No details were being provided with respect to Inter-unit reconciliation, in the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31,2023.

s. No details were being provided in relation to related party name and transaction. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31, 2023.

t. Due to Non Compliance with various Laws and Regulations, e.g. Ministry of Corporate Affairs, Security Exchange Board of India, National Stock Exchange, Income tax Act, Good and Service Tax Act, The Foreign Exchange Management Act, Companies Act, 2013, The Employees'' Provident Funds Scheme, 1952, Employees State Insurance Act, Gratuity Act, Labour Laws, The Micro, Small And Medium Enterprises Development Act, 2006 etc, the amount of penalty cannot be reliably estimated at this stage. Hence, consequential impact, if any, is currently not ascertainable and we are unable to comment on possible financial impacts of the same.

u. Company failed to redeem its debentures on the due date i.e. March 31,2018 and failed to pay interest due thereon and such failure to redeem debentures and payment of interest thereon continuing for one year or more, therefore directors shall not be eligible to be re-appointed as a director of the company.

v. Baramati Unit is inoperative since September 2017, Bootiburi and Pitampur units were inoperative since October, 2019, as per Ind AS 36, Impairment testing is required to be done for the units. In the absence of sufficient appropriate audit evidence, we are unable to determine any possible impact thereof on the loss for the year and on the other equity as at March 31,2023.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the ''Auditor''s Responsibilities for the Audit of the Standalone Financial Statements'' section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. However because of the matters described in the Basis of Disclaimer

of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.

Material uncertainty related to going concern

As mentioned in Note No. 47 to the standalone financial statements, the Company has been referred to National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, and there are persistent severe strains on the working capital and there is considerable decline in level of operations of the Company and net worth of the Company as on the reporting date is negative and it continues to incur losses. The Company has received invocation notices of corporate guarantees given by it and also the personal guarantees of promoter directors have been invoked. Since Corporate Insolvency Resolution Process (CIRP) is currently in progress, as per the Code, it is required that the Company be managed as going concern during CIRP. Accordingly, the standalone financial statements are continued to be prepared on going concern basis. However, there exists a material uncertainty about the ability of the Company to continue as a “Going Concern”. The same is dependent upon the resolution plan to be approved by NCLT. The appropriateness of the preparation of standalone financial statements on going concern basis is critically dependent upon CIRP as specified in the Code necessary adjustments required on the carrying amount of assets and liabilities are not ascertainable at this stage.

Information other than the Financial Statements and Auditor''s Report thereon

The Company''s Board of Directors/RP is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board''s Report including Annexure to Board''s Report, Business Responsibility Report, Corporate Governance and Shareholder''s Information, but does not include the standalone financial statements and our auditor''s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

Management''s Responsibility and Those Charged with Governance for the Standalone Financial Statements

In view of the pendency of corporate insolvency resolution process (“CIRP”), pursuant to the order passed by National Company Law Tribunal (“NCLT”) dated January 03, 2020, the management of the affairs of the Company and powers of board of directors of the Company are now vested with Mr. Subhash Kumar Kundra as Resolution Professional (“RP”), who is appointed by the Committee of Creditors (“CoC”). These Standalone Ind AS Financial Statements have been prepared by the management of the Company and Signed by Mr. Subhash Kumar Kundra-Resolution Professional

The Company''s Board of Directors/RP is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in india. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The management / RP is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for explaining our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor''s Report) Order, 2020 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure A ”a statement on the matters specified in paragraphs 3 and 4 of the Order.

As required by section 143(3) of the Act, based on our audit we report that:

a) except for the matter described in the Basis for Disclaimer of Opinion paragraphs, we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b) except for the possible effects of the matters described in the Basis for Disclaimer of opinion paragraph above, 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, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account,

d) Except for the effects of the matter described in the Basis for Disclaimer of opinion above, in our opinion, the aforesaid financial statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with Companies Rules, 2015, as amended,

e) In terms of section 17 (1) (b) of the Insolvency and Bankruptcy Code, 2016 (“the code”), the powers of the Board of Directors have been suspended and are exercised by the Resolution Professional. Hence, written representation from directors have not been taken on record by the Board of Directors, Accordingly, we are unable to comment whether none of the directors is disqualified as on March 31, 2023 from being appointed as a director in the terms of Section 164 (2) of the Act,.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report.

g) As required by section 197(16) of the Act, we report that the company has not paid the remuneration to its directors during the year ended March 31, 2023.

h) With respect to the other matters to be included in the Auditor''s Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 35 to the standalone financial statements.

ii. Except for the possible effects of matters described under Basis for Disclaimer of Opinion paragraph, The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. In the absence of information provided, we are unable to determine whether there were amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. (a) The Resolution Professional has represented that the Company is under CIRP and Control of RP and to the best of

its knowledge and belief as fact mentioned in Disclaimer of Opinion, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or

on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

b) The Resolution Professional has represented that the Company is under CIRP and Control of RP and to the best of its knowledge and belief as fact mentioned in Disclaimer of Opinion, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

C) As company was under CIRP and nothing has been reported to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement

v. No dividend has been proposed in the current financial year.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31,2023.

For R.N Marwah& Co. LLP

Chartered Accountants

Firm''s Registration No.: 001211N/N500019

Sunil Narwal

Partner

Membership No.: 511190

Place: New Delhi

Date: October 31, 2023

---

Mar 31, 2016

To the Members of Spentex Industries Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Spentex Industries Limited ("the Company"), which comprises the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone 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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,

2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 the disclosures in the financial statements. The procedures selected depend on the auditor''s 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 auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, 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 qualified audit opinion on the standalone financial statements.

Basis for qualified opinion We draw attention to:

a. Note No. 39 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.204,469,921/- in Amit Spinning Industries Limited, subsidiary of the company. Significant uncertainties exist in relation to the recoverability of loans amounting to Rs.320,128,019/-, interest accrued thereon Rs.95,950,582/- and other outstanding amounting to Rs.316,160,592/- due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 29 the standalone financial statements on behalf of above subsidiary.

b. Note No. 40 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.561,011,339/- and Rs.9,323,779/-in Spentex Netherland B.V. and Spentex Tashkent Toytepa LLC respectively, subsidiary/step down subsidiary of the company. Uncertainties exist in relation to the recoverability of Rs.95, 070,902/- due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 29 of the standalone financial statements on behalf of above subsidiary.

c. Note No. 40 of the standalone financial statements wherein, the company has not charged to the statement of profit & loss Rs.70,012,404, due from its step down subsidiary, Spentex Tashkant Toyetpa LLC, shown as trade receivable under the head "Other Non Current Assets" in the standalone financial statements.

d. Note No. 42 of the standalone financial statements, wherein, the company has not charged to statement of profit & loss Rs.10,135,376/- and Rs.2,695,093/- shown as claim receivables and export incentive respectively under the head " Other Non Current Assets" in the standalone financial statements.

e. Note No. 43 of the standalone financial statements wherein, we are unable to comment on the recoverability of amounts relating to certain parties aggregating to Rs.44, 489,435/- and Rs.11,493,145/- shown as advance against expenses and advance to trade payable respectively under the head " Long Term Loan & Advances" for which no provision has been made in the books of amounts.

f. Note No. 49 of the standalone financial statements wherein, the company has not charged to statement of profit & loss penal interest and other charges, if any, in respect of delay in repayment of borrowings from banks. Therefore, we are unable to comment on the adequacy of interest and other charges provided for in the statement of profit & loss.

We further report that, without considering the impact of paragraph (a) ,(b) and (f) above the effect of which could not be determined, had the observation made by us in paragraph (c), (d) and (e) above been considered, the loss before tax for the year would have been Rs.947,937,323/- (as against the reported figure of Rs.809,111,870/-), Reserves and Surplus would have been negative Rs.3,126,702,780/- (as against negative reported figure Rs.2,987,877,827/-), Trade Receivable under the head "Other Non Current Assets" would have been Rs. Nil (as against the reported figure of Rs.70,012,404/-), Export Incentive under the head "Other Non Current Assets" would have been Rs. Nil (as against the reported figure of Rs.26,95,093/-), Claim Receivable under the head "Other Non Current Assets" would have been Rs.1,902,810/- (as against the reported figure of Rs.12,038,186/-), Advance against expenses under the head "Long Term Loans and Advances" would have been Rs.53,038,267/- (as against the reported figure of Rs.97,527,702/-) and Advance to trade payable under the head "Long Term Loans and Advances" would have been Rs.23,678,849/- (as against the reported figure of Rs.35,171,994/-).

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 of the matter described in the basis for qualified opinion paragraph, the aforesaid standalone 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 accounting principles generally accepted in India of the state of affairs of the Company as at March 31, 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

Without qualifying our opinion, we draw attention to:

a. Note No. 41 of the standalone financial statements which indicates that the Company has accumulated losses and its net worth has been fully eroded, the Company has incurred a net cash loss during the current and previous year(s) and, the Company''s current liabilities exceeded its current assets as at the balance sheet date. Further majority of the banks have categorized borrowing of the company as Non performing Assets (NPA) during the year and have sent recall notices u/s 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 to the company. These conditions, along with other matters set forth in Note No. 41, indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. However, the financial statements of the Company has been prepared on a going concern basis for the reasons stated in the said Note.

b. Note No. 42 of the standalone financial statements regarding balance recoverable of Rs.18,410,722/- shown as advance to trade payable under the head " Long Term Loans & Advances " of the standalone financial statements which has been considered good by the management in view of the reasons stated therein. We have relied upon the assertions given by the management as to the recoverability of the said amounts.

c. Note No. 4 of the standalone financial statement, wherein, the Company has not allotted shares against the share application amount of Rs.110,950,000/- which was brought in by the promoters in more than one installments under restructuring scheme approved by the Bankers. However, the company has not complied with the provisions of Section 42 of the Companies Act, 2013 for the reasons stated in the said Note.

d. Note No. 44 of the standalone financial statements requiring deposit/invest a sum of at least 15% of the amount of its debentures maturing during the financial year 2016-17 in one or more of the prescribed methods vide circular no. 04/2013 dated February 11, 2013 issued by Ministry of Corporate Affairs. However, the company has not complied with the requirement of the said circular.

e. Note No. 45 of the standalone financial statements regarding balances of parties under the head trade receivables, trade payables and loans & advances which are subject to confirmation, reconciliation and consequential adjustments, if any.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure 1, a statement on the matters specified in the paragraph 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

a. We have sought and except for the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, 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, the statement of profit and loss and the cash flow statement dealt with in this report are in agreement with the books of account;

d. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

f. On the basis of written representations received from the directors as on March 31, 2016 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of section 164(2) of the Act;

g. With respect to the adequacy of the internal financial controls over financial reporting of the company and operating effectiveness of such controls, refer to our separate report in Annexure 2 to this report.

h. With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigation on its financial position in its financial statements. Refer Note No. 29 of the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the

Annexure 1 to Independent Auditor''s Report of even date of the Standalone Financial Statements of Spentex Industries Limited

Referred to in paragraph 1 of the Independent Auditors'' Report of even date under the heading "Report on Other Legal and Regulatory Requirements" to the members of Spentex Industries Limited on the standalone financial statements as of and for the year ended March 31, 2016.

We report that:

1. (a) The Company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management according to a phased programmed designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies were noticed on such verification as compare to the book records.

(c) According to the information and explanation given to us and on the basis of examination of title deeds, other relevant records

provided to us evidencing the title, confirmation from the lenders with whom title deeds have been deposited as security in respect of funding facilities availed, we are of the opinion that the title deeds of immovable properties, as disclosed in Note No. 12 on fixed assets to the financial statements, are held in the name of the company as at the balance sheet date except the following:

Particulars of Land & Building	Gross Block as on 31.03.2016	Net Block as on 31.03.2016	Remarks
Leasehold Land & Building thereon	490,047,029	240,278,431	The title deeds are in the name of the erstwhile Company that merged with the Company under section 391 to 394 of the Companies Act, 1956 pursuant to Schemes of Amalgamation as approved by the Honorable High Court.

2. (a) Inventories other than inventory lying with third party have been physically verified by the Management to extent practicable at reasonable intervals during the year. In our opinion the frequency of verification is reasonable. The discrepancies noticed on physical verification as compared to the books records were not material having regard to the size and nature of the operations of the company and have been properly adjusted in the books of account.

3. according to the information and explanation given to us, the Company has not granted any loan, secured or unsecured to companies, firms, limited liability partnership or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraphs 3(iii)(a) and 3(iii)(b) & 3(iii)(c) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.

4. According to the information and explanations given to us and in our opinion the company has not advanced any loan, investment, guarantee or security to any person as specified under section 185 of the Companies Act, 2013. The company has not advanced any loan, guarantee or security to any person within the meaning of section 186 of the Companies Act, 2013. The company has compiled with provision of section 186 of the Companies Act, 2013 with regards to investment made.

5. according to the information and explanation given to us, the Company has not accepted any deposits from the public under the provisions of Sections 73 to 76 of the Act or other relevant provisions of the Act and rules framed there under during the year.

6. We have broadly reviewed the books of account, maintained by the Company in respect of products where pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under Section 148(1) of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

7. (a) The Company is not regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income tax, sales tax, service tax, customs duty, excise duty, value added tax, cess and there have been serious delays in a large no of cases. According to the information and explanations given to us, undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31, 2016 for a period of more than six months from the date they became payable, are as follows:

Name of the statute	Nature of dues	Amount (Rs.)	Period to which the amount relates (F.Y.)	Due Date	Date of Payment
Provident Fund Act	Provident Fund	1,868,650	August 2015	15th September 2015	5th April 2016
Income Tax	TDS&TCS	1,076,823	July 2015	7th August 2015	Rs.462,000/- on 5th April 2016 and Rs.614,823/- on 21st April 2016
Income Tax	TDS&TCS	616,622	August 2015	7th September 2015	21st April 2016
Finance Act 1994	Service Tax	87,296	June 2015	6th July 2015	Unpaid Till date
Finance Act 1994	Service Tax	1,870,792	July 2015	6th August 2015	Rs.11,99,271/- paid on 4th May 2016 & Rs.671,521/- still unpaid
Finance Act 1994	Service Tax	1,628,056	August 2015	6th September 2015	Rs 1,202,790/- paid on 4th May 2016 & Rs.425,266/- still unpaid

(b) According to the information and explanations given to us and the records of the company examined by us, the particulars of dues of income tax, sales tax, wealth tax, service tax, customs duty, excise duty, value added tax and cess which have not been deposited on account of matters pending before appropriate authorities are as under:

Name of the statute	Nature of dues	Amount (Rs.)	Period to which the amount relates (F.Y.)	Forum where the dispute is pending
Income Tax
The Income Tax Act, 1961	Disallowance of goodwill amortization & other expenses	10,875,657 (including amount paid Rs.3,981,354)	AY 2001-02 AY 2003-04	Income Tax Tribunal Delhi Bench - Rs.3,981,354/-
				High Court - Rs.6,894,303/-
The Income Tax Act, 1961	Disallowances of various expenses viz. sales tax subsidy, etc.	27,095,747 (including amount paid Rs.2,000,000)	AY 2003-04 AY 2005-06 AY 2006-07	High Court, New Delhi
The Income Tax Act, 1961	Addition on account of arm''s length price of compensation for corporate guarantee to Associated Enterprises	36,403,835	AY 2008-09	Income Tax Appellate Tribunal Delhi Branch
Sales Tax
The M.P Commercial Tax Act, 1994	Penalty - Purchase Tax demand	164,195 (including amount paid Rs. 128,195)	1996-97	First Appellate Authority
The M.P Commercial Tax Act, 1994	Sales Tax Demand	815,157 (including amount paid Rs.815,157)	2009-10	First Appellate Authority
The M.P Commercial Tax Act, 1994	Sales Tax demand on sale of DEPB licenses	1,970,233	2001-03 2009-10	Assessing Authority, Indore
The M.P. Commercial Tax Act, 1994	Sales Tax Demand	455,160 (including amount Paid Rs 45520)	2013-14	First Appellate Authority
The M.P. Commercial Tax Act, 1994	Sales Tax Demand	375,803 (including amount paid Rs. 105,250)	2010-11	First Appellate Authority
Entry Tax Act, 1976	Entry Tax demand	1,538,453 (including amount paid Rs.414,844)	1992-97	Assessing Authority, Indore
Maharashtra Value Added Tax Act, 2002	Sales Tax Demand	532,870 (including amount paid Rs.200,000)	2004-05	Deputy Commissioner, Nagpur
Central Sales Tax, 1956	Sales Tax Demand	2,999,290 (including amount paid Rs.1,000,000)	2004-05	Deputy Commissioner, Nagpur
Finance Act
Finance Act, 1994	Refund against export services	4,381,611	2006-16	Assistant Commissioner of Central Excise, Nagpur
Finance Act, 1994	Service Tax on GTA paid including penalty	280,282	Apr-05 to Sept-06	Customs, Excise & Service Tax Appellate Tribunal, New Delhi
Finance Act, 1994	Service Tax on Foreign Commission paid to overseas agents	1,079,549 (including amount paid Rs. 107,955)	2009-10 to 2010-11	Customs, Excise & Service Tax Appellate Tribunal, New Delhi
Finance Act, 1994	Suo Moto credit taken from Additional Excise Duty	145,531 (including amount paid Rs. 10,915)	Aug- 12	Commissioner (Appeals), Central Excise, Bhopal
Finance Act, 1994	Service Tax credit taken on invoices not having Serial No. & Registration No.	3,744,510 (including amount paid Rs. 140,419)	Apr-09 to Oct- 13	Commissioner (Appeals), Central Excise, Bhopal
Finance Act, 1994	Service Tax credit taken on photocopied copies of Bill of Entry and foreign commission	426,338 (including amount paid Rs 21,317)	Apr-09 to Oct- 13	Customs, Excise & Service Tax Appellate Tribunal, New Delhi
Finance Act, 1994	Service Tax credit taken on tour operator services bill	490,872	Apr-09 to Apr-13	Commissioner (Appeals), Central Excise, Bhopal
Finance Act, 1994	Service Tax credit taken on foreign commission	375,464 (including amount paid Rs. 13,705)	Apr-11 to Mar-12	Commissioner (Appeals), Central Excise, Bhopal
Central Excise Act
The Central Excise Act, 1944	Excise duty demands (Baramati unit)	10,806,176	Jun-99 to Dec-01	Customs, Excise & Service Tax Appellate Tribunal, Mumbai
The Central Excise Act, 1944	Excise duty - demand of duty on clearance of goods under notification 30/2004 without payment of duty (Butibori unit)	75,185,214 (including amount paid Rs.2,314,143)	Aug-04 to Apr-07	Deputy Commissioner of Central Excise, Nagpur - Rs.77,371/-
				Commissioner, Central Excise Nagpur -Rs.72,693,700/-
				Customs, Excise & Service Tax Appellate Tribunal, New Delhi - Rs.2,414,143/-
The Central Excise Act, 1944	Cenvat demand for packing material including penalty (Pithampur unit)	168,812	Apr-00 to Mar-04	Commissioner (Appeals), Central Excise, Indore
The Central Excise Act, 1944	Cenvat demand on packing material / scrap (Butibori unit)	920,697	Apr-03 to July 2015	Customs, Excise & Service Tax Appellate Tribunal, New Delhi -Rs.81,195/-
				Commissioner (Appeals), Rs.786,496/-
				Deputy Commissioner /Assistant Commissioner, Rs 53,006/-
The Central Excise Act, 1944	Cenvat on samples used in quality control (Butibori unit)	333,101 (including amount paid Rs.67,597)	Apr-03 to Oct-13	Customs, Excise & Service Tax Appellate Tribunal, Nagpur - Rs.117,762/-
				Deputy Commissioner, Central Excise, Nagpur -Rs.215,339/-
The Central Excise Act, 1944	Excise duty - demand of duty on clearance of goods under notification 30/2004 without payment of duty (Pithampur unit)	53,291,002 (including amount paid Rs.13,322,751)	Mar-04 to Feb-07	High Court , Indore
The Central Excise Act, 1944	Demand under section Rule 6(3)(i)	121,563,064	2012-13	Customs, Excise & Service Tax Appellate Tribunal, New Delhi
The Central Excise Act, 1944	Cenvat on Capital Goods	5,332,642 (including amount paid Rs. 673,329	2002-2003 to 2010-11	Customs, Excise & Service Tax Appellate Tribunal, Nagpur - Rs. 2,565,854/-
				Additional Commissioner of Central Excise, Nagpur Rs.2,551,564/-
				Commissioner (appeals) central excise Rs 63,026/-
				Deputy Commissioner of Central Excise, Nagpur- Rs.152,198/-

8. Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that company has defaulted in repayment of dues to the banks or government during the year. The Company has outstanding dues in respect of financial institutions, government or debenture holders are as follows:

S. No.	Name of Bank	Type of loan	Amount of default as at balance sheet (includes Interest)	Period of Default
1	Axis Bank Ltd	Non Convertible Debentures	16,892,900	1-90
2	Axis Bank Ltd	Term Loan	8,345,029	1-90
3	Bank of Baroda	Term Loan	82,523,860	Non Performing asset (NPA) as on 31.03.2016.
4	Canara Bank	Term Loan	43,086,793	Non Performing asset (NPA) as on 31.03.2016.
5	ICICI Bank Ltd	Term Loan	660,796,727	Non Performing asset (NPA) as on 31.03.2016.
6	IDBI Bank Ltd	Term Loan	41,418,826	Non Performing asset (NPA) as on 31.03.2016.
7	Indian Bank	Term Loan	193,716,328	Non Performing asset (NPA) as on 31.03.2016.
8	IndusInd Bank Ltd	Term Loan	5,759,957	Non Performing asset (NPA) as on 31.03.2016.
9	ING Vysya Bank Ltd	Term Loan	172,479,747	Non Performing asset (NPA) as on 31.03.2016.
10	Oriental Bank of Commerce	Term Loan	359,295,528	Non Performing asset (NPA) as on 31.03.2016.
11	State Bank of India	Term Loan	973,995,302	Non Performing asset (NPA) as on 31.03.2016.
12	State Bank of India	Short Term Borrowings	1,826,424,955	Non Performing asset (NPA) as on 31.03.2016.
13	Oriental Bank of Commerce	Short Term Borrowings	674,347,445	Non Performing asset (NPA) as on 31.03.2016.
14	ING Vysya Bank Ltd	Short Term Borrowings	182,106,227	Non Performing asset (NPA) as on 31.03.2016.
15	Indian Bank	Short Term Borrowings	244,660,096	Non Performing asset (NPA) as on 31.03.2016.
16	Axis Bank Ltd	Short term Borrowings	128,820,288	1-90
	Total		5,614,670,008

9. In our opinion and according to information and explanation given by the management, the term loans obtained by the company have been applied for the purpose for which they were raised. According to the information and explanation given to us, there was no money raised by the way of initial public offer or further public offer by the company during the year.

10. During the course of our examination of the books of accounts and records carried out in accordance with the generally accepted auditing practices and according to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

11. According to the information and explanation given to us, the company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

12. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi company. Accordingly, clause 3(xii) of the Companies (Auditors Report) Order, 2016 is not applicable.

13. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

14. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, clause 3(xiv) of the Companies (Auditors Report) Order, 2016 is not applicable.

15. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, clause 3(xv) of the Companies (Auditors Report) Order, 2016 is not applicable.

16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

Annexure 2 to Independent Auditors'' Report of even date on standalone Financial Statement of Spentex Industries Limited

Referred to in paragraph 2 (g) of the Independent Auditors'' Report of even date under the heading "Report on Other Legal and Regulatory Requirements" to the members of Spentex Industries Limited on the standalone financial statements as of and for the year ended March 31, 2016.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Spentex Industries Limited ("the Company") as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by The Institute of Chartered Accountants of India and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Company''s internal financial controls over financial reporting as at March 31, 2016.

The company did not have an appropriate internal control system for obtaining confirmation from certain parties included under the head trade receivables, trade payables, loans & advances and other current liabilities and its reconciliation/consequential adjustments, if any. Further, the company''s internal financial controls over recovery of certain long outstanding trade receivable, claim receivables and advance balances are not adequate.

The company''s internal financial controls were not operating effectively in respect of the above which may potentially impact the results of the company.

A ''material weakness'' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company''s annual or interim financial statements will not be prevented or detected on a timely basis.

In our opinion, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2016 standalone financial statements of the Company, and these material weaknesses have affected our opinion on the standalone financial statements of the Company and we have accordingly issued a qualified opinion on the standalone financial statements.

For J.C. Bhalla & Company

Chartered Accountants

Firm Regn. No. 001111-N

Sd/-

(Akhil Bhalla)

Place : New Delhi Partner

Dated : May 27, 2016 Membership No.505002

---

Mar 31, 2015

We have audited the accompanying standalone financial statements of Spentex Industries Limited ("the Company"), which comprises the Balance Sheet as at March 31,2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone 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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 the disclosures in the financial statements. The procedures selected depend on the auditor's 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 auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, 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 qualified audit opinion on the standalone financial statements.

Basis for qualified opinion We draw attention to:

a. Note No. 41 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.204,469,921/- in Amit Spinning Industries Limited, subsidiary of the company. Uncertainties exist in relation to the recoverability of loans amounting to Rs.320,128,019/-, interest accrued thereon Rs.95,950,582/- and advances amounting to Rs.226,165,468/- due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 30 of the standalone financial statements on behalf of above subsidiary.

b. Note No. 42 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.561,011,339/- and Rs.9,323,779/- in Spentex Netherland B.V and Spentex Tashkent Toytepa LLC respectively, subsidiary/step down subsidiary of the company. Uncertainties exist in relation to the recoverability of Rs.95,070,902/- and Rs.70,012,404/- due from above subsidiary/step down subsidiary respectively. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 30 of the standalone financial statements on behalf of above subsidiary.

c. We are unable to comment on the recoverability of advance balance of Rs.19,040,000/-, included under the head "Advance against expenses" in Note No. 14 of the standalone financial statements, for which no provision has been made in the books of account.

d. Note No. 44 of the standalone financial statements, wherein, the company has not charged to statement of profit & loss Rs.10,135,376/- and Rs.2,695,093/- shown as claim receivables and export incentive respectively.

We further report that, without considering the impact of paragraph (a) and (b) above the effect of which could not be determined, had the observation made by us in paragraph (c) and (d) above been considered, the loss before tax for the year would have been Rs.653,781,143/- (as against the reported figure of Rs.621,910,674/-), Reserves and Surplus would have been negative Rs.2,210,635,927/- (as against negative reported figure Rs.2,178,765,458/-), Export Incentive included under head "Other Non Current Assets" would have been Rs.19,030,969/- (as against the reported figure of Rs.21,726,062/-), claim receivables included under the head "Other Non Current Assets" would have been Rs.2,774,242/- (as against the reported figure of Rs.12,909,618/-) and advance against expenses included under the head "Long Term Loans and Advances" would have been Rs.99,655,219/- (as against the reported figure of Rs.118,695,219/-) .

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 of the matter described in the basis for qualified opinion paragraph, the aforesaid standalone 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 accounting principles generally accepted in India of the state of affairs of the Company as at March 31,2015 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

Without qualifying our opinion, we draw attention to:

a. Note No. 4 of the standalone financial statement, wherein, the Company has not allotted shares against the share application amount of Rs.110,950,000/- which was brought in by the promoters in more than one installments under restructuring scheme approved by the Bankers. However, the company has not complied with the provisions of Section 42 of the Companies Act, 2013 for the reasons stated in the said Note.

b. Note No. 43 of the standalone financial statements which indicates that the Company has accumulated losses and its net worth has been fully eroded, the Company has incurred a net cash loss during the current and previous year(s) and, the Company's current liabilities exceeded its current assets as at the balance sheet date. These conditions, along with other matters set forth in Note No. 43, indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis for the reasons stated in the said Note.

c. Note No. 44 of the standalone financial statements regarding amounts recoverable relating to certain trade receivable, advance balances and export incentive recoverable Rs.6,371,477/-, Rs.27,314,712/- and Rs.17,869,256/- respectively which has been considered good by the management in view of the reasons stated therein. We have relied upon the assertion given by the management as to the recoverability of the said amounts.

d. Note No. 45 of the standalone financial statements requiring deposit/invest a sum of at least 15% of the amount of its debentures maturing during the financial year 2013-14, 2014-15 and 2015-16 in one or more of the prescribed methods vide circular no. 04/2013 dated February 11,2013 issued by Ministry of Corporate Affairs. However, the company has not complied with the requirement of the said circular.

e. Note No. 46 of the standalone financial statements regarding balances of parties under the head trade receivables, trade payables and loans & advances which are subject to confirmation, reconciliation and consequential adjustments, if any.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure, a statement on the matters specified in the paragraph 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

a. We have sought and, except for the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, 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, the statement of profit and loss and the cash flow statement dealt with in this report are in agreement with the books of account;

d. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

f. On the basis of written representations received from the directors as on March 31,2015 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2015 from being appointed as a director in terms of section 164(2) of the Act;

g. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

h. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigation on its financial position in its financial statements. Refer Note No. 30 and Note No. 40 of the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure to Independent Auditor's Report

Referred to in paragraph 1 of the Independent Auditors' Report of even date under the heading "Report on Other Legal and Regulatory Requirements" to the members of Spentex Industries Limited on the standalone financial statements as of and for the year ended March 31,2015.

We report that:

1. (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management according to a phased programmed designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies were noticed on such verification as compared to the book records.

2. (a) Inventories other than inventory lying with third party have been physically verified by the Management at reasonable intervals during the year. In our opinion the frequency of verification is reasonable.

(b) According to information given to us, the procedures for physical verification of the inventories followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventories as compared to the book records were not material having regard to the size and nature of the operations of the Company and have been properly adjusted in the books of account.

3. The Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraphs 3(iii)(a) and 3(iii)(b) of the Companies (Auditor's Report) Order, 2015 are not applicable to the Company.

4. According to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in internal control system.

5. The Company has not accepted any deposits from the public under the provisions of Sections 73 to 76 of the Act or other relevant provisions of the Act and rules framed there under.

6. We have broadly reviewed the books of account, maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under Section 148(1) of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

7. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, sales tax, wealth tax, customs duty, excise duty, value added tax, cess and other statutory dues and is generally regular in depositing undisputed statutory dues in respect of income tax and service tax applicable to it. According to the information and explanations given to us, no undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31,2015 for a period of more than six months from the date they became payable except for Service Tax of Rs.27,272/-.

(b) According to the information and explanations given to us and the records of the company examined by us, the particulars of dues of income tax, sales tax, wealth tax, service tax, customs duty, excise duty, value added tax and cess at March 31, 2015, which have not been deposited on account of dispute, are as follows:

Name of the Nature of dues statute

Income Tax

The Income Tax Disallowance of goodwill Act, 1961 amortisation & other expenses

The Income Tax Disallowances of various expenses Act, 1961 viz. sales tax subsidy, etc.

The Income Tax Addition on account of arm's length Act, 1961 price of compensation for corporate guarantee to Associated Enterprises

Sales Tax

The MP Commercial Penalty - Purchase Tax Act, 1994 Tax demand

The MP Commercial Sales Tax Demand Tax Act, 1994

The MP Commercial Sales Tax demand on Tax Act, 1994 sale of DEPB licenses

The MP Commercial Sales Tax Demand Tax Act, 1994

Entry Tax Act, Entry Tax demand 1976

Maharashtra Value Sales Tax Demand Added Tax Act, 2002

Central Sales Sales Tax Demand Tax,1956

Finance Act

Finance Act, 1994 Refund against export services

Finance Act, 1994 Service Tax on GTA paid including penalty

Finance Act, 1994 Service Tax on Foreign Commission paid to overseas agents

Finance Act, 1994 Suo Moto credit taken from Additional Excise Duty

Finance Act, 1994 Service Tax taken on invoices not having Serial No. & Registration No.

Finance Act, 1994 Service Tax taken on photocopied copies of Bill of Entry and foreign commission

Finance Act, 1994 Service Tax taken on tour operator services bill

Finance Act, 1994 Service Tax taken on foreign commission

Central Excise Act

The Central Excise Excise duty demands Act, 1944 (Baramati unit)

The Central Excise Excise duty - demand of Act, 1944 duty on clearance of goods under notification 30/2004 without payment of duty (Butibori unit)

The Central Excise Cenvat demand for packing material Act, 1944 including penalty (Pithampur unit)

The Central Excise Cenvat demand on packing Act, 1944 material/scrap (Butibori unit)

The Central Excise Cenvat on samples used in Act, 1944 quality control (Butibori unit)

The Central Excise Refund of cenvat on inputs Act, 1944 under Rule 18 (Pithampur unit)

The Central Excise Excise duty-demand of duty on Act, 1944 clearance of goods under notification 30/2004 without payment of duty (Pithampur unit)

The Central Excise Demand under Act, 1944 section Rule 6(3)(i)

The Central Excise Cenvat on Capital Act, 1944 Goods

Name of the Amount (Rs.) Period to which statute the amount relates (F.Y.)

Income Tax

The Income Tax 10,875,657 (incl. amt. AY 2001-02 Act, 1961 paid Rs.3,981,354) AY 2003-04

The Income Tax 27,095,747 AY 2003-04 Act, 1961 (including amount AY 2005-06 paid Rs.2,000,000) AY 2006-07

The Income Tax 36,403,835 AY 2008-09 Act, 1961

Sales Tax

The MP Commercial 164,195 (incl. amt. 1996-97 Tax Act, 1994 paid Rs. 128,195)

The MP Commercial 815,157 (incl. amt. 2009-10 Tax Act, 1994 paid Rs.815,157)

The MP Commercial 1,970,233 2001-03 Tax Act, 1994

The MP Commercial 375,803 (incl. amt. 2010-11 Tax Act, 1994 paid Rs. 37,600)

Entry Tax Act, 1,538,453 (incl. amt. 1992-1997 1976 paid Rs.414,844)

Maharashtra Value 532,870 (incl. amt. 2004-05 Added Tax Act, 2002 paid Rs.200,000)

Central Sales 2,999,290 (incl. amt. 2004-05 Tax,1956 paid Rs.1,000,000)

Finance Act

Finance Act, 1994 3,439,884 2006-12

Finance Act, 1994 280,282 April 2005 to Sept 2006

Finance Act, 1994 1,079,549 (incl. amt. 2009-10 to paid Rs. 107,955) 2010-11

Finance Act, 1994 145,531 (incl. amt. Aug- 12 paid Rs. 10,915)

Finance Act, 1994 3,744,510 (incl. amt. Apr-09 to paid Rs. 140,419) Oct- 13

Finance Act, 1994 290,599 Apr-09 to Oct- 13

Finance Act, 1994 490,872 Apr-09 to Apr- 13

Finance Act, 1994 375,464 (incl. amt. Apr-11 to paid Rs. 13,705) Mar- 12

Central Excise Act

The Central Excise 10,806,176 June 1999 to Act, 1944 Dec 2001

The Central Excise 75,185,214 Aug, 2004 to Act, 1944 (including amount Apr, 2007 paid Rs.2,314,143)

The Central Excise 168,812 April, 2000 to Act, 1944 March, 2004

The Central Excise 794,266 April, 2003 to Act, 1944 December, 2012

The Central Excise 309,475 (Incl. amt. Apr, 2003 to Act, 1944 paid Rs.67,597) October, 2013

The Central Excise 60,216,366 Oct, 2004 to Act, 1944 Jan, 2006

The Central Excise 53,291,002 March, 2004 to Act, 1944 (including amount Feb, 2007 paid Rs.13,322,751)

The Central Excise 167,747,574 April-12 to Act, 1944 March, 13

The Central Excise 5,269,616 2002-2003 to Act, 1944 (including amount 2010-11 paid Rs. 673,329

Name of the Forum where the statute dispute is pending

Income Tax

The Income Tax Income Tax Tribunal Delhi Bench - Act, 1961 Rs.3,981,354/- High Court - Rs.6,894,303/-

The Income Tax Commissioner of Income Tax Act, 1961 (Appeal), New Delhi

The Income Tax High Court, New Delhi Act, 1961

Sales Tax

The MP Commercial First Appellate Authority Tax Act, 1994

The MP Commercial First Appellate Authority Tax Act, 1994

The MP Commercial Assessing Authority, Indore Tax Act, 1994 2009-10

The MP Commercial First Appellate Authority Tax Act, 1994

Entry Tax Act, Assessing Authority, Indore 1976

Maharashtra Value Deputy Commissioner, Nagpur Added Tax Act, 2002

Central Sales Deputy Commissioner, Nagpur Tax,1956

Finance Act

Finance Act, 1994 Assistant Commissioner of Central Excise, Nagpur

Finance Act, 1994 Customs, Excise & Service Tax Appellate Tribunal, New Delhi - Rs.280,282/-

Finance Act, 1994 Customs, Excise & Service Tax Appellate Tribunal, New Delhi

Finance Act, 1994 Commissioner (Appeals), Central Excise, Bhopal

Finance Act, 1994 Commissioner (Appeals), Central Excise, Bhopal

Finance Act, 1994 Commissioner (Appeals), Central Excise, Bhopal

Finance Act, 1994 Commissioner (Appeals), Central Excise, Bhopal

Finance Act, 1994 Commissioner (Appeals), Central Excise, Bhopal

Central Excise Act

The Central Excise Customs, Excise & Service Tax Act, 1944 Appellate Tribunal, Mumbai

The Central Excise Deputy Commissioner of Central Excise, Act, 1944 Nagpur - Rs.77,371/- Commissioner, Central Excise Nagpur - Rs.72,693,700/-

Customs, Excise & Service Tax Appellate Tribunal, New Delhi - Rs.2,414,143/-

The Central Excise Commissioner (Appeals), Central Act, 1944 Excise, Indore

The Central Excise Customs, Excise & Service Tax Appellate Act, 1944 Tribunal, New Delhi Rs.81,195/-

Deputy Commissioner, Central Excise, Nagpur - Rs.713,071/-

The Central Excise Customs, Excise & Service Tax Appellate Act, 1944 Tribunal, Nagpur - Rs.117,762/-

Deputy Commissioner, Central Excise, Nagpur - Rs.191,713/-

The Central Excise Joint Secretary, Ministry of Finance, Act, 1944 New Delhi

The Central Excise High Court , Indore Act, 1944

The Central Excise Customs, Excise & Service Tax Appellate Act, 1944 Tribunal, New Delhi

The Central Excise Customs, Excise & Service Tax Appellate Act, 1944 Tribunal, Nagpur - Rs. 2,565,854/-

Additional Commissioner of Central Excise, Nagpur - Rs.2,551,564/-

Deputy Commissioner of Central Excise, Nagpur- Rs.152,198/-

(c ) There were no amount which were required to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

8. The Company has accumulated losses as at March 31,2015 which are more than fifty percent of its net worth. The company has incurred cash losses in the financial year covered by our audit and has not incurred cash losses in the immediately preceding financial year.

9. Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that the Company has defaulted in repayment of dues to banks, financial institutions or debenture holders as follows:

S. Particulars Amount of Default NO.

1 Non Convertible Debenture 95,781,428

2 Term Loan 683,325,713

3 Funded Interest Term Loan 78,360,643

4 Working Capital Term Loan I 70,882,616

5 Working Capital Term Loan II 112,438,732

6 Working Capital Term Loan IV 150,919,395

7 Corporate Loan 144,772,674

8 Short Term Loans other than cash credit 738,623

Total 1,337,219,824

S. Particulars Period of Default NO. (In days)

1 Non Convertible Debenture 27 - 89

2 Term Loan 1 - 90

3 Funded Interest Term Loan 1 - 90

4 Working Capital Term Loan I 1 - 90

5 Working Capital Term Loan II 1 - 90

6 Working Capital Term Loan IV 1 - 90

7 Corporate Loan 1 - 90

8 Short Term Loans other than cash credit 1 - 90

Total

Further, as informed to us, the loan facilities availed from ING Bank as term loan (outstanding balance as on 31.3.2015 amounting to Rs.155,530,998/- with interest) and cash credit facilities (outstanding balance as on 31.3.2015 amounting to Rs.164,867,234/-) have become non-performing asset (NPA) for the lender as the company has not paid the dues within 90 days of payments being falling due.

In addition to above, Cash Credit Facilities taken from the banks have remained overdue during the substantial part of the year. The overdue amounts aggregated to Rs.94,622,613/- as at 31.03.2015.

10. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

11. In our opinion, the term loans have been applied for the purpose for which they were obtained.

12. During the course of our examination of the books of accounts and records carried out in accordance with the generally accepted auditing practices and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year nor we have been informed of such case by the management.

For J.C. Bhalla & Company Chartered Accountants Firm Regn. No. 001111-N

Sd/- (Akhil Bhalla) Place : New Delhi Partner Dated : May 29, 2015 Membership No.505002

---

Mar 31, 2014

We have audited the accompanying financial statements of Spentex Industries Limited ("the Company"), which comprise the Balance Sheet as at March 31,2014, and the 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.

Management''s Responsibility for the Financial Statements

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 ("the Act") read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. 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.

Auditor''s 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 auditor''s 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 auditor considers 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 but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. 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 qualified audit opinion. Basis for Qualified Opinion We draw attention to:

a. i. Note No. 41 of the financial statements, wherein, we are unable to determine the extent of provision that may be required

for diminution in the value of long term investment amounting to Rs 20,44,69,921 in Amit Spinning Industries Limited, subsidiary of the company. Uncertainties exist in relation to the recoverability of loans amounting to Rs 32,01,28,019, interest accrued thereon Rs 9,59,50,582 and advances amounting to Rs 13,21,98,605 due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 30 of the financial statements on behalf of above subsidiary.

ii. Note No. 42 of the financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs 56,10,11,339 and Rs 93,23,779 in Spentex Netherland B.V. and Spentex Tashkent Toytepa LLC respectively, subsidiary/step down subsidiary of the company. Uncertainties exist in relation to the recoverability of Rs 9,50,70,902 and Rs 7,00,12,404 due from above subsidiary/step down subsidiary respectively. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 30 of the financial statements on behalf of above subsidiary/step down subsidiary.

The aggregate amount of investments and other recoverables referred to in para (i) and (ii) as above amounts to Rs 77,48,05,039 (Previous Year Rs 77,48,05,039) and Rs 71,33,60,512 (Previous year Rs 63,61,30,566) respectively.

b. Note No. 44 of the financial statements, wherein, the Company has not charged to statement of profit and loss Rs 1,01,35,376 and Rs 26,95,093 shown as claim receivable and export incentive respectively.

We further report that, without considering the impact of paragraph (a) above the effect of which could not be determined, had the observations made by us in paragraph (b) above been considered, the loss before tax for the year would have been Rs 13,14,67,277 (as against the reported figure of Rs 11,86,36,808), Reserves and Surplus would have been negative Rs 1,55,14,85,221 (as against the negative reported figure of Rs 1,53,86,54,752), Export Incentive included under the head "Other Non Current Assets" would have been Rs 1,78,69,256 (as against the reported figure of Rs 2,05,64,349) and claim receivable included under the head "Other Non Current assets" would have been Rs 1,83,29,992 (as against the reported figure of Rs 2,84,65,368).

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 of the matter described in the Basis for Qualified Opinion paragraph, the 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 accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2014;

(b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to:

(a) Note No. 43 of the financial statements regarding preparation of these accounts on a going concern basis due to reasons indicated therein.

(b) Note No. 44 of the financial statements regarding amounts recoverable relating to certain trade recievable, advance balances and export incentive recoverable Rs 63,71,477, Rs 2,73,14,712 and Rs 1,78,69,256 respectively which has been considered good by the management in view of the reasons stated therein. We have relied upon the assertion given by the management as to the recoverability of the said amounts.

(c) Note No. 45 of the financial statements requiring deposit/invest a sum of atleast 15% of the amount of its debentures maturing during the financial year 2013-14 in one or more of the prescribed methods vide circular no. 04/2013 dated February 11,2013 issued by Ministry of Corporate Affairs. However the company has not complied with the requirement of the said circular.

(d) Note No. 46 of the financial statements regarding balances of parties under the head trade receivables, trade payables and loans & advances which are subject to confirmation, reconciliation and consequential adjustments, if any.

Report on Other Legal and Regulatory Requirements

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

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

i. 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 except for the matter described in the Basis for Qualified Opinion paragraph;

ii. 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;

iii. 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;

iv. except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956 read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 and;

v. 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 of the 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 Companies Act, 1956;

vi since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company;

Annexure to Independent Auditor''s Report of Spentex Industries Limited Referred to in Paragraph 1 under the heading of "report on other legal and regulatory requirements" of our report of even date

1. (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programmed designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and material discrepancies between the book records and physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year.

2. (a) The inventory other than inventory lying with third party has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraphs 4(iii)(b), 4(iii) (c), 4(iii)(d) of the order are not applicable.

(b) The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii) (f) and 4(iii) (g) of the order are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. 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 weakness in the aforesaid internal control system.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, there were no transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or more in respect of any party during the year other than those reported in para 18 below pursuant to paragraph 4 (xviii) of the Companies (Auditor''s Report) Order, 2003.

6. The Company has not accepted any deposits from the public within the meaning of Section 58A and Section 58AA of the Act and the rules framed there under.

7. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8. We have broadly reviewed the books of account, maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, sales tax, wealth tax, custom duty, excise duty, cess and other statutory dues and is generally regular in depositing undisputed statutory dues in respect of income tax and service tax applicable to it. According to the information and explanation given to us, no undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31,2014 for a period of more than six months from the date they became payable except for State Entry Tax of Rs 26,22,198/-.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, entry tax, service tax and excise duty at March 31,2014, which have not been deposited

Name of the Nature of dues Amount (Rs.) Period to which statute the amount relates (A.Y.)

Sales Tax

The M.P. Penalty - Purchase 1,64,195 1996-97 Commercial Tax tax demand (including amount Act, 1994 paid Rs 1,28,195) The M.P. Commercial Sales Tax Demand 8,15,157 2009-10 Tax Act, 1994 (including amount paid 8,15,157)

The M.P. Commercial Sales tax demand on 19,70,233 2001-03 Tax Act, 1994 sale of DEPB licenses 2009-10

The M.P. Commercial Sales Tax Demand 3,75,803 2010-11 Tax Act, 1994 (including amount paid 37,600)

Entry Tax Act, 1976 Entry tax demand 15,38,453 1992-1997 (including amount paid Rs 4,14,844)

Maharashtra Value Sales Tax Demand 12,18,223 2009-10 Added Tax Act, 2002

Maharashtra Value Sales Tax Demand 5,32,870 2004-05 Added Tax Act, 2002 (including amount paid 2,00,000)

Central Sales Tax, Sales Tax Demand 29,99,290 2004-05 1956 (including amount paid Rs 10,00,000)

Income tax

Income Tax Act, 1961 Disallowance of 1,08,75,657 AY 2001-02 goodwill amortisation (including amount AY 2003-04 & other expenses paid Rs.39,81,354)

The Income Tax Disallowances of 2,70,95,747 AY 2003-04 Act,1961 various expenses viz. (including amount AY 2005-06 sales tax subsidy, etc paid Rs20,00,000) AY 2006-07

Central Excise and Service Tax Act

Central Excise Excise duty demands 1,08,06,176 June 1999 Act, 1944 (Baramati unit) Dec 2001

Central Excise Excise duty demands 2,78,61,240 Apr-00 to Act, 1944 (Ahmedabad unit) Sept-01 and Feb-01 to Dec-01

Central Excise Excise duty demands 15,65,015 Feb-04 Act, 1944 (Ahmedabad unit) (including amount paid 15,65,015)

The Central Excise Excise duty-demand 7,51,85,214 Aug 2004 Act, 1944 of duty on clearance (including amount Apr, 2007 of goods under paid Rs 23,14,143) notification 30/2004 without payment of duty (Butibori unit)

The Central Excise Cenvat demand for 1,68,812 Apr 2000 Act, 1944 packing material Mar, 2004 including penalty (Pithampur unit)

The Central Excise Cenvat demand on 7,94,266 Apr 2003 - Act, 1944 packing material / Dec,2012 scrap (Butibori unit)

The Central Excise Cenvat on samples 3,09,475 Apr, 2003 Act, 1944 used in quality control (including amoun Octr 2013 (Butibori unit) paidRs 67,597)

The Central Excise Demand for Cenvat 1,10,32,499 Apr,2003 Act, 1944 reversal of furnace oil Aug, 2006 used in generation of electricity on job-work (Butibori unit)

The Central Excise Refund of cenvat on 6,02,16,366 Oct 2004 Act, 1944 inputs under Rule 18 Jan 2006 (Pithampur unit)

The Central Excise Rejection export 24,50,214 June, 2006 Act, 1944 claims June, 2012

The Central Excise Excise duty-demand 5,32,91,002 Mar 2004 Act, 1944 of duty on clearance (including Feb, 2007 of goods under amount paid notification 30/2004 Rs 1,33,22,751) without payment of duty (Pithampur unit)

The Central Excise Demand under 16,77,47,574 April-12, Act, 1944 section Rule 6(3)(i) March, 13

The Central Excise Rebate claim 7,18,287 2010-11 Act, 1944 deducted (including amount paidRs 7,18,287

The Central Excise Cenvat on Capital 52,69,616 2002-2003 Act, 1944 Goods (including amount 2010-11 paidRs 6,73,329

Finance Act, 1994 Refund against 22,59,287 2006-12 export services

Finance Act, 1994 Service Tax on GTA 13,30,248 Apr 2005 paid including penalty (including amount Sep 2006 paidRs 10,49,966

Finance Act, 1994 Service Tax on 5,44,852 2004-05 Garden labour 2008-09

Name of the Statute Forum where the dispute is pending

Sales Tax

The MP Commercial Tax ACt 1994 First Appellate Authority

The MP Commercial Tax ACt 1994 First Appellate Authority

The MP Commercial Tax ACt 1994 Assessing Authority Indore

The MP Commercial Tax ACt 1994 First Appellate Authority

Entry Tax Act 1976 Assessing Authority, Indore

Maharashtra Value Added Tax Act Joint Commissioner of Sales Tax, 2002 Kolhapur Maharashtra Value Added Tax Act Deputy Commissioner, Nagpur 2002

Central Sales Tax 1956 Deputy Commissioner, Nagpur

Income Tax

Income Tax Act 1961 Income Tax Tribunal Delhi Bench 39,81,354 High Court - Rs 68,94,303

Income Tax Act 1961 Commissioner of Income Tax (Appeal), New Delhi

Central Excise and Service Tax Act

Central Excise Act 1944 Customs, Excise & Service Tax Appellate Tribunal, Mumbai

Central Excise Act 1944 Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad

Central Excise Act 1944 Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad

Central Excise Act 1944 Deputy Commissioner of Central Excise, Nagpur - Rs 77,371

Commissioner, Central Excise Nagpur - Rs 7,26,93,700

The Central Excise Act 1944 Customs, Excise & Service Tax Appellate Tribunal, New Delhi - Rs 24,14,143

The Central Excise Act 1944 Commissioner (Appeals), Central Excise, Indore

The Central Excise Act 1944 Customs, Excise & Service Tax Appellate Tribunal New Delhi Rs 81,195

The Central Excise Act 1944 Deputy Commissioner, Central Excise, Nagpur - Rs 7,13,071

The Central Excise Act 1944 Customs, Excise & Service Tax Appellate Tribunal, Nagpur - Rs 1,17,762

The Central Excise Act 1944 Deputy Commissioner, Central Excise, Nagpur - Rs 1,91,713

The Central Excise Act 1944 Deputy Commissioner of Central Excise, Nagpur - Rs 6,94,852

The Central Excise Act 1944 Customs, Excise & Service Tax Appellate Tribunal - Rs 1,03,37,647

The Central Excise Act 1944 Commissioner (Appeals), Central Excise, Indore

The Central Excise Act 1944 Assistant Commissioner of Central Excise, Nagpur

The Central Excise Act 1944 High Court, Indore

The Central Excise Act 1944 Commissioner, Central Excise, Indore

The Central Excise Act 1944 Commissioner (Appeals), Central Excise, Indore

The Central Excise Act 1944 Additional Commissioner of Central Excise, Nagpur - Rs 51,17,418

Deputy Commissioner of Central Excise - Rs 1,52,198

Finance Act 1994 Assistant Commissioner of Central Excise, Nagpur

Finance Act 1994 Customs, Excise & Service Tax Appellate Tribunal - Rs 2,80,282

Finance Act 1994 Commissioner (Appeals), Central Excise, Indore- Rs 10,49,966

Finance Act 1994 Customs, Excise & Service Tax Appellate Tribunal - Rs 5,44,852

10 The Company has accumulated loss as at March 31,2014 which is more than fifty percent of its net worth. The company has not incurred cash losses in the financial year ended on that date and in the immediately preceding financial year.

11 According to the records of the Company examined by us and the information and explanation given to us, based on our audit procedures, we are of the opinion that the company has defaulted in repayment of dues to financial institutions, banks or debenture holders during the year as follows:

Particulars Amount of Default Period of Default (In days)

Non Convertible Debenture 8,62,14,712 28 - 90

Term Loan 83,12,78,837 1 - 90

Funded Interest Term Loan 8,04,48,319 1 - 90

Working Capital Term Loan I 6,47,86,062 1 - 90

Working Capital Term Loan II 10,97,81,542 1 - 90

Working Capital Term Loan III 8,92,872 1 - 42

Working Capital Term Loan IV 14,97,51,149 1 - 90

Corporate Loan 21,21,076 1 - 58

Total 1,32,52,74,569

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

13. The provisions of any special statute applicable to chit fund/ Nidhi/ mutual benefit fund/ Societies are not applicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, term loan has been applied for the purpose it was obtained.

17. According to the information and explanations given to us and on the overall examination of the balance sheet of the company as at March 31,2014, we report that short term fund of Rs 15,48,51,363 (without considering the impact of other recoverables as mentioned in para a under the head "Basis for qualified opinion" of the independent auditor''s report) have been used for long term investments primarily in repayment of long term borrowing and funding its losses.

18. According to the information and explanations given to us, the company has made preferential allotment of shares to a company covered in the register maintained under Section 301 of the Act. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the company.

19. The Company has created security or charge in respect of debentures issued and outstanding at the year end.

20. The Company has not raised any money by public issue during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

For J.C. Bhalla & Company Chartered Accountants Firm Regn. No. 001111-N

Sd/- (Akhil Bhalla) Place : New Delhi Partner Dated : May 28, 2014 Membership No.505002

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Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Spentex Industries Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the 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.

Management''s Responsibility for the Financial Statements

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 ("the Act"). 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.

Auditor''s 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 auditor''s 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 auditor considers 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 qualified audit opinion.

Basis for Qualified Opinion

We draw attention to:

Note No. 41 of the financial statements, wherein, we are unable to determine the extent of provision that may be required for diminuition in the value of long term investment amounting to Rs.20,44,69,921 in Amit Spinning Industries Limited subsidiary of the company. Further, uncertainities exist in relation to the recoverability of loans amounting to Rs.32,01,28,019, interest accrued thereon Rs.9,59,50,582 and advances amounting to Rs.5,49,68,659 due from above S ubsidiary.

The impact due to above observation on the financial statements could not be ascertained.

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 of the matter described in the Basis for Qualified Opinion paragraph, the 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 accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to:

(a) Note No. 42 of the financial statements regarding long term investment amounting to Rs. 56,10,11,339 and Rs. 93,23,779 in Spentex Netherland B.V. and Spentex Tashkent Toytepa LLC respectively, subsidiaries of the company, and advance amounting to Rs. 9,50,70,902 from Spentex Netherland B.V. and trade recievable amounting to Rs. 7,00,12,404 from Spentex Tashkent Toytepa LLC which has been considered good by the management in view of the reasons stated therein. We have relied upon the assertion given by the management as to the recoverability of the investments and amounts due stated above.

(b) Note No. 43 of the financial statements regarding amounts recoverable relating to certain trade recievable and advance balances Rs.63,71,477 and Rs.2,73,14,712 respectively which has been considered good by the management in view of the reasons stated therein. We have relied upon the assertion given by the management as to the recoverability of the said amounts.

(c) Note No. 47 of the financial statements regarding preparation of these accounts on a going concern basis due to reasons indicated therein.

Report on Other Legal and Regulatory Requirements

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

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

i. 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 except for the matter described in the Basis for Qualified Opinion paragraph;

ii. 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;

iii. 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;

iv. except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

v. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause

(g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company;

Annexure to Independent Auditors'' Report

Referred to in Paragraph 1 under the heading of "report on other legal and regulatory requirements" of our report of even date

1. (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programmed designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. However, the fixed assets have not been physically verified by the management during the year.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year.

2. (a) The inventory other than inventory lying with third party has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii)(b), 4(iii)(c), 4(iii)(d) of the order are not applicable.

(b) The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii) (f) and 4(iii) (g) of the order are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. 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 weakness in the aforesaid internal control system.

5 a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

b) In our opinion and according to the information and explanations given to us, there were no transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or more in respect of any party during the year other than those reported in para 18 below pursuant to paragraph 4 (xviii) of the Companies (Auditor''s Report) Order, 2003.

6 The Company has not accepted any deposits from the public within the meaning of Section 58A and Section 58AA of the Act and the rules framed there under.

7 In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8 We have broadly reviewed the books of account, maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9 a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, sales tax, wealth tax, custom duty, excise duty, cess and other statutory dues and is generally regular in depositing undisputed statutory dues in respect of income tax and service tax applicable to it. According to the information and explanation given to us, no undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31, 2013 for a period of more than six months from the date they became payable except for State Entry Tax of Rs. 26,22,198/-.

b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, entry tax, service tax and excise duty at March 31, 2013, which have not been deposited on account of dispute, are as follows:

Name of the Nature of dues Amount (Rs.) Year to which Forum where the statute the amount dispute is pending relates

Sales Tax

The M.P. Penalty - Purchase 1,64,195 1996-97 First Appellate Authority Commercial Tax tax demand (including amount Act, 1994 paid Rs.1,28,195)

The M.P. Commercial Sales Tax Demand 8,15,157 (including 2009-10 First Appellate Authority Tax Act, 1994 amount paid Rs.8,15,157)

The M.P. Commercial Sales tax demand on 19,70,233 2001-03 Assessing Authority Indore Tax Act, 1994 sale of DEPB licenses 2009-10

Entry Tax Act, 1976 Entry tax demand 15,38,453 (including 1992-1997 Assessing Authority Indore amount paid Rs. 4,14,844)

Maharashtra Value Sales Tax Demand 12,18,223 2009-10 Joint Commissioner of Sales Tax, Added Tax Act, 2002 Kolhapur

Maharashtra Value Sales Tax Demand 5,32,870 (including 2004-05 Deputy Commissioner, Nagpur Added Tax Act, 2002 amount paid Rs. 2,00,000)

10 The Company has accumulated loss as at March 31, 2013 which is more than fifty percent of its net worth. The company has not incurred cash losses in the financial year ended on that date but has incurred cash losses in the immediately preceding financial year.

11 According to the records of the Company examined by us and the information and explanation given to us, based on our audit procedures, we are of the opinion that the company has defaulted in repayment of dues to financial institutions, banks or debenture holders during the year as follows:

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

13 The provisions of any special statute applicable to chit fund/ Nidhi/ mutual benefit fund/ Societies are not applicable to the Company.

14 In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15 In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

16 In our opinion, and according to the information and explanations given to us, term loan has been applied for the purpose it was obtained.

17 On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the information and explanations given to us, there are no funds raised on short term basis which have been used for long-term investment.

18 According to the information and explanations given to us, the company has made preferential allotment of shares to a company covered in the register maintained under section 301 of the Act. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the company.

19 The Company has created security or charge in respect of debentures issued and outstanding at the year end.

20 The Company has not raised any money by public issue during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

For J.C. Bhalla & Company

Chartered Accountants

Firm Regn. No. 001111-N

(Akhil Bhalla)

Place : New Delhi Partner

Dated : May 29, 2013 Membership No.505002

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Mar 31, 2011

1. We have audited the attached Balance Sheet of Spentex Industries Limited, as at March 31, 2011 and the related profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies(Auditors Report) (Amendment) Order, 2004, issued by the Central government of India in terms of sub-section(4A) of Section 227 of The Companies Act, 1956 of India(the Act) and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we further report that:

3.1 (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programmed designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the books records and physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

3.2 (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3.3 (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii)(b), 4(iii)(c), 4(iii)(d) of the order are not applicable.

(b) The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii) (f) and 4(iii) (g) of the order are not applicable.

3.4 In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. 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 weakness in the aforesaid internal control system.

3.5 (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, there were no transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or more in respect of any party during the year other than those reported in para 3.18 below pursuant to paragraph 4 (xviii) of the Companies (Auditors Report) Order, 2003.

3.6 The Company has not accepted any deposits from the public within the meaning of Section 58A and Section 58AA of the Act and the rules framed there under.

3.7 In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

3.8 We have broadly reviewed the books of account, maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

3.9 (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund,

investor education and protection fund, employees state insurance, sales tax, income tax, service tax, wealth tax, custom duty, excise duty, cess and other statutory dues applicable to it. According to the information and explanation given to us, no undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31, 2011 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, entry tax, service tax and excise duty at March 31, 2011, which have not been deposited on account of dispute, are as follows :

Name of the Nature of dues Amount(Rs.) statute

Sales Tax

The M.P. Penalty - Purchase 164,195 Commercial Tax tax demand (including amount Act, 1994 paid Rs.128,195)

The M.P. Commercial Sales tax demand on 3,154,447 Tax Act, 1994 sale of DEPB licenses (including amount paid Rs.2,855,900)

Entry Tax Act, 1976 Entry tax demand 1,420,991 (including amount paid Rs.414,844)

Maharashtra Sales BST Sales Tax dues 192,160 Tax Act, 1975 (including amount paid Rs.17,040)

Income tax

Income Tax Act, 1961 Disallowance u/s 80 31,061,929 HHC on export (including amount incentives paid Rs.5,541,674)

Income Tax Act, 1961 Disallowance of 10,875,657 goodwill amortisation (including amount & other expenses paid Rs.3,981,354)

The Income Tax Disallowances of 27,095,747 Act,1961 various expenses viz. (including amount sales tax subsidy, etc. paid Rs.2,000,000)

Central Excise and Service Tax Act

Central Excise Excise duty demands 10,806,176 Act, 1944 (Baramati unit)

Central Excise Excise duty demands 27,861,240 Act, 1944 (Ahmedabad unit)

Central Excise Excise duty demands 1,565,015 Act, 1944 (Ahemdabad unit) (including amount paid Rs.1,565,015)

The Central Excise Excise duty- demand 75,085,214 Act, 1944 of duty on clearance (including amount of goods under paid Rs.2,314,143) notification 30/2004 without payment of duty (Butibori unit)

The Central Excise Cenvat demand for 168,012 Act, 1944 packing material including penalty (Pithampur unit)



Name of the Period to which Forum where the Statue the amount dispute is pending relates

Sales Tax

The M.P. Commercial Tax Act, 1994 2004-05 First Appellate Authority

The M.P. Commercial Tax Act, 1994 2001-03 Deputy Commissioner (Appeals), 2009-10 Indore - Rs.369,057 Assessing Authority Rs.2,785,390

Entry Tax Act, 1976 1992-2008 The M.P. High Court – Rs.567,816 Deputy Commissioner (Appeals), Indore - Rs.371,076

Assessing Authority – Rs.799,246

Maharashtra Sales Tax Act, 1975 2004-05 Joint Commissioner of Sales Tax (Appeal), Pune

Income tax

Income Tax Act, 1961 A.Y. 2000-01 Income Tax Tribunal Delhi Bench- to Rs.11,207,472 A.Y. 2004-05 Commissioner of Income Tax (Appeal), New Delhi – Rs.19,854,457

Income Tax Act, 1961 A.Y. 2001-02 Income Tax Tribunal Delhi Bench- A.Y. 2003-04 Rs. 3,981,354 High Court - Rs. 6,894,303

The Income Tax Act,1961 A.Y. 2003-04 Commissioner of Income Tax A.Y. 2005-06 (Appeal), New Delhi A.Y. 2006-07

Central Excise and Service Tax Act

Central Excise Act, 1944 June 1999 to Customs, Excise & Service Tax Dec 2001 Appellate Tribunal, Mumbai

Central Excise Act, 1944 Apr-00 Customs, Excise & Service Tax to Sept-01 and Appellate Tribunal, Ahmedabad Feb-01 to Dec-01

Central Excise Act, 1944 Feb-04 Customs, Excise & Service Tax Appellate Tribunal, Ahmadabad

The Central Excise Act, 1944 Aug, 2004 to Deputy Commissioner of Central Apr, 2007 Excise, Nagpur – Rs. 77,371 Commissioner, Central Excise Nagpur – Rs.72,187,903

Additional Commissioner of Central Excise, Nagpur – Rs.505,797

Customs, Excise & Service Tax Appellate Tribunal, New Delhi – Rs. 2,314,143

The Central Excise Act, 1944 April, 2000 – Commissioner (Appeals), Central March, 2004 Excise, Indore

Name of the Nature of dues Amount(Rs.) statute

The Central Excise Cenvat demand on 1,545,165 Act, 1944 packing material / (including amount scrap (Butibori unit) paid Rs.35,536)

The Central Excise Cenvat on samples 203,489 Act, 1944 used in quality control (including amount (Butibori unit) paid Rs.67,597)

The Central Excise Demand for Cenvat 31,855,017 Act, 1944 reversal of furnace oil used in generation of electricity on job- work (Butibori unit)

The Central Excise Refund of cenvat on 60,216,366 Act, 1944 inputs under Rule 18 (Pithampur unit)

The Central Excise Rejection export 1,793,732 Act, 1944 claims

Finance Act, 1994 Refund against 1,515,368 export services

The Central Excise Excise duty–demand 53,291,002 Act, 1944 of duty on clearance (including amount of goods under paid Rs.13,322,751) notification 30/2004 without payment of duty (Pithampur unit)

The Central Excise Duty on Yarn 41,871 Act, 1944

The Central Excise Cenvat on Capital 2,570,898 Act, 1944 Goods

Professional Tax

Professional Tax Act Interest on 36,433 (including Professional Tax amount Paid Rs. 36,433)

Name of the Period to which Forum where the Statue the amount dispute is pending relates

The Central Excise Act, 1944 April, 2003 – Customs, Excise & Service Tax November, 2009 Appellate Tribunal, New Delhi Rs.94,860

Commissioner(Appeals), Nagpur– Assistant Commissioner – Rs. 8,012

Deputy Commissioner, Central Excise, Nagpur – Rs. 2,02,845

Deputy Commissioner, Central Excise, Nagpur – Rs. 12,39,448

The Central Excise Act, 1944 Apr, 2003 to Customs, Excise & Service Tax Aug, 2009 Appellate Tribunal, Nagpur – Rs. 67,597

Deputy Commissioner, Central Excise, Nagpur – Rs. 74,130

Assistant Commissioner, Central Excise, Nagpur – Rs. 61,762

The Central Excise Act, 1944 Apr, 2003 to Deputy Commissioner of Central Aug, 2006 Excise, Nagpur – Rs. 694,852

Customs, Excise & Service Tax Appellate Tribunal – Rs.20,822,518

Additional Commissioner of Central Excise, Nagpur – Rs.10,337,647

The Central Excise Act, 1944 Oct, 2004 to Commissioner (Appeals), Central Jan, 2006 Excise, Indore

The Central Excise Act, 1944 Jun, 2006 to Assistant Commissioner of Central Jan,2007 Excise, Nagpur

Finance Act, 1994 2006-09 Assistant Commissioner of Central Excise, Nagpur

The Central Excise Act, 1944 March, 2004 to High Court , Indore Feb, 2007

The Central Excise Act, 1944 2006 Commissioner (Appeals), Central Excise, Indore

The Central Excise Act, 1944 2002-2003 Additional Commissioner of Central Excise, Nagpur

Professional Tax

Professional Tax Act 2006-07 Deputy Commissioner (Professional Tax)

3.10 The Company has accumulated loss as at March 31, 2011 which, read with comments in para 4 of our report, are more than fifty percent of its net worth. The company has not incurred cash losses in the financial year ended on that date but has incurred cash losses in the immediately preceding financial year.

3.11 According to the records of the Company examined by us and the information and explanation given to us, based on our audit procedures, we are of the opinion that the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders during the year.

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

3.13 The provisions of any special statute applicable to chit fund/ Nidhi/ mutual benefit fund/ Societies are not applicable to the Company.

3.14 In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

3.15 In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

3.16 In our opinion, and according to the information and explanations given to us, no new term loan has been obtained during the year.

3.17 On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the information and explanations given to us, there are no funds raised on short term basis which have been used for long-term investment.

3.18 According to the information and explanations given to us, the company has made preferential allotment of shares to a company covered in the register maintained under section 301 of the Act. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the company.

3.19 The Company has created security or charge in respect of debentures issued and outstanding at the year end.

3.20 The Company has not raised any money by public issue during the year.

3.21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

4. We draw attention to:

Note 8(b) of Schedule XXI, wherein the Company has not charged to Profit and Loss Account a sum of Rs. 210,341,055 due from Schoeller Litvinov k.s. (SLKS), the Czech step down subsidiary of the Company pursuant to reorganization plan approved by the court. Accordingly profit for the year is higher by Rs. 210,341,055 with consequent impact on net assets for the year then ended.

We further report that had the observations made by us above been considered, the profit before tax for the year would have been Rs. 164,612,197 (as against the reported figure of Rs 374,953,252 ), Accumulated loss would have been Rs. 1,168,073,547 (as against the reported figure of Rs. 957,732,492 ), Sundry Debtors and Loans and Advances to subsidiary would have been Rs. 849,870,951 & Rs. 458,844,868 respectively (as against the reported figure of Rs. 1,045,722,558 & Rs. 47,334,316 respectively) .

5. Further to our comments in paragraphs 4 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 purposes 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, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) 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 Act;

(e) On the basis of written representations received from the directors, as on March 31, 2011 and taken on record by the Board of directors, none of the directors is disqualified as on March 31, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act and subject to our remarks in paragraph 4 above, give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2011;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

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

For J.C. Bhalla & Company Chartered Accountants Firm Regn. No. 001111-N

(Akhil Bhalla) Place : New Delhi Partner

Dated : May 12, 2011 Membership No.505002

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of Spentex Industries Limited, as at March 31, 2010 and the related profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies(Auditors Report) Order, 2003 as amended by the Companies(Auditors Report) (Amendment) Order, 2004, issued by the Central government of India in terms of sub-section(4A) of Section 227 of The Companies Act, 1956 of India(the Act) and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we further report that:

3.1 (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programmed designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the books records and physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

3.2 (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3.3 (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii)(b), 4(iii)(c), 4(iii)(d) of the order are not applicable.

(b) The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii) (f) and 4(iii) (g) of the order are not applicable.

3.4 In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. 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 weakness in the aforesaid internal control system.

3.5 (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act 1956 have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, there were no transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or more in respect of any party during the year other than those reported in para 3.18 below pursuant to paragraph 4 (xviii) of the Companies (Auditors Report) Order, 2003.

3.6 The Company has not accepted any deposits from the public within the meaning of Section 58A and Section 58AA of the Act and the rules framed there under.

3.7 In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

3.8 We have broadly reviewed the books of account, maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

3.9 (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, sales tax, wealth tax, custom duty, excise duty, cess and other statutory dues and is generally regular in depositing undisputed statutory dues in respect of income tax and service tax applicable to it. According to the information and explanation given to us, no undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31, 2010 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, entry tax, service tax and excise duty at March 31, 2010, which have not been deposited on account of dispute, are as follows:

Name of the Nature of dues Amount(C)

statute

Sales Tax

The MP. Penalty - Purchase 164,195

Commercial Tax tax demand (including amount

Act, 1994 paid Rs 128,195)

The M.P Commercial Sales tax demand on 3,154,447 Tax Act, 1994 sale of DEPB licenses (including amount paid Rs.2,855,900)

Entry Tax Act, 1976 Entry tax demand 1,738,138

(including amount paid Rs.414,844)

Maharashtra Sales BST Sales Tax dues 178,493

Tax Act, 1975 (including amount paid Rs 17,040)



Name of the Period to which Forum where the Statute the amount dispute is pending

relates

Sales Tax

The M.P. Commercial 2004-05 First Appellate Authority Tax Act, 1994

The M.P. Commercial 2001-03 Deputy Commissioner Tax Act, 1994 (Appeals),

2009-10 Indore - Rs.369,057

Assessing Authority Rs.2,785,390

Entry Tax Act, 1976 1992-2008 The M.P. High Court - Rs.567,816

Deputy Commissioner (Appeals), Indore - Rs.371,076 Assessing Authority - Rs.799,246 Maharashtra Sales 2003-04 Joint Commissioner of Sales Tax Tax Act, 1975 (Appeal), Pune



Income tax

Income Tax Act, 1961 Disallowance u/s 80 31,061,929

HHC on export (including amount

incentives paid Rs.5,541,674)

Income Tax Act, 1961 Disallowance of 10,875,657

goodwill amortisation (including amount

& other expenses paid Rs.3,981,354)

The Income Tax Disallowances of 27,095,747

Act,1961 various expenses viz. (including amount

sales tax subsidy, etc. paid Rs.2,000,000)



Income Tax Act, 1961 A.Y. 2000-01 Income Tax Tribunal Delhi Bench- to Rs.11,207,472

A.Y. 2004-05 Commissioner of Income Tax

(Appeal), New Delhi - Rs.19,854,457

Income Tax Act, 1961 A.Y. 2001-02 Income Tax Tribunal Delhi Bench - A.Y. 2003-04 Rs. 3,981,354 High Court - Rs. 6,894,303

The Income Tax A.Y. 2003-04 Income Tax Tribunal Delhi Bench - Act, 1961 A.Y. 2005-06 Rs.8,315,813

A.Y. 2006-07 Commissioner of Income Tax

(Appeal), New Delhi - Rs.18,779,934



Central Excise and Service Tax Act

Central Excise Excise duty demands 10,806,176

Act, 1944 (Baramati unit)

Central Excise Excise duty demands 27,861,240

Act, 1944 (Ahmedabad unit)

Central Excise Excise duty demands 1,565,015

Act, 1944 (Ahemdabad unit) (including amount

paid Rs.1,565,015)

The Central Excise Excise duty-demand 75,185,214

Act, 1944 of duty on clearance (including amount

of goods under paid Rs.2,314,143)

notification 30/2004

without payment of duty (Butibori unit)

The Central Excise Cenvat demand for 168,012

Act, 1944 packing material

including penalty

(Pithampur unit)



Central Excise June 1999 to Customs, Excise & Service Tax

Act, 1944 Dec 2001 Appellate Tribunal, Mumbai

Central Excise Apr-00 Customs, Excise & Service Tax

Act, 1944 to Sept-01 and Appellate Tribunal, Ahmedabad

Feb-01 to Dec-01

Central Excise Feb-04 Joint Commissioner -Central Act, 1944 Excise

The Central Excise Aug, 2004 to Deputy Commissioner of Central

Act, 1944 Apr, 2007 Excise, Nagpur - Rs. 77,371

Commissioner, Central Excise Nagpur * Rs.72,187,903

Additional Commissioner of Central Excise, Nagpur - Rs.505,797

Customs, Excise & Service Tax Appellate Tribunal, New Delhi - Rs. 2,414,143

The Central Excise April, 2000 - Customs, Excise & Service Tax

Act, 1944 March, 2004 Appellate Tribunal, New Delhi



The Central Excise Cenvat demand on 1,103,017

Act, 1944 packing material / (including amount

scrap (Butibori unit) paid Rs.35,536)

The Central Excise Cenvat on samples 213,846

Act, 1944 used in quality control (including amount

(Butibori unit) paid Rs.67,597) The Central Excise Demand for Cenvat 31,855,017

Act, 1944 reversal of furnace

oil used in generation of electricity on job- work (Butibori unit)

The Central Excise Refund of cenvat on 60,216,366

Act, 1944 inputs under Rule 18

(Pithampur unit)

The Central Excise Rejection export 1,793,732

Act, 1944 claims

Finance Act, 1994 Refund against 1,262,396

export services

The Central Excise Excise duty-demand 53,291,002

Act, 1944 of duty on clearance (including amount

of goods under paid Rs.13,322,751)

notification 30/2004

without payment of

duty (Pithampur unit)

The Central Excise Duty on Yarn 41,871

Act, 1944

The Central Excise Cenvat on Capital 2,570,898

Act, 1944 Goods



The Central Excise April, 2003 - Customs, Excise & Service Tax

Act, 1944 November, 2009 Appellate Tribunal, New Delhi Rs.94,860 Commissioner(Appeals), Nagpur - Assistant Commissioner - Rs.4,006

Deputy Commissioner, Central Excise, Nagpur - Rs. 1,004,151

The Central Excise Apr, 2003 to Customs, Excise & Service Tax Act, 1944 Aug, 2009 Appellate Tribunal, Nagpur - Rs.117,762

Deputy Commissioner, Central Excise, Nagpur - Rs. 74,130

Assistant Commissioner, Central Excise, Nagpur - Rs. 21,954

The Central Excise Apr, 2003 to Deputy Commissioner of Act, 1944 Central Aug, 2006 Excise, Nagpur - Rs. 694,852

Customs, Excise & Service Tax Appellate Tribunal - Rs.20,822,518

Additional Commissioner of Central Excise, Nagpur - Rs.10,337,647

The Central Excise Oct, 2004 to Commissioner (Appeals), Act, 1944 Central

Jan, 2006 Excise, Indore

The Central Excise Jun, 2006 to Additional Commissioner of Act, 1944 Central Jan,2007 Excise, Nagpur

Finance Act, 1994 2006-09 Additional Commissioner of Central

Excise, Nagpur

The Central Excise March, 2004 to Customs, Excise & Service Tax

Act, 1944 Feb, 2007 Appellate Tribunal

The Central Excise 2006 Commissioner (Appeals), Act, 1944 Central Excise, Indore

The Central Excise 2002-2003 Additional Commissioner of Act, 1944 Central Excise, Nagpur



3.10 The Company has accumulated loss as at March 31, 2010 which is more than fifty percent of its net worth and read with comments in para 4(b) of our report, the company has incurred cash losses in the financial year ended on that date and in the immediately preceding financial year.

3.11 According to the records of the Company examined by us and the information and explanation given to us, based on our audit procedures, we are of the opinion that the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders during the year.

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

3.13 The provisions of any special statute applicable to chit fund/ Nidhi/ mutual benefit fund/ Societies are not applicable to the Company.

3.14 In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

3.15 In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

3.16 In our opinion, and according to the information and explanations given to us, no new term loan has been obtained during the year.

3.17 On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short term basis which have been used for long-term investment.

3.18 According to the information and explanations given to us, the company has made preferential allotment of shares to a company covered in the register maintained under section 301 of the Act. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the company.

3.19 The Company has created security or charge in respect of debentures issued and outstanding at the year end.

3.20 The Company has not raised any money by public issue during the year.

3.21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

4. We draw attention to:

(a) Note 9(a) on Schedule XXI, wherein we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs. 20,44,69,921 in Amit Spinning Industries Limited subsidiary of the company. Further, uncertainties exist in relation to the recoverability of loans amounting to Rs.270,128,019 ( net of Amount received subsequently Rs. 170,400,000,) interest accrued thereon amounting to Rs.60,414,121 and advances amounting to Rs.17,726,208 due from the above subsidiary.

(b) Note 9(b) on Schedule XXI, wherein the Company has not charged to Profit and Loss Account a sum of Rs.329,563,767 due from Schoeller Litvinov k.s. (SLKS), the Czech step down subsidiary of the Company pursuant to reorganization plan approved by the court. Accordingly loss for the year is lower by Rs.329,563,767 with consequent impact on net assets for the year then ended.

(c) Note 10 on Schedule XXI, wherein we are unable to comment on the amounts recoverable relating to certain debtor and advance balances aggregating to Rs.17,408,913 and Rs.22,473,335, respectively, for which no provision has been made in the books of account.

We further report that, without considering the impact of paragraphs 4(a) and 4(c) above the effect of which could not be determined, had the observations made by us in paragraph 4(b) above been considered, the loss before tax for the year would have been Rs. 55,30,08,482 (as against the reported figure of Rs 22,34,44,715), Accumulated loss would have been Rs. 1,53,38,78,558 (as against the reported figure of Rs.1,20,43,14,791), Sundry Debtors and Loans and Advances to subsidiary would have been Rs.77,91,36,218 & Rs. 59,79,62,210 respectively (as against the reported figure of Rs. 1,09,42,10,537 & Rs. 61,24,51,658 respectively) .

5. Further to our comments in paragraphs 4 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 purposes 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, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, subject to our remarks in paragraph 4(b) above, 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 Act;

(e) On the basis of written representations received from the directors, as on March 31, 2010 and taken on record by the Board of directors, none of the directors is disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act and subject to our remarks in paragraph 4 above, give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010;

(ii) in the case of the Profit and LossAccount, of the loss for the year ended on that date; and

(iii) in the case of the Cash FlowStatement, of the cash flows for the year ended on that date.

For J.C. Bhalla & Company

Chartered Accountants

Firm Regn. No. 001111-N

(Akhil Bhalla)

Place : New Delhi Partner

Dated : August 13, 2010 Membership No.505002