Haryana Steel & Alloys Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2009

1. We have audited the attached balance sheet of Haryana Steel & Alloys Limited as at 31st March, 2009 and the profit & loss account and also the cash flow statement for the period ended on that date annexed there to. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India.

Those Standards require 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 (Auditor's Report) Order, 2003 (as amended) issued by Central Government of India in terms of sub-section (4A) of section 227 of the Companies . . Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the annexure referred to above, 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.

ii) In our opinion, proper books of account as required by the law have been kept by the company, so far as appears from our examination of those books

iii) The balance sheet, profit & loss account, and cash flow statement dealt with by this report are in agreement with the books of account;

Iv) In our opinion, the balance sheet and profit & loss account and cash flow statement dealt with this report comply with the accounting standards referred in section 211(3C) of the Companies Act, 1956; except AS -15, Employees Benefits.

(v) On the basis of Written representations received from directors as on 31st March, 2009 and taken on record by the board of directors, we report that none of the directors is disqualified as on 31st March, 2009 from being appointed as a director in terms of clause (g) of sub clause (1) of section 274 of the Companies Act, 1956;

(vi) Attention is drawn to the under mentioned notes of Schedule S:

a) Note B-2 regarding total contingent liability amounting to Rs. 1,641,555,908/- which includes interest on secured loans amounting to Rs.l,503,261,607/-.

b) Note B-3 regarding liability on account of bouncing of cheque amounting to Rs.205.79 lacs.

c) Note B-4 regarding winding up petition filed with the Honorable High Court of Punjab & Haryana.

d) Note B-5 regarding the non-compliance of the provisions of mini, small and micro enterprises under the MSMED Act.

e) Note B-6 regarding not provisioning for non-moving inventory for more than one years.

f) Note B- 7 & 9 regarding preparation of accounts on a going concern basis even through total liabilities exceeds its total assets. These accounts do not include any adjustments in case the company ceases to be a going concern.

g) Note B-11 regarding non provisioning of salary & other benefits payable to workers/staff.

h) Note B-15 regarding confirmation of balances from debtors, creditors, loans & advances and other parties.

i) Note B-18 regarding non provisioning of gratuity liability.

(vii) Subject to our comments in para (i) to (vi) above and their consequential effects on the net assets and / or losses (if any), we report that, in our opinion and to the best of our information and according to the explanations given to , the said accounts subject to notes thereon give the information required by the Companies Act, 1956 in the manner so required, and give a true and fair view :

a) In the case of Balance Sheet, of the state of affairs of the company as at 31st March, 2009;

b) In the case of Profit & Loss Account, of the loss of the company for the period ended on that date; and

c) In the case of the cash flow statement, of the cash flows for the period ended on that date.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF HARAYANA STEEL & ALLOYS LIMITED FOR THE PERIOD ENDED ON 31st March.2009

(i) (a) The company has maintained 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 programme 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 between the book records and the physical inventory have been noticed. ;

(c) During the period, the company has not disposed off substantial / major part of fixed assets.

(ii) (a) As explained to us, the inventory has been physically verified during the period by the management- In our opinion, the frequency of verification is reasonable in relation to the size of the company. ' '

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are ' reasonable and adequate in relation to the size of the company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us and on ' the basis of our examination of the records of inventory, the company is maintaining , ; proper records of inventory. The discrepancies noticed on verification between the ;; physical stocks and the books records were not material and have been properly dealt with in the books of accounts.

iii. a) According to the information and explanations given to us, the company has not granted any loan to parties covered in the register maintained under section 301 of the Companies v Act, 1956. Accordingly, the clauses 4 (iii) (a) to (d) of the order are not applicable.

b) According to the information and explanations given to us, the company has not taken any unsecured loan from parties covered in the register maintained under section 301 of the . Companies Act, 1956. .

(iv) In our opinion and according to the information and explanation given to us, there are adequate internal control systems commensurate with the size of the company and the nature : of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods.

(v) In our opinion and according to the information and explanation given to us, there is no transaction made in pursuance of contract or arrangement referred to in section 301 of the companies Act. Accordingly the provisions of clause (V) are not applicable to the company.

(vi) In our opinion and according to the information and explanations given to us, the company has ' not accepted any deposits from public to which provisions of sections 58A and 58AA or any other relevant provisions of the Act, apply. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. .

(vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business. Directors them self are implementing the system.

(viii) During the period under review, no production has been made by the Company; hence no cost : records as required under section 209(1) d of Companies Act are maintained.

(ix) (a) According to the information and explanations given to us and according to the books and records produced before us, the company is not regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it. .

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess were in arrears, as at 31st March,2009 for a period of more than six months from the date they become payable, except as follows:- .

Particulars Amount (Rs.)

TDS 8,36,194/-

Sales Tax 12,01,212/-

P.F. & ESI 4,97,294/-

Service Tax 8,00,230/-

LADT 39,36,515/-

(c ) According to the information and explanations given to vis and the records of the Company examined by us, dues of sales tax, income tax, custom duty, wealth tax, excise duty and cess which have not been deposited on account of disputes and the forum where the dispute, is pending as under:

Name of the Nature of Dues Amount Period to Forum where Statute (Rs.) which dispute is Amount Pending Relates

Central Excise Act Excise Duty & 2,04,13,799/- 01.12.93 to Commissioner Penalty 04.10.94

Central Excise Act Excise Duty 12,72,849/- 01.06.99 to Commissioner 07.02.2000

H.S.E.B. Service line 2,26,33,749/- Aug.97 to Arbitration Charges March, 2009

(x) In our opinion, the net-worth of the company is negative. The Company has incurred cash loss j 1 during the financial year covered by our audit as well as in the immediately preceding financial j year.

(xi) Based on our audit procedures and on the basis of the information and explanations given to -p us, there is continuous default in repayment of dues to financial institutions & bank since 1998. However, dues of original lenders have been taken over by ARC & Others as stated hereunder: '

Name of the Original Lender Name of the Present Assignee

Punjab National Bank Cygnet Projects (P) Ltd.

IFCI Ltd Dhir & Dhir Assets Recon. & Securitisation Co. Ltd

IIBI Ltd Dhir & Dhir Assets Recon. & Securitisation Co. Ltd

(xii) According to the information and explanations given to us, the company has not granted ;,j loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the provisions of any special statute applicable to Chit Fund, Nidhi or Mutual . . Benefit Fund / Society are not applicable to the company.

(xiv) In our Opinion and according to the information and explanations given to us , the company is not dealing in or trading in shares, securities, debentures and other investments, ' Accordingly, the provisions of clause 4(xiv) of the Order are hot applicable in respect the company.

(xv) The company has not given guarantees for loans taken by others from bank/financial institutions.

(xvi) According to the information and explanations given to us, the company has not availed any term loan during the year under audit.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have -.j been used for long-term investment.

(xviii) According to the information and explanations given to us, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 ofthe Act.

(xix) According to the information and explanations given to us, the company had not issued any '' debentures during the year.

(xx) According to the information and explanations given to us, the company had not raised any money by public issue during the year.

(xxi) According to the information and explanations given to us, ho fraud on or by the company has been noticed or reported during the course of our audit.

For PC-BINDAL & CO.

PLACE: Sonepat

Partner

DATED :01/09/2009 M. No.: 088638