KC Textiles Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2010

1. We have audited the attached balance sheet of K.C. Textiles Limited, as at 31st March 2010, the profit and loss account and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the 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 (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in theAnnexure 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.were port that:

(I) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of ouraudit;

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

(iii) The balance sheet, profit and 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, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March, 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 on the said date ;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the accounts read together with Notes & Significant Accounting Policies thereon give the information required by the Companies Act, 1956, 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 31 st March, 2010;

(b) in the case of the profit and loss account, of the loss of the company for the year ended on that date; and;

(c) in the case of the cash flow statement, of the cash flow for the year ended on that date.

Annexure to the Auditors Report (REFERRED TO IN PARAGRAPH 3 OF AUDITORS REPORT OF EVEN DATE)

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

(b) All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasona- ble having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) No fixed assets were disposed off during the year and hence the going concern status of the company is not affected.

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

(b) 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) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii)(a)The company had taken loans from a company and a director covered in the register under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 58.86 Lakhs and the year end balance of loan from a director was nil and from a company was Rs.55.02 Lakhs.

(b) In our opinion, the rate of interest and other terms and conditions on which loans were taken from the parties as listed in the Register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

(c) As per information and explanations given to us there is no stipulation for repayment of loans from the parties listed in the Register maintained under section 301 of the CompaniesAct, 1956.

(d) There is no overdue amount of loans taken from the above parties as listed in the Register maintained under section 301 of the CompaniesAct, 1956.

(e) According to the information and explana- tions given to us, the company has granted loan to a company listed in the register maintained under section 301 of the Companies, Act,1956. The maximum amount involved during the year was Rs.45.28 Lakhs and the year end balance was Rs.45.28 Lakhs.

(f) According to the information & explanations given to us, the rate of interest and other terms and conditions on which loan was given to the company as listed in the register maintained under section 301 of the Companies Act, 1956 are not prima-facie prejudicial to the interest of the company.

(iv) In our opinion and according to the information & explanations given to us, there are adequate internal company procedures commensurate with the size of the company and nature of its business with regard to purchase and sales of goods . Further on the basis of our examination of the books & records of the company and according to the information and explanations given to us, we have neither come across nor we have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

(v)(a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered in the register required to be maintained underthis section.

(b) In our opinion and according to the information and explanations given to us the transactions made in pursuance of contracts or arrangements entered in the register maintained u/s 301 of the Companies Act, 1956 and exceeding the value of Rs.5 Lakhs in respect of any party during the year were made at prices which were reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Companies Act, 1956, and the Rules framed thereunder and any relevant provisions of the Companies Act, 1956.

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

(viii) According to the information and explanations given to us, the Company has not made and maintained cost records prescribed by the Central Government under section 209(1) (d) of the Companies Act, 1956 as there was no production of yarn etc. during the year.

(ix)(a)According to the information and explanations given to us and the records of the company

examined by us, undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax , sales tax, wealth tax, custom duty, service tax, cess and excise duty have been generally regularly deposited with the appropriate authorities for the year. However, old arrears of sales tax, cess, listing fee, & provident fund as at the last day of the financial year concerned for a period of more than 6 month from the date they become payable, are given below:

Nature of Amount Before 01.04.2008 For the year

Statutory Dues (Rs. in |acs) (Rs. In lacs) (Rs. in lacs)

Listing Fee 1.1 1.13 0

b) According to the books of account and records as produced and examined by us in accordance with the generally accepted auditing practices in India there are no dues of Sales Tax, Wealth Tax, Service Tax and Cess which have not been deposited on account of any dispute. The particulars of dues of Municipal Tax as at 31st March, 2010 which have not been deposited on account of a dispute are as follows:

Nature of Statutory Dues Forum where Dispute is Pending Amount (Rs.In Lacs)

Municipal Tax Municipal Corporation Jind, Haryana 4.81

(x) The accumulated losses of the Company exceed 50% of its networth as at the end of the financial year. The Company has incurred cash losses in the current year though not in the immediately preceding financial year.

(xi) Based on our audit and on the basis of information and explanations given to us, the company has not obtained any borrowings from banks, financial institutions or by way of debentures, hence our comments are not required.

(xii) Based on our examination of documents and records and as per information and explanations given to us, we are of the opinion that the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the company is not a chit fund or a nidhi mutual benefit fund/society and hence the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xv) In our opinion and as per information and explanations given to us the company has not given any guarantees for loan taken by others from banks or financial institutions.

(xvi) In our opinion, the term loans have been applied for the purpose for which they were raised.

(xvii) In our opinion and 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 been utilized for long-term investment.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the companies Act, 1956.

(xix) According to the information and explanations given to us, no debentures have been issued by the Company during the year.

(xx) Based on our examination of books and records of the Company, no public issue was made by the Company during the year.

(xxi) During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, we have not come across any instance of fraud on or by the Company nor have we been informed by the management of any such instance being noticed or reported during the year.

For JAGDISH SAPRA & CO. (FRN 001378N) CHARTERED ACCOUNTANTS

(CA VIPAL KALRA) NEW DELHI PARTNER

Dated : 14th Aug. 2010 M.NO. 084583