Steel Tubes of India Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2009

We have audited the attached Balance Sheet of Steel Tubes of India Limited as at 31 st March 2009 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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.

We report that:

1. As required by the Companies (Auditors Report) Order, 2003 as amended by Companies (Auditors Report) (Amendment) Order 2004 (together the Order) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956 (the "Act"), and on the basis of such checks as were considered appropriate and according to the information and explanations given to us we enclose in the annexure hereto a Statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. Attention is drawn to the following:

Note No. 3 regarding declaration of Company as sick under section 3(l)(o) of SICA and preparation of financial statements on going concern basis and

regarding disposal of manufacturing assets by SASF in the financial year 2006-2007, however the accounts are continued to be prepared on going concern basis

3 Further to our comments in the Annexure referred to in paragraph 1 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 purposes of our audit;

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; and proper returns adequate for the purposes of our audit have been received from the offices not visited by us;

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) The Company has defaulted in repayment of fixed deposits for more than three years. Written representation has been received from directors of the Company regarding disqualification under clause (g) of sub section (I) of section 2 74 of the Companies Act, 1956 as on 31st March, 2009.

v) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Accounting Policies and Notes thereon in Schedule 18 and subject to, (a) Note No. 4 regarding non implication of financial liability in various courts pending against the company (bj Note No. 5 regarding non provision of interest amounting to Rs. 315.79 lacs on unsecured loans resulting into understatement of loss and corresponding liability to the tune ofRs. 315.79 lacs, (c) Note No. 6 regarding non adherence ofrepayment schedule with few parties, liability, if any, unascertained. (d)NoteNo. 7 regarding default in repayment of public deposits (e) Note no. 9 regarding non remittance of balance due for transfer to Investor Education and Protection Fund (f) Note No 10 regarding balances of Loans & Advances, Sundry Creditors, Deposits and Other Loans being subject to reconciliation and confirmation, (g) Note No. 11 (a) regarding non provision of interest arid penalty, if any on delay of payment of statutory due, amount not ascertainable, (h) Note No. 11(b) regarding deferred sales tax due for repayment (i) Note No. 12 regarding non provision for diminution in value of investments in Global Stone India Ltd in spite of erosion of entire net worth, and (j) Note No. 16 regarding non provision in respect of impairment of Solar Power Plant in accordance with AS -28, give the information required by 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, 2009; and

b) In the case of the Profit and Loss Account, of the loss for the year ended on that date.

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

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 1 of our report of even date to the members of Steel Tubes of India Limited for the year ended 31st March, 2009)

1. a) The Company is maintaining proper records showing fall particulars including quantitative details and situation of fixed assets, except in respect of certain assets.

b) The fixed assets have been 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 the nature of its assets. The Solar Power Plant of the company continues to remain installed at the erstwhile factory premises of the company and accordingly its physical existence becomes doubtful. (Refer Note 16 of Schedule 18)

c) During the year, the company has not disposed of substantial part of fixed assets affecting its going concern basis.

2. During the year company has not carried out any production activities and there has been no inventory and accordingly, paragraph (ii) (a), (b) & (c) of the order are not applicable

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 Companies Act, 1956.

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 Companies Act, 1956. Accordingly, paragraph (iii)(b), (iii)(c), (iii)(d), (iii)(f) and (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 and fixed assets and for processing Activities. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5 a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act 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 are no transactions made in pursuance of such contracts or arrangements entered in the register maintained under Section301 of the Companies Act, 1956.

6. During the year the Company has not accepted any deposits from the Public within the meaning of section 58 A, 58 AA or any other relevant provisions of the Act and the rules framed thereunder. However, in respect of deposits accepted during earlier years, the Company has not maintained the liquid assets as prescribed by rule 3A(1) and further penal interest on overdue period in case of public deposit amounting to Rs. 155.66 lacs matured, but remaining unpaid has also not been provided /paid as prescribed by rule SA of the Companies (Acceptance of deposits) Rules, 1975. (Refer Note No. 7 of Schedule 18) According to information and explanations given to us no orders under the aforesaid section have been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

7. During the current year no activities have been carried on by the company and therefore the internal audit was also not carried on.

8. As per the information and explanations given to us the maintenance of cost records has been prescribed by the Central Government under section 209(l)(d) of the Companies Act, 1956. The application to exempt the Company from the requirement of maintaining cost records and cost audit for the financial year 2002-03 and 2003-04, since the Company has changed its activities from manufacturing to processing on behalf of other party, has been rejected by the Department of Company Affairs on the ground that the party for which the goods are processed has not been ordered for audit of cost records. However, no such application has been filed by the Company for the financial year 2004-05, 2005-06, 2006-07,2007-08 and 2008-09 The Company is stated to be in the process of submitting representation before the Department of Company affairs.

9. a) According to the records of the Company examined by us, in our opinion, the Company is not regular in depositing the 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 as applicable with the appropriate authorities in India. The amount of statutory dues outstanding and payable for a period exceeding six months as on the last day of financial year concerned are mentioned in Note No. 11 of Schedule 18.

b) According to the records of the Company, the dues of Income tax /sales tax/ wealth tax/service tax/custom duty/excise duty/cess, which have not been deposited on account of disputes and the forum where the dispute is pending are as given below:

Name of the Statute Nature of the Amount Forum where dispute Dues (Rs.in lacs) ispending Central Excise Act, 1994 Excise duty 60.00 DGFT, New Delhi

Central Excise Act, 1944 Excise duty 31.63 Central Excise & Service

Tax Appellate Tribunal

Central Excise Act, 1944 Excise Duty 1.14 Commissioner Central

Excise (Appeals)

Entrytax Act, 1976 Entry Tax 89.64 Board of Revenue, M.P.

M.P. Commercial Tax Act, 1994 Sales Tax 110.06 M.P. High Court / Supreme Court.

CFS Cases Sales Tax 555.16 M.P.Fjigh Court / Supreme Court.



10. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth. The Company has incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

11. Based on our audit procedures and on the information & explanations given by the Management, we are of the opinion that the default in repayment of principal dues to financial institution/Banks by the Company has been cleared in view of repayment/settlement of loans through disposal of fixed assets.

12. Based on our examination of the records and the information and explanations given to us, the Company has not granted any loans and/or 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 Company.

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

15. According to the information and explanations given to us, the Company has not given guarantee for loans taken by others from banks and financial institutions.

16. The Company has not obtained any term loans during the current year.

17. 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 used for long-term investment by the Company.

18. The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Act during the year.

19. No Debentures have been issued by the Company during the year.

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

21. During the course of our examination of the books and records of the Company, carried out in accordance with generally accepted auditing practices in India, 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 cases by the management.

For Rastogi Narain & Co.

Chartered Accountants

(SANJAY RASTOGI)

Place : New Delhi Partner

Date : 2nd September, 2009 M. No.86962