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Auditor Report of Classic Diamonds (India) Ltd.

Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

The 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 Section 211(3C) of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India.

However, because of the matters described in the Basis for Disclaimer of Opinion paragraph below, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion

1. We could not observe the counting of physical inventories in the absence of information available and restriction placed by the Management Accordingly, we were unable to satisfy ourselves by alternative means concerning the inventory quantities held at 31st March, 2013 and 31st March, 2014 which are stated in the Balance Sheet at Rs.44,11,593and Rs.44,11,593 respectively.

2. In addition, we were unable to confirm or verify by alternative means balance of accounts receivableRs.2,957,822,918 and balance of accounts payable Rs.244,505,890 and corresponding translation gain or loss, if any on theses balance is not recorded for the year ended 31st March, 2014 and same matters was reported in previous year.

3. We are also unable to confirm the bank balance (including working capital facility and overdraft) and interest payable thereon since the accounts are freezed by the consortium of banks and by income tax authorities and as a result facility has been ceased to be operational and same matter was reported in previous year,.

4. The Company has been unable to renegotiate its borrowings from its bankers and also incurred loss in current year and previous year. Wthout such financial support there is substantial doubt that it will be able to continue as a going concern. Consequently, adjustments may be required to the recorded asset amounts and classification of liabilities. The financial statements (and notes thereto) do not disclose this fact.

As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded inventories, bank balance (including overdraft facilities) and interest payable thereon and accounts receivable/payable and the elements making up the Statement of Profit and Loss and the Cash Flow Statement.

Disclaimer of Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph above, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the aforesaid financial statements.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) 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:

(a) As described in the Basis for Disclaimer of Opinion paragraph above, we were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion paragraph above, we are unable to state whether 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 by this Report are in agreement with the books of account except for fixed assets register and other matter as referred in Basis for Disclaimer of Opinion

(d) Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion paragraph above, we are unable to state whether the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

(e) We are unable to comment on compliance of Section 274(1)(g) of the Act since none of the directors has submitted written representations with regards to being appointed as a director in terms of Section 274(1)(g) of the Act and consequently the same not been taken on record by the Board of Directors.

Annexure to Independent Auditors'' Report Referred to in paragraph under the heading of "Report on Other Legal and Regulatory Requirements" of our Report of even date

i. In respect of its fixed assets:

a) The company has not maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

b) As explained to us, the fixed assets have not been physically verified by the management during the year. Hence, we are unable to comment on discrepancies between book record and physical assets.

c) In the absence of fixed assets register and physical verification report of fixed assets we are unable to comment on disposal of fixed assets

ii. In respect of its inventories:

a) As explained to us, the inventories other than those lying with outside parties were physically verified during the year by the management at reasonable intervals. However, records of such physical verification were not made available to us for verification.

b) In our opinion and according to the information and explanations given to us, we are unable to comment on the procedures of physical verification in the absence of appropriate audit evidence.

c) In our opinion and on the basis of our examination of the records, in the absence of appropriate audit evidence, we are unable to comment on discrepancy on physical verification of stocks by the management if any.

iii.

d) According to information and explanations given to us, 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. As the Company has not granted any loans, the clause 4(iii)(b), 4(iii)(c) and 4(iii)(d) of the Order are not applicable.

e) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured, to / from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956 except for interest free loan from the Director and relative of director. The maximum amount involved during the year was Rs. 2,49,409 and Rs. 89,313 respectively and year-end balance is Rs.7,494 and Nil respectively.

f) In our opinion and according to information and explanations given to us, in respect of such interest free unsecured loans taken by the Company, the other terms and conditions are prima facie, not prejudicial to the interest of the Company.

g) In respect of such loans taken by the Company, the principal amounts were repayable on demand.

iv. In our opinion, and according to the information and explanations given to us, there is an inadequate internal control system commensurate with the size of the Company and there are no sale of goods and services during the year. There are no purchases of inventory and fixed assets during the year.

v. In respect of contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

b) Where each of such transaction is in excess of Rs. 5 lakh in respect of any party, having regard to the explanation that some of the items sold during the year where the suitable alternative sources are not readily available for obtaining comparable quotations. Hence, we are unable to comment on transactions have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.

vi. According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year. In respect of unclaimed deposits, the Company has complied with the provisions of Sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956.

vii. According to the information and explanations given to us the Company does not have internal audit system.

viii. The Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 for trading activities. Accordingly, this para is not applicable to the Company.

ix. According to the information and explanations given to us in respect of statutory dues:

a) The Company has not deposited undisputed statutory dues, including Provident Fund, Investor Education & Protection Fund, and Employees'' State Insurance, Income-tax, Sales-tax, Wealth-tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it with appropriate authorities.

b) There are undisputed amounts payable in respect of certain statutory dues for a period of more than six months from the date they became payable as given below:

Name of the statutory dues For the financial Amount (Rs.) Year Profession tax 2012-13 43,200

Employees contribution to ESIC Earlier years* 31,779

Employers contribution to ESIC Earlier years* 58,825

Income tax 2010-11 39,596,893

Wealth tax 2010-11 14,000

Property Tax 2011-12 132,270

Employees contribution to MLWF 2011-12 14,191

Value Added Tax 2012-13 309,693

Value Added Tax - Surat 2011-12 117,107

Value Added Tax - Maharashtra 2005-06 59,377,769

Value Added Tax - Maharashtra 2008-09 12,466,008

Value Added Tax - Maharashtra 2013-14 82,193

Value Added Tax - Maharashtra 2012-13 93,572

Value Added Tax - Maharashtra Earlier years* 216,806

Investor Education Protection Fund Earlier years* 10,385

year wise break up not available

c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and Cess which have not been deposited as on 31March 2014 on account of disputes are given below:

Name of statute Nature of dues Forum Period to which where the amount dispute is relates pending

Income tax act, Disallowances CIT(A) F.Y. 2007-08 1961 of expenses

Income tax act, Disallowances CIT(A) F.Y. 2008-09 1961 of expenses and deductions

Income tax act, Disallowances ITAT F.Y. 2009-10 1961 of expenses and deductions

Name of Statute Amount involved (Rs.)

Income tax act, 1961 53,75,640

Income tax act, 1961 24,72,17,205

Income tax act, 1961 2,05,61,740

xi. Accumulated losses of the Company at the end of the financial year are more than hundred percent of its net worth.

The Company has incurred cash losses during the current financial year and in the immediately preceding financial year.

xii. In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of dues to banks amounting to Rs.3,00,64,46,069/- in respect of loans repayable on demand. Also, the Company has failed to repay the overdraft balance in Current Accounts with the banks amounting to Rs.13,83,08,413/-.The Company has not defaulted in repayment of dues to financial institution. The Company has not issued any debentures and hence, clause

(xi) so far as it related to debenture holders does not apply in the case of the Company.

xiii. In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiv. In our opinion, and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statue applicable to chit fund and nidhi / mutual benefit fund / societies. Accordingly, clause 4

(xiii) of the Order is not applicable to the Company. xv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures or other investments. Accordingly, the provisions of paragraph 4

(xiv) of the Order are not applicable to the Company.

xvi. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given corporate guarantees to banks or financial institutions on behalf of associated concerns are prejudicial to the interests of the Company.

xvii. In our opinion and according to the information and explanations given to us, the Company has not raised any term loan during the current period consequently the para of the order is not applicable.

xviii. In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we are unable report on utilisation of short term fund for long term purpose as referred in basis of disclaimer of opinion since we do not have appropriate audit evidence for classification and recoverability of certain amounts.

xix. The Company has not made any preferential allotment of shares to parties or companies covered in the Register maintained under Section 301 of the Companies Act, 1956, during the year.

xx. The Company has not issued any debentures. Accordingly, clause (xix) of paragraph 4 of the Order is not applicable in the case of the Company.

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

xxii. To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

For JMR & Associates Chartered Accountants Firm Reg. No. 106912W

Place: Mumbai (CA. Nikesh Jain) Date : 30th May, 2014 Partner Membership No: 114003


Mar 31, 2012

1. We have audited the attached Balance Sheet of CLASSIC DIAMONDS (INDIA) LIMITED, Mumbai as at 31st March, 2012, the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with 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 (Auditor's Report) Order, 2003 as amended by Companies (Auditor's Report) (Amendment) Order, 2004 (together 'the Order) issued by the Central Government of India in terms of Sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of the information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we give 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 in paragraph 3 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit subject to our observations in Para 5 below;

(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 are, subject to our observations in Para 6 below, in compliance with the Accounting Standards referred to in Sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable;

(e) On the basis of written representations received from the Directors, as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2012 from being appointed as a director in terms of clau ° (g) of sub-section (1) of section 274 of the Companies Act, 1956;

5. Note No.30 regarding lock-out at the Company's factory at SEEPZ and consequential non- availability of books of accounts and other records for the purpose of audit;

6. In our opinion and to the best of our information and according to the explanations given to us, and subject to Para 5 above and:

I. Provision of Gratuity / Leave encashment not being provided on actuarial basis, which is in non- compliance with the requirements of Accounting Standard 15 'Employee Benefits' as specified in the Companies (Accounting Standards) Rules, 2006. In the absence of an actuarial valuation being made, we are unable to quantify the effect, if any, on the profits of the company for the year ended 31st March, 2012. (Refer Note No.36).

ii. Note No.33 regarding change in method of accounting relating to foreign exchange transactions; the year end assets and liabilities have not been converted at closing rate which is in non- compliance with the requirements of Accounting Standard 11 'Foreign Exchange transactions' as specified in the Companies (Accounting Standards) Rules, 2006. Had such conversion being made, the gross amount of debtors & creditors (before giving netting off effect) would have been higher by Rs. 38,769.38 lakh and Rs. 30,938.77 lakh respectively and loss before tax for the year would have been lower by Rs. 7,830.62 lakh.

The said accounts read with notes 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 31st March, 2012;

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

(c) in the case of Cash Flow Statement, of the Cash Flow for the year ended on that date. ANNEXURE TO THE AUDITORS' REPORT TO THE MEMBERS OF CLASSIC DIAMONDS (INDIA)

LIMITED FOR THE YEAR ENDED 31ST MARCH, 2012

(Referred to in paragraph 3 of our report of even date)

i. In respect of its fixed assets:

a) The Company is in the process of compiling fixed assets records to show full particulars, including quantitative details and situation of fixed assets.

b) Physical verification of fixed assets was carried out by the management, but since fixed assets records are still under compilation, no comparison with book records has yet been made.

c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

ii. In respect of its inventories:

a) As explained to us, the inventories other than those lying with outside parties were physically verified during the year by the management at reasonable intervals. However, records of such physical verification were not made available to us for verification.

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 were reasonable and adequate in relation to the size of the Company and the nature of its business.

c) Since inventory verification records were not available for verification, we are unable to determine whether the Company has maintained proper records of its inventories and whether material discrepancies were noticed on physical verification.

iii. According to the information and explanations given to us, the Company has, neither granted nor taken any loans, secured or unsecured, to / from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956. Accordingly, sub-clauses (a), (b), (c), (d), (e), (f) and (g) of the order, are not applicable in the case of the Company.

iv. In our opinion, and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

v. In respect of contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

b) Where each of such transaction is in excess of Rs. 5 lakh in respect of any party, having regard to the explanation that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, the transactions have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.

vi. According to the information and explanations given to us and in so far as it appears from our audit, the Company has not accepted any deposits from the public. Accordingly, clause (vi) of paragraph of the order is not applicable in the case of the Company.

vii. The company does not have a formal internal audit system. However, its internal control procedures ensure internal checking of financial records which in our opinion is reasonable under the circumstances having regard to the nature of the business and size of the Company.

viii. As informed, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956.

ix. According to the information and explanations given to us in respect of statutory dues:

a) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education & Protection Fund, and Employees' State Insurance, Income- tax, Sales-tax, Wealth-tax, Service tax, Value Added Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it with appropriate authorities.

b) There were no undisputed amounts payable in respect of Income-tax, Wealth-tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31st March, 2012 for a period of more than six months from the date they became payable except Income Tax relating to Assessment Year 2011-12 amounting to Rs.401.35lakh.

x. The Company does not have accumulated losses as at 31st March 2012. The Company has incurred cash losses during financial year ended on that date. However, no cash losses were incurred in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of dues to banks amounting to Rs. 28,736.89 lakh in respect of loans repayable on demand. The Company has not defaulted in repayment of dues to financial institution. The Company has not issued any debentures and hence clause (xi) so far as it related to debenture holders does not apply in the case of the Company.

xii. In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The provisions of any special statute as specified under clause (xiii) of the said Order are not applicable to the Company.

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

xv. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given corporate guarantees to banks or financial institutions on behalf of associated concerns are not prejudicial to the interests of the Company.

xvi. In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

xvii. In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on short term basis have not been used during the year for long term investments.

xviii. The Company has not made any preferential allotment of shares to parties or companies covered in the Register maintained under Section 301 of the Companies Act, 1956, during the year.

xix. The Company has not issued any debentures. Accordingly, clause (xix) of paragraph 4 of the Order is not applicable in the case of the Company.

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

xxi. During the course of 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 significant fraud on or by the Company, noticed or reported during the year nor have we been informed of such case by management.

For APTE & CO. Chartered Accountants Firm Reg.No.lll925W

(Dr. JayantApte)

Place: Mumbai Partner

Date: 14th August, 2012 Membership No: 035494


Mar 31, 2011

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

2. We conducted our audit in accordance with 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 (Auditor's Report) Order, 2003 as amended by Companies (Auditor's Report) (Amendment) Order, 2004 (together 'the Order) issued by the Central Government of India in terms of Sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of the information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we give 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 in paragraph 3 above, we report that:

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

b. In our opinion, proper books of account as required by law have been kept by the Company, so far as 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 are in compliance with the Accounting Standards referred to in Sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable; except regarding provision of Gratuity / Leave encashment not being provided on actuarial basis, therefore we are unable to quantify the effect, if any, on the profits of the company for the year ended 31th March 2011. (Refer Note No. B-7 of Schedule XV).

e. On the basis of written representations received from the Directors, as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2011 from being appointed as a director in terms of clause (g) of sub-section (I) of section 274 of the Companies Act, 1956;

f. Subject to our comment in Para 4(d) above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read with notes 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 31st March, 2011 ;

b) in the case of Profit and Loss Account, of the Profit of the Company for the year ended on that date; and

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

ANNEXURETOTHE AUDITORS' REPORT TO THE MEMBERS OF CLASSIC DIAMONDS (INDIA)

LIMITED FOR THE YEAR ENDED 31st MARCH, 2011

(Referred to in paragraph 3 of our report of even date)

1 (a) Fixed Assets records showing full particulars, including quantitative details and situation of fixed assets are being compiled by the company.

(b) Fixed assets have not been physically verified by the management during the year.

(c) No disposal of substantial part of the fixed assets of the company has taken place during the year.

2 (a) The inventories, other than those lying with outside parties have been physically verified by the management. In our opinion,

the frequency of verification is reasonable.

(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) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3. According to the information and explanation given to us, the Company has, during the year, neither granted nor taken any loan secured or unsecured to / from companies, firms and other parties covered in the register maintained Under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) ,(d), (e), (f) and (g) of the order, not applicable.

4. In our opinion, and 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 with regard to purchase of inventory and fixed assets and die sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

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 and arrangements that need to be entered in the register maintained in section 301 of the Companies Act, 1956 have been so entered. (b) The Company is dealing in the items which requires technical appraisal and expertise in determining prevailing market prices as on the date of transaction and in the absence of required information and records, we are unable to express the opinion in respect of transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, with regards to prices which are reasonable having regard to prevailing market prices at the relevant time.

6. During the year the Company has not accepted any deposits to which provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under would apply.

7. The company did not have any independent internal auditor during the year. We are informed that the company is in the process of appointment an internal auditor. However, according to the information and explanation given to us, the company has an internal audit system, which is commensurate with the size of the company and nature of its business.

8. The Central Government has not prescribed maintenance of cost records under Section 209(I)(d) of the Companies Act, 1956 for any of the products of the Company.

9 (a) According to the information and explanations given to us, and verification of records of the Company, the Company is regular in depositing with appropriate authorities undisputed statutory dues, including Provident Fund, Investor Education Protection Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealdi-tax, Service tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it. According to the information and explanations given to us, there are no undisputed amounts payables in respect of the aforesaid dues as at 31st March, 2011.

(b) According to the records of the company and information and explanation given to us, there are no disputed dues pending / payable of Income Tax, Sales Tax, Wealth Tax, ServiceTax, Custom Duty, Excise Duty, Cess as on 31th March 2011.

10. The Company has no accumulated losses and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

11. Based on our audit procedures and on the basis of information and explanations given by the Management, we are of the opinion that the Company has not defaulted in repayment of dues to any bank or financial institution. The Company has not issued any debentures.

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

13. The Company is not carrying the chit fund business; hence, the provisions of any special statute applicable to chit fund are not applicable.

14. The Company is not dealing in or trading in shares, securities, debentures or other investments.

15. In our opinion, terms and conditions on which the Company has given corporate guarantees to banks on behalf of Associated concerns, are not prima facie prejudicial to the interest of the Company.

16. On the basis of the review of the utilization of funds pertaining to term loans on overall basis and related information as made available to us by the Company, prima facie, the term loans taken by the Company were applied for the purpose for which they had been raised.

17. According to Cash flow statements and other records examined by us and on the basis of the information and explanation given to us, on overall basis we report that funds raised on short term basis have not been used for long term investments by the company.

18. The Company has made preferential allotment of shares to parties or companies covered in the Register maintained under section 301 of the Companies Act, 1956, However, the price at which shares have been issued is not prejudicial to the interest of the company.

19. During the year, the Company has not issued any debentures.

20. During the year, the Company has not raised money by public issue(s).

21. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For Apte & Co. Chartered Accountants

Jayant Apte Partner Membership No: 035494

Place: Mumbai Date: 11th August, 2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of CLASSIC DIAMONDS (INDIA) LIMITED, Mumbai as at 31st March, 2010, the Profit and Loss Account and 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 as amended by Companies (Auditors Report) (Amendment) Order, 2004 (together the Order) issued by the Central Government of India in terms of Sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of the information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we give 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 in paragraph 3 above, we report that:

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

b. In our opinion, proper books of account as required by law have been kept by the Company, so far as 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 are in compliance with the Accounting Standards referred to in Sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable; except regarding provision of Gratuity / Leave encashment not being provided on actuarial basis, therefore we are unable to quantify the effect, if any, on the profits of the company for the year ended 31st March 2010. (Refer Note No. B-7 of Schedule XV).

e. 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;

f. Subject to our comment in Para 4(d) above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read with notes 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 Profit and Loss Account, of the Profit of the Company for the year ended on that date; and c)in the case of Cash Flow Statement, of the Cash Flow for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT TO THE MEMBERS OF CLASSIC DIAMONDS (INDIA) LIMITED FOR THE YEAR ENDED 31 ST MARCH, 2010 (Referred to in paragraph 3 of our report of even date)

1 (a) Fixed Assets records showing full particulars, including quantitative details and situation of fixed assets are being compiled by the company.

(b) Fixed assets have not been physically verified by the management during the year.

(c) No disposal of substantial part of the fixed assets of the company has taken place during the year.

2(a) The inventories, other than those lying with outside parties have been physically verified by the management. In our opinion, the frequency of verification is reasonable.

(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) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3. According to the information and explanation given to us, the Company has, during the year, neither granted nor taken any loan secured or unsecured to / from companies, firms and other parties covered in the register maintained Under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) ,(d), (e), (f) and (g) of the order, not applicable.

4. In our opinion, and 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 with regard to purchase of inventory and fixed assets and the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

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 and arrangements that need to be entered in the register maintained in section 301 of the Companies Act, 1956 have been so entered. (b) The Company is dealing in the items which requires technical appraisal and expertise in determining prevailing market prices as on the date of transaction and in the absence of required information and records, we are unable to express the opinion in respect of transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, with regards to prices which are reasonable having regard to prevailing market prices at the relevant time.

6. During the year the Company has not accepted any deposits to which provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under would apply.

7. The company did not have any independent internal auditor during the year. We are informed that the company is in the process of appointment an internal auditor. However, according to the information and explanation given to us, the company has an internal audit system, which is commensurate with the size of the company and nature of its business.

8. The Central Government has not prescribed maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956 for any of the products of the Company.

9 (a) According to the information and explanations given to us, and verification of records of the Company, the Company is regular in depositing with appropriate authorities undisputed statutory dues, including Provident Fund, Investor Education Protection Fund, Employees State Insurance, Income-tax, Sales-tax, Wealth-tax, Service tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it. According to the information and explanations given to us, there are no undisputed amounts payables in respect of the aforesaid dues as at 31st March, 2010.

(b) According to the records of the company and information and explanation given to us, there are no disputed dues pending / payable of Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess as on 31st March 2010.

10. The Company has no accumulated losses and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

11. Based on our audit procedures and on the basis of information and explanations given by the Management, we are of the opinion that the Company has not defaulted in repayment of dues to any bank orfinancial institution. The Company has not issued any debentures.

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

13. The Company is not carrying the chit fund business; hence, the provisions of any special statute applicable to chit fund are not applicable.

14. The Company is not dealing in or trading in shares, securities, debentures or other investments.

15. In our opinion, terms and conditions on which the Company has given corporate guarantees to banks on behalf of Associated concerns, are not prima facie prejudicial to the interest of the Company.

16. On the basis of the review of the utilization of funds pertaining to term loans on overall basis and related information as made available to us by the Company, prima facie, the term loans taken by the Company were applied for the purpose for which they had been raised.

17. According to Cash flow statements and other records examined by us and on the basis of the information and explanation given to us, on overall basis we report that funds raised on short term basis have not been used for long term investments by the company.

18. The Company has made preferential allotment of shares to parties or companies covered in the Register maintained under section 301 of the Companies Act, 1956. However, the price at which shares have been issued is not prejudicial to the interest of the company.

19. During the year, the Company has not issued any debentures.

20. During the year, the Company has not raised money by public issue(s).

21. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For A. N. Damania & Co.

Chartered Accountants

Ashvin Damania

Place: Mumbai Proprietor

Date: 11th August, 2010 Membership No: 40166

Firm Reg.No.:102077W

 
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