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Auditor Report of Cranes Software International Ltd.

Mar 31, 2015

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

2. 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 Ac- counting 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 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 main- tenance 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.

3. 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.

4. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards and pronouncement 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.

5. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor's judg- ment, 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 adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropri- ateness 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.

6. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Basis for Qualified Opinion

7. The attached Balance Sheet as at 31st March, 2015 is drawn on the basis of the Principle of 'Going Concern'. We opine as follows in this connection :

7.1 An advance of Rs. 23,958.53 lakhs is due from a party for an inordinate period and in our opinion recovery of the same is doubtful. However, the company continues to classify such amounts as 'Good'. However, no evidence has been given to us to consider those amounts as recoverable as on the date of Balance Sheet.

7.2 Attention of the members is invited to note 3.11 of the Notes regarding recognition of deferred tax credit on account of unabsorbed losses and allowances aggregating to Rs.26,965.82 lakhs (year ended March 31, 2014 Rs. 22,559.89 lakhs). This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in Accounting Standard 22.

7.3 Reference is drawn to note no. 3.33 of the Notes regarding the amounts classified under "Fixed As- sets" including "Intangible Assets Under Development" amounting to Rs. 32,252.28 lakhs. No evi- dence has been produced before us for testing its impairment and in the absence of the same, we are unable to express any opinion on the impairment to such asset. In our opinion, such test of impairment as on the date of Balance Sheet is mandatory, especially in view of the higher degree of the obsoles- cence of software which is stated to be under various stages of development, though no further devel- opments have been carried out during the recent years.

7.4 The appropriateness of the 'Going Concern' concept based on which the accounts have been prepared is interalia dependent on the Company's ability to infuse requisite funds for meeting its obligations, rescheduling of debt and resuming normal operations.

8 We further report that, except for the effect, if any, of the matters stated in paragraphs 7.3 above, whose effect are not ascertainable, had the observations made in paragraphs 7.1 and 7.2 above been considered, the loss after tax for the year ended March 31, 2015 would have been higher by Rs. 50,924.36 lakhs.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matters expressed in Basis for Qualified opinion and Emphasis of matter 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 31st March, 2015, its loss and its cash flows for the year ended on that date.

Emphasis of Matter

1. Redemption of Foreign currency convertible bond amounting to Rs. 28,354.20 lakhs (42 million Euros) to the holders of the bonds have fallen due during April 2011 and is yet to be redeemed as on the date of Balance Sheet. A winding up petition has been filed by the trustees of the Foreign Currency Convertible Bond holders against the Company, before the Hon'ble High Court of Karnataka for non-payment of principal and the accrued interest thereon.

2. Term loans and working capital loans availed by the company from various banks amounting to Rs. 58,550.95 lakhs, which includes an amount of Rs. 4,425.04 lakhs taken over by an Asset Reconstruction Company, remain unpaid and are overdue since 2009. The lenders have filed cases before the Debt Recovery Tribunal (DRT) / Hon'ble Courts, etc for recovery of dues. These proceedings are in various stages of disposal before the "DRT" and respective Hon'ble Courts. Winding up petitions have been filed by Canara Bank and Bank of India against the company, before the Hon'ble High Court of Karnataka for non-payment of principal and the accrued interest thereon.

3. SBI Capital, a Creditor, has initiated a winding up petition against the company, before the Hon'ble High Court of Karnataka for non-payment of its dues.

4. In our opinion the securities provided to Banks are not adequate to cover the amounts outstanding to them as on the date of Balance Sheet.

5. We would like to draw the attention of the members to note no. 3.27 of the financial statements regarding default of payments to various statutory authorities.

6. We further draw attention on the following non compliances under the Companies Act, 2013 and rules thereon

a. Non-appointment of Woman Director as required under the second proviso to Section 149(1) of the said Act.

b. Non-appointment of Chief Financial Officer as required under section 203 of the said Act.

c. The Company has drawn and utilised an amount Rs. 43.77 lakhs from the 'CSIL Employees Comprehensive Gratuity Trust' fund for the purpose not intended in terms of 'The Payment of Gratuity Act, 1972'.(See note No. 3.05 of the Financial Statements)

Our Report is not qualified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2015 ("the order"), issued by the Central Govern- ment 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 paragraphs 3 and 4 of the order to the extent applicable.

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

(a) 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) 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 by this Report are in agreement with the books of account.

(d) In our opinion, except for the matters expressed in paras 7.2 and 7.3 of the Basis for Qualified 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) In our opinion, the qualifications and matters specified in the "Emphasis of Matter" paragraph, may have an adverse effect on the functioning of the Company.

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

(g) 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 finan- cial statements - Refer Note No. 3.27 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. The Company has not transferred an amount of Rs. 3.93 Lakhs, which is required to be trans- ferred to the Investor Education and Protection Fund.

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

The Annexure referred to in our Independent Auditor's re port to the members of Cranes Software International Limited ('the Company') on the standalone financial statements for the year ended on 31st March 2015.

We report that:

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

(b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

ii) (a) In our opinion and according to the information and explanations given to us, the management has conducted the physical verification of inventory at reasonable intervals during the year under review.

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

(c) According to the information and explanations given to us, we are of the opinion that the Company is maintaining proper records of inventory and no material discrepancies were noticed on their physical verification.

iii) (a) The Company has in the past granted interest free loans to its subsidiary companies covered in the register maintained under section 189 of the Companies Act, 2013. However, the Company has not granted any loan, secured or unsecured, to firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

(b) In the case of the loans granted to the bodies corporate listed in the register maintained under section 189 of the Act, the terms of arrangements do not stipulate any repayment schedule and the loans are repayable on demand. Accordingly, paragraph 3(iii)(b) of the Order is not applicable to the Company in respect of repayment of the principal amount.

(c) There are no overdue amounts of more than rupees one lakh in respect of the loans granted to the bodies corporate listed in the register maintained under section 189 of the Act.

iv) 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, with regard to the purchase of inventory and fixed assets and for the sale of goods and services. We have not observed any major weakness in the internal control system during the course of the audit.

v) The company has not raised any deposits from public as covered by provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed thereunder.

vi) The Central Government has not prescribed the maintenance of cost records under section 148(1) of the Act, for any of the services rendered by the Company.

vii) (a) On Examination of the books of accounts and other records of the Company we report that the company has defaulted in depositing its undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs duty, and Cess with the appropriate authorities. The following statutory liabilities are pending for payment for a period of more than six months from the date they became payable:

(Rs. In Lakhs)

Name of the Statute Nature of dues Amount to be paid

Employee's Provident Fund & Miscellaneous Provision Act Provident Fund 12.19

Employees State Insurance Act ESI 3.85

Income Tax Act Withholding Taxes 271.27

Finance Act Service Tax 184.49

Commercial Taxes Act Sales Tax/Value Added Tax 71.26

Income Tax Act Self Assessment Tax 89.02

Wealth Tax Act Wealth Tax 0.88

Income Tax Act Dividend Distribution Tax 273.88

Income Tax Act Fringe Benefit Tax 0.41

Investor Education Protection Fund Unclaimed Dividend 0.97

(b) According to the information and explanations given to us, there are no disputed amounts as at 31st March 2015 in respect of Provcident Fund, Employees' State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs duty and Cess and other applicable statutory dues with the exception of the following:

(Rs. In Lakhs)

Period to Name of the statute Nature of dues Amount which amount relates

Income Tax Act, 1961 Income Tax 6728.44 2009-10

Chapter V of the 2004-05 to Finance Act, 1994 Service Tax 756.02 2007-08

Chapter V of the 2008-09 to Finance Act, 1994 Service Tax 630.45 2012-13

The Employees Provident Employer and 51.87 1996-1997 to Fund and Miscellaneous Employee 2013-14 Provisions Act, 1972 Provident Fund

The Foreign Exchange Penalty for 50.00 2006 Regulation Act, 1999 Contravention of Section 42(1) of the FEMA, 1999

Name of the Statute Forum where dispute is pending

Income Tax Act, 1961 Income Tax Appellate Tribunal

Chapter V of the Finance Act, 1994 Customs, Excise and Service Tax Appellate Tribunal

Chapter V of the Finance Act, 1994 Commissioner, Service Tax, Bangalore

The Employees Provident Fund Assistant / Regional Provident Fund Commissioner

The Foreign Exchange Regulation Act, 1999 Director, Directorate of Enforcement.

(c) According to the information and explanations given to us, an amount of Rs. 3.93 Lakhs required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has not been transferred to such fund within time.

viii) The Company has accumulated losses amounting to Rs. 12,600 lakhs as at March 31, 2015 which is more than 50% if its Net worth. The Company has also incurred cash losses of Rs. 3,733.89 lakhs in the current financial year ended on that date and incurred cash loss of Rs. 16,142.52 lakhs in the immediate preceeding financial year.

ix) There are defaults in repayment of dues to various financial institutions and banks as at the balance sheet date. The amount of defaults and the period are tabulated below (Rs. In Lakhs)

Name of the Banks & Amount of default Period of financial institutions (including accrued Default interest)

Bank of India 25,555.83 From 2009 to Till Date

Canara Bank 8,050.43 From 2009 to Till Date

Industrial Development Bank of India 4,871.58 From 2009 to Till Date

State Bank of Mysore 4,186.97 From 2009 to Till Date

Bank of India 5,994.76 From 2009 to Till Date

State Bank of Travancore 5,466.33 From 2009 to Till Date

Jammu and Kashmir Bank Limited 1,951.06 From July 2013 to Till Date

x) In our opinion and according to the information and the explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

xii) During the course of our examination of the books of accounts carried on 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 been informed of such case by the management.

For S.JANARDHAN & ASSOCIATES

Chartered Accountants

Firm Registration No. 005310S

Bengaluru Vijay Bhatia

May 29, 2015 Partner

Membership No.201862


Mar 31, 2014

1. We have audited the accompanying financial statements of Cranes Software International Limited, which comprise the Balance Sheet as at March 31st, 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.

2. 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 13th 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.

3. 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.

4. 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 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.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

6. The attached Balance Sheet as at 31st March, 2014 is drawn on the basis of the Principle of ''Going Concern''. We opine as follows in this connection:

6.1 Redemption of Foreign currency convertible bond amounting to Rs. 34,682.13 lakhs (42 million Euros) to the holders of the bonds have fallen due during April 2011 and is yet to be redeemed as on the date of Balance Sheet.

6.2 Legal proceedings u/s. 138 of the Negotiable Instruments Act have been initiated by various Banks against the company. These Banks have applied to the Debt Recovery Tribunal (DRT) / Hon''ble Courts, etc for recovery of dues. These proceedings are in various stages of disposal before the "DRT" and respective Hon''ble Courts.

6.3 In our opinion the securities provided to Banks are not adequate to cover the amounts outstanding to them as on the date of Balance Sheet.

6.4 An advance of Rs. 23,950.68 lakhs is due from a party for an inordinate period and in our opinion recovery of the same is doubtful. However, the company continues to classify such amounts as ''Good''. However, no evidence has been given to us to consider those amounts as recoverable as on the date of Balance Sheet.

6.5 Attention of the members is invited to note 3.11 of the Notes regarding recognition of deferred tax credit on account of unabsorbed losses and allowances aggregating to Rs. 22,559.89 lakhs (year ended March 31,2013 Rs. 13,249.77lakhs). This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in A ccounting Standard 22.

6.6 The subsidiary company M/s. Systat Software Inc has out of amounts due to the company, written back a sum of 2.6 Million USD equivalent to Rs. 1,562.60 Lakhs during the year under reference. The Company has created a provision in the Statement of Profit and Loss for a similar amount in the books of the company. The company is yet to apply to the Reserve Bank of India seeking its approval for write off of this amount in accordance with the provisions of the Foreign Exchange Management Act, 1999.

6.7 Reference is drawn to note no. 3.34 of the notes regarding the amounts classfied under "Fixed Assets" including "Intangible Assets Under Development"amounting to Rs. 35,469.53 lakhs. No evidence has been produced before us for testing its impairment and in the absence of the same, we are unable to express any opinion on the impairment to such asset. In our opinion, such test of impairment as on the date of Balance Sheet is mandatory, especially in view of the higher degree of the obsolescence of software which is stated to be under various stages of development, though no further developments have been carried out during the recent years. In the light of the above, the appropriateness of the ''Going Concern'' concept based on which the accounts have been prepared is interalia dependent on the Company''s ability to infuse requisite funds for meeting its obligations, rescheduling of debt and resuming normal operations.

7. Further to the above, we would like to draw the attention of the members to note no. 3.28 regarding default of payments to various statutory authorities;

8. We further report that, except for the effect, if any, of the matters stated in paragraphs 6.7 above, whose effect are not ascertainable, had the observations made in paragraphs 6.4 and 6.5 above been considered, the loss after tax for the year ended March 31,2014 would have been higher by Rs. 46,510.57lakhs.

9. In our opinion and to the best of our information and according to the explanation given to us, the financial statements give the information required by the Act in the manner so required and subject to our observations as stated in para 6 and para 8 as above 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.

10. As required by the Companies (Auditor''s Report) Order, 2003 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.

11. As required by section 227(3) of the Act, 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, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance sheet, the Statement of Profit and Loss and the 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 ("the Act") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 subject to Para No. (6.5) as stated above regarding recognition of Deferred Tax Asset on account of Carried forward losses and Para No. (6.7) as stated above regarding impairment test of Fixed Assets both tangible and intangible along with Intangible Assets under Development.

e) On the basis of the written representations received from the directors as on March 31,2014, taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2014, from being re-appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

ANNEXURE

1. (a) The Company has 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 during the year.

(c) The Company has not disposed off any substantial part of the fixed assets during the year.

2. (a) The inventories have been physically verified during the year 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) The company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. (a) The Company during the year has granted unsecured loan of Rs. 1024.10 Lakhs to five subsidiary

Companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 11,856.22 lakhs and the year-end balance was Rs. 11,773.42 lakhs. Apart from the above, the Company has not granted any loan, secured or unsecured, to firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(b) In our opinion and according to the information and explanations given to us, the terms and conditions on which such loans have been granted are not prima facie prejudicial to the interest of the Company.

(c) The receipt of the principal amount is in accordance with the terms and conditions of such granted loan.

(d) There are no overdue amounts due from such parties.

(e) The company has not taken any loan from Companies, Firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause (3)

(f) and (3) (g) of Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to the purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control.

5. a. According to the information and explanations given to us, we are of the opinion that the particulars of

all contracts and 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, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of Rs. 5 lakhs in respect of any party during the year, have been made at prices, which are reasonable having regard to the prevailing market prices at the relevant time.

6. The company has not accepted any deposit from the public and as such the provisions of clause 4(vi) of the said Order are not applicable.

7. In our opinion, the company''s in house internal audit system needs to be further strengthened to render it commensurate with the size and nature of its business.

8. The Central Government has not prescribed the maintenance of cost records as required under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956.

9. (a) According to the information and explanations given to us, there have been delays and defaults

in depositing of undisputed statutory dues including , Provident Fund, Investors Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs Duty and Cess with the appropriate authorities. As on 31st March, 2014, the following amounts are still to be deposited on account of undisputed statutory liabilities:

(Rs. in Lakhs)

Name of the Statute Nature of dues Amount to be paid

Employee''s Provident Fund Provident Fund 31.90 & Miscellaneous Provision Act

Commercial Taxes Act Professional Tax 0.22

Employee State Insurance Act ESI 3.24

Income Tax Act Withholding Taxes 256.63

Service Tax Service Tax 156.15

Commercial Taxes Act Sales Tax/Value Added Tax 68.64

Income Tax Act Self Assessment Tax 696.96

Wealth Tax Act Wealth Tax 0.88

Income Tax Act Dividend Distribution Tax 273.88

Income Tax Act Fringe Benefit Tax 0.41

Investor Education Unclaimed Dividend 0.97 Protection Fund

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty, Sales Tax and Cess were in arrears as at 31st March 2014 for a period of more than six months from the date they became payable except in the following cases which is still due for payment:

(Rs. in Lakhs) Name of the Statute Nature of dues Amount to be paid

Employee''s Provident Fund Provident Fund 20.73 & Miscellaneous Provision Act

Employees State Insurance Act ESI 3.08

Income Tax Act Withholding Taxes 213.53

Service Tax Service Tax 97.49

Commercial Taxes Act Sales Tax/Value Added Tax 50.08

Income Tax Act SelfAssessment Tax 696.96

Wealth Tax Act Wealth Tax 0.88

Income Tax Act Dividend Distribution Tax 273.88

Income Tax Act Fringe Benefit Tax 0.41

Investor Education Unclaimed Dividend 0.97 Protection Fund

(c) According to the information and explanations given to us, there are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth Tax and Cess, which have not been deposited on account of any dispute except in respect of the following:

(Rs. in Lakhs) Name of the Nature of Disputed Assessment Statute dues Amount Year

Income Tax Act, Income 3,278.23 2008 - 09 1961 Tax

Income Tax Act, Income 5,942.48 2009 - 10 1961 Tax

Chapter V of the Service 756.02 2004 - 05 to Finance Act, 1994 Tax 2007 - 08

Chapter V of the Service 630.45 2004 - 05 to Finance Act, 1994 Tax 2007 - 08

Name of the Statues Forum where dispute is pending

Income Tax Act,Income 1961 Tax Tax Appellate Tribunal

Income Tax Act,Income 1961 Tax Income Tax Appellate Tribunal

Chapter V of the Customs, Excise and Service Tax Finance Act, 1994 Appellate Tribunal

Chapter V of the Department Finance Act, 1994 Authorities

10. The Company has accumulated losses, as at March 31, 2014. The Company has also incurred cash losses of Rs. 16,142.52 lakhs in the financial year ended on that date and Rs. 22,565.33 lakhs cash losses in the immediate preceding financial year.

11. There are defaults in repayment of dues to some financial institution and banks as at the balance

sheet date. The amount of defaults and the period are tabulated below

(Rs. in Lakhs) Amount of default Period of default Name of the Banks & Financial (including accrued Institutions interest)

Bank of India 22,295.79 From 2009 till date

Allahabad Bank 3,797.96 From 2009 till date

Canara Bank 5,535.66 From 2009 till date

Industrial Development 4,104.76 From 2009 till date Bank of India

State Bank of Mysore 3,676.65 From 2009 till date

Bank of India 5,277.27 From 2009 till date

State Bank of Travancore 4,824.13 From 2009 till date

The company has not issued any Debentures during the year.

12. According to the information and explanations given to us, the company has not granted any loans and advances on the basis of securities by way of pledge of shares and debentures.

13. In our opinion, the Company is not a chit fund or a Nidhi / Mutual Benefit Fund / Society. Therefore the provisions of clause (xiii) of para 4 of the Order are not applicable.

14. According to the information and explanations given to us, the Company is not dealing in or trading in any shares and securities and hence the provisions of Para (xiv) of the order are not applicable.

15. 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.

16. In our opinion and according to the information and explanations given to us, the term loan(s) have been applied for the purpose for which they were raised.

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 investments.

18. The company has not made any preferential allotment of shares during the year and hence the provisions of clause (xviii) of para 4 of this Order are not applicable.

19. The company has not issued any debentures during the year and hence the provisions of clause (xix) of para 4 of this Order are not applicable.

20. The company has not raised any money by way of public issues during the year and hence the provisions of clause (xx) of para 4 of this Order are not applicable.

21. During the course of our examination of the books of accounts carried on 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 been informed of such case by the management.

For S.JANARDHAN & ASSOCIATES Chartered Accountants Firm Registration No. 005310S

Bangalore Vijay Bhatia May 29, 2014 Partner, Membership No.201862


Mar 31, 2013

1. We have audited the accompanying financial statements of Cranes Software International Limited, which comprise the Balance Sheet as at March 31st, 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.

2. 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. 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

3. 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.

4. 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 risk 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.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

6. The attached Balance Sheet as at 31st March, 2013 is drawn on the basis of the Principle of "Going Concern" . We opine as follows in this connection :

6.1 A winding up petition has been filed by the Trustees of Foreign Currency Covertible Bond holders against the Company u/s 434 of the Companies Act, 1956 before the Hon''ble high Court of Karnataka for non-payment of principal (due for redemption in March 2011) and the accrued interest thereon.

6.2 Cases are filed u/s 138 of the Negotiable Instruments Act by various Banks against the company. These Banks have opplied to the Debt Recovery Tribunal / Hon''ble Courts, etc for recovery of dues and provisions of SARFAESI have also been invoked against the company. These cases are in various stages of disposal before the respective Hon''ble Courts.

6.3 In our opinion the securities provided to Banks are not adequate to cover the amounts outstandaing to them as on the date of Balance Sheet.

6.4 There are several overdue Trade Receivables and Advances recoverable from parties for an inordinate period and however, the company has classified such amounts as "˜Good''. However, no evidence has been given to us to consider those amounts as recoverable as on the date of Balance Sheet. In this connection, a sum of Rs. 21,300 lakhs has been provided in the books of account as provision for bad and doubtful debts against Trade Receivable, which in our opinion is inadequate and further provision to the extent of Rs. 10,974.50 lakhs on account of Trade Receivables and a sum of Rs. 23,610.83 lakhs on account of advances have not been made in the accounts.

6.5 Attention of the members is invited to note 3.11 of the Notes regarding recognition of deferred tax credit on account of unabsorbed losses and allowances aggregating to Rs. 11,802.46 lakhs (year ended March 31,2012 Rs. 11,953.94 lakhs) (Total amount utilized for the year ended March 31, 2013 amounts to Rs. 151.48 lakhs). This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in Accounting Standard 22.

6.6 Reference is drawn to note no. 3.34 of the notes regarding the amounts classfied under "Fixed Assets" including "Intangible Assets Under Development" amounting to Rs. 36,914.80 lakhs. No evidence has been produced before us for testing its impairment and in the obsence of the same, we are unable to express any opinion on the impairment to such asset. In our opinion, such test of impairment as on the date of Balance Sheet is mandatory, especially in view of the higher degree of the obsolescence of software which is stated to be under various stages of development, though no further developments have been carried out during the recent years. In the light of the above, the appropriateness of the "˜Going Concern'' concept based on which the accounts have been prepared is interalia dependent on the Company''s ability to infuse requisite funds for meeting its obligations, rescheduling of debt and resuming normal operations.

7. Further to the above, we would like to draw the attention of the members to the following i) Note No. 3.28 regarding default of payments to various statutory authorities;

ii) Note No. 3.46 regarding default in payment of dividend

8. We further report that, except for the effect, if any, of the matters stated in paragraphs 6.6 above, whose effect are not ascertainable, had the observations made in paragraphs 6.4 and 6.5 above been considered, the loss after tax for the year ended March 31, 2013 would have been higher by Rs. 46,378.80 lakhs.

9. In our opinion and to the best of our information and according to the explanation given to us, the financial statements give the information required by the Act in the manner so required and subject to our observations as stated in para 6 and para 8 as above 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 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.

10. As required by the Companies (Auditor''s Report) Order, 2003 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.

11. As required by section 227(3) of the Act, 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, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance sheet, the Statement of Profit and Loss and the 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 subject to Para No. (6.5) as stated above regarding recognition of Deferred Tax Asset on account of Carried forward losses and Para No. (6.6) as stated above regarding impairment test of Fixed Assets both tangible and intangible along with intangible assets under Development.

e) On verification of records and documents available with the company we report that all of the Directors have been disqualified from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

ANNEXURE

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

(b) The fixed Assets have been physically verified by the management during the year.

(c) The Company has not disposed off any substantial part of the fixed assets during the year.

2. (a) The inventories have been physically verified during the year 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) The company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3. The Company has not granted/taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. In view of the above, clause 4 (iii) (b), (c), (d), (f) and (g) of the said order are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures 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 and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control.

5. (a) According to the information and explanations given to us, we are of the opinion that the particulars of all contracts and 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, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of Rs. 5 lakhs in respect of any party during the year, have been made at prices, which are reasonable having regard to the prevailing market prices at the relevant time.

6. The company has not accepted any deposit from the public and as such the provisions of clause 4(vi) of the said Order are not applicable.

7. In our opinion, the company''s in house internal audit system needs to be further strengthened to render it commensurate with the size and nature of its business.

8. The Central Government has not prescribed the maintenance of cost records as required under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956.

9. (a) According to the information and explanations given to us, there have been delays and defaults in depositing of undisputed statutory dues including, Provident Fund, Investors Education and Protection Fund, Employees'' state Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs duty, and Cess with the appropriate authorities. As of 31st March, 2013, the following amounts are still to be deposited on account of statutory liabilities:

(Rs. in Lakhs)

Amount to be Name of the Statute Nature of dues Deposited

Employee''s Provident Fund Provident Fund 75.08

& Miscellaneous Provisions Act

Commercial Taxes Act Professional Tax 23.80

Employee State Insurance Act ESI 2.80

Income Tax Act Withholding Taxes 770.27

Service Tax Service Tax 103.60

Commercial Taxes Act Sales Tax/Value Added Tax 55.39

Income Tax Act Self Assessment Tax 696.96

Wealth Tax Act Wealth Tax 0.88

Income Tax Act Dividend Distribution Tax 273.88

Income Tax Act Fringe Benefit Tax 0.41

Investor Education Protection Fund Unclaimed Dividend 0.96

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Employees State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty, Sales Tax and Cess were in arrears as at 31st March 2013 for a period of more than six months from the date they became payable except in the following cases which are still due for payment:

(Rs. in Lakhs)

Name of the Statute Nature of dues Amount Due

Employee s Provident Fund Provident Fund 62.37 & Miscellaneous Provision Act

Commercial Taxes Act Professional Tax 22.35

Employees State Insurance Act ESI 1.99

Income Tax Act Withholding Taxes 722.2

Service Tax Act Service Tax 84.65

Commercial Taxes Act Sales Tax/Value Added Tax 23.05

Income Tax Act Self Assessment Tax 607.94

Wealth Tax Act Wealth Tax 0.88

Income Tax Act Dividend Distribution Tax 273.88

Income Tax Act Fringe Benefit Tax 0.41

Investor Education Protection Fund Unclaimed Dividend 0.60

(c) According to the information and explanations given to us, there are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth Tax, and Cess, which have not been deposited on account of any dispute except in respect of the following:

(Rs. in Lakhs)

Name of the Nature of Disputed Assessment Statute dues Amount Year

Income Tax Act, Income 2459.72 2008 - 09 1961 Tax

Chapter V of the Service 756.02 2004 - 05 to

Finance Act, 1994 Tax 2007 - 08



Forum where dispute is pending

Income Tax Appellate Tribunal

Customs, Exicise and Service

Tax Appellate Tribunal

10. The Company has accumulated losses, as at March 31, 2013. The Company has also incurred cash losses of Rs. 22,565.33 lakhs in the financial year ended on that date and Rs. 3,920.17 lakhs cash losses in the immediate preceding financial year.

11. There are defaults in repayment of dues to some financial institution and banks as at the balance sheet date. The amount of defaults and the period are tabulated below:

(Rs. in Lakhs)

Amount of default Period of default

Name of the Banks & Financial Institutions (including accrued interest)

Bank of India 20,673.04 From 2009 till date

Allahabad Bank 3,258.58 From 2009 till date

Canara Bank 4,768.37 From 2009 till date

Industrial Development Bank of India 3,527.20 From 2009 till date

State Bank of India 10,361.31 From 2009 till date

State Bank of Mysore 3,228.52 From 2009 till date

Bank of India 4,750.31 From 2009 till date

State Bank of Travancore 4,257.37 From 2009 till date

The company has not issued any Debentures during the year

12. According to information and explanations given to us, the Company has not granted any loans and advances on the basis of securities by way of pledge of shares and debentures.

13. In our opinion, the company is not a chit fund or a Nidhi / Mutual Benefit fund / Society. Therefore the provisions of clause (xiii) of para 4 of the Order are not applicable.

14. According to the information and explanations given to us, the company is not dealing in or trading in any shares and securities and hence the provisions of para (xiv) of the order are not applicable.

15. 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.

16. In our opinion and according to the information and explanations given to us, the term loan(s) have been applied for the purpose for which they were raised.

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 terms investments.

18. The company has not made any preferential allotment of shares during the year and hence the provisions of clause (xviii) of para 4 of this Order are not appliable.

19. The company has not issued any debentures during the year and hence the provisions of clause (xix) of para 4 of this Order are not applicable.

20. The company has not raised any money by was of public issues during the year and hence the provisions of clause (xx) of para 4 of this Order are not applicable.

21. During the course of our examination of the books of accounts carried on in acordance 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 been informed of such case by the management.



for S.JANARDHAN & ASSOCIATES

Chartered Accountants

Firm Registration No. 005310S



Seattle, USA Vijay Bhatia

May 30, 2013 Partner

Membership No.201862


Mar 31, 2011

1. We have audited the attached Balance Sheet of Cranes Software International Limited as at 31st 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. The attached Balance Sheet as at 31st March, 2011 is drawn on the basis of the Principle of 'Going Concern'. We opine as follows in this connection :

3.1 A petition has been filed by the ex-principal supplier of the company 'The Math works Inc.' for Winding up of the company u/s.434 of the Companies Act, 1956 before the High Court of Karnataka for non-payment of dues. The Management has represented that a settlement arrangement has been executed with the Party. We are yet to be shown conclusive evidence of the same, and whether the terms of such settlement are being implemented by the Company, enabling adhere to the same.

3.2 The petition has been filed by the Trustees of Foreign Currency Convertible Bond holders for winding up of the company u/s 434 of the Companies Act,1956 before the High Court of Karnataka for nonpayment of principal and the accrued interest thereon due for redemption in March, 2011. The Management has represented that admission of this matter is currently progressing before the Hon'ble High Court. Meanwhile, the Management also represents that discussions have been initiated with a large number of Bondholders to enable, explore and evolve a mutually acceptable course of action so that matters are not precipitated. Conclusive progress on these actions is yet to be evidenced to us.

3.3 There are several cases filed u/s.138 of the Negotiable Instruments Act against the company are in various stages of disposal in the respective Hon'ble Courts.

3.4 Some Banks and lending institutions have applied to the DRT / Hon'ble Courts, etc for recovery of dues and provisions of SARFAESI have also been invoked against the company. These cases are in various stages of disposal in the respective Hon'ble Courts.

3.5 The Company is also fighting various legal cases from creditors and employees for non- payment of dues to them. We are told that these cases are in various stages of disposal in the respective Hon'ble Courts.

3.6 The security provided to Banks and other lending institutions is not adequate to cover the amounts outstanding as appearing in the Balance Sheet.

3.7 There has been a further reduction in staff strength, though marginal, in the year under review.

3.8 The Book Debts and Trade Advances outstanding for more than one year, and even more are still being regarded as Company's good current assets in the financial statements as at 31/03/2011, and being classified as such in the reports. However, nothing has come to our knowledge to satisfy ourselves of these Current Assets continue to be 'good'. In this connection we state that no provision for bad and doubtful debts to the extent of Rs.310.67 Crores and Rs.236.95 Crores on account of the advances has been made in the accounts.

3.9 The company has not carried out the exercise of assessing the value of intangible assets appearing in the books with a view to provide for any impairment.

3.10 The expenses incurred for the purposes of developing different version of software were capitalized and classified as "CAPITAL WORK IN PROGRES" for preceding financial years are continued without any further development. In the absence of further development and "TECHNICAL CERTIFICATE" about the viability of these versions of software, we are not able to express any favourable opinion on CAPITAL WORK IN PROGRESS.

3.11 The Company has incurred a cash loss of Rs.76.37Crore for the year under review.

In the light of the above, we are unable to give an opinion on the reasonableness and applicability of the principle of 'Going Concern'. Nevertheless, in the absence of any conclusive evidence to indicate the contrary, the statements and Accounts thereon are prepared based on the principles of 'Going Concern' and our opinion is based on the same as well.

4. Further to the above, we additionally opine as follows :

4.1 The Company has defaulted in discharge of undisputed statutory dues like Provident Fund, ESI, VAT, Income Tax, including Tax deducted at source and Dividend Tax and Service Tax.

4.2 The Company has recognized Deferred Tax asset in respect of the carried forward losses to the extent of Rs.590/- Lakhs; in the absence of any reasonable certainty of future taxable income, consideration of this Asset may be 'Doubtful'.

4.3 The Company has not paid dividend declared in the Annual General meeting held on 29th September 2009 for the FY ending 31st March 2011.

5. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) order, 2004 issued by 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.

6. 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 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;

iii) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv) in our opinion, the Balance Sheet, the Profit and Loss Account and the 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, 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 (1) of section 274 of the Companies Act, 1956;

vi) in our opinion and to the best of our information and according to the explanations given to us, subject to Para nos ( 3 ) and ( 4 ) above the said accounts 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 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 flows of the Company for the year ended on that date.

ANNEXURE

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

(i) (a) The Company has generally maintained records showing particulars including quantitative details and situation of fixed assets. Movements of fixed assets took place in the immediately preceding financial year resulting incomplete records, updations are under progress.

(b) Not all the Fixed Assets have been physically verified by the management during the year.

(c) The Company has not disposed off substantial part of fixed assets during the year and therefore do not affect the going concern assumption on this account.

(ii) (a) The inventory has been physically verified during the year 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) 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) The Company has not granted/taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. In view of the above, clause 4 (iii) (b), (c), (d), (f) and (g) of the said order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures 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 and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system.

(v) (a) According to the information and explanations given to us, we are of the opinion that the particulars of all contracts and 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, the contracts and arrangements entered in the register maintained under section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The company has not accepted any deposit from the public and as such the provisions of clause 4(vi) of the said Order are not applicable.

(vii) In our opinion, the company's in house internal audit system needs to be further streamlined to render it commensurate with the size and nature of its business.

(viii) The Central Government has not prescribed the maintenance of cost records as required under clause

(d) of sub-section (1) of section 209 of the Companies Act, 1956.

(ix) (a) According to the information and explanations given to us, there have been delays and defaults in depositing of undisputed statutory dues including, Provident Fund, Employees' state Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs duty, and Cess with the appropriate authorities. As of 31st March, 2011, the following amounts are still to be deposited out of the total liabilities:

(Rs. in Lakhs)

Name of the Statute Nature of dues Amount to be Deposited

Employee's Provident Fund Provident Fund 77.46 & Miscellaneous Provisions Act

Commercial Taxes Act Professional Tax 9.88

Employee State Insurance Act ESI 0.73

Income Tax Act TDS 537.44

Service Tax Act Service Tax 328.10

Sales Tax / Value Added Tax Value Added Tax 11.47

Income Tax Act Self Assessment Tax 607.90

Wealth Tax Act Wealth Tax 0.88

(b)According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Employees State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty, Sales Tax and Cess were in arrears as at 31st March 2011 for a period of more than six months from the date they became payable except in the below case which is still due for payment:

(Rs. in Lakhs)

Name of the Statute Nature of dues Amount Due

Income Tax Act Corporate Dividend Tax 373.88

Employee's Provident Fund Provident Fund 68.46 & Miscellaneous Provision Act

Commercial Taxes Act Professional Tax 8.01

Employee State Insurance Act ESI 0.34

Income Tax Act TDS 471.93

Service Tax Act Service Tax 326.65

Sales Tax / Value Added Tax Value Added Tax 10.28

Income Tax Act Self Assessment Tax 607.90

Wealth Tax Act Wealth Tax 0.88

(c) According to the information and explanations given to us, there are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth Tax, and Cess, which have not been deposited on account of any dispute except in the below said cases:

(Rs. in Lakhs)

Name of the Nature of Disputed Assessment Forum where dispute is Statute dues Amount Year pending

Income Tax Act, Income 3849.18 2003-2004 Commissioner of Income Tax, 1961 Tax to 2007-08 Appeals

Sales Tax Act, Sales 34.21 2005-06 to Commissioner of Commercial 1956 Tax 2007-08 Taxes Appeal

Service Tax Act, Service 523.34 2004-05 to Customs, Exicise and Service 1994 Tax 2007-08 Tax Appelate Tribunal

(x) The Company has accumulated losses, as at March 31, 2011. The Company has also incurred cash losses of Rs.76.37crores in the financial year ended on that date and Rs.220crores cash losses in the immediate preceding financial year.

(xi) There are defaults in repayment of dues to some financial institution and banks although there are no dues to debenture holders as at the balance sheet date. The amount of defaults and the period are tabulated bellow:

(Rs. in Lakhs)

Amount of default Period of default/ Name of the Banks & (including accrued delay Financial Institutions interest)

Bank of India 18,493.26 From 2009 till date

State Bank of Travancore 3,212.31 From 2009 till date

Jammu & Kashmir Bank Limited 5,597.54 From 2009 till date

Hongkong and Shanghai Banking Corporation Limited 17,642.23 From 2009 till date

Allahabad Bank 2,859.03 From 2009 till date

Canara Bank 3,451.61 From 2009 till date

Industrial Development Bank of India 2,492.51 From 2009 till date

India bulls Financial Services Limited 230.00 From 2009 till date

State Bank of Mysore 2,789.76 From 2009 till date

State Bank of India 8,021.22 From 2009 till date

Yes Bank 3,255.66 From 2009 till date

(xii) According to information and explanations given to us, 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 and according to the information and explanation given to us, the Company is not a chit fund or a Nidhi /mutual benefit fund/ society.

(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.

(xv) In our opinion and according to information and explanations given to us, and as per our examination of relevant records, there are no guarantees outstanding as at 31/03/2011.

(xvi) In our opinion and according to the information and explanations given to us, a categorical examination of the application of financing received by the Company compared to the purposes as stipulated in the terms of the sanction has not been possible.

(xvii) According to the information and explanations given to us during this audit, we have not come across situations of funds raised on short-term basis being used for long-term investment.

(xviii) During the year 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) During the period, the Company has not raised any funds by issue of debentures.

(xx) During the year under review the Company has not raised any money through public issue and hence the provisions of this para is not applicable.

(xxi) During the course of our examination of the books of accounts carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, no fraud on or by the Company, has been noticed or reported during the course of our audit. for S.JANARDHAN & ASSOCIATES

Chartered Accountants

FRN : 005310S

Balakrishna S. Bhat

Bangalore Partner

September 7, 2011 Membership No.202976


Mar 31, 2010

1. We have audited the attached Balance Sheet of Cranes Software International Limited 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. The attached Balance Sheet as at 31st March, 2010 is drawn on the basis of the Principle of Going Concern. We opine as follows in this connection :

i) A Principal supplier of the company The Mathworks Inc. has filed a petition for Winding up of the company u/s.434 of the Companies Act, 1956 before the High Court of Karnataka for non-payment of dues.

ii) The Trustees of Foreign Currency Convertible Bond holders due for redemption in March, 2011 have served a legal notice on the Company for non-payment of interest due on the Bonds from September, 2009 and stated that a Petition u/s.434 for winding up of the company would be filed in the event of non-payment of interest.

iii) The company has also received several legal notices from creditors and employees for non- payment of dues to them.

iv) The security provided to Banks and other lending institutions is not adequate to cover the amounts outstanding as appearing in the Balance Sheet.

v) The Company has incurred a cash loss of Rs. 220.08 Crore for the year under review

vi) There has been a considerable erosion of staff strength for the year under review

vii The ability of the company to recover the book debts/trade advances representing substantial part of these assets shown in the Balance Sheet particularly in the absence of confirmation of balances and any tangible evidence for follow up of collection

viii) The company has not carried out the exercise of assessing the value of intangible assets appearing in the books with a view to provide for any impairment

vix) There are several cases filed u/s.138 of the Negotiable Instruments Act against the company

x) Some Banks and lending institutions have applied the DRT for review of dues and provisions of SARFAESI have also been invoked against the company

In the light of the above, we are unable to give an opinion on the reasonableness and applicability of the principle of Going Concern. Nevertheless, in the absence of any conclusive evidence to indicate the contrary, the statements are prepared based on the principles of Going Concern and our opinion is based on the same as well.

4. Further to the above, we additionally opine as follows :

i) The company has defaulted in discharge of undisputed statutory dues like Provident Fund, ESI, VAT, Income Tax, including Tax deducted at source and Dividend Tax and Service Tax.

ii) Non provision for the book debts to the extent of Rs.319.84 Crore and Rs. 234.44 Crore on account of the advances, which in the auditors opinion is doubtful.

iii) Recognition of Deferred Tax asset in respect of the carried forward losses to the extent of Rs.102 Crore, in the absence of any reasonable certainty of future taxable income

iv) Non payment of dividend declared in the Annual General meeting held on 29th September 2009 for the FY ending 31st March 2009.

v) As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) order, 2004 issued by 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.

6. 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 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;

iii) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv) in our opinion, the Balance Sheet, the Profit and Loss Account and the 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, 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;

vi) in our opinion and to the best of our information and according to the explanations given to us, subject to Para nos ( 3 ) and ( 4 ) above the said accounts 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 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 flows of the Company for the year ended on that date.

ANNEXURE

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

(i) (a) The Company has generally maintained records showing particulars including quantitative details and situation of fixed assets. During the year, there have been a large number of movements of such Fixed Assets amongst locations; these movements and the consequential impact are yet to be comprehensively reflected in the above records.

(b) The Fixed Assets have generally been physically verified by the management during the year.

(c) The Company has not disposed off substantial part of fixed assets during the year and therefore do not affect the going concern assumption on this account.

(ii) (a) The inventory has been physically verified during the year 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) 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) The Company has not granted/taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. In view of the above, clause 4 (iii) (b), (c), (d), (f) and (g) of the said order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures 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 and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system.

(v) (a) According to the information and explanations given to us, we are of the opinion that the particulars of all contracts and 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, the contracts and arrangements entered in the register maintained under section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The company has not accepted any deposit from the public and as such the provisions of clause 4(vi) of the said Order are not applicable.

(vii) In our opinion, the company has an in house internal audit system which needs to be further streamlined to render it commensurate with the size and nature of its business.

(viii) The Central Government has not prescribed the maintenance of cost records as required under clause

(d) of sub-section (1) of section 209 of the Companies Act, 1956.

(ix) (a) According to the information and explanations given to us, the Company was yet to deposit undisputed statutory dues including, Provident Fund, Employees state Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs duty, and Cess with the appropriate authorities. As of 31st March, 2010, the following amounts were still to be deposited out of the total liabilities:

(Rs. in Lakhs)

Name of the Statute Nature of dues Amount to be Deposited

Employee`s Provident Fund Provident Fund 265.30 & Miscellaneous Provisions Act

Commercial Taxes Act Professional Tax 5.70

Employee State Insurance Act ESI 0.20

Income Tax Act TDS 453.00

Service Tax Act Service Tax 274.2

Sales Tax Value Added Tax 16.50

Income Tax Act Self Assessment Tax 607.90

Wealth Tax Act Wealth Tax 0.80

(b)According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Employees State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty, Sales Tax and Cess were in arrears as at 31st March 2010 for a period of more than six months from the date they became payable except in the below case which is still due for payment:

(Rs. in Lakhs)

Name of the Statute Nature of dues Amount Due For the Period

Income Tax Act Corporate Dividend Tax 233.85 F Year 2007-08 40.03 F Year 2008-09

(c) According to the information and explanations given to us, there are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth Tax, and Cess, which have not been deposited on account of any dispute except in the below said cases:

(Rs. in Lakhs)

Name of the Nature of Disputed Assessment Forum where dispute is Statute dues Amount Year pending

Income Tax Act, Income 3849.18 2003-2004 Commissioner of Income Tax, 1961 Tax to 2007-08 Appeals -VI

Sales Tax Act, Sales 104.1 2005-06 to Commissioner of Commercial 1956 Tax 2007-08 Taxes, Appeals

Service Tax Act, Service 523.34 2004-05 to Customs, Exicise and Service 1994 Tax 2007-08 Tax Appelate Tribunal

(x) The Company does not have any accumulated losses, as at March 31, 2010. The Company has incurred cash losses of Rs.220crores in the financial year ended on that date and there are no cash losses in the immediate preceding financial year.

(xi) There are defaults in repayment of dues to some financial institution and banks although there are no dues to debenture holders as at the balance sheet date.

(xii) According to information and explanations given to us, 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 and according to the information and explanation given to us, the Company is not a chit fund or a Nidhi /mutual benefit fund/ society.

(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.

(xv) In our opinion and according to information and explanations given to us, and as per our examination of relevant records, the terms and conditions on which guarantees are given are not prejudicial to the interest of the Company.

(xvi) In our opinion and according to the information and explanations given to us, a categorical examination of the application of financing received by the Company compared to the purposes as stipulated in the terms of the sanction has not been possible.

(xvii) According to the information and explanations given to us during this audit, we have not come across situations of funds raised on short-term basis being used for long-term investment.

(xviii) During the year 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) During the period, the Company has not raised any funds by issue of debentures.

(xx) The end use of money raised by preferential issue and Foreign Currency Convertible bonds is disclosed in the Notes on Accounts to the financial statement. We have verified the same, based on the information and explanation given to us.

(xxi) During the course of our examination of the books of accounts carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, no fraud on or by the Company, has been noticed or reported during the course of our audit.

for S.JANARDHAN & ASSOCIATES

Chartered Accountants

FRN : 005310S

Balakrishna S. Bhat Bangalore Partner

September 30, 2010 Membership No.202976

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