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Auditor Report of Dharamsi Morarji Chemicals Company Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of THE DHARAMSI MORARJI CHEMICAL COMPANY 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.

Management's Responsibility for the Financial Statements

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 financial statements that give a true and fair view of the financial position, financial performance and cash fl ows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specifi ed 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 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 maintenance 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.

Auditor's Responsibility

Our responsibility is to express an opinion on these 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 thereunder. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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.

An audit involves performing procedures to obtain audit evidence about the amounts and the 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 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 an adequate internal fi nancial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the financial statements.

Basis for qualified opinion

The Company had recognized net deferred tax asset in earlier years aggregating to Rs.2654.15 lacs till 31st March, 2009 considering unabsorbed loss up to 31st March, 2008 and unabsorbed depreciation up to 31st March, 2009. For the subsequent financial periods, further net deferred tax asset has not been recognized in view of management's perceptions and reasons detailed in Note No.V(c). We are not in a position to opine on the realisability of the said net deferred tax asset. Consequently, the Accumulated losses as at the end of the year would have been higher by Rs.2654.15 Lacs.

Opinion

In our opinion and to the best of our information and according to the explanations given to us and except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid 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 and its profit and its cash fl ows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government 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.

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, the aforesaid 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) On the basis of the written representations received from the directors as on 31st 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.

(f) 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 (net of provision made) in its financial statements

Refer Note 2-A 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 amount 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 been transferred to such fund within time.

Re: The Dharamsi Morarji Chemical Company Limited.

Referred to in paragraph 1 on Report on Other Legal and Regulatory Requirements of our report.

(i) (a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) A substantial portion of the fixed assets has been physically verified by the management during the year and in our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(ii) (a) Physical verification of inventory has been conducted at reasonable intervals by the management;

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. No material discrepancies were noticed on physical verification.

(iii) The Company has not granted any secured or unsecured loans to any party covered in the register maintained under section 189 of the Companies Act, 2013. Therefore the requirements of sub-clause (a) and (b) of clause (iii) are not applicable to the Company.

(iv) There is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. There is a no continuing failure to correct major weaknesses in internal control system.

(v) The Company had unclaimed fixed deposits of Rs.0.60 Lacs (Earlier deposits) which will be paid/transferred to Investor Education and Protection Fund when claimed/ due.

The Company has not accepted any deposits during the year to which the provisions of section 73 to 76 of the Companies Act, 2013 and Companies (Acceptance of deposits) Rules, 2014 apply.

(vi) Central Government has specified the maintenance of cost records under sub-section (l) of section 148 of the Companies Act, 2013. Such accounts and records have been made and maintained by the Company.

(vii) (a) The Company is generally regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, wealth tax,service tax, duty of customs, duty of excise, value added tax cess and any other statutory dues with the appropriate authorities. There were no undisputed statutory dues that were outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable.

(b) Dues of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess have not been deposited on account of any dispute are as under.

Name of the Nature of Dues Forum where dispute is Pending Statute

Central Duty/Interest/Penalty Asst.Commissioner Excise Act Duty/Interest/Penalty Asst.Commissioner Duty/Interest/Penalty Asst.Commissioner Duty/Interest/Penalty Asst.Commissioner Duty/Interest/Penalty Asst.Commissioner Duty/Interest/Penalty Asst.Commissioner Duty/Interest/Penalty Asst.Commissioner Duty/Interest/Penalty Asst.Commissioner Duty/Interest/Penalty Commissioner Duty Dy. Commissioner Duty CESTAT, West Zone Bench. Duty Additional Commissioner of Central Excise Duty Suptd. Of Central Excise(Tech)- IVth Division, Mahad Transport Fees on SDS Bombay High Court

Name of the Period to which relate Amount (Rs in Lacs)

Central Excise Act June 1999 to August 1999 2.29 Sept 1999 to Dec 1999 1.81 Jan 2000 to June 2000 3.04 July 1996 to May 1999 4.03 July 2000 to May 2001 2.68 Various 24.48 Various 0.57 August 2003 to May 2004 1.18

56.59 3.79

Sept 13 to Aug 14 14.70

Nov 10 to Sept 13 5.96

Oct 13 to Aug 14 0.50

2007-08 to 2014-15 42.34

Total 163.96

(c) The amount 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 been transferred to such fund within time.

(viii) The accumulated losses of the Company are more than fifty percent of the Net Worth of the Company as at the end of the year and it has not incurred any cash loss during the current financial year and in the immediately preceding financial year.

(ix) The Company has not defaulted in repayment of dues to a financial institution or bank or debenture holders.

(x) The Company has not given any guarantee for loans taken by others from any bank or financial institution.

(xi) Term loans were applied for the purpose for which the loans were obtained;

(xii) No fraud on or by the Company has been noticed or reported during the year.

For K.S.AIYAR & Co

Chartered Accountants Firm's Registration No. 100186W

RAJESH S.JOSHI

Place of Signature: Mumbai Partner

Date: 28thMay, 2015 Membership No. 38526


Mar 31, 2014

We have audited the accompanying financial statements of The Dharamsi Morarji Chemical Company Limited ("the Company"), which comprise the Balance Sheet as at March 31,2014 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.

Management''s Responsibility for the Financial Statements

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 13 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 fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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.

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 entity''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for 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 accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Basis for Opinion

The Company had recognized net deferred tax asset in earlier years aggregating to Rs.2654.15 lacs till 31s March, 2009 considering unabsorbed loss up to 31st March, 2008 and unabsorbed depreciation up to 31st March, 2009. For the subsequent financial periods, further net deferred tax asset has not been recognized in view of management''s perceptions and reason detailed in Note No.V(c). We are not in a position to opine on the net deferred tax asset recognized till date as regards its ultimate realization since the virtual certainty of the available sufficient future taxable income, as required by Accounting Standard 22 i.e. ''Accounting for taxes on income'' notified pursuant to Companies (Accounting Standards) Rules, 2006, could not be substantiated.

Had the Company not recognized the said net deferred tax asset aggregating to Rs2654.15 Lacs, the Accumulated losses as at the end of the year would have been higher by Rs.2654.15 Lacs.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the 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:

(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 Profit 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.

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 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.

2. 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 comply with the Accounting Standards notified under the Companies Act, 1956 read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013.

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

ANNEXURE TO THE AUDITORS'' REPORT Referred to in paragraph 1 of Report on Other Legal and Regulatory Requirements

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

(b) A substantial portion of the fixed assets has been physically verified by the management during the year and in our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

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

(ii) (a) The inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly sub clause (b), (c) and (d) are not applicable.

(b) The Company has taken interest free loan amounting to Rs. 1715.43 Lacs from a director of the Company and inter-corporate deposits of Rs.523.80 Lacs from four parties listed in the register maintained under section 301 of the Companies Act, 1956.

(c) In our opinion and according to the information and explanations given to us, the terms and conditions of the unsecured loans taken were prima facie not prejudicial to the interest of the Company.

(d) According to the information and explanations given to us the repayment terms of the principal amounts are not decided.

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

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of Companies Act, 1956 have so been entered in register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, these contracts or arrangements 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 deposits during the year from the public to which provisions of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply.

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

(viii) We have broadly reviewed the books of account maintained by the Company which have been made pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1)(d) of the Companies Act, 1956, and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) (a) According to the records of the Company, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Customs Duty and Wealth Tax, Provident Fund, Investor Education Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Excise Duty, Service Tax, Cess and other statutory dues applicable to it. Based on our audit procedures and according to the information and explanations given to us, the following undisputed statutory dues were outstanding as at March 31,2014 for a period of more than six months from the date they became payable.

Nature of Dues Period to which Due Dates Amount (Rs. In Lacs) Amount relates

Service Tax & Interest 2005-06 Various 0.19

2006-07 Various 35.34

2007-08 Various 33.31

2008-09 Various 3.53

Total 72.37

(b) According to the records of the Company, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which have not been deposited on account of dispute are given below:

Name of the Nature of Dues Forum where Period to Amount Statute dispute is which (Rs in Lacs) Pending relate

Central Duty/ Asst. June 1999 2.29 Excise Act Interest/ Commissioner to Penalty August 1999

Duty/ Asst. Sept 1999 1.81 Interest/ Commissioner to Dec 1999 Penalty

Duty/ Asst. Jan 2000 3.04 Interest/ Commissioner to June 2000 Penalty

Duty/ Asst. July 1996 4.03 Interest/ Commissioner to May 1999 Penalty

Duty/ Asst. July 2000 2.68 Interest/ Commissioner to May 2001 Penalty

Duty/ Asst. Various 24.48 Interest/ Commissioner Penalty

Duty/ Asst. Various 0.57 Interest/ Commissioner Penalty

Duty/ Asst. August 2003 1.18 Interest/ Commissioner to May 2004 Penalty

Duty/ Commissioner 56.59 Interest/ Penalty

Duty Dy. Commissioner 3.79

Duty on Asst. Various 0.80 captive Commissioner consumption

Alleged CESTAT Various 9.76 undervaluation of SA

Transport Fees Bombay 2007-08 37.51 on SDS High Court to 2013-14

Total 148.53

Sales Tax Tax/ Appellate 1992-93 6.91 Act Interest/ Tribunal Penalty

Tax/ Appellate 1993-94 4.20 Interest/ Tribunal Penalty Total 11.11

Entry Tax Tax/Interest High Court 4.47

(x) The accumulated losses of the Company are more than fifty percent of the Net Worth of the Company as at the end of the year and it has not incurred any cash loss during the current financial year and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

(xii) Based on our examination of the records and the 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, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

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

(xv) The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The term loan taken from a Bank has been utilized for the purpose for which it is taken.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term purposes.

(xviii) 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) The Company has not issued any debentures during the year.

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

(xxi) Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the 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 K.S.Aiyar & Co. Chartered Accountants ICAI Firm Registration Number: 100186W

Raghuvir M. Aiyar Partner Membership Number: 38128

Mumbai, 28.05.2014


Mar 31, 2012

1) We have audited the attached Balance Sheet of The Dharamsi Morarji Chemical Company Limited, as at March 31, 2012 and also the Statement of Profit & Loss 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 the Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4-A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4) Further to our comments in the Annexure referred to in paragraph 3 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, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

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

(vi) Attention is invited to Note No. X(11), regarding preparation of accounts on a 'Going Concern' basis despite continued losses and erosion of total net worth of the Company, in view of the management's perceptions and reasons detailed therein.

(vii) Attention is invited to Note No. X(16), regarding Trade Receivables that could not be classified as outstanding for a period of more than six months from the due date instead of invoice date as required by the revised Schedule VI to the Companies Act, 1956. We were explained that the necessary modification in the existing computer program will be carried out in due course. This revised classification does not have any material impact on the financial statements except for the Presentation and Disclosure of the same.

(viii) The Company had recognized net deferred tax asset in earlier years aggregating to Rs. 2654.15 lacs till 31st March, 2009 considering unabsorbed loss up to 31st March, 2008 and unabsorbed depreciation up to 31st March, 2009. For the subsequent financial periods, further net deferred tax asset has not been recognized in view of management's perceptions and reason detailed in Note No. V(c). We are not in a position to opine on the net deferred tax asset recognized till date as regards its ultimate realization since the virtual certainty of the available sufficient future taxable income, as required by Accounting Standard 22 i.e. 'Accounting for taxes on income' notified pursuant to Companies (Accounting Standards) Rules, 2006, could not be substantiated.

Had the Company not recognized the said net deferred tax asset aggregating to Rs. 2654.15 Lacs, the Accumulated Losses as at the end of the year would have been higher by Rs. 2654.15 Lacs.

(ix) Had the impact of matter stated at (viii) been considered, accumulated losses as at 31st March, 2012 of Rs. 9755.75 Lacs would have been Rs. 12409.90 Lacs.

(x) Subject to Clause No. (viii) and (ix)above, in our opinion and to the best of our information and according to the explanations given to us, 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 March 31, 2012;

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 flow for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in paragraph 3 of our report of even date on the Accounts for the year ended March 31, 2012, of The Dharamsi Morarji Chemical Company Limited)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However, in the case of some assets, individual records with quantitative details and values are to be segregated, updated and reconcited.

(b) A substantial portion of the fixed assets has been physically verified by the management during the year and in our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year were not substantial. According to the information and explanations given to us, we are of the opinion that the disposal of the fixed assets has not affected the going concern status of the Company.

(ii) (a) The inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly sub clause (b), (c) and (d) are not applicable.

(b) The Company has taken interest free loan amounting to Rs. 1715.43 Lacs from a director/s of the Company and inter-corporate deposits of Rs. 716.80 Lacs from four parties listed in the register maintained under section 301 of the Companies Act, 1956.

(c) In our opinion and according to the information and explanations given to us, the terms and conditions of the unsecured loans taken were prima facie not prejudicial to the interest of the Company.

(d) According to the information and explanations given to us the repayment terms of the principal amounts are not decided.

(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 purchase of inventory, fixed assets and with regard to the sate of goods and services. However, there is scope to strengthen the internal controls at operational level through proper implementation. During me course of our audit no major weakness has been noticed in the internal controls.

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of Companies Act, 1956 have so been entered in register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, these contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has not complied with certain provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public including non-filing of returns of fixed deposits etc. As informed to us, no order has been passed by the Company Law Board or National Law Tribunal or Reserve Bank of India or any other Court or any other Tribunal in contravention of the aforesaid provisions and/or rules by the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business, however, the scope and coverage of the same needs to be increased.

(viii) We have broadly reviewed the books of account maintained by the Company which have been made pursuant to the Rules made by me Central Government for the maintenance of cost records under Section 209 (1)(d) of the Companies Act, 1956, and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) (a) According to the records of the Company, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including Customs Duty and Wealth Tax, Provident Fund, Investor Education Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Excise Duty, Service Tax, Cess and other statutory dues applicable to it. Based on our audit procedures and according to the information and explanations given to us, the following undisputed statutory dues were outstanding as at March 31, 2012 tor a period of more than six months from the date they became payable.

Nature of Dues Period to which Due Dates Amount (Rs. Amount relates In Lacs)

Service Tax/ Interest thereon 2005-06 Various 0.19

2006-07 Various 45.51

2007-08 Various 33.31

2008-09 Various 3.53

Total 82.54

Professional Tax 2006-07 Various 11.18

2007-08 Various 9.75

2008-09 Various 0.20

2009-10 Various 0.05

2010-11 Various 0.50

2011-12 Various 1.25

Total 22.88

VAT and CST Various 3.36

PF, FPF, EDLI, Admin. Charges, ESIC etc Various 12.75

Tax deducted at source on:

Salary 2011-12 Various 2.55

Contractors 2011-12 Various 2.54

Prof. Fees 2011-12 Various 1.39

TDS on WCT 2011-12 Various 0.15

TCS 2010-11 Various 0.06

2011-12 Various 0.02

Total 6.71

IEPF- Cannot be Cannot be 10.63 Unclaimed Ascertained Ascertained dividend

IEPF-Unclaimed Interest on FD/Debentures Cannot be Cannot be 5.29 Ascertained Ascertained

IEPF-Unclaimed Cannot be Cannot be 17.31 Fixed Deposits Ascertained Ascertained

Sales Tax Loans 161.10

(ix) (b) According to the records of the Company, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which have not been deposited on account of dispute are given below:

Name of the Nature of Dues Forum where Period to Amount Statute dispute is whch relate (Rs. Pending Lacs)

Central Duty/Interest/ Asst. June 1999 to 2.29 Excise Act Penalty Commissioner August 1999

Duty/Interest/ Asst. Sept 1999 to 1.81 Penalty Commissioner Dec 1999

Duty/Interest/ Asst. Jan 2000 to 3.04 Penalty Commissioner June 2000

Duty/Interest/ Asst. July 1996 to 4.03 Penalty Commissioner May 1999

Duty/Interest/ Asst. July 2000 to 2.68 Penalty Commissioner May 2001

Duty/Interest/ Asst. Various 24.48 Penalty Commissioner

Duty/Interest/ Asst. Various 0.57 Penalty Commissioner

Duty/Interest/ Asst. August 2003 1.18 Penalty Commissioner to May 2004

Duty/Interest/ Asst. Various 0.80 Penalty Commissioner

Alleged CESTAT Various 9.76 undervaluation of SA

Total 50.64

Sales Tax Tax/Interest/ Appellate 1992-93 6.91 Act Penalty Tribunal

Tax/Interest/ Appellate 1993-94 4.20 Penalty Tribunal

Total 11.11

Entry Tax Tax/Interest High Court 4.47



(x) The accumulated losses of the Company are more than fifty percent of the Net Worth of the Company as at the end of the year and it has not incurred any cash loss during the current financial year and in the immediately preceding financial year.

(xi) Company has defaulted in repayment of Sales Tax Loans of Rs. 161.10 Lacs. Pending receipt of revised schedule the same has been considered as 'Other Payables' in 'Current Liabilities' (Also referred to in ix(a) above).

(xii) Based on our examination of the records and the 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, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

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

(xv) The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The term loan taken from a Bank has been utilized for the purpose for which it is taken.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the funds amounting to Rs. 2396.16 Lacs raised on short-term basis have been used for long-term purposes.

(xviii) 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) The Company has not issued any debentures during the year.

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

(xxi) Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the 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 K. S. Aiyar & Co. Chartered Accountants FRN: 100186W

RAGHUVIR M. AIYAR Partner Membership No. 38128

Mumbai, 30th May, 2012


Mar 31, 2011

1) We have audited the attached Balance Sheet of The Dharamsi Morarji Chemical Company Limited, as at March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the nine months period ("the period") 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 the Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4-A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4) Further to our comments in the Annexure referred to in paragraph 3 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, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

(v) On the basis of written representations received from the directors as on March 31, 2011 and taken on record by the Board of Directors, we report that none of the directors of the Company are disqualified, as on March 31, 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) Attention is invited to Note No.22, regarding preparation of accounts on a 'Going Concern' basis despite continued losses and erosion of total net worth of the Company, in view of the management's perceptions and reasons detailed therein.

(vii) The Company had recognized net deferred tax asset in earlier years aggregating to Rs.2654.15 lacs till 31st March, 2009 considering unabsorbed loss up to 31st March, 2008 and unabsorbed depreciation up to 31st March, 2009. For the subsequent financial period, further net deferred tax asset has not been recognized in view of management's perceptions and reason detailed in Note No. 16 (b). We are not in a position to opine on the net deferred tax asset recognized till date as regards its ultimate realization since the virtual certainty of the available sufficient future taxable income, as required by Accounting Standard 22 i.e. 'Accounting for taxes on income' notified pursuant to Companies (Accounting Standards) Rules, 2006, could not be substantiated.

Had the Company not recognized the said net deferred tax asset aggregating to Rs.2654.15 Lacs, the Accumulated Losses as at the end of the period would have been higher by Rs.2654.15 Lacs.

(viii) During the period, consequent to the negotiated settlements with the secured/unsecured lenders of the Company, waived dues representing only the Principal amount of borrowings aggregating to Rs.3362.76 Lacs have been credited directly to the 'Capital Reserve' of the Company for the reasons detailed in Note No. 14, instead of crediting the same to the Profit and Loss Account of the period, as per the treatment recommended by the Expert Advisory Committee of the Institute of Chartered Accountants of India, in respect of a similar case. Had this been credited to the Profit & Loss Account of the period, the Loss for the period would have been lower by Rs. 3362.76 Lacs and accumulated losses as at the end of the period would have been lower by a like amount.

(ix) Had the impact of matters stated at (vii) and (viii) been considered, Loss for the period ended 31st March, 2011 of Rs.479.53 Lacs would have been converted into Profit for the period ended 31st March, 2011 of Rs.2883.23 Lacs and accumulated losses as at 31st March, 2011 of Rs.9357.42 Lacs would have been Rs.8648.81 Lacs.

(x) Subject to Clause No.(vii) and (viii)above, in our opinion and to the best of our information and according to the explanations given to us, 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 March 31, 2011 ;

b. in the case of the Profit and Loss Account, of the Loss for the period ended on that date; and

c. in the case of the Cash Flow Statement, of the cash flow for the period ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in paragraph 3 of our report of even date on the Accounts for the nine months period ended March 31,2011, of The Dharamsi Morarji Chemical Company Limited)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However, in the case of some assets individual records with quantitative details and values are to be segregated, updated and reconciled.

(b) A substantial portion of the fixed assets has been physically verified by the management during the period and in our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the period were not substantial. According to the information and explanations given to us, we are of the opinion that the disposal of the fixed assets has not affected the going concern status of the Company.

(ii) (a) The inventories have been physically verified during the period by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly sub clause (b), (c) and (d) are not applicable.

(b) The Company has taken interest free loan amounting to Rs. 1715.43 Lacs from a director/s of the Company and inter-corporate deposits of Rs.896.80 Lacs from four parties listed in the register maintained under section 301 of the Companies Act, 1956.

(c) In our opinion and according to the information and explanations given to us, the terms and conditions of the unsecured loans taken were prima facie not prejudicial to the interest of the Company.

(d) According to the information and explanations given to us the repayment of the principal amounts are as stipulated.

(iv) In our opinion and according to the information and explanatioas 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 purchase of inventory, fixed assets and with regard to the sale of goods and services. However, there is scope to strengthen the internal controls at operational level through proper implementation. During the course of our audit no major weakness has been noticed in the internal controls.

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of Companies Act, 1956 have so been entered in register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to usr these contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has not complied with certain provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public including non-filing of returns of fixed deposits etc. As infonved to us, no order has been passed by the Company Law Board or National Law Tribunal or Reserve Bank of India or any other Court or any other Tribunal in contravention of the aforesaid provisions and/or rules by the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business, however, the scope and coverage of the same needs to be increased.

(viii) We have broadly reviewed the books of account maintained by the Company which have been made pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1 ){d) of the Companies Act, 1956, in respect of Sulphuric Acid, Single Super Phosphate (Fertilizer) and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) (a) According to the records of the Company, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including Customs Duty and Wealth Tax, Provident Fund, Investor Education Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Excise Duty, Service Tax, Cess and other statutory dues applicable to it. Based on our audit procedures and according to the information and explanations given to us, the following undisputed statutory dues were outstanding as at March 31,2011 for a period of more than six months from the date they became payable.

Nature of Dues Period to which Amount relates Due Dates Amount (Rs. In Lacs)

Service Tax/Interest thereon 2005-06 Various 0.19

2006-07 Various 45.51

2007-08 Various 33.31

2008-09 Various 3.53

Total 82.54

Professional Tax 2006-07 Various 11.18

2007-08 Various 10.99

2008-09 Various 0.99

2009-10 Various 0.55

2010-11 Various 0.65

Total 24.36

VAT arid CST Various 8.10

PF,FPF,EDLI,Admin Charges.ESIC etc Various 0.18

Tax deducted at source on:

Salary 2010-11 Various 10.36

Contractors 2010-11 Various 0.74

Prof. Fees 2010-11 Various 3.07

Interest 2010-11 Various 2.33

Brokerage 2010-11 Various 1.58

Non resident 2010-11 Various 0.04

Total 18.12

Nature of Dues Period to which Amount relates Due Dates Amount (Ra. In Lacs)

IEPF-Unclaimed divedend Cannot be Ascertained Cannot be 10.63 Ascertained

IEPF-Unclaimed Interest on FD/ Debentures Cannot be Ascertained Cannot be 5.29 Ascertained

lEPF-Unclaimed Fixed Deposits Cannot be Ascertained Cannot be 19.83 Ascertained

Sales Tax Loans 221.90

(b) According to the records of the Company, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which have not been deposited on account of dispute are given below:

Name of the Nature of Dues Forum where dispute Period to which relate Amount Statute is Pending (Rs In Lacs)

Central Excise Act Duty/interest/ Penalty Asst. Commissioner June 1999 to August 1999 2.29

Duty/Interest/ Penalty Asst. Commissioner Sept 1999 to Dec 1999 1.81

Duty/interest/ Penalty Asst. Commissioner Jan 2000 to June 2000 3.04

Duty/interest/ Penalty Asst. Commissioner July 1996 to May 1999 4.03

Duty/interest/ Penalty Asst. Commissioner July 2000 to May 2001 2.68

Duty/interest/ Penalty Asst. Commissioner Various 24.48

Duty/interest/ Penalty Asst. Commissioner Various 0.57

Duty/interest/ Penalty Asst. Commissioner August 2003 to May 2004 1.18

Duty on captive consumption Asst. Commissioner Various 0.80

Alleged undervaluation of SA CESTAT Various 9.76

CenVat Credit on CHA related services Deputy Commissioner April 2010 to March 2011 2.93

Total 53.57

Sales Tax Act Tax/interest/ Penalty Appelate Tribunal 1992-93 6.91

1993-94 4.20

Total 11.11

Entry Tax Tax/Interest High Court 4.47

(x) The accumulated losses of the Company are more than fifty percent of the Net Worth of the Company as at the end of the financial period, and it has not incurred cash loss during the current financial period, but it had incurred cash loss during the immediately preceding financial perdiod.

(xi) Company had defaulted in repayment of Sales Tax Loans for which rescheduling has been sought by the Company.

(xV) Based on our examination of the records and the 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.

(xiH) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

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

(xv) The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The term loans outstanding in the books of the Company as on March 31,2011 have been taken and utilized in earlier accounting periods, including working Capital term loans, which have been converted from working capital fund based limits.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the funds amounting to Rs.4255.26 lacs raised on short-term basis have been used for long-term purposes.

(xviii)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) The Company has not issued any debentures during the period.

(xx) The Company has not raised money by public issue during the period.

(xxi) Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the 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 K. S. Alyar & Co.

Chartered Accountants

FRN:100186W

Raghuvtr M. Alyar

Partner

Membership No. 38128

Mumbai, 30th May, 2011




Jun 30, 2010

1) We have audited the attached Balance Sheet of The Dharamsi Morarji Chemical Company Limited, as at June 30, 2010 and also the Profit and Loss Account and the Cash Flow Statement for the fifteen months period ("the, period") 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 the Companies (Auditors Report) (Amendment) Order, 2004,

issued by the Central government of India in terms of sub-sectidn (4-A) of section 227 of 1he Companies act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4) Further to our comments in the Annexure referred to in paragraph 3 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, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

(v) On the basis of written representations received from the directors as on June 30,2010 and taken on record by the Board of Directors, we report that none of the directors of the Company are disqualified as on June 30,2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) Attention is invited to Note No.23, regarding preparation of accounts on a Going Concern basis despite continued losses and erosion of total net worth of the Company, in view of the managements perceptions and reasons detailed therein.

(vii) The Company had recognized net deferred tax asset in earlier years aggregating to Rs.2654.15 lacs till 31s March, 2009 considering unabsorbed loss up to 31s1 March, 2008 and unabsorbed depreciation up to 31st March, 2009. For the subsequent financial period, further net deferred tax asset has not been recognized in view of managements perceptions and reason detailed in Note No. 16(b). We are not in a position to opine on the net deferred tax asset recognized till date as regards its ultimate realization since the virtual certainty of the available sufficient future taxable income, as required by Accounting Standard 22 i.e. Accounting for taxes on income issuedby the Institute of Chartered Accountants of India, could not be substantiated.

(viii) Had the impact of matter stated at (vii) been considered, accumulated losses as at the year end would have been Rs. 11532.04 Lacs.

(ix) Subject to Clause No.vii above, in our opinion and to the best of our information and according to the explanations given to us, 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 June 30,2010;

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

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

ANNEXURE TO THE AUDITORSREPORT (Referred to in paragraph 3 of our report of even date on the Accounts for the fifteen months period ended June 30, 2010, of The Dharamsi Morarji Chemical Company Limited)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However, in the case of some assets individual records with quantitative details and values are to be segregated, updated and reconciled.

(b) A substantia! portion of the fixed assets have been physically verified by the management during the period and in our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the period were not substantial. According to the information and explanations given to us, we are of the opinion that the disposal of the fixed assets has not affected the going concern status of the Company.

(ii) (a) The inventories have been physically verified during the period by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly sub clause (b), (c) and (d) are not applicable.
(c) In our opinion and according to the information and explanations given to us, the terms and conditions of the unsecured loans taken were prima facie not prejudicial to the interest of the Company.

(d) According to the information and explanations given to us the repayment of the principal amounts are as stipulated.

(iv) In our opinion and accoiding to the informatipn 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 purchase of inventory, fixed assets and with regard to the sate of goods and services. However, there is scope to strengthen the internal controls at operational level through proper implementation. During the course of our audit no major weakness has been noticed in the internal controls.

(v) (a) In our opinion and according to the iniormation and explanations given to us, the particulars of contracts of arrangements referred to in Section 301 of Companies Act, 1956 have so been entered in register required to be maintained under that section. (b) In our opinion and according to the information and explanations given to us, these contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the.relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has not complied with certain provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public including non-filing of returns of fixed deposits etc. As informed to us, no order has been passed by the Company Law Board or National Law Tribunal or Reserve Bank of India or any other Court or any other Tribunal in contravention of the aforesaid provisions and/or rules by the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business, however, the scope and coverage of the same needs to be increased.

(viii) We have broadly reviewed the books of account maintained by the Company which have been made pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1 )(d) of the Companies Act, 1956, in respect of Sulphuric Acid, Single Super Phosphate (Fertilizer) and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however, made a detailed examination of the same.

(ix) (a) According to the records of the Company, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including Customs Duty and Wealth Tax, Provident Fund, Investor Education Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Excise Duty, Service Tax, Cess and other statutory dues applicable to it. Based on our audit procedures and according to the information and explanations given to us, the following undisputed statutory dues were outstanding as at June 30,2010 for a period of more than six months from the date they became payable.

Nature of Dues Period to which Amount the amount relates Due Dates (Rs.in Lacs)

Service Tax/ Interest thereon 2005-06 Various 0.19

2006-07 Various 45.51

2007-08 Various 33.31

2008-09 Various 3.53

Total 82.54

Profession Tax 2006-07 Various 11.18

2007-08 Various 10.99

2008-09 Various 1.19

2009-10 Various 1.40

Total 24.76

VAT and CST Various 12.29

PF, FPF, EDLI, Admin. Charges, ESIC etc., Various 0.30

Tax Deducted at source - WCT 2008-09 Various 0.01

2009-10 Various 0.03

Total 0.04

Tax Collected at Source on Scrap Sales 2008-09 Various 0,06

IEPF - Unclaimed Dividend Cannot be ascertained Cannot be ascertained 10,63

IEPF - Unclaimed Interest on FD/ Debentures Cannot be ascertained Cannot be ascertained 5,29

IEPF - Unclaimed Fixed deposits Cannot be ascertained Cannot be ascertained 20,46

(ix) (b) According to the records of the Company, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which have not been deposited on account of dispute are given below:

Name of the Nature of Dues Forum where dispute is Period to which relates Amount Statute Pending (Rs In Lacs)

Duty/Interest /Penalty Asst.Commissioner June 1999 to August 1999 2.29

Central Excise Act Duty/Interest /Penalty Asst.Commissioner Sept 1999 to Dec 1999 1.81

Duty/lnterest/ Penalty Asst.Commissioner Jan 2000 to June 2000 3.04

Duty/Interest/ Penalty Asst.Commissioner Jul 1996 to may 1999 4.03

Duty/lnterest/ Penalty Asst.Commissioner July 2000 to May 2001 2.68

Duty/Interest/ Penalty Asst.Commissioner Various 24.48

Duty/lnterest /Penalty Asst.Commissioner Various 0.57

Duty/lnterest/ Penalty Asst.Commissioner August 2003 to May 2004 1.18

Duty on captive consumption Asst.Commissioner Various 0.80

Alleged under valuation of SA CESTAT Various 9.76

Total 50.64

Sales Tax Act Tax/Interest /Penalty Appellate Tribunal 1992-93 6.91

1993-94 4,20

Total 11.11

Entry Tax Tax/Interest High Court 5.21

(x) The accumulated losses of the Company are more than fifty percent of the Net Worth of the Company as at the end of the financial period, and it has incurred cash loss during the period and in the immediately preceding previous period.

(xi) During the period Company had defaulted in repayment of dues to Banks. However the Companys offers for One Time Settlement (OTS) made to the Banks have been accepted by those Banks before the year end. The Company has since complied with the stipulations contained in those OTS. Therefore, in our opinion and according to the information and explanations given to us, the Company as at the year end is not considered to be at any default hi repayment of dues to those Banks.

(xii) Based on our examination of the records and the information and explanations given to us, the Company has not granted loans and advances on the basts of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

(xiv) In our opinion and according to ttie information and explanations given to us, the Company is not dealing in or trading in shares/securities, debentures and other investments. Accordingly the provisions of clause 4 (xiv) of the Order are not applicable to the Company.

(xv> The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The term loans outstanding in the books of the Company as on June 30, 2010 have been taken and. utilized in earlier accounting periods, including working capital term loans, which have been converted from working capital fund based limits.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the funds amounting to Rs.12542.66 lacs raised on short-term basis have been used for long-term purposes.

(xviii)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) The Company has not issued any debentures during the period.

(xx) The Company has not raised money by public issue during the period.

(xxi) Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the 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 K. S. Alyar & Co.

Chartered Accountants FRN:100186W

Raghuvir M. Aiyar

Partner Membership No. 38128 Mumbai, 31 st August, 2010


Mar 31, 2009

1) We have audited the attached Balance Sheet of The Dharamsi Morarji Chemical Company Limited, as at March 31,2009 and also the Profit and Loss Account and the Cash Flow Statement for the eighteen months period ("the period") 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 the Companies (Auditors Report) (Amendment) Order, 2004, issued by the Central government of India in terms of sub-section (4-A) of section 227 of the Companies act, 1956, we enclose in the Anpexure 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:

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

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

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

(vi) As detailed in Note No.15(a), the Company has considered the reduction in interest rates with effect from April.01, 2005 on borrowings from lenders as stipulated in the Revised Corporate Debt Restructuring (CDR) Scheme. The Company is in the process of complying with the conditions stipulated by the lenders, which are essential for implementing the Revised CDR Scheme. Had the Company continued to provide the interest cost as per rates of interest mentioned in earlier CDR Scheme, the interest cost and loss for the period ended March 31, 2009 would have been higher by Rs.20.69 lacs. This results in an aggregate negative impact, on the financial position of the Company as on March 31, 2009 of Rs.350.93 lacs.

(vii) No provision has been made towards interest of Rs.785.82 lacs due to banks, since the banks concerned have not debited the same to the respective accounts of the Company till date (Refer note 15(d)). Had the Company provided for the same, interest cost and loss for the period and accumulated losses as at year end would have been higher by Rs. 785.82 Lacs.

(viii) During the period, the Company has recognized estimated net deferred tax asset amounting to Rs.505.98 lacs and credited the same to the Profit and Loss Account. (Refer note 16(b)). Consequently, the accumulated net deferred tax asset as at year end aggregates to Rs.2654.15 lacs. We are not in a position to opine on the net deferred tax asset recognized till date as regards its ultimate realization since the virtual certainty of the available sufficient future taxable income, as required by Accounting Standard 22 i.e. Accounting for taxes on income issued by the Institute of Chartered Accountants of India, could not be substantiated.

(ix) Attention is invited to Note No.24, regarding preparation of accounts on a Going Concern basis despite continued losses and erosion of total net worth of the Company, in view of the managements perceptions and reasons detailed therein.

(x) Had the impact of matters stated at (vii) and (viii) been considered, then the Loss for the year would have been higher by Rs. 1291.80 Lacs and the accumulated losses as at the year end would have been higher by Rs.3439.97 Lacs.

(xi) Subject to Clause Nos. (vii) & (viii) above, in our opinion and to the best of our information and according to the explanations given to us, 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 March 31, 2009;

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

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

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 3 of our report of even date on the Accounts for the eighteen months period ended March 31,2009, of The Dharamsi Morarji Chemical Company Limited)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However, in the case of some assets individual records with quantitative details and values are to be segregated, updated and reconciled.

(b) A substantial portion of the fixed assets have been physically verified by the management during the period and in our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the period were not substantial. According to the information and explanation given to us, we are of the opinion that the disposal of the fixed assets has not affected the going concern status of the Company.

(ii) (a) The inventories have been physically verified during the period by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly sub clause (b), (c) and (d) are not applicable.

(b) The Company has taken interest free loan amounting to Rs. 329.43 lacs from a director of the Company and inter-corporate deposits of Rs.896.80 Lacs from four parties listed in the register in the Register maintained under section 301 of the Companies Act, 1956.

(c) In our opinion and according to the information and explanations given to us, the terms and conditions of the unsecured loans taken were prima facie not prejudicial to the interest of the Company.

(d) According to the information and explanations given to us the repayment of the principal amounts are as stipulated.

(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 purchase of inventory, fixed assets and with regard to the sale of goods and services. However, there is scope to strengthen the internal controls at operational level through proper implementation. During the course of our audit no major weakness has been noticed in the internal controls.

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts of arrangements referred to in Section 301 of Companies Act, 1956 have so been entered in register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, these contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has not complied with certain provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public including non-filing of returns of fixed deposits etc. As informed to us, no order has been passed by the Company Law Board or National Law Tribunal or Reserve Bank of India or any other Court or any other Tribunal in contravention of the aforesaid provisions and/or rules by the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business, however, the scope and coverage of the same needs to be increased.

(viii) We have broadly reviewed the books of account maintained by the Company which have been made pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1 )(d) of the Companies Act, 1956, in respect of Sulphuric Acid, Single Supei Phosphate (Fertilizer) and Ethyl (Absolute) Alcohol and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) (a) According to the records of the Company, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including Customs Duty and Wealth Tax, Provident Fund, Investor Education Protection Fund, Employees State Insurance, Income Tax, Saies Tax, Excise Duty, Service Tax, Cess and other statutory dues applicable to it. Based on our audit procedures and according to the information and explanations given to us, the following undisputed statutory dues were outstanding as at March 31, 2009 for a period of more than six months from the date they became payable.

Nature of Dues Period to which the Due Dates Amount

amount relates (Rs.in Lacs)

Service Tax/ Interest thereon 2006-07 Various 44.87

2007-08 Various 24.94

2008-09 Various 3.09

Total 72.90

Profession Tax 2006-07 Various 11.18

2007-08 Various 10.99

2008-09 Various 5.60

Total 27.77

Provident Fund, EDLI, Administra- tive charges. 2008-09 Various 8.20 (Employers Cont- ribution & Contra- ctors employees)

Tax Deducted at source - Profess- ional fees 2008-09 Various 9.10

Tax Deducted at source - Salaries 2008-09 Various 4.36

Tax Deducted at source - Contractors 2008-09 Various 6.60

Tax Deducted at source - Interest 2008-09 Various 7.01

Tax Deducted at source - Brokerage 2008-09 Various 1.79

Tax Deducted at source - Rent 2008-09 Various 0.23

Total 29.09

Tax Collected at Source on Scrap Sales 2008-09 Various 0.21

IEPF - Unclaimed Dividend Cannot be ascertained Cannot be ascertained 10.63

IEPF - Unclaimed Interest on FD/ Debentures Cannot be ascertained Cannot be ascertained 5.29

IEPF - Unclaimed Fixed deposits Cannot be ascertained Cannot be ascertained 21.11

(ix) b) According to the records of the Company, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which have not been deposited on account of dispute are given below:

Name of the Statute Nature of Dues Forum where dispute is Period to which relates Amount

Pending (Rs.in lacs)

Duty/lnterest/ Penalty CESTAT June 1999 to August 1999 2.29

Duty/Interest/ Penalty CESTAT Sept 1999 to Dec 1999 1.81

Duty/Interest/ Penalty CESTAT Jan 2000 to June 2000 3.04

Duty/lnterest/ Penalty CESTAT July 2000 to May 2001 2.68

Duty/lnterest/ Penalty CESTAT August 2003 to May 2004 0.56

Cess on EOU Supply Assistant Commissioner July 1996 to May 1999 0.80

Cess on EOU Supply Assistant Commissioner March 2007 0.35

Alleged under- valuation of SA - 9.76

Total 21.29

Sales Tax Act Tax/Interest/ Penalty Appellate Tribunal 1992-93 6.91

1993-94 4.20

Total 11.11

(x) The accumulated losses of the Company are more than fifty percent of the Net Worth of the Company as at the end of the financial period, and it has incurred cash loss during the period and in the immediately preceding previous period.

(xi) In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to banks as detailed below:

Name of Bank Principal Amount Period of default Interest Amount

default

IDBI Limited Rs.476 Lacs Quarterly installment from Rs.347.56 Lacs

01-07-2007 to 31-03-2009

State Bank of India Rs.88.05 Lacs Quarterly installment from Rs.57.97 Lacs

01-01-2008 to 31-03-2009

Dena Bank Rs.51.24 Lacs Quarterly installment from Rs.35.36 Lacs

01-07-2008 to 31-03-2009

SBI Commercial and International Rs.14.82 Lacs Quarterly installment from Rs.10.29 Lacs

Bank Limited. 01 -01 -2008 to 31 -03-2009





Name of Bank Period of default

State Bank of India Monthly from 01-05-2007 to 31-03-2009.

Dena Bank Monthly from 31-10-2007 to 31-03-2009.

SBI Commercial and International Monthly from 30-04-2008 to 31-03-2009.

Bank Limited. Monthly from 31-07-2007 to 31-03-2009.

(xii) Based on our examination of the records and the 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, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

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

(xv) The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The term loans outstanding in the books of the Company as on March 31, 2009 have been taken and utilized in earlier accounting periods, including working capital term loans, which have been converted from working capital fund based limits.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the funds amounting to Rs.9519.63 lacs raised on short-term basis have been used for long-term purposes.

(xviii)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) The Company has not issued any debentures during the period.

(xx) The Company has not raised money by public issue during the period.

(xxi) Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the 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 K. S. Aiyar & Co.

Chartered Accountants

Raghuvir M. Aiyar

Partner Mumbai, 30th June, 2009 Membership No. 38128



 
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