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Auditor Report of Eastern Silk Industries Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of Eastern Silk Industries Limited which comprise the Balance Sheet as at 31st March, 2015, 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

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 flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting 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 judgements 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 there under.

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 disclosures in the financial statements. The procedures selected depend on the auditor's judgement, 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 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 the accounting estimates made by the 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 audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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 loss and its cash flows for the year ended on that date.

EMPHASIS OF MATTER

We draw attention to;

a) Note No. 33 (b) to the financial statements which states that the company has not provided interest to lenders amounting to Rs. 6,557.70 lacs

b) Note No. 35 to the financial statements which states that the company is a BIFR company pending registration as per the provisions of the SICA Act 1985.

c) Note No. 36(a) to the financial statements which states that a fresh provision of Rs. 3,697.22 Lacs has been made during the year for bad & doubtful debts, thus aggregating to Rs. 12,665.10 Lacs as at 31st March 2015 against a total Overdue Trade Receivables of Rs. 29,468.25 lacs, of which Rs. 16,803.15 Lacs is considered good for recovery by the management. We are unable to express any opinion on correctness and/or adequacy of the provision for bad & doubtful debts.

d) Note No. 37 to the financial statements regarding non recognition of Net Deferred Tax Assets (DTA) of Rs. 429.77 lacs in the accounts. We are unable to express any opinion regarding non-recognition of DTA and about its adjustment against future profits of the company.

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 Companies Act, 2013, 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 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, Statement of Profit and Loss, and Cash Flow Statement 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 written representation received from the directors as at 31st March, 2015 and taken on record by the Board of Directors, none of the directors is disqualified as at 31st March, 2015, from being appointed as a director in terms of Section 164 (2) of the Act.

f) In our opinion, the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls are adequate.

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:

* The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No.27 to the financial statements

* The Company has no long-term contracts including derivative contracts hence no provision is required under the applicable law or accounting standards

* There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE 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. The management has physically verified certain fixed assets during the year in accordance with a programme of verification, which, in our opinion, provides for physical verification of the fixed assets at reasonable intervals having regard to the size of the Company and nature of its assets. According to the information and explanations given to us no material discrepancies were noticed on such verification.

c. In our opinion and according to explanations given to us, Fixed Assets disposed off during the year were not substantial and as such the disposal has not affected the going concern concept of the Company.

ii) a. As explained to us, inventories have been physically verified by the management at regular intervals during the year.

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. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification as compared to the book records.

iii) The company has not granted any loans, secured or unsecured to companies firms or other parties covered in the register maintained under section 189 of the Act and as such clauses (iii) (a) and (b) of the order are not applicable to the company.

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 nature of its business for the purchase of inventory, fixed assets and also for the sale of goods and services. During the course of our audit, we have not observed any major weakness in internal controls.

v) The Company has not accepted any deposits from the public and as such clause (v) of the Order is not applicable.

vi) We have broadly reviewed the books of account maintained by the company pursuant to the order made by the Central Government for the maintenance of cost records under section 148(1) of the Act, and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of such accounts and records.

vii) According to the information and explanations given to us in respect of the statutory dues:

a. The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities during the year. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us, details of dues of Customs Duty/ Excise Duty/Income Tax & Sales Tax, Wealth Tax, Service Tax and Cess which have not been deposited on account of any dispute are as follows :

c. Required amount was transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act,2013 and rules made there under.

viii) The Company's accumulated losses at the end of the financial year under Audit has eroded more than 100% of the net worth. The company has incurred Cash Losses during the financial year and in the immediately preceding financial year.

ix) In our opinion and according to the information and explanation given to us the company has defaulted in repayment of the following amount to Banks & to Financial Institutions :

a) Term Loan Rs. 5,341.59 Lacs

b) Other Loans Rs. 38,472.59 Lacs

c) * Interest Rs. 8,951.87 Lacs

* Rs. 2,394.17 Lacs provided in Statement of Accounts and Rs. 6,557.70 Lacs not provided in the Statement of Accounts.

x) In our opinion and according to the information and explanation given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

xi) The company has not obtained any fresh term loans during the year under review. Accordingly, the provisions of clause (xi) of the Order are not applicable to the company.

xii) 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 B. K. SHROFF & CO. Firm Registration No.: 302166E Chartered Accountants (L.K.Shroff)

Place : Kolkata PARTNER Date : The 30th May, 2015 Membership No. : 060742


Mar 31, 2014

We have audited the accompanying financial statements of Eastern Silk Industries Limited which comprise the Balance Sheet as at 31st March, 2014, 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 .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.

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 judgement, 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 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 the 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 audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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 31st March, 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.

EMPHASIS OF MATTER

We draw attention to;

a) Note no. 35 to the financial statements which states that the losses of the Company for the year and preceding years as per Books of Accounts stand at Rs. 38,134.70 lacs (Previous year Rs. 24,489.96 lacs) as on 31st March, 2014. After adjustment of the losses, the shareholders funds stands at Rs. (821.08) lacs (Previous year Rs.12,897.98 lacs). As stated by the management, the Company is proceeding to file a revival plan before the BIFR under section 15 of SICA Act, 1985.

b) Note No. 36 to the financial statements which states that Trade Receivables of Rs. 21,681.81 lacs (Previous year Rs. 21,681.81 lacs) receivable from overseas buyers towards sale consideration of goods exported, against which the company has filed money suits in the Hon''ble High Court Kolkata, which has been considered good for recovery by the management. We are unable to express any opinion on correctness and/ or adequacy of the provision for bad & doubtful debts.

c) Note No 38 to the financial statements regarding non recognition of Net Deferred Tax Assets (DTA) of Rs. 1,828.81 lacs in the accounts based on lack of future profitability projections made by the management. However we are unable to express any opinion on the projection and their consequential impact, if any.

Report on Other Legal and Regulatory requirements

1. 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.

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, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act;

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

ANNEXURE 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. The management has physically verified certain fixed assets during the year in accordance with a programme of verification, which, in our opinion, provides for physical verification of the fixed assets at reasonable intervals having regard to the size of the Company and nature of its assets. According to the information and explanations given to us no material discrepancies were noticed on such verification.

c. In our opinion and according to explanations given to us, Fixed Assets disposed off during the year were not substantial and as such the disposal has not affected the going concern concept of the Company.

ii) a. As explained to us, inventories have been physically verified by the management at regular intervals during the year.

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. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification as compared to the book records.

iii) As explained to us and according to the information furnished to us, the Company has neither granted nor 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 and as such clause (iii) of the Order is 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 nature of its business for the purchase of inventory, fixed assets and also for the sale of goods and services. During the course of our audit, we have not observed any major weakness in internal controls.

v) In respect of transactions entered in the register maintained under Sec. 301 of the Companies Act, 1956:

a. To the best of our knowledge and belief and according to the information and explanations given to us, transactions that needed to be entered into the register pursuant to Section 301 of the Companies Act, 1956 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5 lacs or more in respect of any party 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 from the public and as such clause (vi) of the Order is not applicable.

vii) In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of its business and needs to be further strengthened.

viii) We have broadly reviewed the books of account and records maintained by the Company relating to ''Textiles'' pursuant to Sec. 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, however, not made a detailed examination of these records.

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

a. The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities during the year. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31 March, 2014 for a period of more than six months from the date they became payable.

b. Acccording to the information and explanations given to us, details of dues of Customs Duty/ Excise Duty/Income Tax & Sales Tax, Wealth Tax, Service Tax and Cess which have not been deposited on account of any dispute are as follows :

Name of the Statute Name of the Dues Amount (Rs. in lacs)

Central Excise Act Excise Duty and Penalty 26.72

Employees State Employees State Insurance 6.03 Insurance Act

Custom Duty Act Custom Duty 109.77

Customs Duty Act Custom Duty 148.50

Customs Duty Act Custom Duty 78.92

Customs Duty Act Custom Duty 28.70

Customs Duty Act Custom Duty 44.07

Income Tax Act Income Tax 2.31

Income Tax Act Income Tax 71.51

Name of the Statute Period to which Forum where the amount dispute is pending relates

Central Excise Act 2002-03 Deputy Commissioner, Central Excise

Employees State Insurance Act 1995-96 & Asst. Director, ESIC 2002-03

Custom Duty Act 2001-02 Hon''ble High Court of Kamatka

Customs Duty Act 2005-06 Commissioner of Custom (Port), Kolkata

Customs Duty Act 2003-04 CESTAT, Bangalore

Customs Duty Act 2003-04 Commissioner of Custom

Customs Duty Act 2002-03 Commissioner of Custom

Income Tax Act 2004-05 I.T.A.T (Kolkata)

Income Tax Act 2010-11 I.T.A.T (Kolkata)

x) The Company''s accumulated losses at the end of financial year under Audit has eroded more than 100% of the net worth. The company has incurred Cash Losses during the financial year and in the immediately preceding financial year.

xi) In our opinion and according to the information & explanations given to us, the Company has not defaulted in repayment of term loan installment & Interest to Banks and/or to Financial Institutions, except, Rs. 2,716.42 lacs Interest payable to Banks and Financial Institutions for which necessary provisions have been made. However, a sum of Rs. 35.45 lacs have been paid subsequently.

xii) In our opinion and according to the information and explanation given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund/Society and as such reporting under clause (xiii) of the Order is not applicable to the Company.

xiv) Based on our examination of the records and according to the information and explanations given to us, Company is not dealing or trading in shares, securities, debentures and other investments. We also report that the Company has held the shares, securities, debentures and other investments in its own name.

xv) 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.

xvi) The company has not obtained any fresh term loans during the year under review. Accordingly, the provisions of clause (xvi) of the Order are not applicable to the company.

xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that prima facie funds raised on short-term basis have been not used for long-term investments.

xviii) The Company has not made preferential allotment of shares during the year 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 any money by public issue during the year.

xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit.

For B. K. SHROFF & CO.

Firm Registration No.: 302166E

Chartered Accountants

(L.K.Shroff)

Place : Kolkata PARTNER

The 28th May, 2014 Membership No. : 060742


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Eastern Silk Industries Limited which comprise the Balance Sheet as at 31st March, 2013, 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 .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.

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 judgement, 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. 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.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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 31st March, 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.

EMPHASIS OF MATTER

We draw attention to ;

a) Note no. 36 to the financial statements which states that the losses of the Company for the year and preceding years as per Books of Accounts stand at Rs. 24,489.96 lacs (Previous year Rs. 14,954.05 lacs) as on 31st March, 2013. After adjustment of the losses, the shareholders funds stands at Rs. 12,897.98 lacs (Previous year Rs. 25,232.33 lacs). As stated, the management has a strategic plan for the revival of the Company and is hopeful in improving the financial health of the Company in near future. Accordingly the Financial Statement for the year has been drawn up by the management as per going concern assumption.

b) Note No. 37 to the financial statement which states that Sundry Debtors of Rs. 24,804.33 lacs (Previous year Rs. 23,536.05 lacs) receivable from overseas buyers towards sale consideration of goods exported, against which the company has filed money suits in the Hon''ble High Court Kolkata, which has been considered good for recovery by the management. We are unable to express any opinion on correctness and/or adequacy of the provision for bad & doubtful debts.

c) Note No. 39 to the financial statements regarding recognition of Net Deferred Tax Assets (DTA) of Rs. 2,193.03 lacs (Previous year Rs. 2,379.95 lacs) in the accounts based on future profitability projection made by the management. However, we are unable to express any opinion on the projections and their consequential impact, if any, on the recognition of such DTA

Report on Other Legal and Regulatory requirements

1. 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.

2. As required by section 227(3) of the act, 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 purpose 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 comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act;

(v) On the basis of written representation received from the directors as at 31st March, 2013 and taken on record by the Board of Directors, none of the directors is disqualified as at 31st March, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

ANNEXURE 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. The management has physically verified certain fixed assets during the year in accordance with a programme of verification, which, in our opinion, provides for physical verification of the fixed assets at reasonable intervals having regard to the size of the Company and nature of its assets. According to the information and explanations given to us no material discrepancies were noticed on such verification.

c. In our opinion and according to explanations given to us, Fixed Assets disposed off during the year were not substantial and as such the disposal has not affected the going concern concept of the Company.

ii) a. As explained to us, inventories have been physically verified by the management at regular intervals during the year.

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. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification as compared to the book records.

iii) As explained to us and according to the information furnished to us, the Company has neither granted nor taken any loans, (except a sum of Rs. 1,474 lacs-unsecured, interest free, from the promoters) secured or unsecured, to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and as such clause (iii) of the Order is 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 nature of its business for the purchase of inventory, fixed assets and also for the sale of goods. During the course of our audit, we have not observed any major weakness in internal controls.

v) In respect of transactions entered in the register maintained under Sec. 301 of the Companies Act, 1956:

a. To the best of our knowledge and belief and according to the information and explanations given to us, transactions that needed to be entered into the register pursuant to Section 301 of the Companies Act, 1956 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5 lacs or more in respect of any party 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 from the public and as such clause (vi) of the Order is not applicable.

vii) In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of its business and needs to be further strengthened.

viii) We have broadly reviewed the books of account and records maintained by the Company relating to ''Textiles'' pursuant to Sec. 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, however, not made a detailed examination of these records.

ix) According to the information and explanations given to us in respect of the statutory dues: a. The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor''s Education and Protection Fund, Employees'' State Insurance, Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2013 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us, details of dues of Customs Duty/ Excise Duty/Income Tax & Sales Tax which have not been deposited on account of any dispute are as follows :

Name of the Statute Name of the Dues Amount (Rs. in lacs)

Central Excise Act Excise Duty and Penalty 26.72

Employees State Employees State Insurance 6.03 Insurance Act

Custom Duty Act Custom Duty 109.77

Customs Duty Act Custom Duty 148.50

Customs Duty Act Custom Duty 78.92

Customs Duty Act Custom Duty 28.70

Customs Duty Act Custom Duty 44.07

Income Tax Act Income Tax 2.31

Income Tax Act Income Tax 71.51

NAME Period to which Forum where the amount dispute is pending relate

Custom Duty Act 2002-03 Deputy Commissioner, Central Excise

Custom Duty Act 1995-96 & Asst. Director, ESIC 2002-03

Custom Duty Act 2001-02 Hon''ble High Court of Kamatka

Custom Duty Act 2005-06 Commissioner of Custom (Port), Kolkata

Custom Duty Act 2003-04 CESTAT, Bangalore

Custom Duty Act 2003-04 Commissioner of Custom

Custom Duty Act 2002-03 Commissioner of Custom

Custom Duty Act 2004-05 I.T.A.T (Kolkata)

Custom Duty Act 2010-11 I.T.A.T (Kolkata)

x) The Company has accumulated losses at the end of financial year and has also incurred cash losses during the financial year covered by our audit .The company has also incurred cash losses in the previous financial year.

xi) In our opinion and according to the information & explanations given to us, the Company has not defaulted in repayment of term loan installment & Interest to Banks and/or to Financial Institutions.

xii) In our opinion and according to the information and explanation given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund/Society and as such reporting under clause (xiii) of the Order is not applicable to the Company.

xiv) Based on our examination of the records and according to the information and explanations given to us, Company is not dealing or trading in shares, securities, debentures and other investments. We also report that the Company has held the shares, securities, debentures and other investments in its own name.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee to a bank for an Associate Company for Rs. 650.00 Lacs for availing loan from bank by the said Company, the terms of conditions of which are not prima facie prejudicial to the interest of the Company.

xvi) The company has not obtained any fresh term loans during the year under review. Accordingly, the provisions of clause (xvi) of the Order are not applicable to the company.

xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that prima facie funds raised on short-term basis have been not used for long-term investments.

xviii) The Company has not made preferential allotment of shares during the year 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 any money by public issue during the year.

xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit.

For B. K. SHROFF & CO. Firm Registration No.: 302166E

Chartered Accountants

(L.K.Shroff)

23A, Netaji Subhas Road, PARTNER

Kolkata Membership No. : 60742

The 29th May, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of EASTERN SILK INDUSTRIES LTD. as at 31st March, 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 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 (Auditor's Report Amendment) Order 2004 issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks as were considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matter 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 & Loss 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, Statement of Profit & Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in clause (3C) of Section 211 of the Companies Act, 1956, subject to our comment in Para-VI below.

V. on the basis of written representation received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31s1 March, 2012 from being appointed as a Director in terms of clause (g) of Sub-Section (I) of Section 274 of the Companies Act, 1956;

VI. without qualifying our opinion, attention is drawn to the following notes-

a) Note no. 34 states that the losses of the Company for the year and preceding year as per Books of Accounts stand at Rs 14,954.05 Lacs as on 31s1 March, 2012. As stated, the management has a strategic plan for the revival of the Company and it is hopeful in improving the financial health of the Company in near future. Accordingly the Financial Statement for the year has been drawn up by the management as pergoing concern assumption.

b) Note no. 36 states that Sundry Debtors of Rs.23536.04 lacs (Previous year Rs.24172.76 lacs) receivable from overseas buyers towards sale consideration of goods exported, which has been considered good for recovery by the management. We are unable to express any opinion on correctness and/or adequacy of the Provision for Bad & Doubtful Debts.

VII. attention is drawn to the following Note-

Note No.37 regarding recognition of Net Deferred Tax Assets (DTA) of Rs. 2,379.95 lacs in the accounts as at 31.03.2012 based on future profitability projection made by the management. However we are unable to express any opinion on the projections and their consequential impact, if any on the recognition of such DTA.

Had the impact of above item not been considered, there would have been a loss of Rs.11,555.21 lacs as against the reported loss of Rs. 9,160.43 lacs for the year and the Reserves & Surplus account would have been lower by Rs. 2,394.78 lacs against the reported figure of Rs.22,253.28 lacs as on the balance sheet date.

VIII. in our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give , in the prescribed manner, the information required by the Act 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 31s1 March, 2012.

(b) in the case of the Statement of Profit & 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.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

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

b. The management has physically verified certain fixed assets during the year in accordance with a programme of verification, which, in our opinion, provides for physical verification of the fixed assets at reasonable intervals having regard to the size of the Company and

nature of its assets. According to the information and explanations given to us no material discrepancies were noticed on such verification.

c. In our opinion and according to explanations given to us, Fixed Assets disposed off during the year were not substantial and as such the disposal has not affected the going concern concept of the Company.

ii) a. As explained to us, inventories have been physically verified by the management at regular intervals during the year.

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. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification as compared to the book records.

iii) As explained to us and according to the information furnished to us, the Company has neither granted nor taken any loans, (except a sum of Rs.734 lacs-unsecured, interest free, from the Chairman and Managing Director & his wife) secured or unsecured, to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and as such clause (iii) of the Order is 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 nature of its business for the purchase of inventory, fixed assets and also for the sale of goods. During the course of our audit, we have not observed any major weakness in internal controls.

v) In respect of transactions entered in the register maintained under Sec. 301 of the Companies Act, 1956:

a. To the best of our knowledge and belief and according to the information and explanations given to us, transactions that needed to be entered into the register pursuant to Section 301 of the Companies Act, 1956 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.5 lacs or more in respect of any party 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 from the public and as such clause (vi)of the Order is not applicable.

vii) In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of its business and needs to be further strengthened.

viii) We have broadly reviewed the books of account and records maintained by the Company relating to 'Textiles' pursuant to Sec. 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, however, not made a detailed examination of these records.

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

a. The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31s1 March, 2012 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us, details of dues of Customs Duty/ Excise Duty/ Sales Tax which have not been deposited on account of any dispute are as follows:

Name of the Statute Name of the Dues Amount (Rs in lacs)

Central Excise Act Excise Duty and Penalty 26.72

Employees State Employees State Insurance 6.03 Insurance Act

Custom Duty Act Custom Duty 109.77

Customs Duty Act Custom Duty 148.50

Customs Duty Act Custom Duty 78.92

Customs Duty Act Custom Duty 28.70

Customs Duty Act Custom Duty 44.07

Income Tax Act Income Tax 2.31

Name of the Statute Period to which Forum where the amount dispute is relates pending

Central Excise Act 2002-03 Deputy Commissioner, Central Excise

Employees State 1995-96 & Asst. Director, ESIC 2003-03

Custom Duty Act 2001-02 Hon'ble High Court of Karnataka

Customs Duty Act 2003-04 CESTAT, Bangalore

Customs Duty Act 2003-04 Commissioner of Custom

Customs Duty Act 2002-03 Commissioner of Custom

Income Tax Act 2004-05 I.T.A.T (Kolkata)

x) The Company has no accumulated losses at the end of financial year but has incurred cash losses during the financial year covered by our audit .The company has also incurred cash losses in the previous financial year.

xi) In our opinion and according to the information & explanations given to us, the Company has not defaulted in repayment of term loan installment& Interest to Banks and/or to Financial Institutions.

xii) In our opinion and according to the information and explanation given to us, no loans and advances have been granted by the Company on the basis of security byway of pledge of shares, debentures and other securities.

xiii) The Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund/Society and as such reporting under clause (xiii)of the Order is not applicable to the Company.

xiv) Based on our examination of the records and according to the information and explanations given to us, Company is not dealing or trading in shares, securities, debentures and other investments. We also report that the Company has held the shares, securities, debentures and other investments in its own name.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee to a bank for an Associate Company for Rs. 650.00 Lacs for availing loan from bank by the said Company, the terms of conditions of which are not prima facie prejudicial to the interest of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the company were, prima facie, applied by the company during the year for the purposes for which the loans were obtained.

xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that prima facie funds raised on short-term basis have been not used for long-term investments.

xviii) The Company has not made preferential allotment of shares during the year 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 any money by public issue during the year.

xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit.

For B. K. SHROFF & CO.

Firm Registration No.: 302166E

Chartered Accountants

(L.K.Shroff)

PARTNER

Membership No. : 60742


Mar 31, 2011

1. We have audited the attached Balance Sheet of EASTERN SILK INDUSTRIES LTD. as at 31 st,March, 2011 and also the Profit & 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 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 (Auditor's Report Amendment) Order 2004 issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks as were considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matter specified in paragraphs 4 and 5 of the said Order.

4. Furtherto ourcomments 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 & 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, Profit & Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in clause (3C) of Section 211 of the Companies Act, 1956, subject to our comment in Para-VII below.

V. on the basis of written representation received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2011 from being appointed as a Director in terms of clause (g) of Sub-Section (I) of Section 274 of the Companies Act, 1956;

VI. In our opinion the valuation of closing stock has been overstated by the Company by Rs. 92.46 crores as at 31st March 2011. This is due to the lower realisation of finished goods in the subsequent periods and a substantial stock being non/slow moving, the lower realisation in the value of stocks have not been fully captured in the accounts by the management. Only a sum of Rs.34.70 crores has been accounted for in the Profit & Loss Account towards lower realisable value of stock. Had the entire lower realisable value been accounted, the loss for the year ended 31st March, 2011 would have been Rs 150.40 crores and Reserves & Surplus would have been lower by Rs.92.46 crores.

VII. Without qualifying our opinion, attention is drawn to the following notes in Schedule 14 :

a) Note No. 12 - Provision for Bad & Doubtful debts, on which we are unable to express any opinion on correctness and/or adequacy of the provision.

b) Note No. 9 -As at the Balance Sheet date the losses of the Company stands at Rs 57.94 crores as against the shareholders' fund of Rs 331.40 crores (including revaluation reserve of Rs 42.11 crores). As stated in the said note the management has a future plan for the revival of the Company and is confident and hopeful of improving financial health in the near future. Accordingly the financial statements for the year have been drawn up by the management as per the going concern assumption.

VIII. in our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with Accounting Policies and the Notes thereon appearing in schedule - 14 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 & Loss Account 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.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

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

b. The management has physically verified certain fixed assets during the year in accordance with a programme of verification, which in our opinion provides for physical verification of the fixed assets at reasonable intervals having regard to the size of the Company and nature of its assets. According to the information and explanations given to us no material discrepancies were noticed on such verification.

c. In our opinion and according to explanations given to us, Fixed Assets disposed off during the year were not substantial and as such the disposal has not affected the going concern concept of the Company.

ii) a. As explained to us, inventories have been physically verified by the management at regular intervals during the year.

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. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification as compared to the book records.

iii) As explained to us and according to the information furnished to us, the Company has neither granted nor 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 and as such clause (iii) of the Order is 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 nature of its business for the purchase of inventory, fixed assets and also for the sale of goods. During the course of our audit, we have not observed any major weakness in internal controls.

v) In respect of transactions entered in the register maintained under Sec. 301 of the Companies Act, 1956:

a. To the best of our knowledge and belief and according to the information and explanations given to us, transactions that needed to be entered into the register pursuant to Section 301 of the Companies Act, 1956 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.5 lakhs or more in respect of any party 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 from the public and as such clause (vi) of the Order is not applicable.

vii) In our opinion, the Company has an adequate interna! audit system commensurate with the size and nature of its business and needs to be further strengthened.

viii) We have broadly reviewed the books of account and records maintained by the Company relating to Textiles' pursuant to Sec. 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, however, not made a detailed examination of these records.

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

a. The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2011 for a period of more than six months from the date they became payable except 42.93 Lacs since paid.

b. According to the information and explanations given to us, details of dues of Customs Duty/ Excise Duty/Sales Tax which have not been deposited on account of any dispute are as follows:

Name of the Name of the Amount Period Forum where Statute Dues (Rs. in to which dispute is lacs) the amount pending relate

Central Excise Excise Duty 26.72 2002-03 Deputy Commis- Act and Penalty sioner, Central Excise

Employees State Employees 6.03 1995-96 & Asst.Director, Insurance Act State Insur 2002-03 ESIC -ance

Custom Duty Act Custom Duty 109.77 2001-02 Hon'ble High Court of Karnatka

Customs Duty Act Custom Duty 148.50 2005-06 Commissioner of Custom (Port), Kolkata

Customs Duty Act Custom Duty 78.92 2003-04 CESTAT, Bangalore

Customs Duty Act Custom Duty 28.70 2003-04 Commissioner of Custom

Customs Duty Act Custom Duty 44.07 2002-03 Commissioner of Custom

Income Tax Act Income Tax 2.31 2004-05 I.T.A.T (Kolkata)

x) The Company has no accumulated losses at the end of financial year but has incurred cash losses during the financial year covered by our audit .The company has not incurred cash losses in the previous financial year.

xi) In our opinion and according to the information & explanations given to us, the Company has not defaulted in repayment of term loan installment & Interest to Banks. However in the repayment of term loan installments amounting to Rs. 150.00 Lacs due in Apr'10, July'10, Oct'10 & Jan'11 respectively due to State Bank of India were paidinJuly'10, Sep'10, Jan'11 & Feb'11 respective and repayment of interest is as follows:

Bank Period (Rs. In Lacs) Amount Payment Date

State Bank of India May'10 22.14 02.07.10

June'10 21.61 01.07.10

July'10 21.52 01.11.10

Aug'10 26.29 01.11.10

Sep'10 30.79 22.12.10

Oct'10 27.93 22.12.10

Nov'10 27.95 04.02.11

Dec'10 28.98 04.02.11

Jan'11 28.33 04.02.11

Feb'11 23.77 12.05.11

Mar'11 26.23 12.05. & 30.06.11

Exim Bank 20th Feb'11 To 27.47 20.06.11 19th Mar'11

xii) In our opinion and according to the information and explanation given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

xiii)' The Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund/Society and as such reporting under clause (xiii) of the Order is not applicable to the Company.

xiv) Based on our examination of the records and according to the information and explanations given to us, Company is not dealing or trading in shares, securities, debentures and other investments. We also report that the Company has held the shares, securities, debentures and other investments in its own name.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee to a bank for an Associate Company for Rs. 650.00 Lacs for availing loan from bank by the said Company, the terms of conditions of which are not prima facie prejudicial to the interest of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the company were, prima facie, applied by the company during the year for the purposes for which the loans were obtained.

xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that prima facie funds raised on short-term basis have been not used for long-term investments.

xviii). The Company has not made preferential allotment of shares during the year 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 any money by public issue during the year.

xxi). To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit.

For B. K. SHROFF & CO. Firm Registration No.: 302166E Chartered Accountants (L.K.Shroff) 23A, Netaji Subhas Road, PARTNER Kolkata, the 2nd August, 2011 Membership No. : 60742


Mar 31, 2010

1. We have audited the attached Balance Sheet of EASTERN SILK INDUSTRIES LTD. as at 31stMarch, 2010 and also the Profit & 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 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 (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks as were considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matter 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 & 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, Profit & Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in clause (3C) of Section 211 of the Companies Act, 1956.

V. on the basis of written representation received from the Directors 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 (I) 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, the said accounts, read together with Accounting Policies and the Notes thereon appearing in schedule - 14 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 & Loss Account 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.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

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

b. The management has physically verified certain fixed assets during the year in accordance with a programme of verification, which in our opinion provides for physical verification of the fixed assets at reasonable intervals having regard to the size of the Company and nature of its assets. According to the information and explanations given to us no material discrepancies were noticed on such verification.

c. The Company has not disposed off substantial Fixed Assets during the year. Therefore, it has not affected the going concern concept of the Company.

ii) a. As explained to us, inventories have been physically verified by the management at regular intervals during the year.

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. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification as compared to the book records.

iii) As explained to us and according to the information furnished to us, the Company has neither granted nor 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 and as such clause (iii) of the Order is 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 nature of its business for the purchase of inventory, fixed assets and also for the sale of goods. During the course of our audit, we have not observed any major weakness in internal controls.

v) In respect of transactions entered in the register maintained under Sec. 301 of the Companies Act, 1956:

a. To the best of our knowledge and belief and according to the information and explanations given to us, transactions that needed to be entered into the register pursuant to Section 301 of the Companies Act, 1956 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.5 lakhs or more in respect of any party 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 from the public and as such clause (vi) of the Order is not applicable.

vii) In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of its business and is being further strengthened.

viii) We have broadly reviewed the books of account and records maintained by the Company relating to ‘Textiles pursuant to Sec. 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, however, not made a detailed examination of these records.

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

a. The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2010 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us, details of dues of Customs Duty/ Excise Duty/ Sales Tax which have not been deposited on account of any dispute are as follows :

Name of the Statute Name of the Dues Amount Period to Forum where dispute is (Rs. in lacs) which the pending amount relates

Central Excise Act Excise Duty and Penalty 26.72 2002-03 Deputy Commissioner, Central Excise

Employees State Employees State 6.03 1995-96 & Asst. Director, ESIC Insurance Act Insurance 2002-03

Custom Duty Act Custom Duty 109.77 2001-02 Honble High Court ofKarnatka

Customs Duty Act Custom Duty 148.50 2005-06 Commissioner of Custom (Port), Kolkata

Customs Duty Act Custom Duty 78.92 2003-04 CESTAT, Bangalore

Customs Duty Act Custom Duty 28.70 2003-04 Commissioner of Custom

Customs Duty Act Custom Duty 44.07 2002-03 Commissioner of Custom

Income Tax Act Income Tax 2.31 2004-05 C.I.T. (Appeal)

x) The Company has no accumulated losses and has not incurred any cash losses during the financial year covered by our audit or the immediately preceding financial year.

xi) In our opinion and according to the information & explanations given to us, the Company has not defaulted in repayment of term loan installment to Banks. However in the repayment of term loan installment amounting to Rs.18.85 Lacs due in May09 & Rs.18.85 Lacs due in August09 to Uco Bank and interest thereon Rs.1.28 Lacs & Rs. 0.73 Lacs were paid in July09 & September09 respectively.

xii) In our opinion and according to the information and explanation given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund/Society and as such reporting under clause (xiii) of the Order is not applicable to the Company.

xiv) Based on our examination of the records and according to the information and explanations given to us, Company is not dealing or trading in shares, securities, debentures and other investments. We also report that the Company has held the shares, securities, debentures and other investments in its own name.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee to a bank for an Associate Company for Rs. 650.00 Lacs for availing loan from bank by the said Company, the terms of conditions of which are not prima facie prejudicial to the interest of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the company were, prima facie, applied by the company during the year for the purposes for which the loans were obtained.

xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that prima facie funds raised on short-term basis have not been used for long-term investments.

xviii). The Company has not made preferential allotment of shares during the year 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 any money by public issue during the year.

xxi). To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit.

For B. K. SHROFF & CO. Firm Registration No.: 302166E

Chartered Accountants

23A, Netaji Subhas Road, (L.K.Shroff)

Kolkata, the 10th August, 2010. PARTNER

Membership No. : 60742

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