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Auditor Report of Galada Power & Telecommunications Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of GALADA POWER AND TELECOMMUNICATION 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 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 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.

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 audit opinion on the financial statements.

Basis for Qualified Opinion:

a. The Company has not provided for the liability amounting to Rs.6,077 lakhs due up to 31st March, 2014 on account of additional interest and liquidated damages payable to the Financial Institutions for non compliance with the terms of sanction of loans and / or repayment schedules.

b. The Company has not provided for the liability on account of interest on recalled bank working capital loans amounting to Rs.23,929 lakhs up to 31st March, 2014 and Rs.2,569 lakhs for the year.

Consequent to the above, the loss for the year and the liabilities as at 31.03.2015 is understated by Rs.2,569 lakhs and Rs. 32,575 lakhs respectively.

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 above, 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 the following matters in the Notes to the financial statements:

a. Note 1 to the financial statements regarding the preparation of the financial statements on a going concern basis, despite substantial erosion of the net worth, lower cash inflows from the existing business activities and Continuous default in payment of dues to banks / financial institutions and the legal proceedings initiated by the Bankers of the Company for the recovery of the debts.

b. Note 30 to the financial statements on suitability of Equipment in Transit for its intended use

c. Note 33 to the financial statements regarding the appointment and payment of Managerial Remuneration.

d. Note 38 to the financial statements on non compliance with the provisions of Sec-205-A (1) of the Companies Act, 1956 regarding transfer of unpaid dividend to a special Bank Account.

Our opinion is not qualified in respect of these matters.

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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraphabove, 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraphabove, 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) The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, mayhave an adverse effect on the functioning of the Company.

(f) 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.

(g) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 48 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. According to the information and explanations given to us , there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure to the Auditor's Report:

The Annexure referred to in Para 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date ,to the members of GALADA POWER AND TELECOMMUNICATION LIMITED, HYDERABAD, for the year ended March 31,2015.,

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

b. As explained to us, the management has physically verified the fixed assets during the year and there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of the assets. No discrepancies were noticed on such verification.

2. a. The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

b. In our opinion, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory. The discrepancies noticed on physical verification between the physical stocks and book records were not material.

3. a. During the year, 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 Companies Act, 2013.

b. In view of our comment in paragraph (a) above, Clause (III) (a) and (b) of paragraph 3 of the aforesaid order are not applicable to the Company.

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

5. The Company has not accepted any deposits from the public. Hence the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act, 2013, and the rules framed there under, do not apply to this Company.

6. We have broadly reviewed the cost records maintained by the Company pursuant to sub-section (1) of section 148 of the Companies Act, 2013 and are of the opinion that prime facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of the cost records with a view to determine whether they are accurate or Complete.

7. a. According to the records of the Company, the company 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.

b. According to the records of the Company, no un disputed 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 were in arrears as at March 31, 2015 for a period of more than six months from the date they became payable except the following.

Nature of Nature of Amount Period to which Statute the Dues Rs. the amount relates

The Investor Companies Education and 115,56,699 1996 Act, 1956 Protection Fund

IFST Loan 3,11,190 1988

APGSTAct Differed Sales 67,10,843 1996

Tax Sales tax 5,25,000 2000

9,84,920 1997 to 2011

2,07,075 2011 to 2012

2,07,075 2011 to 2012

Property Tax 2,07,075 2012 to 2012

AP Municipalities 2,07,075 2012 to 2013

Act,1965 2,07,075 2013 to 2014

2,07,075 2013 to 2014

2,07,075 2014 to 2015

Customs Duty on 30,02,346 Act 1942 Imports

Name of Statute Due date Date of payment

The Companies Act,1956 Not yet 30.12.2003 pajd

APGST Act 25.07.1997 Not yet

01.04.2001 01.08.2001

AP Municipalities Act,1965 1997-2011

30.09.2011

31.03.2012

30.09.2012 Not yet

31.03.2013 pajd

30.09.2013

31.03.2014

30.09.2014

Customs Act,1942 Not yet paid

c. According to the records of the Company and the information and explanations given to us, there were no 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.

d. According to the information and explanations given to us , there were no amounts which were required to be transferred to Investor Education and Protection Fund. Therefore, the provisions of clause 3 (vii) (c ) of the Companies (Auditor's Report) Order, 2015 are not applicable to the Company.

8. The accumulated losses of the Company as at the end of the financial year under reference are more than fifty percent of net worth of the Company. The Company has incurred cash losses during the year covered by our audit and also in the immediately preceding financial year.

9. In our opinion the company has defaulted in repayment of dues to financial institutions, banks and debenture holders. However, the period and amount of default is not furnished as the Company has submitted its rehabilitation proposal to re schedule all dues payable to the financial institutions, banks and debenture holders.

10. The Company has not given any guarantee for the loans taken by others from banks and financial institutions.

11. During the year the Company has not obtained any term loans. Therefore, the provisions of clause 3 (xi) of the Companies (Auditor's Report) Order, 2015 are not applicable to the Company.

12. Based upon the audit procedures performed and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.

forBRAHMAYYA&CO;

Chartered Accountants

Firm's Registration Number: 000513S

(P. CHANDRAMOULI)

Place : Hyderabad Partner

Date : 30.05.2015 Membership Number: 025211


Mar 31, 2014

We have audited the accompanying financial statements of GALADA POWER AND TELECOMMUNICATION 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 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act,2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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 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 Company''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.

Basis for Qualified Opinion:

a. In the absence of confirmation letters from the parties, we are unable to ascertain whether the amounts shown under the heads Trade receivables, Current Assets and Loans and Advances are realisable and the payables shown under various heads of account are also subject to confirmation by the respective institutions / parties. In the absence of sufficient evidence, we are unable to comment on the recoverability of these receivables and consequential effect on the financial statements.

b. The Company has not complied with the provisions of Sec-205-A (1) of the Companies Act, 1956 regarding transfer of unpaid dividend to a special bank account and the interest payable for such non compliance amounting to Rs. 235.45 lakhs up to 31st March, 2013 and Rs.13.87 lakhs for the year is not provided in the Accounts.

c. The Company has not provided for the liability on account of additional interest and liquidated damages payable to the Financial Institutions and / or other financiers for non compliance with certain terms of sanction of loans and / or repayment schedules amounting to Rs.30,316.18 lakhs up to 31st March, 2013 and Rs.5,418.13 lakhs for the year.

d. The Company has not provided for the liability on account of interest on recalled bank working capital loans amounting to Rs.20,313.31 lakhs up to 31st March, 2013 and Rs.3,616.13 lakhs for the year.

Consequent to the above, the loss for the year and the liabilities as at 31.03.2014 is understated by Rs.9,048.13 lakhs and Rs. 59,913.07 lakhs respectively.

Qualified 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 matters described in the Basis for Qualified Opinion, 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 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:

a. Without qualifying our opinion, we draw attention to Note 1 to the financial statements regarding the preparation of the financial statements on a going concern basis, despite substantial erosion of the net worth, lower cash inflows from the existing business activities and continuous default in payment of dues to banks / financial institutions and the legal proceedings initiated by the Bankers of the Company for the recovery of the debts.

b. We draw attention to Note 27 to the financial statements also regarding the appointment and payment of Managerial Remuneration. Our opinion is not qualified in respect of this matter.

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. Except for the matters described in the Basis for Qualified Opinion, 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, except for the matters described in the Basis for Qualified 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, except for the matters described in the Basis for Qualified Opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of Section 211 of the Companies Act, 1956; read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs.

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 Companies Act, 1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441 A of the Companies Act, 1956 nor has it issued any Rules under the said section prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

Annexure to the Auditor''s Report:

The Annexure referred to in Para 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date ,to the members of GALADA POWER AND TELECOMMUNICATION LIMITED, HYDERABAD, for the year ended 31st March 2014.,

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

b) As explained to us, the management has physically verified most of the fixed assets during the year and there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of the assets. No material discrepancies were noticed on such verification.

c) During the year the Company has not disposed off any substantial part of fixed assets that would affect the going concern status of the Company.

2. a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

b) In our opinion, 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 is maintaining proper records of inventory. The discrepancies noticed on physical verification between the physical stocks and book records were not material.

3. a) During the year, 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.

b) In view of our comment in paragraph 3(a) above, (III) (b), (c), (d), (e), (f) and (g) of paragraph 4 of the aforesaid order are not applicable to the Company.

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

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

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted deposits from the public. Hence the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 are not applicable to the Company for the time being.

7. In our opinion, the Company has an internal audit system, the scope and coverage of which, in our opinion, needs to be enlarged so as to make it commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company 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. However, we have not made a detailed examination of the same.

9. a) According to the records, during the year, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it. However, the Company is not regular in depositing the dues relating to Investor Education and Protection Fund, Sales Tax and Property Tax

b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at March 31, 2014 for a period of more than six months from the date they became payable except the following

Nature of Nature of the Amount Period to Statute Dues Rs. which the amount relates The Investor 115,56,699 1996 Companies Education and Act, 1956 Protection Fund

IFST Loan 3,11,190 1988 APGST Act Deferred Sales Tax 67,10,843 1996 Sales tax 8,25,000 2000

AP 9,84,920 1997 to 2011 Municipalities Property Tax 2,07,075 2011 to 2012 Act, 1965 2,07,075 2012 to 2012 2.07.075 2012 to 2013 2.07.075 2013 to 2014

Customs Duty on 227,50,002 Act 1942 Imports

Nature of Due date Date of Statute payment The 30.12.2003 Not yet Companies paid Act, 1956

25.07.1997 Not yet APGST Act 01.04.2001 paid 01.08.2001

AP 1997- 2011 Not yet Municipalities 30.09.2011 Paid Act, 1965 30.09.2012 31.03.2013 30.09.2013

Customs Not yet Act 1942 paid c) According to the records of the Company and the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited on account of any dispute.

10. The accumulated losses of the Company as at the end of the financial year under reference are more than fifty percent of net worth of the Company. The Company has incurred cash losses during the year covered by our audit and also in the immediately preceding financial year.

11. In our opinion the Company has defaulted in repayment of dues to financial institutions, banks and debenture holders. However, the period and amount of default is not furnished as the Company has submitted its rehabilitation proposal to re-schedule all dues payable to the financial institutions, banks and debenture holders.

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

13. The Company is not a chit fund or a nidhi/mutual benefit fund/ society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

14. The Company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

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

16. According to the information and explanations given to us, the Company has not obtained any term loans during the year.

17. In our opinion and according to the information and explanations given to us, the funds raised on short-term basis have not been used for long-term investment.

18. During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

19. During the year, the Company has not issued any debentures, therefore the question of creating security or charge in respect thereof does not arise. However intrespect of the debentures issued to Unit Trust of India in earlier years and outstanding as at this year end, the security or charge is not yet created.

20. During the year, the Company has not made any public issue and therefore the question of disclosing the end use of money raised by public issue does not arise.

21. Based upon the audit procedures performed and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.

for BRAHMAYYA & CO. Chartered Accountants Firm''s Registration Number: 000513S

(P. CHANDRAMOULI) Place: Hyderabad Partner Date : May 30, 2014 Membership Number: 025211


Mar 31, 2013

Report on the Financial Statements:

We have audited the accompanying financial statements of GALADA POWER AND TELECOMMUNICATIONS Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

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"). 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 judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. 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 agpxgoriate to provide a basis for our audit opinion.

Basis for Qualified Opinion:

a. In the absence of confirmation letters from the parties, we are unable to ascertain whether the amounts shown under the heads Trade receivables, Current Assets and Loans and Advances are realisable and the payables shown under various heads of account are also subject to confirmation by the respective institutions / parties. In the absence of sufficient evidence, we are unable to comment on the recoverability of these receivables and consequential effect on the financial statements.

b. The Company has not complied with the provisions of Sec-205-A (1) of the Companies Act, 1956 regarding transfer of unpaid dividend to a special bank account and the interest payable for such non compliance amounting to Rs. 221.58 lakhs up to 31st March, 2012 and Rs.13.87 lakhs for the year is not provided in the Accounts.

c. The Company has not provided for the liability on account of additional interest and liquidated damages payable to the Financial Institutions and / or other financiers for non compliance with certain terms of sanction of loans and / or repayment schedules amounting to Rs.29,558.99 lakhs up to 31st March, 2012 and Rs.4,986.83 lakhs for the year.

d. The Company has not provided for the liability on account of interest on recalled bank working capital loans amounting to Rs.17,162.06 lakhs up to 31st March, 2012 and Rs.3,151.25 lakhs for the year.

Consequent to the above, the loss for the year and the liabilities as at 31.03.2013 is understated by Rs.8,151.95 lakhs and Rs. 55,094.58 lakhs respectively.

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 matters described in the Basis for Qualified Opinion, 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, 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 yeafcgeded on that date

Emphasis of Matter:

a. Without qualifying our opinion, we draw attention to Note 1 to the financial statements regarding the preparation of the financial statements on a going concern basis, despite substantial erosion of the net worth, lower cash inflows from the existing business activities and Continuous default in payment of dues to banks / financial institutions and the legal proceedings initiated by the Bankers of the Company for the recovery of the debts.

b. We draw attention to Note 27 to the financial statements also regarding the appointment and payment of Managerial Remuneration. Our opinion is not qualified in respect of this matter.

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. Except for the matters described in the Basis for Qualified Opinion, 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, except for the matters described in the Basis for Qualified 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, except for the matters described in the Basis for Qualified Opinion,

the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956; /f^^Ws^s.

e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441 A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

Annexure to the Auditor''s Report:

The Annexure referred to in Para 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date ,to the members of GALADA POWER AND TELECOMMUNICATION LIMITED, HYDERABAD, for the year ended 31 March 2013.,

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

b) As explained to us, the management has physically verified most of the fixed assets during the year and there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of the assets. No material discrepancies were noticed on such verification.

c) During the year the Company has not disposed off any substantial part of fixed assets that would affect the going concern status of the Company.

2. a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

b) In our opinion, 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 is maintaining proper records of inventory. The discrepancies noticed on physical verification between the physical stocks and book records were not material.

3. a) During the year, 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.

b) In view of our comment in paragraph 3(a) above, (III) (b), (c), (d), (e), (f) and (g) of paragraph 4 of the aforesaid order are not applicable to the Company.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknessesJrL|nternal control system. /^SF^v

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

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted deposits from the public. Hence the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 are not applicable to the Company for the time being.

7. In our opinion, the Company has an internal audit system, the scope and coverage of which, in our opinion, needs to be enlarged so as to make it commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company 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. However, we have not made a detailed examination of the same.

9. According to the records, during the year, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it. However, the Company is not regular in depositing the dues relating to Investor Education and Protection Fund, Sales Tax and Property Tax, //<&^;/« > c) According to the records of the company and the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited on account of any dispute.

10. The accumulated losses of the Company as at the end of the financial year under reference are more than fifty percent of net worth of the Company. The Company has incurred cash losses during the year covered by our audit and also in the immediately preceding financial year.

11. In our opinion the company has defaulted in repayment of dues to financial institutions, banks and debenture holders. However, the period and amount of default is not furnished as the Company has submitted its rehabilitation proposal to re schedule all dues payable to the financial institutions, banks and debenture holders.

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

13. The Company is not a chit fund or a nidhi/mutual benefit fund/ society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

14. The Company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

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

16. According to the information and explanations given to us the Company has not obtained any term loans during the year.

17. In our opinion and according to the information and explanations given to us the funds raised on short-term basis have not been used for long-term investment.

18. During the year, the Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained under section 301 of the Companies Act, 1956.

19. During the year, the Company has not issued any debentures, therefore the question of creating security or charge in respect thereof does not arise. However introspect of the debentures issued to Unit Trust of India in earlier years and outstanding as at this year end, the security or Charge is not yet created.

20. During the year, the Company has not made any public issue and therefore the question of disclosing the end use of money raised by public issue does not arise.

21. Based upon the audit procedures performed and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.

for BRAHMAYYA & Co.,

Chartered Accountants

Firms'' Registration Number:

(P. CHANDR)

Place : Hyderabad Parter

Date : May 31, 2013 Membership Number: 025211


Mar 31, 2012

1. We have audited the attached Balance Sheet of GALADA POWER AND TELECOMMUNICATION LIMITED, HYDERABAD (A P) as at 31st March, 2012 and the Statement of Profit and Loss and also 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 (Auditors' Report) Order, 2003 (as amended} issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order

4. Without qualifying our opinion we draw attention to Note no: 1 of the financial statements regarding the preparation of the financial statements on a going concern basis.

5. in the absence of confirmation letters from the parties, we are unable to ascertain whether the amounts shown under the heads Trade receivables, Current Assets and Loans and Advances are realisable and the payables shown under various heads of account are a/so subject to confirmation by the respective institutions/parties

6. a} The Company has not complied with the provisions of Sec 205-A (1) of the Companies Act, 19$$ regarding transfer of unpaid dividend to a special bank account and the interest payable for such non compliance amounting to Rs. 207.67 lakhs up to 31st March, 2011 and Rs. 13.91 lakhs for the year is not provided in the Accounts.

b) The Company has not provided for the liability on account of additional interest and liquidated damages payable to the Financial institutions and/or other financiers for non compliance with certain terms of sanction of loans and for repayment schedules amounting to Rs. 25,363.35 lakhs up to 31st March, 2011 and Rs. 4,195.04 lakhs for the year,

c) The Company has not provided for the liability on account of interest on recalled bank working capital loans amounting to Rs. 14,415.93 lakhs up to 31st March, 2011 and Rs. 2.746.13 lakhs for the year. Consequent to The above, the loss for the year and the liabilities as at 31.03.2012 understated by Rs. 6,955.68 lakhs and Rs. 46,942.63 lakhs respectively

7. Further to our comments in the Annexure referred to above, we report that;

i) Except as discussed in paragraphs 4 to 6 above, 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, except as discussed in paragraphs 4 to 6 above. 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 Row statement dealt with by this report are in agreement with the books of account.

iv) In our opinion, except as discussed in paragraphs 4 to 6 above, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement clean with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act 1956. On the basis of written representations received from the Directors, as on 31st March, 2012 and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2012 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956,

vi) In our opinion and to the best of our information and according to the explanations given to us, subject to our observations in paragraphs 4 1o 6 above and also Note no: 27 regarding payment of Managerial remuneration the said accounts read in Conjunction with the other notes thereon give the information required by the Companies Act. 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2012:

b) In the case of the statement of profit and loss,of the Loss of the Company for the year ended on that date, and

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

Annexure to the Auditor's Report: referred to in paragraph 3 of our report of even date.

Re: GALADA POWER AND TELECOMMUNICATION LIMITED. HYDERABAD

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

b) As explained to us, the management has physically verified most of the fixed assets during the year and there is a regular programme of verification which, in our opinion 15 reasonable having regard to the size of the Company and the nature of the assets. No material discrepancies were noticed on such verification

c) During the year the Company has not disposed off any substantial part of fixed assets that would affect the going concern status of the Company

2. a) The inventory has been physically verified during the year by the management. In our opinion the frequency of verification is reasonable

b) In our opinion, 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 is maintaining proper records of inventory The discrepancies noticed on physical verification between the physical stocks and book records were not material.

3. a) During the year, 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

b) In view of our comment in paragraph 3(a) above (III) (b), (c), (d), (e), (f) and (g) of paragraph 4 of the aforesaid order are not applicable to the Company

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

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

b) In our opinion and according to the information and explanations given to us. the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act. 1956 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted deposits from the public Hence the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975 are not applicable to the Company for the time being

7. In our opinion, the Company has an Internal audit system the scope and coverage of which, in our opinion, needs to be enlarged so as to make it commensurate with the size and nature of its business

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company 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 However, we have not made a detailed examination of the same

9. a) According to the records, during the year the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund. Employees' State Insurance, income-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it. However. The Company is not regular in depositing the dues relating 1o investor Education and Protection Fund, Sales Tax and Property Tax,

b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty. Excise Duty and Cess were in arrears as at March 31, 2012 for a period of more than six months from the date they became payable except the following

Nature of Nature of the Amount Period to Statute Dues Rs. which the amount relates The Companies Investor Education 115,56,589 1996 Act, 1956 and Protection Fund

APGST Act IFST Loan 3,11,190 1988 Differed Sales Tax 67,10,843 1996 Sales Tax 14,00,000 2000

AP Property Tax 9,84,920 1997 to 2011 Municipalities Act, 1965 2,07,075 2011 to 2012

Customs Act Duty on imports 204,49,304 1942



Nature of Due date Date of Payment Statute The Companies 30.12.2003 Not yet paid Act, 1956

APGST Act 25.07.1997 - 01.04.2001 - 01.08.2001 Rs. 75,000 paid up to 30.06.2012

AP 1997-2011 Not yet paid Municipalities 30.09.2011 Act, 1965

Customs Act Not yet paid 1942

c) According to the records of the company and the information and explanations given to us. there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited on account of any dispute.

10. The accumulated losses of the Company as at the end of the financial year under reference are more than fifty percent of net worth of the Company The Company has incurred cash losses during the year covered by our audit and also in the immediately preceding financial year.

11. In our opinion the company has defaulted in repayment of dues to financial Institutions, banks and debenture holders However the period and amount of default is not furnished as the Company has submitted its rehabilitation proposal to reschedule all dues payable to the financial institutions banks and debenture holders.

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

13. The Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

14. The Company is not dealing or trading in shares, securities debentures and other investments. Therefore the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial Institutions

16 According to the information and explanations given to us the Company has not obtained any term loans during the year

17. In our opinion and according to the information and explanations given to us the funds raised on short-term basis have not been used for long-term investment

18. During the year, the Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained under section 301 of the Companies Act, 1956

19. During the year the Company has not issued any debentures therefore the question of creating security or charge in respect thereof does not arise However introspect of the debentures issued to Unit Trust of India in earlier years and outstanding as at this year end the security or Charge is not yet created

20 During the year the Company has not made any public issue and therefore the question of disclosing the end use of money raised by public issue does not arise.

21 Based upon the audit procedures performed and according to the information and explanations given to us. we report that no fraud on or by the Company has been noticed or reported during the year



for BRAHMAYYA & Co. Chartered Accountants Firms' Registration Number 000513S

(P. CHANDRAMOULI) Partner Membership Number 025211

Place : Hyderabad Date: June 30, 2012


Mar 31, 2010

1. We have audited the attached Balance Sheet of GALADA POWER AND TELECOMMUNICATION LIMITED, HYDERABAD (AP) as at31stMarch,2010andthe Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 (as amended), issued by the Central Government of I ndia in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our opinion we draw attention to Note no: 3 of Schedule 20 to the financial statements regarding the preparation of the financial statements on a going concern basis.

5. In the absence of confirmation letters from the parties, we are unable to ascertain whether the amounts shown under the heads Sundry Debtors, Other Current Assets and Loans and Advances are realisable and the payables shown under various heads of account are also subject to confirmation by the respective institutions / parties.

6. a) The Company has not complied with the provisions of Sec-205-A (1) of the Companies Act, 1956 regarding transfer of unpaid dividend to a special bank account and the interest payable for such noncompliance amounting to Rs. 179.93 lakhs upto 31st March, 2009 and Rs. 13.87 lakhs for the year is not provided in the Accounts.

b) The Company has not provided for the liability on account of additional interest and liquidated damages payable to the Financial Institutions and / or other financiers for non compliance with certain terms of sanction of loans and / or repayment schedules amounting to Rs. 17,793.27 lakhs upto 31st March, 2009 and Rs.3,624.83 lakhs for the year.

c) The Company has not provided for the liability on account of interest on recalled bank working capital loans amounting to Rs.9,937.39 lakhs upto 31st March, 2009 and Rs.2,085.44 lakhs for the year.

Consequent to the above, the loss for the year and the liabilities as at 31.03.2010 is understated by Rs.5,724.14 lakhs and Rs. 33,634.73 lakhs respectively.

7. Further to our comments in the Annexure referred to above, we report that:

i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books.

iii) The Balance Sheet, 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 with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

v) On the basis of written representations received from the Directors, as on 31st March, 2010 and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2010 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read in conjunction with the Schedules annexed therewith and subject to our comments in para 5 and 6 above and also note no : 20 of Schedule 20 regarding payment of Managerial remuneration the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2010;

b) in the case of the profit and loss account, of the Loss of the Company for the year ended on that date; and

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

Annexure to the Auditors Report: referred to in paragraph 3 of our report of even date, Re: GALADA POWER AND TELECOMMUNICATION LIMITED, HYDERABAD.

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

b) As explained to us, the management has physically verified most of the fixed assets during the year and there is a regular programme of verification which,in our opinion, is reasonable having regard to the size of the Company and the nature of the assets. No material discrepancies were noticed on such verification.

c) During the year the Company has not disposed off any substantial part of fixed assets that would affect the going concern status of the Company.

2. a) The inventory has been physically verified during the year by the management.

In our opinion, the frequency of verification is reasonable.

b) In our opinion, 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 is maintaining proper records of inventory. The discrepancies noticed on physical verification between the physical stocks and book records were not material.

3. a) During the year, 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.

b) In view of our comment in paragraph 3(a) above, (III) (b), (c), (d), (e), (f) and (g) of paragraph 4 of the aforesaid order are not applicable to the Company.

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

5. a) In our opinion and according to the information and explanations given to us,

we are of fhe opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register to be maintained under that section

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted deposits from the public. Hence the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 are not applicable to the Company for the time being.

7. In our opinion, the Company has an internal audit system, the scope and coverage of which, in our opinion, needs to be enlarged so as to make it commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company 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. However, we have not made a detailed examination of the same.

9. a) According to the records, during the year, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees State Insurance, Income-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it. However, the Company is not regular in depositing the dues relating to Investor Education and Protection Fund, Sales Tax and Property Tax,

b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at March 31,2010 for a period of more than six months from the date they became payable except the following.

Period

Nature of Nature of Amount to Due date Date of

Statute the Dues Rs. which payment

the amount relates

The Compan ies Investor 115,56,699 1996 30.12.2003 Not

Act, 1956 Education yet paid

and

Protection

Fund

APGST Act IFSTLoan 3,11,190 1988 25.07.1997

Differed

Sales Tax 45,00,000 1996 01.04.2001

Salestax 19,75,000 2000 01.08.2001 Rs.25,000

paid up to 26.06.10

APMunicipal ities Property Tax 7,47,440 1997 to 1997 to Not

Act, 1965 2010 2010 yet paid

Income tax Tax Deduc ted 17,14,887 Upto - Not

Act, 1961 at Source 2009 yet paid

Customer Act Duty on 181,48,606 Not

1942 Imports yet paid

c) According to the records of the company and the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess, which have not been deposited on account of any dispute.

10. The accumulated losses of the Company as at the end of the financial year under reference are more than fifty percent of net worth of the Company. The Company has incurred cash losses during the year covered by our audit and also in the immediately preceding financial year.

11. In our opinion the company has defaulted in repayment of dues to financial institutions, banks and debenture holders. However, the period and amount of default is not furnished as the Company has submitted its rehabilitation proposal to re schedule all dues payable to the financial institutions, banks and debenture holders.

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

13. The Company is not a chit fund or a nidhi/mutual benefit fund/ society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

14. The Company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

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

16. According to the information and explanations given to us the Company has not obtained any term loans during the year.

17. In our opinion and according to the information and explanations given to us the funds raised on short-term basis have not been used for long-term investment.

18. During the year, the Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained under section 301 of the Companies Act, 1956.

19. During the year, the Company has not issued any debentures, therefore the question of creating security or charge in respect thereof does not arise. However introspect of the debetures issued to Unit Trust of India in earlier years and outstanding as at this year end, the security or Charge is not yet created.

20. During the year, the Company has not made any public issue and therefore the question of disclosing the end use of money raised by public issue does not arise.

21. Based upon the audit procedures performed and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.

for BRAHMAYYA&CO.

Chartered Accountants

Firms Registration Number: 000513S

(P.CHANDRAMOULI)

Place: Hyderabad Partner

Date : 26,th June, 2010 Membership Number: 025211



 
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