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Auditor Report of Garg Furnace Ltd.

Mar 31, 2015

We have audited the accompanying Financial Statements of Garg Furnace Limited ("the Company"), Kanganwal Road, V.P.O. Jugiana, G. T. Road, Ludhiana, which comprise the Balance Sheet as at March 31,2015, the Profit and Loss Statement 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 matters stated in Section 134(5) of the Companies Act,2013 ("the Act") with respect to the preparation and presentation 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 Companies Act, 2013, read with rule 7 of the Companies (Accounts) Rules,2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the 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 consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our Responsibility is to express an opinion on these financial statements based on our audit. 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 Companies Act, 2013("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 misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on auditor's judgment, including 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 auditor 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 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, of the state of affairs of the Company as at 31st March, 2015, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to Note 30 to the financial statements which describes the uncertainty related to outcome of appeal filled by the Company against demand of Punjab Power Corporation Ltd. However 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 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 paragraph 3 and 4 of the Order.

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, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance Sheet, the statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Companies Act,2013, read with rule 7 of the Companies (Accounts) Rules, 2014.

e) On the basis of the written representations received from the directors as on March 31, 2015, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2015, from being appointed as a director in terms of Section 164(2) of the Companies Act, 2013.

f) With respect to 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 explanations given to us:

i) The Company has disclosed the impact of pending litigations on its financial positions in its financial statements as referred to in note 30 to its financial statements.

ii) The Company does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii) There were no amount which were required to be transferred to Investor Education and Protection Fund by the company.

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

(REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING OF "REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS'^ 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). All the assets have not been physically verified by the management during the year but 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 its assets. No material discrepancies were noticed on such verification.

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

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

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

(iii) According to the information and explanations given to us and on the basis of our examination of the books of accounts, the company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under section 189 of the companies Act, 2013. Consequently, the provisions of clauses iii (b) and iii (c) of paragraph 3 of the order are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business for purchases of inventory, fixed assets and for 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.

(v) According to the information and explanations given to us, the Company has not accepted deposits within the meaning of Section 73 to 76 or other relevant provisions of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 during the year. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

(vi) 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 148(1) of the Companies Act, 2013 and we 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 the record with a view to determine whether they are accurate or complete.

(vii) a). The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, income tax, sales tax, custom duty, excise duty, cess, service tax and other material statutory dues applicable to it.

b) . According to the information and explanations given to us, there are no dues of sales tax, income tax, custom duty, excise duty, cess and service tax which have not been deposited on account of any dispute except mentioned below:

Name of Statute Nature of Dues Forum where appeal is pending

Income Tax Act,1961 Income Tax ITAT

Income Tax Act,1961 Income Tax ITAT

Income Tax Act,1961 Income Tax ITAT

Name of Statute Period to which Amount involved amount relates in Rs

Income Tax Act,1961 A.Y 2008-09 29.00 Lacs

Income Tax Act,1961 A.Y 2010-11 10.00 Lacs

Income Tax Act,1961 A.Y 2011-12 12.11 Lacs

c) . According to the information and explanations given to us, there is no amount which is required to be transferred to Investor education and protection fund in accordance with relevant provisions of the Companies Act, 1956 (1 of 1956) and rules there under.

(viii) The Company does not have any accumulated losses, further it has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to bank/ financial institutions.

(x) The Company has not given guarantees for loan taken by others from banks or financial institutions.

(xi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purpose for which they were obtained.

(xii) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Dass Khanna & Co. Chartered Accountants (Reg No. 000402N)

Sd/- (CA AMARJIT KAMBOJ) Place: LUDHIANA. PARTNER Date : 30-05-2015 M. No. 082152


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying Financial Statements of Garg Furnace Limited ("the Company"), Kanganwal Road, V.PO Jugiana, G. T Road, Ludhiana, which comprise the Balance Sheet as at March 31, 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 Statement

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 accounting principles generally accepted in India including Accounting Standards referred to in Section 211 (3C) of the Companies Act 1956 ("the Act").This Responsibility includes the design, implementation and maintenance of Internal Control relevant to the preparation and presentation of the financial statements that give true and fair view and are free from material misstatement, whether due to fraud or error. Auditors'' Responsibility

Our Responsibility is to express an opinion on these financial statements based on our audit. 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 misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on auditor''s judgment, including 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 auditor 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 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 March 31, 2013. b). In the case of the tatement of Profit and Loss, of the profit for the year ended on that date and c). In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory

Requirements

1 As required by the Companies (Auditor''s Report) Order 2003 ("the Order") issued by the Central Government of India in terms of section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraph 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 ourexammation of those books.

c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account

d) In our opinion, the Balance Sheet, the statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211 (3C)oftheAct

e) On the basis of the written representations received from the directors as on March 31, 2013, 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 Section 274( 1) (g) of the Act.

ANNEXURE TO THE AUDITOR REPORT

(REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING OF

"REPORT ON OTHER LEGAL AND REGULATORY

REQUIREMENTS''^OUR REPORTOF EVEN DATE.)

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

b). All the assets have not been physically verified by the management during the year but 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 its assets. No material discrepancies were noticed on such verification.

c). During the year, the company has not disposed off substantial part of its plant & machinery and hence the going concern status of the company has not been affected.

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

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

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

(iii) a). The company has not granted secured or unsecured loan to the companies, firms or other parties covered in the register maintained under section 301 of the companies Act 1956. Therefore the provisions of Paragraph 4 (iii) (b) (c) and (d) of the above said order are not applicable to the company.

b). The company has taken interest free unsecured loans from three parties covered in the register maintained under section 301 of the Companies Act, 1956. The amount involved in the transaction is Rs 1.93 Crores and balance outstanding at the end of the year is Rs 1.12 crores

c). In our opinion, the terms and conditions on which loan has been taken are not prima facie prejudicial to the interest of the company.

d). In our opinion and according to the information and explanation given to us, the payment of principal amount as agreed are regular.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business for purchases of inventory, fixed assets and for 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.

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

b). In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rs. five lacs or more in respect of each party during the year, have been made at prices which are reasonable having regard to the prevalent market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the provisions of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the companies (Acceptance of Deposits) Rules, 1975 are not applicable to Company. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other court or any other Tribunal.

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

(viii) We have broadly reviewed the books of account 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 we 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 the record with a view to determine whether they are accurate or complete.

(ix) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income tax, sales tax, custom duty, excise duty, cess, service tax and other material statutory dues applicable to it.

(x) The Company does not have any accumulated losses, further it has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to bank.

(xii) The company has not granted loans or advances on the basis of security by way of pledge of shares, debentures and other securities

(xiii) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society.

(xiv) In our opinion, the company has not dealt or traded in shares, securities, debentures and other investments

(xv) The Company has not given guarantees for loan taken by others from banks. Therefore provisions of 4(XV) of above said order are not applicable to Company.

(xvi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purpose for which they 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 report that the no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures.

(xx) The company has not raised money through Public Issue during the period covered by our audit.

(xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year

For Dass Khanna & Co.

Chartered Accountants

(Registration No. 000402 N)

SD/-

(RAKESH SONI)

Place: LUDHIANA. PARTNER

Date : 30-05-2013 M. No. 83142


Mar 31, 2012

1. We have audited the attached Balance Sheet of Garg Furnace Limited, Kanganwal Road, V.P.O. Jugiana, G. T. Road, Ludhiana, as at 31st March 2012, the Profit and Loss Statement 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 basisfor our opinion.

3. 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 Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order.

4. 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 Statement 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 Statement 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 2012 and taken on record by the Board of Directors, We report that none of the directors is disqualified as on 31 st 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, the said accounts read together with notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

a). In the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2012.

b). In the case of the Profit and Loss Statement, 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 TO THE AUDITOR REPORT

(REFERED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE ON THE STATEMENT OF ACCOUNTS FOR GARG FURNACE LIMITED AS AT AND FOR THE YEAR ENDED 31st MARCH, 2012)

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

b). All the assets have not been physically verified by the management during the year but 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 its assets. No material discrepancies were noticed on such verification.

c). During the year, the company has not disposed off substantial part of its plant & machinery and hence the going concern status of the company has not been affected.

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

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

c). The company is maintaining proper records of inventory.

The discrepancies noticed on verification between

physical stocks and the book records ware not material.

(iii) a). The company has not granted secured or unsecured loan to the companies, firms or other parties covered in the

register maintained under section 301 of the companies Act 1956. Therefore the provisions of Paragraph 4 (iii) (b) (c) and (d) of the above said order are not applicable to the company.

b). The company has taken an interest free unsecured loan from one party covered in the register maintained under section 301 of the Companies Act, 1956. The amount involved in the transaction and balance outstanding at the end of the year is Rs. 1.74 Crores .

c). In our opinion, the terms and conditions on which loan has been taken are not prima facie prejudicial to the interest of the company.

d). In our opinion and according to the information and explanation given to us, the payment of principal amount as agreed are regular.

(iv) In our opinion and according to the information and ' explanations given to us, there is adequate internal

control system commensurate with the size of the company and the nature of its business for purchases of inventory, fixed assets and for 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.

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

b). In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rs. five lacs or more in respect of each party during the year, have been made at prices which are reasonable having regard to the prevalent market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the provisions of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the companies (Acceptance of Deposits) Rules, 1975 are not applicable to Company. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other court or any other Tribunal.

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

(viii) We have broadly reviewed the books of account 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 we 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 the record with a view to determine whether they are accurate or complete.

(ix) a).The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, income tax, sales tax, custom duty, excise duty, cess, service tax and other material statutory dues applicable to it.

b) .According to the information and explanation given to us, there are no dues of sale tax, income tax, customs duty, excise duty, cess and service tax which have not been deposited on account of any dispute.

(x) The Company does not have any accumulated losses, further it has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to bank.

(xii) The company has not granted loans or advances on the basis of security by way of pledge of shares, debentures and other securities

(xiii) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society.

(xiv) In our opinion, the company has not dealt or traded in shares, securities, debentures and other investments

(xv) The Company has not given guarantees for loan taken by others from banks. Therefore provisions of 4(XV) of above said order are not applicable to Company.

(xvi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purpose forwhich they 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 report that the no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 oftheAct.

(xix) According to the information and explanations given to us, -during the period cowarad by our audit report, the company has not issued any debentures.

(xx) The company has not raised money through Public Issue during the period covered by our audit.

(xxi) 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 except additional income of Rs. 250.04 Lacs surrendered during survey proceedings conducted by Income Tax Department.



For Dass Khanna & Co.

Chartered Accountants

(Registration No. 000402 N)

(RAKESH SONI)

Place: LUDHIANA. PARTNER

Date : 31-08-2012 M. No. 83142


Mar 31, 2010

1. We have audited the attached balance sheet of Garg Furnace Limited, Kanganwal Road, V.P.O. Jugiana, G. T. Road, Ludhiana, as at 31st March 2010, the 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 company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor’s Report) Order, 2003 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 & 5 of the said Order.

4. 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 together with notes thereon as per Annexure-U give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

a). In the case of the balance sheet, of the state of affairs of the company as at 31st March, 2010.

b). In the case of the profit and loss account, of the 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 TO THE AUDITOR REPORT



(REFERED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE ON THE STATEMENT OF ACCOUNTS FOR GARG FURNACE LIMITED AS AT AND FOR THE YEAR ENDED 31ST MARCH, 2010)

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

b). All the assets have not been physically verified by the management during the year but 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 its assets. No material discrepancies were noticed on such verification.

c). During the year, the company has not disposed off substantial part of its plant & machinery and hence the going concern status of the company has not been affected.

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

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

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

(iii) a). The company has not granted secured or unsecured loan to the companies, firms or other parties covered in the register maintained under section 301 of the companies Act, 1956. Therefore the provisions of Paragraph 4 (iii) (b) (c) and (d) of the above said order are not applicable to the company.

b) The company has taken an interest free unsecured loan from one party covered in the register maintained under section 301 of the Companies Act, 1956. The amount involved in the transaction and balance outstanding at the end of the year is Rs. 0.50 Lacs.

c) In our opinion, the terms and conditions on which loan has been taken are not prima facie prejudicial to the interest of the company.

d) In our opinion and according to the information and explanation given to us, the payment of principal amount as agreed are regular.

(iv) In our opinion and according to the information and

explanations given to us, there is adequate internal contro system commensurate with the size of the company and the nature of its business for purchases of inventory, fixed assets and for sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal contro system.

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

b). In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rs. five lacs or more in respect of each party during the year, have been made at prices which are reasonable having regard to the prevalent market prices at the relevant time.

(vi) In our opinion and according to the information and

explanations given to us, the company has complied with the provisions of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or Nationa Company Law Tribunal or Reserve Bank of India or any other court or any other Tribunal.

(vii) In our opinion, the company has an internal audit system

commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Centra Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act,1956 and we 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 the record with a view to determine whether they are accurate or complete

(ix) a). The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees’ state insurance, income tax, sales tax, custom duty, excise duty, cess, service tax and other material statutory dues applicable to it except wealth tax.

b). According to the information and explanations given to us, undisputed amounts payable in respect of wealth tax amounting to Rs. 3.47 Lacs, was in arrear, as at 31.03.2010 for a period of more than six months from the date they became payable.

c). According to the information and explanation given to us, there are no dues of sale tax, income tax, customs duty, excise duty, cess and service tax which have not been deposited on account of any dispute.

(x) The Company does not have any accumulated

losses, further it has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information

and explanations given to us, the company has not defaulted in repayment of dues to bank.

(xii) The company has not granted loans or advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society.

(xiv) In our opinion, the company has not dealt or traded in shares, securities, debentures and other investments.

(xv) In our opinion, the terms and conditions on which the company has given corporate guarantees for loans taken by others from a Bank are not prime facie, prejudicial to the interest of the company.

(xvi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purpose for which they 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 report that the no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures.

(xx) The company has not raised money through Public Issue during the period covered by our audit.

(xxi) 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 Dass Khanna & Co.

Chartered Accountants

(Registration No. 000402 N)

Place : Ludhiana. (Rakesh Soni)

Date : 18-08-2010 Partner

M. No. 83142

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