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Auditor Report of Himachal Futuristic Communications Ltd.

Mar 31, 2013

Report on the Financial Statements

1. We have audited the accompanying fnancial statements of Himachal Futuristic Communications Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Proft and Loss and Cash Flow Statement for the year then ended, and a summary of signifcant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these fnancial statements that give a true and fair view of the fnancial position, fnancial performance and cash fows 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 fnancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor''s Responsibility

Our responsibility is to express an opinion on these fnancial 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 fnancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fnancial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the fnancial 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 fnancial 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 fnancial statements. We believe that the audit evidence we have obtained is suffcient and appropriate to provide a basis for our audit opinion.

4. Basis of Qualifed Opinion

a) With regard to the trade receivable outstanding for a long period as mentioned in Note No. 37, we are unable to comment on the extent of realisability and consequently on the adequacy of provision for doubtful debts made by the Company. Impact thereof on the proft for the year, if any, is unascertainable.

b) As mentioned in Note No. 41, balances of some of the trade receivable, trade payable, lenders and loans and advances are subject to confrmations, reconciliation and adjustments, if any.

The effect of items mentioned at paragraph 4(a) and (b) above on proft for the year, assets, liabilities and reserves is unascertainable.

5. Qualifed Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matters described in the Basis of Qualifed Opinion paragraph the effect of which is unascertainable and read together with the other notes, 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 Proft and Loss, of the proft for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash fows for the year ended on that date.

6. Report on Other Legal and Regulatory Requirements

A. 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 specifed in paragraphs 4 and 5 of the Order.

B. As required by section 227(3) of the Act, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. the Balance Sheet, Statement of Proft and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. in our opinion, the Balance Sheet, Statement of Proft and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

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 disqualifed 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.

ANNEXURE TO THE AUDITORS'' REPORT

Annexure referred to in paragraph 3 of the Auditors'' Report of even date to the Members of Himachal Futuristic Communications Limited on the accounts for the year ended 31st March, 2013;

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situations of its Fixed Assets.

(b) All the assets have been physically verifed by the management during the year but there is a regular programme of verifcation which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets and as informed, no material discrepancies were noticed on such verifcation.

(c) During the year, the Company has not disposed off any substantial part of the fxed assets, which affects the going concern status of the company.

(ii) (a) As per the information furnished, the Inventories have been physically verifed by the management at reasonable intervals during the year. In our opinion, having regard to the nature and location of stocks, the frequency of physical verifcation is reasonable.

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

(c) The Company is maintaining proper records of Inventory. In our opinion, the discrepancies noticed on physical verifcation of stocks were not material in relation to the operation of the Company and the same have been properly dealt with in the books of account.

(iii) (a) As per the information furnished, the Company has not granted any loans, secured or unsecured to and from companies, frms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) and (d) of the Order are not applicable.

(b) As per the information furnished, the Company has not taken any loans, secured or unsecured from companies, frms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, Clause 4 (iii) (e), (f) and (g) of the said Order is not applicable.

(iv) In our opinion and according to information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fxed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

(v) Based on the audit procedure applied by us and according to the information and explanations provided by the management, during the year, there has been no contract or arrangement that needed to be entered into the register maintained under section 301 of the Companies Act, 1956. Accordingly, Clause 4 (v)(b) of the said Order is not applicable.

(vi) The Company has not accepted any deposits from the public within the meaning of the provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956.

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

(viii) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanations given to us and records examined by us, the Company has generally been regular in depositing undisputed statutory dues with the appropriate authorities in respect of provident fund, employees'' state insurance, income tax deducted at source, wealth tax, excise duty, service tax and sales tax/works contract tax though there has been a slight delay in a few cases. According to information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at 31st March, 2013 for period of more than six months from the date they become payable.

(b) According to the records of the Company, the dues of Sales tax, which have not been deposited on account of disputes and the forum where the dispute is pending, are as under:

Name Nature Amount in Period to Forum where of the Rs. which the dispute is of the dues amount Pending Statute relates

1. Sales Sales 18,742,719 1997-1998 & Hon''ble High Tax Act Tax 1998-1999 Court of Punjab & Haryana.

2. Sales Sales 21,241,396 2009-2010 & Addl. Tax Act Tax 2010-2011 Commissioner, Department of Trade & Taxes, New Delhi

Total 39,984,115

(x) There are no accumulated losses of the Company at the end of the fnancial year. The Company has not incurred cash losses during the fnancial year covered by our audit and in the immediately preceding fnancial year.

(xi) According to the information and explanations given to us and records examined by us, in view of the Reworked Package approved by the Corporate Debt Restructuring (CDR) Empowered Group as explained in Note No. 33, the Company has not defaulted in repayment of dues to fnancial institution or banks or debenture holders as at the Balance Sheet date

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

(xiii) As per the information and explanations given to us the provisions of any Special Statute applicable to Chit Fund do not apply to the Company. The Company is also not a nidhi/mutual beneft fund/ society.

(xiv) The Company has maintained proper records of transactions and contracts in respect of trading in shares, securities, debentures and other investments and timely entries have been made therein. All shares, debentures and other investments have been held by the Company in its own name, except 65,00,000 shares of AB Corp Limited, which are pledged with Oriental Bank of Commerce ltd. (erstwhile GTBL).

(xv) Based on our examination of the records and information and explanations given to us, the Company has given corporate/counter guarantees for loans taken by group companies, from banks and fnancial institutions. As one of the businesses of the Company is to promote the companies and also the long term involvement with those companies, the guarantees have not been considered prima facie, prejudicial to the interest of the Company.

(xvi) Based on our examinations of the records and information and explanations given to us during the year no term loan with repayment period beyond 36 months has been obtained. However, during the year the Company has raised inter corporate loans which on an overall basis, have been applied for the purposes 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 as at the end of the year, funds raised on short term basis have, prima facie, not been used for long term investment.

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

(xx) The Company has not raised any money by public issue during the year ended March 31, 2013.

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

FOR KHANDELWAL JAIN & CO.

Chartered Accountants

Firm Registration No: 105049W

(Akash Singhal)

Place: New Delhi Partner

Date : 29th April, 2013 Membership No. 103490


Mar 31, 2012

1. We have audited the attached Balance Sheet of Himachal Futuristic Communications Limited (the Company) as at 31st March, 2012, the Statement of Profit & 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 have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors' Report) Order, 2003, issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 and on the basis of such checks as considered appropriate and according to the information and explanations given to us during the course of the audit, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extent applicable.

4. a) As mentioned in Note No. 33, the Company has accounted for the impact of Rework Package approved by the CDR Empowered Group after complying with most of the terms and conditions stipulated therein, though compliance of few of them is still in process.

b) With regard to the sundry debtors outstanding for a long period as mentioned in Note No. 37, we are unable to comment on the extent of realisability and consequently on the adequacy of provision for doubtful debts made by the Company. Impact thereof on the profit for the year, if any, is unascertainable.

c) As mentioned in Note No. 41, balances of some of the sundry debtors, creditors, lenders and loans and advances are subject to confirmations, reconciliation and adjustments, if any.

d) As stated in Note No. 30, the Company has paid remuneration to managerial personnel during the year for which approval of central government is pending.

The effect of items mentioned at paragraph 4(a), (b), (c) and

(d) above is unascertainable, and hence the consequential cumulative effect thereof on profit for the year, assets, liabilities and reserves is unascertainable.

5. Further to our comments in the Annexure referred to above paragraph, 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 purposes of our audit;

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

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

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

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

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to para 4 above and read together with the other notes and the significant accounting policies 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:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

(ii) In the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(iii) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

Annexure referred to in paragraph 3 of the Auditors' Report of even date to the Members of HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED on the accounts for the year ended 31st March, 2012;

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situations of Fixed Assets.

(b) As per the information and explanations given to us, there is a phased programme of physical verification of fixed assets adopted by the Company and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

(c) During the period, the Company has not disposed off any substantial part of the fixed assets, which affects the going concern status of the company.

(ii) (a) As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the year. In our opinion, having regard to the nature and location of stocks, the frequency of physical verification is reasonable.

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

(c) The Company is maintaining proper records of Inventory. In our opinion, the discrepancies noticed on physical verification of stocks were not material in relation to the operation of the Company and the same have been properly dealt with in the books of account.

(iii) (a) As per the information furnished, the Company has not granted any loans, secured or unsecured to and from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) and (d) of the Order are not applicable.

(b) As per the information furnished, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, Clause 4 (iii) (e), (f) and (g) of the said Order is not applicable.

(iv) In our opinion and according to information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

(v) Based on the audit procedure applied by us and according to the information and explanations provided by the management, during the year, there has been no contract or arrangement that needed to be entered into the register maintained under section 301 of the Companies Act, 1956. Accordingly, Clause 4 (v)(b) of the said Order is not applicable.

(vi) The Company has not accepted any deposits from the public within the meaning of the provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956.

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

(viii) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanations given to us and records examined by us, the Company has generally been regular in depositing undisputed statutory dues with the appropriate authorities in respect of provident fund, employees ' state insurance, income tax deduced at source, wealth tax, excise duty, service tax and sales tax/ works contract tax though there has been a slight delay in few cases. According to information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at 31st March, 2012 for period of more than six months from the date they become payable.

(b) According to the records of the Company, the dues of Sales tax, which have not been deposited on account of disputes and the forum where the dispute is pending, are as under:

Name Nature Amount in Period to Forum where of the of the Rs. which the dispute is pending Statute dues amount relates

1. Sales Sales 18,742,719 1997-1998 & Hon'ble High Tax Act Tax 1998-1999 Court of Punjab & Haryana.

2. Income Income 82,160,582 A/Y 2002-2003 Commissioner Tax Act Tax & 2003-2004 of Income Tax (Appeal), New Delhi

Total 100,903,301

(x) There are no accumulated losses of the Company at the end of the financial year. The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial period.

(xi) According to the information and explanations given to us and records examined by us, in view of the Rework Package approved by the Corporate Debt Restructuring (CDR) Empowered Group as explained in Note No. 33, the Company has not defaulted in repayment of dues to financial institution or banks or debenture holders as at the Balance Sheet date.

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

(xiii) As per the information and explanations given to us the provisions of any Special Statute applicable to Chit Fund do not apply to the Company. The Company is also not a nidhi/mutual benefit fund/society.

(xiv) The Company has maintained proper records of transactions and contracts in respect of trading in shares, securities, debentures and other investments and timely entries have been made therein. All shares, debentures and other investments have been held by the Company in its own name except 65,00,000 shares of AB Corp Limited, which are pledged with OBC (erstwhile GTBL) and held in OBC's name.

(xv) Based on our examination of the records and information and explanations given to us, the Company has given corporate/counter guarantees for loans taken by group companies, from banks and financial institutions. As one of the businesses of the Company is to promote the companies and also the long term involvement with those companies, the guarantees have not been considered prima facie, prejudicial to the interest of the Company.

(xvi) Based on our examinations of the records and information and explanations given to us during the year no term loan with repayment period beyond 36 months has been obtained. However, during the year the Company has raised inter corporate loans which on an overall basis, have been applied for the purposes 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 as at the end of the year, funds raised on short term basis have, prima facie, not been used for long term investment.

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

(xx) The Company has not raised any money by public issue during the period ended March 31, 2012.

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

For KHANDELWAL JAIN & CO.,

Firm Registration No. 105049W

Chartered Accountants,

(Akash Shinghal)

Place: New Delhi Partner

Dated: 30th May, 2012 Membership No: 103490


Sep 30, 2010

1. We have audited the attached Balance Sheet of Himachal Futuristic Communications Limited (the Company) as at 30th September, 2010, the profit & Loss Account and also the Cash Flow statement for the period ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi -nancial 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 signifi cant 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, issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 and on the basis of such checks as considered appropriate and according to the information and explanations given to us during the course of the audit, we enclose in the Annexure hereto a statement on the matters specifi ed in paragraphs 4 and 5 of the said Order to the extent applicable.

4. a) As stated in Note 13 of Schedule 19, the Company has accounted for the impact of modifi ed CDR package after complying with most of the terms and conditions stipulated therein, however compliance of some of them are still in process. The company is also not regular in payment of its dues including interest thereon to the lenders and may be liable to consequential withdrawal of any of the reliefs granted earlier.

b) As stated in Note 15 of Schedule 19, the Company has, in terms of the CDR package, provided for interest on ballooning basis at the rate specifi ed for the period which is higher then the rate on YTM basis i.e. @ 8.5% per annum, resulting in the higher loss for the period by Rs. 172.60 millions. Had the interest been provided on YTM basis, the cumulative provision for interest and accumulated losses upto 30th September 2010 would have been higher by Rs. 46.35 millions.

c) With regard to the sundry debtors outstanding for a long period as stated in Note 19 of Schedule 19, we are unable to comment on the extent of realisability and consequently on the adequacy of provision for doubtful debts made by the Company. Impact thereof on the loss for the period, if any, is unascertainable.

d) As stated in Note 23 of Schedule 19, balances of some of the sundry debtors, creditors, lenders and loans and advances are subject to confi rmations, reconciliation and adjustments, if any.

e) As stated in Note 9 of Schedule 19, the Company has paid remuneration to managerial personnel during the period for which approval of central government is pending.

f) As stated in Note 21 of Schedule 19, the Company is in process of determining the impairment loss, if any, on its assets as per Accounting Standard - 28 "Impairment of Assets" issued by The Institute of Chartered Accountants of India and will give effect thereto upon such determination. As such we are unable to express any opinion as to the effect thereof on the value of Assets and loss for the period.

The effect of items mentioned at paragraph 4(a), (c), (d), (e) and (f) above is unascertainable, and hence the consequential cumulative effect thereof on loss for the period, assets, liabilities and reserves is unascertainable. If the observation at paragraph 4(b) above had been considered, the loss for the period would have been lower by Rs. 172.60 millions and accumulated losses upto 30th September 2010 and the current liabilities and provisions would have been higher by Rs. 46.35 millions.

5. Further to our comments in the Annexure referred to above paragraph, 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 purposes of our audit;

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

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

d) 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 except AS 28 - Impairment of Assets (Refer para 4(f) above)

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

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to para 4 above and read together with the other notes and the signifi cant accounting policies 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:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at 30th September, 2010;

(ii) In the case of the profit and Loss Account, of the loss for the period ended on that date; and

(iii) In the case of the Cash Flow Statement, of the cash flows for the period ended on that date.

ANNEXURE TO THE AUDITORS REPORT Annexure referred to in paragraph 3 of the Auditors Report of even date to the Members of HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED on the accounts for the period ended 30th September, 2010;

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situations of Fixed Assets.

(b) As per the information and explanations given to us, there is a phased programme of physical verifi cation of fixed assets adopted by the Company and no material discrepancies were noticed on such verifi cation. In our opinion, the frequency of verifi cation is reasonable, having regard to the size of the Company and nature of its business.

(c) During the period, the Company has not disposed off any substantial part of the fixed assets.

(ii) (a) As per the information furnished, the Inventories have been physically verifi ed by the management at reasonable intervals during the period. In our opinion, having regard to the nature and location of stocks, the frequency of physical verifi cation is reasonable.

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

(c) The Company is maintaining proper records of Inventory. In our opinion, the discrepancies noticed on physical verifi cation of stocks were not material in relation to the operation of the Company and the same have been properly dealt with in the books of account.

(iii) (a) As per the information furnished, the Company has not granted any loans, secured or unsecured to and from companies, fi rms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) and (d) of the Order are not applicable.

(b) As per the information furnished, the Company has not taken any loans, secured or unsecured from companies, fi rms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, Clause 4 (iii) (e), (f) and (g) of the said Order is not applicable.

(iv) In our opinion and according to information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls.

(v) Based on the audit procedure applied by us and according to the information and explanations provided by the management, during the period, there has been no contract or arrangement that needed to be entered into the register maintained under section 301 of the Companies Act, 1956. Accordingly, Clause 4 (v) (b) of the said Order is not applicable.

(vi) The Company has not accepted any deposits from the public within the meaning of the provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956.

(vii) The Company is having internal audit system which needs to be strengthened further to make it commensurate with the size of the Company and nature of its business.

(viii) The Central Government has prescribed maintenance of the cost records under section 209(1)(d) of the Companies Act, 1956 in respect of one of the product of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records.

(ix) (a) According to the information and explanations given to us and records examined by us, the Company has not been regular in depositing undisputed statutory dues with the appropriate authorities in respect of provident fund, employees state insurance, income tax deduced at source, income tax, wealth tax, excise duty, service tax and sales tax/works contract tax. According to information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at 30th September 2010 for period of more than six months from the date they become payable.

(b) According to the records of the Company, the dues of Sales tax, which have not been deposited on account of disputes and the forum where the dispute is pending, are as under:

Name Nature Amount of the of the in Rs. In Statute dues millions

Sales Sales 18.74 Tax Act Tax

Total 18.74

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

Sales Tax Act 1997-1998 Honble & High Court of Punjab 1998-1999 & Haryana.

(x) The accumulated losses of the Company, after giving effect of the Composite Scheme of Arrangement and Amalgamation between Sunvision Engineering Company Private Limited (SECPL) and the Company, are not more than fi fty percent of its net worth at the end of the financial period. The Company has incurred cash loss during the period. In the immediately preceding financial year also, the Company had incurred cash loss.

(xi) According to the information and explanations given to us and records examined by us, the Company has defaulted in repayment of dues to financial institution or banks in respect of the following:-

Name of Nature Period of Lender of the Default/ Dues delay

ARCIL Principal Sept, 2010 (ICICI)

ARCIL Interest April, 2005 (ICICI) to Sept, 2010

OBC Principal April, 2007 (eGTBL) to Sept, 2010

Interest February, OBC 2004 to (eGTBL) Sept, 2010

IDBI Principal April, 2007 to Sept, 2010

IDBI Interest April, 2007 to Sept, 2010

Bank of Principal April, 2007 Baroda to Sept, 2010

Bank of Interest April, 2007 Baroda to Sept, 2010

Union Principal January, Bank of 2009 to India Sept, 2010

Union Interest January, Bank of 2009 to Sept, Inia 2010

State Bank Principal October, of India 2008 to Sept, 2010

State Bank Interest October, of India 2008 to Sept, 2010



Name of Lender Maximum Overdue Overdue Amount during as on the period 30.09.10 (Rs. In (Rs. In millions) millions)

ARCIL (ICICI) 10.59 0.72

ARCIL (ICICI) 387.09 387.09

OBC (eGTBL) 370.18 370.18

OBC (eGTBL) 134.91 134.91

IDBI 259.13 259.13

IDBI 370.72 370.72

Bank of Baroda 72.84 72.84

Bank of Baroda 39.21 39.21

Union Bank of India 133.34 133.34

Union Bank of India 29.76 29.76

State Bank of India 439.37 439.37

State Bank of India 116.68 116.68

Note: In view of the One Time Settlement (OTS) with some of the lenders, as explained in note no 13(f) and (g) of schedule 19, the Company has not defaulted in repayment of dues to said lenders as on Balance Sheet Date.

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

(xiii) As per the information and explanations given to us the provisions of any Special Statute applicable to Chit Fund do not apply to the Company. The Company is also not a nidhi/ mutual benefi t fund/society.

(xiv) The Company has maintained proper records of transactions and contracts in respect of trading in shares, securities, debentures and other investments and timely entries have been made therein. All shares, debentures and other investments have been held by the Company in its own name. The company is in the process of getting the investment of erstwhile SECPL registered in its own name.

(xv) Based on our examination of the records and information and explanations given to us, the Company has given corporate/ counter guarantees for loans taken by group companies, from banks and fi nancial institutions. As one of the businesses of the Company is to promote the companies and also the long term involvement with those companies, the guarantees have not been considered prima facie, prejudicial to the interest of the Company.

(xvi) Based on our examinations of the records and information and explanations given to us during the period no term loan with repayment period beyond 36 months has been obtained. However, during the period the Company has raised inter corporate loans which on an overall basis, have been applied for the purposes 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 as at the end of the period, funds raised on short term basis have, prima facie, not been used for long term investment.

(xviii) The Company has not made any preferential allotment of shares during the period to parties and companies covered in the register maintained under section 301 of the Act.

(xix) The Company has not issued any secured debentures during the period. The Company has created securities/charges in respect of 15,704,000 Zero Coupon Premium Bonds (ZCPBs) of Rs. 100 each issued under the CDR package approved on 6th April 2004. However, no securities/charges is created in respect of 10,937,000 ZCPBs of Rs. 100 each issued under the said CDR package, as the status-quo on the existing security is maintained by each lender for its exposure.

(xx) The Company has not raised any money by public issue during the period ended September 30, 2010.

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

For KHANDELWAL JAIN & CO.,

Firm Registration No. 105049W

Chartered Accountants,

(Akash Shinghal) Place: New Delhi Partner

Dated: 28th February, 2011 Membership No: 103490



 
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