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Auditor Report of IL&FS Engineering & Construction Company Ltd.

Mar 31, 2015

Report on the Financial Statements

We have audited the accompanying standalone financial statements of IL&FS Engineering and Construction Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone 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 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 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 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 standalone 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, issued by the Institute of Chartered Accountants of India, as specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of 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 standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the standalone 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 March 31, 2015,its profit and its cash flows for the year ended on that date.

Emphasis of Matter

a. We draw attention to note 47 of the accompanying standalone financial statements regarding Rs. 259.67 Crores investment of the Company in Pass Through Certificates ("PTC") issued by the Maytas Investment Trust ("the Trust"). As more fully described in the aforesaid note, the portfolio held by the Trust includes an investment where the investee company has gas based power plant wherein uncertainties towards availability of gas has been considered as temporary in nature. Based on the fair valuation of underlying investments held by the Trust, the Company does not currently envisage any diminution in the value of PTCs on this account.

b. We draw attention to note 49 of the accompanying standalonefinancial statements regarding accrual of proportionate revenue to the extent of percentage completion in case of a road project amounting to Rs. 137.54 Crores (including interest of Rs. 36.30 Crores) based on an arbitration award, against which the customer has filed an appeal in the Honourable High Court of New Delhi.

c. We draw attention to note 28 of the accompanying standalone financial statements regarding Inter Corporate Deposits (ICDs) amounting to Rs. 343.78 Crores which is under litigation. Based on internal evaluation of recent developments after considering expert advice, Management is of the opinion that the Company has the ability to ultimately recover the aforesaid ICDs.

We have not qualified our opinion in respect of the matters referred in the above paragraphs.

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 1 a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by section 143 (3) of the Act, we report that:

(a) We have sought and 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 it 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 aforesaid standalone 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 matters described in the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;

(f) On the basis of written representations received from the directors as on March 31, 2015, and 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 Act;

(g) With respect to the other matters to be included in the Auditor''s Report in accordance withRule 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 26 (a) to the financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts – Refer note 31 and 32 to the financial statements. The Company has no derivative contracts;

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

Annexure -1 referred to in our report of even date

Re: IL&FS Engineering and Construction Company Limited ("the Company")

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

(b) All fixed 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 and discrepancies identified on such verification have been properly dealt with in the books of account.

(ii) (a) The Management has conducted physical verification of inventory at reasonable intervals during the year.

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

(c) The Company is maintaining proper records of inventory. Discrepancies noted on physical verification of inventories were not material, and have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, 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. Accordingly, the provisions of clause 3(iii)(a) and (b) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the 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 major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) The Company has not accepted any deposits from the public.

(vi) We have broadly reviewed the books of account 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, related to the construction industry and construction of roads and other infrastructure projects and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) (a) Undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, value added tax, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been slight delays in few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees'' state insurance, income-tax, wealth- tax, service tax, sales-tax, customs duty, excise duty, value added tax, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, value added tax and cess on account of any dispute, are as follows:

Name of the Nature of Amount Paid under Statute the dues Demanded protest (Rs. In Crores) (Rs. In Crores)

AP Value Added Sales Tax 0.86 0.05 Ta x Act, 2005 & Penalty

AP Value Added Penalty on 0.36 0.18 Ta x Act, 2005 Sales Tax

AP Value Added Sales Tax 27.06 - Tax Act, 2005

Central Sales Penalty on 0.50 0.12 Tax Act, 1956 Sales Tax

Central Sales Penalty on 0.70 0.20 Tax Act, 1956 Sales Tax

Finance Act, 1994 Service tax 9.70 -

Finance Act, 1994 Penalty on 0.28 - Service Tax

West Bengal Vat Sales Tax 0.06 - Act, 2003

West Bengal Sales Tax 1.52 - Vat Act, 2003

AP Value Added Sales Tax 0.92 0.51 Tax, 2005

Andhra Pradesh Tax on Professional 0.06 - Professions, Trades, Tax Callings and Employments Act, 1987

Finance Act, 1994 Service tax 15.45 -

Orissa Entry Tax Entry tax 0.02 - Act, 1999

Orissa Value Added Sales tax 3.37 - Tax Act, 2004

Finance Act 1994 Service tax 0.12 -

AP Value Added Sales Tax 1.85 - Tax, 2005

Maharashtra Value Sales Tax 1.37 0.15 Added Tax Act

Name of the Period to which Forum where dispute Statute the amount is pending relates (Assess- ment Years)

AP Value Added 2005-06 Sales Tax Appellate Tax Act, 2005 2006-07 and Tribunal, Hyderabad 2007-08

AP Value Added 2007-08 Appellate Deputy Tax Act, 2005 Commissioner, Hyderabad

AP Value Added 2007-08 High Court of Tax Act, 2005 judicature at Hyderabad for the states of Andhra Pradesh and Telangana

Central Sales 2002-03 Sales Tax Appellate Tax Act, 1956 and 2003-04 Tribunal, Hyderabad

Central Sales 2007-08 Appellate Deputy Tax Act, 1956 Commissioner, Chattisgarh

Finance Act, 1994 2007-08 and Commissioner of Customs 2008-09 & Central Excise, Hyderabad

Finance Act, 1994 2006-07 The Customs, Excise and and 2007-08 Service Tax Appellate Tribunal, Bangalore

West Bengal Vat Act, 2003 2009-10 Joint Commissioner of Commercial Taxes, Berhampore

West Bengal Vat Act, 2003 2008-09 West Bengal Appellate & Revisional Board

AP Value Added Tax, 2005 2008-09 Appellate Deputy Commissioner, Hyderabad

Andhra Pradesh Tax on 2008-09 Commercial Tax Professions, Trades, Officer, Callings and Employments Act, 1987 Hyderabad

Finance Act, 1994 2007-08 2008-09 Commissioner of Customs and 2009-10 & Central Excise, Hyderabad

Orissa Entry Tax Act, 1999 January 1, 2007 Joint Commissioner to March 31, 2010 of Sales Tax, Cuttack

Orissa Value Added January 1, 2007 Joint Commissioner Tax Act, 2004 to March 31, 2010 of Sales Tax, Cuttack

Finance Act 1994 2010-11 Superintendent of Service and 2011-12 Tax, Hyderabad

AP Value Added Tax, 2005 2005-06 2006-07 Commercial Tax 2007-08 2008-09 Officer, Hyderabad and 2009-10

Maharashtra Value Added Tax Act 2010-11 Deputy Commissioner of Sales Tax, Satara, Maharashtra

Name of the Nature of Amount Paid under Statute the dues Demanded protest (Rs. In Crores) (Rs. In Crores)

AP Value Added Sales Tax 4.12 - Tax, 2005

AP Value Added Sales Tax 0.34 - Tax, 2005

Income Tax Act, 1961 Income tax 4.46 4.46

Income Tax Act, 1961 Income tax 1.97 1.97

Income Tax Act, 1961 Income tax 11.90 11.90

Income Tax Act, 1961 Income tax 10.55 10.55

Income Tax Act, 1961 Income tax 3.46 3.46

Income Tax Act, 1961 Income tax 12.95 12.95

Income Tax Act, 1961 Income tax 8.78 8.78

Income Tax Act, 1961 Income tax 4.27 3.09

Income Tax Act, 1961 Income tax 0.75 -

Period to which Forum where dispute the amount is pending relates

(Assess- ment Years)

AP Value Added Tax, 2005 2009-10 Assistant Commissioner 2010-11 2011-12 Sales Tax and 2012-13 of (Enforcement), Hyderabad

AP Value Added Tax, 2005 2008-09 Additional Commissioner Tax (Legal), Hyderabad

Income Tax Act, 1961 2003-04

Income Tax Act, 1961 2004-05

Income Tax Act, 1961 2005-06

Commissioner of Income Income Tax Act, 1961 2006-07 Tax (Appeals), Hyderabad

Income Tax Act, 1961 2007-08

Income Tax Act, 1961 2008-09

Income Tax Act, 1961 2009-10

Income Tax Act, 1961 2010-11

Income Tax Act, 1961 2011-12

(d) According to the information and explanations given to us, the amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

(viii) The Company''s accumulated losses at the end of the financial year are less than fifty per cent of its net worth. The Company has not incurred cash loss during the year. In the immediately preceding financial year, the Company had incurred cash loss.

(ix) Based on our audit procedures and as per the information and explanations given by the Management, we are of the opinion that the Company has not defaulted in repayment of dues to banks. The Company did not have any outstanding dues in respect of a financial institution or debenture holders during the year.

(x) According to the information and explanations given to us, the Company has given guarantee for loans taken by a subsidiary from banks, the terms and conditions whereof, in our opinion, are not prima-facie prejudicial to the interest of the Company. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from financial institutions.

(xi) Based on the information and explanations given to us by the Management, term loans were applied for the purpose for which the loans were obtained.

(xii) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

For S.R. BATLIBOI & ASSOCIATES LLP

ICAI Firm Registration Number: 101049W

Chartered Accountants

per Vikas Kumar Pansari

Partner

Membership Number: 093649

Place of Signature: New Delhi

Date: May 29, 2015


Mar 31, 2014

We have audited the accompanying financial statements of IL&FS Engineering and Construction Company Limited and reduced ("the Company"), which comprise the Balance Sheet as at March 31. 2014, and the Statement of Profit and Loss and the Cash Flow Statement for the 18 months 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 accounting principles generally accepted in India, including the Accounting Standards notified under the Companies Act, 1956, read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs. 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 entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Qualified Opinion

a. As at March 31, 2014, the Company had certain Inter Corporate Deposits (ICDs) outstanding ofRs. 343.78 Crores (September 30, 2012: Rs. 343.78 Crores). Management has represented that the Company has taken steps to recover the amounts and is of the opinion that all ICDs are fully recoverable. Accordingly no adjustments have been made to the accompanying financial statements in respect of the same. Pending final outcome of the recovery process, we are unable to comment on the extent of recoverability of the aforesaid amounts. Our audit report on the financial statements for the eighteen months ended September 30, 2012 was also qualified in respect of the aforesaid matter.

b. As detailed in note 40 to the financial statements, the accompanying financial statements include Company''s share of profit to the extent of Rs.2.20 Crores (September 30, 2012: share of profit Rs 2.50 Crores) from Integrated Joint Ventures, in which the Company is a co-venturer, based on their unaudited financial statements. The accompanying financial statements do not include the consequential impacts that may have been required had the audited financial statements of the joint ventures been made available. Our audit report on the financial statements for the 18 months ended September 30, 2012 was also qualified in respect of the aforesaid matter.

Qualified opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects, if any, of the matters described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Companies Act, 1956 ("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 18 months ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the 18 months ended on that date.

Emphasis of Matter

We draw attention to note 50 of the accompanying financial statements regarding Rs. 259.67 Crores investment of the Company in Pass Through Certificate ("PTCs") issued by the Maytas Investment Trust ("the Trust"). As more fully described in the aforesaid note, the portfolio held by the Trust includes an investment where the investee company has gas based power plant wherein uncertainties towards availability of gas has been considered as temporary in nature. Based on the fair valuation of underlying investments held by the Trust, the Company does not currently envisage any diminution in the value of PTCs on this account. 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 paragraph, 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) Except for the matters described in the Basis for Qualified Opinion paragraph, 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) Except for the matters described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956, read with General Circular 8/2014 dated 4 April 2014 issued by 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.

Annexure referred to in our report of even date

Re: IL&FS Engineering and Construction Company Limited and reduced (''the Company'')

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

(b) All fixed 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) There was no disposal of substantial part of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

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

(iii) (a) The Company had granted unsecured loans to a company covered in the register maintained under section 301 of the Companies Act, 1956 during earlier year. The maximum amount involved during the 18 months was Rs 47.87 Crores, which was outstanding since previous year and the aggregate balance of the loans as at March 31, 2014 was Rs 47.87 Crores. However as at March 31, 2014, the company is not covered in the register maintained under section 301 of the Companies Act, 1956. During the 18 months. the Company has converted the interest accrued into principal and the total receivable as at March 31, 2014 amounts to Rs.95.92 Crores.

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(c) In respect of loans granted, the repayment of principal amount was not stipulated and also payment of interest had not been regular During the 18 months, the terms of the loans granted have been restructured, as per which, principal amount and interest is not due as at March 31, 2014.

(d) Based on our audit procedures and the information and explanations made available to us, in case where overdue amount is more than rupees one lakh, reasonable steps have been taken by the Company for recovery of the principal and interest.

(e) According to information and explanations given to us. 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, the provisions of clause 4(iii)(e) to (g) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the 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 major weakness or continuing failure to correct major weakness in internal control system of the company in respect of these areas.

(v) (a) In our opinion, there are no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly the provisions of clause 4(v)(b) of the Order is not applicable to the Company and hence not commented upon.

(vi) The Company has not accepted any deposits from the public.

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

(viii) We have broadly reviewed the books of account maintained by the Company 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.

(ix) (a) Undisputed statutory dues including provident fund. investor education and protection fund, or employees'' state insurance, income-tax, sales-tax, wealth-tax. service tax, customs duty, excise duty, cess and other material statutory dues have not generally been regularly deposited with the appropriate authorities though the delays in deposit have not been serious.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund. employees'' state insurance, income-tax, wealth-tax. service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the Nature of Amount Paid under Statute the dues Demanded protest (Rs. In Crores) (Rs. In Crores)

AP Value Added Sales Tax 0.85 0.05 Tax Act, 2005 and Penalty

AP Value Added Penalty on 0.36 0.18 Tax Act, 2005 Sales Tax

AP Value Added Sales Tax 27.06 - Tax Act, 2005

Central Sales Penalty on 0.50 - Tax Act, 1956 Sales Tax

Central Sales Penalty on 0.70 0.17 Tax Act, 1956 Sales Tax

Finance Act, 1994 Service tax 0.70 -

Finance Act, 1994 Penalty on 0.28 - Service Tax

West Bengal Sales Tax 0.06 - Vat Act, 2003

West Bengal Sales Tax 1.52 - Vat Act, 2003

AP Value Added Sales Tax 0.92 - Tax, 2005

Andhra Pradesh Professional 0.06 - Tax on Tax Professions, Trades, Callings and Employments Act, 1987

Finance Act, 1994 Service tax 13.75 -

Income Tax Act, 1961 Income tax 4.46 4.46

Income Tax Act, 1961 Income tax 1.97 1.97

Income Tax Act, 1961 Income tax 11.90 11.90

Income Tax Act, 1961 Income tax 10.55 10.55

Income Tax Act, 1961 Income tax 3.46 3.46

Income Tax Act, 1961 Income tax 12.95 12.95

Income Tax Act, 1961 Income tax 8.78 8.78

Income Tax Act, 1961 Income tax 5.51 -

Income Tax Act, 1961 Income tax 2.12 -

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

AP Value Added 2005-06, Sales Tax Appellate Tax Act, 2005 2006-07 and Tribunal, Hyderabad 2007-08

AP Value Added Tax Act, 2005 2007-08 Appellate Deputy Commissioner, Hyderabad

AP Value Added Tax Act, 2005 2007-08 High Court of Andhra Pradesh

Central Sales Tax Act, 1956 2002-03 Sales Tax Appellate and 2003-04 Tribunal, Hyderabad

2007-08 Appellate Deputy Central Sales Tax Act, 1956 Commissioner, Chattisgarh

Finance Act, 1994 2007-08 Commissioner of and 2008-09 Customs & Central Excise, Hyderabad

Finance Act, 1994 2006-07 The Customs, Excise and 2007-08 and Service Tax Appellate Tribunal, Bangalore

West Bengal Vat Act, 2003 2009-10 Joint Commissioner of Commercial Taxes, Berhampore

West Bengal Vat Act, 2003 2008-09 Joint Commissioner of Commercial Taxes, Berhampore

AP Value Added Tax, 2005 2008-09 Appellate Deputy Commissioner, Hyderabad

Andhra Pradesh 2008-09 Commercial Tax Tax on Officer, Professions. Hyderabad Trades, Callings and Employments Act, 1987

Finance Act, 1994 2007-08 Commissioner of 2008-09 and Customs & Central

2009-10 Excise, Hyderabad

Income Tax Act, 1961 2003-04

Income Tax Act, 1961 2004-05

Income Tax Act, 1961 2005-06 Commissioner of

Income Tax Act, 1961 2006-07 Income Tax (Appeals),

Income Tax Act, 1961 2007-08 Hyderabad

Income Tax Act, 1961 2008-09

Income Tax Act, 1961 2009-10

Income Tax Act, 1961 2010-11

Income Tax Act, 1961 2011-12

(x) Without considering the consequential effects, if any, of the matters stated in basis of qualified opinion paragraph of our auditors'' report, the Company''s accumulated losses at the end of the financial year are less than fifty per cent of its net worthTte Company has incurred cash losses in the current and immediately preceding financial year

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution or banks. There are no dues to debenture holders.

(xii) Based on our examination of documents and records, we are of the opinion that the Company has maintained adequate records where the Company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) 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.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

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

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year

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

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the year.

For S.R. BATLIBOI & ASSOCIATES LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W

per Vikas Kumar Pansari

Partner

Membership Number: 093649

Place of Signature: New Delhi Date: May 19, 2014


Sep 30, 2012

1. We have audited the attached balance sheet of IL&FS Engineering and Construction Company Limited and reduced (''the Company'') as at September 30, 2012 and also the statement of profit and loss and the cash flow statement for the 18 months ended on that date annexed thereto. These financial statements are the responsibility of the Company''s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor''s 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 52 of the accompanying financial statements regarding eventual settlement of the Pass Through Certificate holders by the Maytas Investment Trust (Trust). The portfolio held by the Trust includes an investment where the investee company has gas based power plant wherein uncertainties towards availability of gas has been considered as a temporary in nature. Based on fair valuation of underlying investments held by the Trust, the Company does not currently envisage any shortfall on this account.

5. As detailed in note 43 to the financial statements:

a) One of the Integrated Joint Ventures, where the Company is a co-venturer, namely Maytas-SNC JV has not prepared its financial statements for the 18 months ended September 30, 2012.

b) The accompanying financial statements include the Company''s share of profit of Rs. 2.50 Crores (March 31,2011: share ofloss Rs. 0.11 Crore) from Integrated Joint Ventures, in which the Company is a co-venturer, based on their unaudited financial statements.

The accompanying financial statements do not include the consequential impacts that may have been required had the audited financial statements of thejoint ventures been made available. Our audit report on the financial statements for theyear ended March 31,2011 was also qualifed in respect of the aforesaid matters.

6. As at September 30, 2012, the Company had certain Inter Corporate Deposits (ICDs) outstanding ofRs. 343.78 Crores (March 31, 2011: Rs. 343.78 Crores), management has represented that the Company has taken steps to recover the amounts and is of the opinion that all ICDs are fully recoverable. Accordingly no adjustments have been made to the accompanying financial statements in respect ofthe same. Pending final outcome of the recovery process, we are unable to comment on the extent ofrecoverability ofthe aforesaid amounts. Our audit report on the financial statements for the year ended March 31, 2011 was also qualifed in respect ofthe aforesaid matter.

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

i. Except as discussed in paragraphs 5 and 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, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

iii. The balance sheet, statement of profit and loss and cash flow statement dealt with by this report are in agreement with the books of account;

iv. Except as discussed in paragraphs 5 and 6 above,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 ofthe Companies Act, 1956;

v. On the basis of the written representations received from the directors, as on September 30, 2012, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on September 30, 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 give the information required by the Companies Act, 1956, in the manner so required and except for the possible effects ofthe matters stated in paragraphs 5 and 6 above, the said accounts gives 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 ofthe Company as at September 30,2012;

b) in the case of the statement of profit and loss, of the loss for the 18 months ended on that date; and

c) in the case of cash flow statement, of the cash flows for the 18 months ended on that date.

Annexure to the Auditors'' Report

Annexure referred to in paragraph [3] of our report of even date

Re: IL&FS Engineering and Construction Company Limited and reduced (''the Company'')

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

(b) All fixed 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) There was no disposal of a substantial part of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

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

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

(iii) (a) The Company had granted unsecured loans to a company covered in the register maintained under section 301 of the Companies Act, 1956 during earlier year. The maximum amount involved during the 18 months was Rs. 47.87 Crores, which was outstanding since previous year and the aggregate balance of the loans as at September 30, 2012 was Rs. 47.87 Crores. However as at September 30, 2012, the company is not covered in the register maintained under section 301 of the Companies Act, 1956.

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(c) In respect ofloans granted, repayment of the principal amount is not stipulated and also payment ofinterest has not been regular.

(d) Based on our audit procedures and the information and explanations made available to us, in case where overdue amount is more than rupees one lakh, reasonable steps have been taken by the Company for recovery of the principal and interest.

(e) According to information and explanations given to us, 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, the provisions of clause 4(iii)(e) to (g) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the 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 major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) In our opinion, there are no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(v)(b) of the Order is not applicable to the Company and hence not commented upon.

(vi) The Company has not accepted any deposits from the public.

(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 books of account 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.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have not generally been regularly deposited with the appropriate authorities though the delays in deposit have not been serious.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Nature of Amount Paid under Name of the Statute dues demanded protest (Rs. in Crores) (Rs. in Crores)

AP Value Added Sales Tax 0.85 0.05 Tax Act, 2005 & Penalty

AP Value Added Penalty 0.36 0.18 Tax Act, 2005

AP Value Added Tax Sales Tax 27.06 - Act, 2005

Central Sales Tax Act, 1956 Penalty 0.50 -

Central Sales Tax Act, 1956 Penalty 0.70 0.17

Finance Act, 1994 Service tax 9.70 -

Finance Act, 1994 Penalty 0.28 -

West Bengal Vat Act, 2003 Sales Tax 0.06 -

West Bengal Vat Act, 2003 Sales Tax 1.52 -

AP Value Added Tax, 2005 Sales Tax 0.92 -

Andhra Pradesh Tax on Professional 0.06 - Professions, Trades, Callings Tax and Employments Act, 1987

Finance Act, 1994 Service tax 13.75 -

Income Tax Act, 1961 Income tax 4.46 4.46

Income Tax Act, 1961 Income tax 1.97 1.97

Income Tax Act, 1961 Income tax 11.90 11.90

Income Tax Act, 1961 Income tax 2.05 2.05

Income Tax Act, 1961 Income tax 12.95 12.95

Income Tax Act, 1961 Income tax 8.78 8.78

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

AP Value Added Tax Act, 2005 2005-06, 2006-07 Sales Tax Appellate and 2007-08 Tribunal, Hyderabad

AP Value Added Tax Act, 2005 2007-08 Appellate Deputy Commissioner, Hyderabad

AP Value Added Tax Act, 2005 2007-08 High Court of Andhra Pradesh

Central Sales Tax Act,1956 2002-03 and Sales Tax Appellate 2003-04 Tribunal, Hyderabad

Central Sales Tax Act,1956 2007-08 Appellate Deputy Commissioner, Chattisgarh

Finance Act, 1994 2007-08 and Commissioner of 2008-09 Customs & Central Excise, Hyderabad

Finance Act, 1994 2006-07 and The Customs, Excise 2007-08 and Service Tax Appellate Tribunal, Bangalore

West Bengal Vat Act, 2003 2009-10 Joint Commissioner of Commercial Taxes, Berhampore

West Bengal Vat Act, 2003 2008-09 Joint Commissioner of Commercial Taxes, Berhampore

AP Value Added Tax, 2005 2008-09 Appellate Deputy Commissioner, Hyderabad

Andhra Pradesh Tax On Professions, Trades, Callings and Employments Act, 1987 2008-09 Commercial Tax Officer, Hyderabad

Finance Act, 1994 2007-08 Commissioner of 2008-09 Customs & Central and 2009-10 Excise, Hyderabad

Income Tax Act, 1961 2003-04

Income Tax Act, 1961 2004-05 Commissioner of

Income Tax Act, 1961 2005-06 Income Tax (Appeals),

Income Tax Act, 1961 2007-08 Hyderabad

Income Tax Act, 1961 2008-09

Income Tax Act, 1961 2009-10

(x) Without considering the consequential effects, if any, of the matters stated in paragraphs 5 and 6 of our auditors'' report, the Company has no accumulated losses at the end of the financial year. The Company has incurred cash losses in the current and immediately preceding financial year

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution or banks. There are no dues to debenture holders.

(xii) Based on our examination of documents and records, we are of the opinion that the Company has maintained adequate records where the Company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 (as amended) are not applicable to the Company.

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

(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

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

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

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

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.

For S.R. BATLIBOI & ASSOCIATES

Firm registration number: 101049W

Chartered Accountants

per Vikas Kumar Pansari

Partner

Membership No.:093649

Place: New Delhi

Date: November 25, 2012

 
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