Auditor Report of Kailash Auto Finance Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of Kailash Auto Finance Limited ('the Company'), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors are 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 flow of the company in accordance with the accounting policies 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 provision 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 prudence ; and design, implementation and maintenance of adequate internal financial controls, that are operating effectively for ensuring the adequacy 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.

Auditors' Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into accounts 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 rules made thereunder.

We have conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors'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 consider 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 control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by 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 aforesaid 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 31st March, 2015, its profit or loss and its 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, 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 the paragraph 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. On the basis of written representations received from the directors as on 31st March, 2015, taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015, from being appointed as a director in terms of section 164(2) of the Act; and

f. With respect to the other matters to be included in the Auditor's Reports in accordance with Rule 11 of the companies (Audit and Auditors ) rules, 2014 , in our opinion and to the best of our information and according to the explanation given to us:

i. The Company has disclosed the impact of pending litigation on its financial position in its financial statements - refer Note 23 of the financial statement.

ii. The Company did not have any long term contracts including derivatives contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company

ANNEXURE TO INDEPENDENT AUDITORS' REPORT

With reference to the Annexure referred to in paragraph 1 in Report on Other Legal & Regulatory Requirements of the Independent Auditors Report to the members of the Company on the standalone financial statements for the year ended 31 March 2015, we report that:

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

b The company has a regular programme of the physical verification of its fixed assets by which all fixed assets are verified in the phased manner. In our opinion, this periodicity of physical verification in reasonable having regard to the size of the company and the nature of its assets. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

ii. a The inventories have been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

b The procedures for the 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 inventories. There was no material discrepancies noticed on verification between the physical stock and the book records.

iii. The Company has not granted any loans secured or unsecured, to companies, firms or other parties covered in the Register maintained under section 189 of the Companies Act , 2013

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 the business with regard to purchase of inventories and fixed assets and with regard to the sale of goods and services. We have not observed any major weakness in the internal control system during the course of the audit.

v. According to the information and explanations given to us, the company has not accepted any deposits from the public during the year and accordingly the question of complying with section 73 and 76 of the Companies Act 2013 does not arise.

vi. The Central Government has not prescribed the maintenance of cost records under section 148(1) of the Act for the Company.

vii. a According to the information and explanations given to us and on the basis of our examination of the records of the company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident fund, Employees State Insurance, Income- tax, sales tax, Wealth tax, Service tax, Duty of excise, Value added tax and any other material statutory dues have been generally regularly deposited during the year by the company with the appropriate authorities.

b According to the information and explanations given to us, the dues of Income- tax, sales tax, Wealth tax, Service tax, Duty of customs, Duty of excise, Value added Tax and any other material statutory dues which were not deposited on account of any disputes are as follows

1 . Interest Tax:

Assessment Year 1998-99, 1999-2000 and 2000-2001 cases are pending before Allahabad High Court by the Income Tax Department against the order of ITAT where in it is held that the Finance Charges on Hire Purchase is not interest but a profit.

2. Income Tax:

a. Assessment Year 2001 -2002 and 2002-2003 are pending before Allahabad High Court (by the Deptt.) against the order of the ITAT wherein depreciation is allowed at the rate of 40% on leased vehicles.

b. Assessment Year 1996-1997 is pending before Allahabad High Court against the penalty order passed by the ITAT.

c. Assessment Year 2004-05: Case is pending before ITAT (u/s 254) and before High Court against the legal ground that case cannot be opened u/s 148 before completion of 12 months in which return of income was originally filed.

d. Assessment Year 2006-07: Case is pending before CIT (Appeals) Kanpur against the order of the Assessing Officer.

e. Assessment Year 2007-08: Case is pending for assessment before DCIT - 6 Kanpur.

f. Assessment Year 1 995-96: We have filed a Writ Petition before Lucknow High Court under the KAR VIVAD SAMADHAN SCHEME and matter is pending before Lucknow High Court.

g. Assessment Year 1992-93: Application is pending for appeal effect to be given before the Assessing Officer.

The quantification of above liabilities has not been done on account of cases pending before the authority.

3. Legal Cases:

a. Disputed Case of Bhubaneswar Branch for recovery of Rs. 4.45/- Lacs deposited in court.

b. Disputed Case of Citi Corp for recovery of Rs. 3.04/- Lacs of Alwar Branch.

c. Disputed Case liabilities of Rs 3.08/- Lacs repayable if claimed by the customer

c According to the information and explanations given to us there was no amount which were required to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the companies Act, 1956 and rules framed there under.

viii. The company has accumulated losses of Rs. 204.29 lacs at the end of the financial year and has not incurred cash losses in 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 does not have any outstanding dues to any bank or financial institution or debenture holders.

x. In our opinion and 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.

xi. According to the information and explanations given to us the Company has not taken any term loan during the year.

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

For Anil Agrawal Chartered Accountants

Anil Agrawal Proprietor Membership No: 79054 Place: Mumbai Date: May 30, 2015

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Mar 31, 2012

We have audited the accompanying Balance Sheet of Messer's Kailash Auto Finance Limited, Kanpur as at 31st March' 2012 and the Profit and Loss Account for the year ended on that date, annexed thereto and the cash flow statement for the period ended on that date. 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 audits.

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 also 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1) As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of Section-227(4A) of the Companies Act, 1956. We annex hereto a statement on the matters specified in paragraph 4 of the said order, to the extent applicable to the company.

2) There has been change in the management control of the company by purchase of 2616517 nos shares of the company i.e. 68.74% of the issued capital of the company by M/s Padma Impex Pvt. Ltd. vide order of the Hon'ble Bombay High Court in arbitration petition no. 304 of 2011 dated 22-02-2012. Further, the company has transferred all its old outstanding debit & credit balances including all contingent liabilities (except statutory taxes) at book value to one of its sister concern namely M/s Kailash Motors Finance Pvt. Ltd. Jabalpur vide assignment deed executed on 13-02-2012.

3) The physical existence and the valuation of repossessed stock and documentation of repossessed stocks sold and/or refinanced during the year is based on the management certificate. We could not physically verify the same since located in far off places.

4) The provision for gratuity and leave encashment has been done on estimated basis and not as per Actuarial valuation required as per accounting standard 15 issued by ICAI. Therefore in light of the above, correctness of provision cannot be commented upon.

5) On account of expired lease asset and non availability of information regarding terms of lease and stock on lease , the compliance with accounting standard 19 on leases issued by ICAI could not be commented upon.

6) As we are not able to visit branches of the company as they are located at far off places, we have relied upon the information submitted by the branches and accounts maintained at H.O. at Jabalpur and certified by the management.

7) Subject to our comments in Para - 2, 3, 4, 5, & 6 above :-

(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 accounts as required by law have been kept by the company so far as appears from our examination of those books.

(c) The Balance Sheet and Profit & Loss Account and the Cash Flow Statement dealt with by. this report are in agreement with the books of accounts.

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

(e) On the basis of the written representation received from the Directors, and taken on record by the Board of Directors of the Company, we report that none of the directors is disqualified as on 31st March, 2012 from being appointed as a director in terms of clause (g) of Sub Sec-(1) of Sec-274 of the Companies Act, 1956.

(f) In our opinion and to the best of our information and recording to the explanations given to us the said accounts read with the notes thereon given 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 Balance Sheet of State of Affairs of the Company as at 31.03.2012.

(ii) In the case of Profit & Loss Account of the 'LOSS' for the year ended on that date; and

(iii) In the case of cash flow statement of the cash flow for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT REFERRED TO IN PARAGRAPH-1 OF OUR REPORT OF EVEN DATE.

(i) (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets, except in respect of lease assets, however there exist Nil fixed assets as on 31-03-2012.

(b) The fixed assets of the company other than lease assets are physically verified by the management at the end of the year. To the best of our knowledge no material discrepancies were noticed on such physical verification as compared with the book records, however there exist Nil fixed assets as on 31-03-2012

(c) During the year, the company has disposed no assets

(ii) (a) The repossessed stocks has been physically verified by the management at the end of the year. In our opinion, the frequency of verification is reasonable; however the repossessed stock had been assigned during the year to M/s Kailash Motors finance Pvt. Ltd. Jabalpur vide assignment deed dated 13-02-2012.

(b) The procedures of physical verification of repossessed stock followed by the management are reasonable and adequate in relation to the size of the company and nature of its business;

(c) The company is maintaining proper records of repossessed stocks. To the best of our knowledge no material discrepancies were noticed on such verification between the physical stocks and the book records ;

(iii) (a) The company had granted no unsecured loans/advances during the year to companies, firm or other parties covered in the register maintained U/s-301 of the Companies Act, 1956,

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been granted to companies, firms or other parties listed in the register maintained U/s-301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.

(c) As per the information made available to us, the aforesaid loans granted by the company are repayable on demand and no such demand has been made during the year.

(d) There is no overdue amount more than rupees one lacs in respect of the aforesaid loans (please refer to Point-iii) (c) above);

(iv) (a) The company had taken unsecured loans/advances during the year from companies, firm or other parties covered in the register maintained U/s-301 of the Companies Act, 1956, the details required are given hereunder

Particulars

No. of Parties involved 3

Total Transactions Net (Rs. in Lacs) 141.14

Closing Balance (Rs. in Lacs) 170.55

(b) In our opinion the rate of interest and other terms and conditions on which loans have been taken from companies, firms or other parties listed in the register maintained U/s-301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the company ;

(c) As per the information made available to us the aforesaid loans taken by the company are repayable on demand and no such demand has been made during the year;

(d) There is no overdue amount more than Rupees One Lac in respect of the aforesaid loans (Please refer to Point-iv (c) above);

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

(vi) (a) According to the information and explanations given to us by the company, we are of the opinion that the particulars of contracts or arrangements referred to in Sec-301 that need to be entered into the register maintained U/s-301 of the Companies Act, 1956 have been so entered ;

(b) In our opinion and according to the information and explanations given to us, there are no transactions (excluding loans referred under Para-(iii) above) made in pursuance of contracts or arrangements entered in the register maintained U/s-301 of the Companies Act, 1956, exceeding the value of rupees five lacs in respect of any party during the year;

(vii) In the case of public deposit received by the company the directives issued by the Reserve Bank of India and the provisions of Sections-58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 have been complied with except for delay in filing of returns and as per information made available to us no order has been passed by the Company law Board or National Company Law Tribunal or RBI or any court of any other Tribunal with regard to the deposits;

(viii) The company has an Internal Audit System commensurate with the size and nature of its business which should be strengthened in respect of reporting and action thereon ;

(ix) The company is in the business of financing and hence maintenance of cost records under Clause-(d) of sub-section-(1) of Section-209 of the Companies Act, 1956 is not applicable;

(x) (a) According to the records, information and explanations given to us, the company is not regular in depositing with appropriate authorities undisputed amount of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues applicable to it and no undisputed amounts payable were outstanding as at 31st March, 2012, for a period of more than six months from the date they become payable.

(b) According to the records of the company, dues in respect of income tax, wealth tax, sales tax, custom duty and excise duty, cess, which have not been deposited on account of any dispute are as under

1. INTEREST TAX:

Assessment Year 1998-99, 1999-2000 and 2000-2001 cases are pending before Allahabad High Court by the Income tax Department against the order of ITAT where in it is held that the Finance Charges on Hire Purchase is not interest but a profit.

2. INCOME TAX:

a. Assessment Year 2001-2002 and 2002-2003 are pending before Allahabad High Court (by the Deptt.) against the order of the ITAT wherein depreciation is allowed at the rate of 40% on leased vehicles.

b. Assessment Year 1996-1997 is pending before Allahabad High Court against the penalty order passed by the ITAT.

c. Assessment Year 2004-05: Case is pending before ITAT(u/s 254) and before High Court against the legal ground that case can not be opened u/s 148 before completion of 12 month time from the month in which return of income was originally filed.

d. Assessment Year 2006-07: Case is pending before CIT (Appeals) kanpur against the order of the Assessing Officer.

e. Assessment Year 2007-08: Case is pending for assessment before DCIT- 6 kanpur.

f. Assessment Year 1995-96: We have filed a Writ Petition before Lucknow High Court under the KAR VIVAD SAMADHAN SCHEME and matter is pending before Lucknow High Court.

g. Assessment Year 1992-93: Application is pending for appeal effect to be given before the Assessing Officer . The quantification of above liabilities has not been done on account of cases pending before the authority.

3. LEGAL CASES

a. Disputed Case of Bhubaneswar Branch for recovery of Rs. 4.45/- Lacs deposited in court

b. Disputed Case of Citi Corp for recovery of Rs. 3.04/- Lacs of Alwar Branch

c. Disputed Case liabilities of Rs. 3.08/- lacs repayable if claimed by the customer.

(xi) The accumulated losses at the end of the year of the company are more than fifty percent of its net worth and the company has incurred cash losses in the current financial year and there was no cash loss in immediately preceding financial year;

(xii) The company has not defaulted in repayment of dues to Financial Institutions, Banks or Debenture holders.

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

(xiv) In our opinion, the company is not a chit fund, nidhi or mutual benefit fund/societies. Therefore, the provisions of the Clause-4 (xiii) of the Companies (Auditors' Report) Order, 2003 are not applicable to the Company;

(xv) In our opinion, the company is not dealing or trading in shares, securities, debentures and other investments. In respect of investment in shares, the same has been transferred to M/s Kailash Motors Finance Pvt. Ltd. Jabalpur on its book value during the year.

(xvi) In our opinion and according to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks and financial institutions;

(xvii) The company has not taken any term loan during the year accordingly the provisions of para 4 (xvi) of the Companies (Auditors' Report) Order 2003 are not applicable to the Company.

(xviii) According to the information and explanations given to us and on the basis of an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on a short-term basis which have been used for long-term investment, and vice-versa;

(xix) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained U/s-301 of the Act during the year;

(xx) The company has not issued any debentures, hence the provisions of Para-4 (xix) of Companies (Auditors' Report) Order, 2003 are not applicable ;

(xxi) The company has not raised any money by public issue during the year; however M/s Padma Impex Pvt. Ltd. had purchases 68.74% share of the company during the year and taken control of the management.

(xxii) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year by the Company;

For Anil Agrawal Chartered Accountants

Anil Agrawal Proprietor M No. 079054

Place : Jabalpur Dated : 14-05-2012

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Mar 31, 2010

We have audited the accompanying Balance Sheet of Messers Kailash Auto Finance Limited, Kanpur as at 31st March 2010 and the Profit and Loss Account for the year ended on that date, annexed thereto and the cash flow statement for the period ended on that date. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audits.

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 also 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1) 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. We annex hereto a statement on the matters specified in paragraph 4 of the said order, to the extent applicable to the company

2) The physical existence and the valuation of repossessed stock and documentation of repossessed stocks sold and/or refinanced during the year is based on the management certificate. We could not physically verify the same since located in far off places.

3) The provision for gratuity and leave encashment has been done on estimated basis and not as per Actuarial valuation required as per accounting standard 15 issued by ICAI. Therefore in light of the above, correctness of provision cannot be commented upon.

4) On account of expired lease asset and non availability of information regarding terms of lease and stock on lease , the compliance with accounting standard 19 on leases issued by ICAI could not be commented upon.

5) As we are not able to visit branches of the company as they are located at far off places, we have relied upon the information submitted by the branches and accounts maintained at H.O. at Jabalpur and certified by the management.

6) Subject to our comments in Para - 2 & 3 above :-

(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 accounts as required by law have been kept by the company so far as appears from our examination of those books.

(c) The Balance Sheet and Profit & Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of accounts.

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

(e) On the basis of the written representation received from the Directors, and taken on record by the Board of Directors of the Company, 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 Sec-(1) of Sec-274 of the Companies Act, 1956

(f) In our opinion and to the best of our information and recording to the explanations given to us the said accounts read with the notes thereon given 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 Balance Sheet of State of Affairs of the Company as at 31.03.2010.

(ii) In the case of Profit & Loss Account of the PROFIT for the year ended on that date; and

(iii) In the case of cash flow statement of the cash flow for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT REFERRED TO IN PARAGRAPH-1 OF OUR REPORT OF EVEN DATE

(i) (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets, except in respect of lease assets, however there exist Nil fixed assets as on 31 03 2010

(b) The fixed assets of the company other than lease assets are physically verified by the management at the end of the year. To the best of our knowledge no material discrepancies were noticed on such physical verification as compared with the book records , however there exist Nil fixed assets as on 31 03.2010; . ¦ •. ¦

(c) During the year, the company has disposed all of its lease assets and vehicles. According to the information and explanations given to us, we are of the opinion that such sale might affect the going concern status of the company but the management has planned to induct new directors who invest fresh funds to maintain the going concern status of the company.

(ii) (a) The repossessed stocks has been physically verified by the management at the end of the year in our opinion, the frequency of verification is reasonable;

(b) The procedures of physical verification of repossessed stock followed by the management are reasonable and adequate in relation to the size of the company and nature of its business;

(c) The company is maintaining proper records of repossessed stocks. To the best of our knowledge no material discrepancies were noticed on such verification between the physical stocks and the book records ;

(iii) (a) The company had granted no unsecured loans/advances during the year to companies, firm or other parties covered in the register maintained U/s-301 of the Companies Act, 1956,

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been granted to companies, firms or other parties listed in the register maintained U/s-301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.

(c) As per the information made available to us, the aforesaid loans granted by the company are repayable on demand and no such demand has been made during the year.

(d) There is no overdue amount more than rupees one lacs in respect of the aforesaid loans (please refer to Point-iii) (c) above);

(e) The company had taken unsecured loans/advances during the year from companies, firm or other parties covered in the register maintained U/s-301 of the Companies Act, 1956, the details required are given hereunder

Particulars

No. of Parties involved 12

Total Net Transactions (Rs. in Lacs) 241.45 Closing Balance (Rs. in Lacs) 246.78

(f) In our opinion the rate of interest and other terms and conditions on which loans have been taken from companies, firms or other parties listed in the register maintained U/s-301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the company ;

(g) As per the information made available to us the aforesaid loans taken by the company are repayable on demand and no such demand has been made during the year;

(h) There is no overdue amount more than Rupees One Lac in respect of the aforesaid loans (Please refer to Point-iii (g) above);

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

v) (a) According to the information and explanations given to us by the company, we are of the opinion that the particulars of contracts or arrangements referred to in Sec-301 that need to be entered into the register maintained U/s-301 of the Companies Act, 1956 have been so entered

(b) In our opinion and according to the information and explanations given to us, there are no transactions (excluding loans referred under Para-(iii) above) made in pursuance of contracts or arrangements entered in the register maintained U/s-301 of the Companies Act, 1956, exceeding the value of rupees five lacs in respect of any party during the year;

(vi) In the case of public deposit received by the company the directives issued by the Reserve Bank of India and the provisions of Sections-58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 have been complied with except for delay in filing of returns and as per information made available to us no order has been passed by the Company law Board or National Company Law Tribunal or RBI or any court of any other Tribunal with regard to the deposits;

(vii) The company has an Internal Audit System commensurate with the size and nature of its business which should be strengthened in respect of reporting and action thereon ;

(viii) The company is in the business of financing and hence maintenance of cost records under Clause-(d) of sub-section-(l) of Section-209 of the Companies Act, 1956 is not applicable; *

(ix) , (a)According to the records, information and explanations given to us, the company is not regular in depositing with appropriate authorities undisputed amount of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues applicable to it and no undisputed amounts payable were outstanding as at 31st March, 2010, for a period of more than six months from the date they become payable, except service tax of Rs. 17,00,219/-, and Professional Tax Rs. 8861/-.

(b) According to the records of the company, dues in respect of income tax, wealth tax, sales tax, custom duty and excise duty, cess, which have not been deposited on account of any dispute are as under

1. INTEREST TAX:

Assessment Year 1998-99, 1999-2000 and 2000-2001 cases are pending before Allahabad High Court by the Income tax Department against the order of ITAT where in it is held that the Finance Charges on Hire Purchase is not interest but a profit.

2. INCOME TAX:

a. Assessment Year 2001-2002 and 2002-2003 are pending before Allahabad High Court (by the Deptt.) against the order of the ITAT wherein depreciation is allowed at the rate of 40% on leased vehicles.

b. Assessment Year 1996-1997 is pending before Allahabad High Court against the penalty order passed by the ITAT.

c. Assessment Year 2004-05: Case is pending before ITAT(u/s 254) and before High Court against the legal ground that case can not be opened u/s 148 before completion of 12 month time from the month in which return of income was originally filed.

d. Assessment Year 2006-07: Case is pending before CIT (Appeals) kanpur against the order of the Assessing Officer.

e. Assessment Year 2007-08: Case is pending for assessment before DCIT- 6 kanpur.

f. Assessment Year 1995-96: We have filed a Writ Petition before Lucknow High Court under the KAR VIVAD SAMADHAN SCHEME and matter is pending before Lucknow High Court.

g. Assessment Year 1992-93: Application is pending for appeal effect to be given before the Assessing Officer . The quantification of above liabilities has not been done on account of cases pending before the authority.

3. LEGAL CASES

a. Disputed Case of Bhubaneswar Branch for recovery of Rs 4.45/-Lacs deposited in court

b. Disputed Case of Citi Corp for recovery of Rs.3.04/-Lacs of Alwar Branch

c. Disputed Case liabilities of Rs 3.08/-lacs repayable if claimed by the customer.

(x) The accumulated losses at the end of the year of the company are more than fifty percent of its net worth and the company has incurred no cash losses in the current financial year and there was no cash loss in immediately preceding financial year,

(xi) The company has not defaulted in repayment of dues to Financial Institutions Banks or Debenture holders

(xii) The company has not granted any 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, nidhi or mutual benefit fund / societies. Therefore, the provisions of the Clause-4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company;

(xiv) In our opinion, the company is not dealing or trading in shares, securities, debentures and other investments. In respect of investment in shares, securities the same are held by the company in its own name.

(xv) In our opinion and according to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks and financial institutions;

(xvi) The company has not taken any term loan during the year accordingly the provisions of para 4 (xvi) of the Companies (Auditors Report) Order 2003 are not applicable to the Company.

(xvii) According to the information and explanations given to us and on the basis of an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on a short-term basis which have been used for long-term investment, and vice-versa;

(xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained U/s-301 of the Act during the year;

(xix) The company has not issued any debentures, hence the provisions of Para-4 (xix) of Companies (Auditors Report) Order, 2003 are not applicable;

(xx) The company has not raised any money by public issue during the year;

(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year by the Company;

For Anil Agrawal

Chartered Accountants

(Anil Agrawal)

Proprietor M No. 079054

Place: Jabalpur

Dated: 12-08-2010