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Auditor Report of Kirloskar Electric Company Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of Kirloskar Electric Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss, the Cash Flow Statement, and a summary of significant accounting policies and other explanatory information for the year then ended, in which are incorporated the Returns audited by the branch auditors M/s Sundar & Associates, Chartered Accountants of the Kuala Lumpur office of the Company in Malaysia.

Management's Responsibility for the Standalone 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 the accounting principles generally accepted in India, including the accounting standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility:

Our responsibility is to express an opinion on these 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 there under. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, 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 the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion:

Attention of the members is invited to note 54 (a), (b) and (d) of the financial statements, which sets out the sale of certain assets comprising of immoveable property and book debts by the Company to its wholly owned subsidiaries and the consequent recognition of profits resulting there from. We have relied on the representation of the management that it is confident of realization of the entire amounts due from the said subsidiaries of Rs 18,452.51 lacs. Ultimate shortfall in realization of assets transferred to its subsidiaries, if any, is not ascertainable at this stage. The transactions between the Company and its wholly owned subsidiaries referred to notes 54 are subject to the approval of the members by way of special resolutions in terms of section 188 of the Companies Act, 2013, rule 15 (2) of the Companies (Meetings of Boards and its Powers), Rules, 2014 and other applicable provisions, if any.

Qualified Opinion:

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, 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 March 31,2015, and its loss and its cash flows for the year ended on that date.

Other Matter

We did not audit the financial statements/information of one branch, the Kuala Lumpur office of the Company, included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs. 438.75 lakhs as at 31 st March, 2015 and total revenues of Rs.425.68 lakhs for the year ended on that date, as considered in the standalone financial statements. The financial statements of the said office have been audited by the branch auditors (M/s Sundar & Associates, Chartered Accountants) whose report has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Emphasis of Matter:

(a) Attention of the members is invited to note 54 (c) of the financial statements regarding execution of deeds of immovable properties in favour of certain subsidiaries before March 31, 2015, the legal advice obtained by the Company that these properties have already vested in the relevant subsidiaries on the date of execution of the concerned deeds, even though payment of stamp duty and registration will be done subsequently. We have relied on the legal opinion obtained by the Company in this respect and management's representation that the payment of duty will be made within the time limit and registration completed. Our report is not qualified in this respect.

(b) Attention of the members is invited to note 55 of the financial statements, where in the directors have detailed the reasons for compiling the financial statements on a going concern basis, even though the net worth of the group, consisting of the Company, its subsidiaries and its associate has been eroded. The appropriateness of the said basis is subject to the Company adhering to the restructuring plan and infusion of requisite funds to it. We have relied on the representations made to us by the management. Our report is not qualified in this respect.

(c) Attention of the members is invited to note 57 of the financial statements which sets out that the Company has filed special leave petitions in respect of demands for resale tax and sales tax penalty of Rs.527 lakhs and Rs.362 Lakhs respectively before the honourable Supreme Court of India. Management has represented to us that it is not probable that there will be an outflow of economic benefits and no provision is required to be recognized in this respect. We have relied on this representation. Our report is not qualified in this respect.

Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by the 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 and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.

c. The report on the accounts of the Kuala Lumpur office in MalaysiaoftheCompanyauditedunderSection143(8)of the Act by branch auditors have been forwarded to us and have been duly dealt with by us while preparing this report.

d. 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 and with the returns received from the branches not visited by us.

e. 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.

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

g. With respect to other matters to be included in the Auditors report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us,

i The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer note 23 to the financial statements.

ii The Company did not have any long-term contracts and has not entered into any derivative contracts. Accordingly no provision is required to be recognized in respect of material foreseeable losses under applicable laws or accounting standards.

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

ANNEXURE REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING "REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS" OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF KIRLOSKAR ELECTRIC COMPANY LIMITED

1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However comprehensive description of assets and their current location need to be updated in the asset records.

b. Management during the year has physically verified fixed assets in certain units as per a phased program of physical verification. The discrepancies noticed on such verification were not material however the same has been properly dealt with in the books of account.

2. a. Inventories have been physically verified during the year by the management at reasonable intervals.

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

c. The Company has implemented SAP ECC 6 systems at all its units. Certain mistakes and omissions noticed during the year have been corrected based on physical verification taken from time to time. The Company is in the process of quantifying the differences adjusted/to be adjusted in the books of account on a comprehensive basis as reported in note 39 of the financial statements and consequently we are not in a position to comment on the extent of discrepancies and any further adjustments required in the books of account.

d. We have relied on the representation of the management that the consumption of materials and components is in line with production/ industry norms.

3. The Company has not granted any loans to companies, firms and other parties covered in the register maintained under section 189 of the Companies Act, 2013. For this purpose, we have relied on the representations of the management that monies due from parties referred to in note 41 to the financial statements are advances and not in the nature of loans.

4. Having regard to the explanations given to us, that some of the bought out items/ assets are proprietary and/ or are customised to the requirements of the Company and as such comparative quotations are not available, there are adequate internal control procedures with regard to purchases of inventory, fixed assets and for the sale of goods and services. However as detailed in notes 37 and 39 to the financial statements the same needs to be further strengthened to be commensurate with the size of the Company and the nature of its business. We have not observed during the course of our audit any continuing failure to correct the major weaknesses in the internal controls, except as stated above.

5. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of sections 73 to 76 of the Act or any other relevant provisions of the Act and the rules framed there under, with regard to deposits accepted from the public. Further and according to the Company no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

6. We have broadly reviewed the Cost Records maintained by the Company as prescribed by the Central Government under sub- section (1) of section 148 of the Act and read with paragraph 2(c) above regarding inventory records, we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not made a detailed examination to ensure their accuracy or completeness.

7. a. The Company has been regular in depositing undisputed statutory dues including Investor Education and Protection Fund, Sales Tax, Customs Duty, Value added Tax, Cess and other applicable statutory dues with the appropriate authorities barring delays in certain months ranging up to 5 months in the case of income tax deducted at source, up to 4 months delay in respect of provident fund and up to 2 months delay in Employees' State Insurance, excise duty and service tax. According to the information and explanations given to us, there are no undisputed amounts payable in respect of above mentioned statutory dues were in arrears, as at March 31, 2015 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us, the following dues of Sales Tax, Income Tax, Customs Duty, Excise Duty, Value Added Tax, Service Tax and Cess had not been deposited as at March 31, 2015 with the relevant authorities on account of disputes.

Name of the Nature of the Amount statue dues (Rs in Lakhs.)

Karnataka Sales Resale tax TaxAct, 1957 demanded 339.07

Karnataka Value Added TaxAct, VAT penalty 2003 demanded 181.06

Karnataka Value Added TaxAct, 2003 VAT demanded 35.61

The Central Excise, 1944 Excise demand 2.18

Excise demand 2.62

Cenvatavailment 92.24

The Customs Act, Customs 1962 demand 10.53

The Income Tax Income tax Act, 1961 demand 15.56

The Income Tax Income tax Act, 1961 demand 174.13

The Central Sales Sales tax 20.66

Tax Act, 1956 & demand The Bombay Sales Works contract 96.49 TaxAct, 1959 tax

The Central Sales TaxAct, 1956 & The Bombay Sales Sales tax 1,190.43 TaxAct, 1959 demand

The Central Sales TaxAct, 1956 & Maharastra Value Added TaxAct, Sales tax 2002 demand 3,196.41

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

Karnataka Sales 2003-2005 Supreme Court Tax Act,1957

Karnataka Value Added Tax Act,2003 2005-2008 Supreme Court

Karnataka Value Added Tax Act,2003 Joint Commissioner of 2006 - 2007 & Commercial Tax 2008-2009 (Appeals)

The Central Excise,1944 April 1993 & High Court of April 2001 Karnataka

September 2006 Central Excise and and September 2007 Service Tax Appellate Tribunal

June 2006,January 2008 to April 2010& October 2008 to Commissioner April 2010, September of Central Excise 2010 to March 2011 (Appeals)

The Customs Act,1962 1994 to 1999 Asst. Commissioner of Customs

The Income Tax Act,1961 Assessment Year Commissioner of 2010-2011 Income Tax (Appeals)

The Income Tax Act,1961 Assessment Year Commissioner of 2012-2013 Income Tax (Appeals)

The Central Sales Tax Act,1956 & 1999 - 2000 Maharastra Sales Tax The Bombay Sales Tax Act,1959 Tribunal, Mumbai

1996-1997 to Joint Commissioner of 2004 - 2005 Commercial Taxes

The Central sales Tax Act,1956 & 1999-2000, Joint Commissioner of 2005-2006 and Commercial Taxes 2008-2009

The Central Sales The President, Tax Act,1956 & Maharashtra Sales Tax maharashtra Value Tribunal, Mumbai (in Added Tax Act, respect of CST demand) 2002 2010-2011 & Deputy Commissioner of Sales Tax (Appeals) Pune

c. According to the information and explanations given to us, the Company has transferred the matured deposits amounting to Rs.2.44 lakhs by remitting to Investor Protection Fund, in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

8. In our opinion, the Company's accumulated losses as at the end of the financial year are more than fifty per cent of its net worth as at the year end. The Company has incurred cash losses during the financial year covered by our audit amounting to Rs 9,487.51 lakhs and has incurred cash losses during the preceding financial year amounting to Rs 2,929.18 lakhs.

9. In our opinion and according to the information and explanations given to us, the Company had delayed repayment in certain months during the year however those loans were restructured by the consortium of banks (as referred vide note 54 of the financial statements) of the Company and there are no defaults in repayment of dues to banks as at March 31, 2015 taking into consideration of the restructuring program carried out by the Company. The delay in repayment in respect of a term loan with a bank ranged from 16 to 80 days during the year amounting to Rs 139.14 lakhs.

10. In our opinion, the terms and conditions on which the Company has given a guarantee to its wholly owned subsidiary, in respect of loans taken by its wholly owned subsidiary from a bank, is not prima facie prejudicial to its interest.

11. According to the information and explanations given to us, term loans are utilized for the purpose for which it was sanctioned.

12 According to the information and explanations given to us and to the best of knowledge and belief, no material frauds on or by the Company that causes material misstatement to the financial statement have been noticed or reported during the year.

For B.K. RAMADHYANI & CO. LLP

Chartered Accountants Firm Registration No. 002878S/S200021

(CA. C R Krishna)

Partner Membership No. 027990

Place : Bangalore Date : May 29, 2015


Mar 31, 2013

Report on the Financial Statements:

We have audited the accompanying financial statements of Kirloskar Electric Company Limited ("the Company") which comprise of Balance Sheet as at March 31, 2013, Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date and a summary of accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements:

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility:

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis of our Qualified Opinion:

(i) Note 10 to the financial statements regarding complete particulars (including interest payable) of dues to micro, small and medium enterprises not being ascertained, with consequential non provision for interest due.

(ii) Note 37 (a) to the financial statements regarding confirmation of balances from trade receivables being awaited and accounts of certain trade receivables being subject to review/reconciliation/identification of doubtful debts. Debts above two years and considered as good by management is estimated at Rs.7,940.45 lakhs. The relevant accounts are subject to adjustments, if required after management completes review, reconciliation and identification of further doubtful debts.

(Hi) Para 2(c) of the annexure to this report and Note 38 to the financial statements regarding certain mistakes and omissions noticed in the inventory records have been corrected to the extent identified based on physical inventory taken from time to time. Further, work in progress at certain units as at March 31, 2013 with aggregate carrying value of Rs. 5,658.81 lakhs includes non moving and old inventories in respect of which physical identification/ reconciliation/assessment of net realizable value and reusability is under progress. The determination of cost or net realizable value in respect of work in progress is not in line with Accounting Standard (AS) - 2.

(iv) Note 40 to the financial statements regarding realizable value of assets held for sale fRs. 793.09 lakhs) being assessed by management without the support of an external valuation or quotations from prospective buyers.

In all cases referred to above, effect on revenue, assets and liabilities is not ascertainable. We do not express any independent opinion in these matters.

Qualified Opinion:

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, the said 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:

(i) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2013;

(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 for the year ended on that date.

Emphasis of Matter:

Attention is invited to note 51 of the financial statements, that Lloyd Dynamowerke GmbH & Co. KG, Germany ("LDW") has incurred losses for the year, management''s representation that it has sufficient orders in hand, is confident of earning profits in the subsequent years and that the diminution in the carrying value of the investments held by the Company in Kirsons BV (immediate holding company of LDW) of Rs. 15,458.53 lakhs is considered temporary and no provision is considered necessary. Our report is not qualified in this respect.

Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditor''s Report) Order, 2003, as amended by the Companies (Auditor''s Report) (Amendment) Order 2004 issued by the Company Law Board, in terms of subsection 4A of section 227 of the Act ("the Order"), we enclose in the annexure a statement on matters specified in paragraphs 4 and 5 of the Order.

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

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the 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 report on the accounts of the Kuala Lumpur office in Malaysia not visited by us but audited by M/s Sundar & Associates, Chartered Accountants has been forwarded to us and has been dealt with in the manner considered appropriate by us while preparing our report.

d. 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.

e. In our opinion, the Balance Sheet, Statement of Profit & 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 Act except for valuation of work in progress being not in line with Accounting Standard - 2 as referred in note 38 of the financial statements.

f. On the basis of written representations received from the directors, as on March 31, 2013 and taken on record by the board of directors, we report that none of the directors are disqualified as on March 31, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

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

ANNEXURE REFERRED TO IN PARA 1 UNDER THE HEADING "REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS" OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF KIRLOSKAR ELECTRIC COMPANY LIMITED

1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However comprehensive description of assets and their current location need to be updated in the asset records.

b. The management during the year has physically verified the fixed assets during the year. In our opinion and as represented to us by the Company the differences so identified and yet to be adjusted in the books of accounts are not material.

c. During the year, the Company has not disposed off a substantial part of its fixed assets and as such the provisions of clause 4(i) (c) of the Order are not applicable to the Company.

2. a. Inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. Certain stocks lying with third parties amounting to 1142.37 lakhs and at port are subject to confirmation/ reconciliation.

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

c. The Company has implemented SAP ECC 6 systems at all its units. Certain mistakes and omissions noticed during the year have been corrected based on physical verification taken from time to time (refer note 38 of the financial statements). The Company is in the process of quantifying the differences to be adjusted in the books of account on a comprehensive basis. Accordingly, we are unable to state whether the discrepancies between books/records and inventory are material and whether they have been properly dealt with in the books of account.

d. We have relied on the representation of the management that the consumption of materials and components is in line with production/ industry norms.

3. a. The terms and conditions on which fixed deposits were accepted from a director and a relative of a director are prima facie not prejudicial to the interests of the Company. The maximum amount involved during the year and amount outstanding at the end of the year were Rs. 45.00 lakhs. b. The Company has not granted any loans to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. For this purpose, we have relied on the representations of the management that monies due from parties referred to in note 41 to the financial statements are advances and not in the nature of loans.

4. Having regard to the explanations given to us that some of the bought items/ assets are proprietary and/ or are customised to the requirements of the Company and as such comparative quotations are not available and subject to notes 37 and 38 to the financial statements, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and for the sale of goods. We have not observed during the course of our audit any continuing failure to correct the major weaknesses in the internal controls, subject to note 37 and 38 of the financial statements.

5. a. According to the information and explanations given to us, we are of the opinion that contracts that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. b. In respect of transactions made in pursuance of such contracts or arrangements exceeding the value of f 500,000 entered into during the year the Company has represented to us that their rates are comparable to market prices. However considering the proprietary nature of certain items and in the absence of comparable prices from other parties we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to deposits accepted from the public. Further and according to the Company no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

7. The Company has an internal audit system in place conducted through an external agency. According to the information and explanation given to us the management has a policy, for covering all relevant areas of internal audit in a phased manner from time to time, which in our opinion is commensurate with size and nature of the business of the Company.

8. We have broadly reviewed the Cost Records maintained by the Company as prescribed by the Central Government under clause (d) of sub section (1) of 209 of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained, subject to paragraph 2(c) above regarding inventory records. We have not made a detailed examination to ensure their accuracy or completeness.

9. a. The Company has been regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Service Tax, Cess and other applicable statutory dues with the appropriate authorities barring delays in certain months.

b. According to the information and explanations given to us, there are no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty, Service Tax and Cess were in arrears, as at March 31, 2013 for a period of more than six months from the date they became payable except for matured deposits amounting to Rs. 244,000 have not been remitted to Investor Protection Fund, pending resolution of disputes regarding beneficiaries.

10. In our opinion, the Company did not have accumulated losses as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceeding financial year. This is without taking cognizance of our comments in basis of qualified opinion paragraph of our report.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks & financial institutions.

12 The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities and as such the provisions of clause 4(xii) of the Order are not applicable to the Company.

13. 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 Order are not applicable to the Company.

14. 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 Order are not applicable to the Company.

15. In our opinion, the terms and conditions on which the Company has given guarantees in a prior year for loans taken by its wholly owned subsidiary from a bank is not prima facie prejudicial to its interest.

16. According to the information and explanations given to us, there are no term loans taken from banks. Accordingly the provisions of clause 4 (xvi) of the Order is not applicable.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report that Rs. 7,254.99 lakhs funds raised on short- term basis have been used for long-term investment.

18. According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties covered in the register maintained under section 301 of the Act.

19. According to the information and explanations given to us, no debentures were outstanding at the end of the year. Accordingly, the provisions of clause 4 (xix) of the Order is not applicable

20. The Company has not raised any monies by public issue during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

21. According to the information and explanations given to us and to the best of knowledge and belief, no material frauds on or by the Company that causes material misstatement to the financial statement have been noticed or reported during the year.

For B.K.RAMADHYANI & CO.

Chartered Accountants

Firm Registration No. 002878S

(CA C R KRISHNA)

Place : Bangalore Partner

Date : May 30, 2013 Membership number 027990


Mar 31, 2012

We have audited the attached Balance Sheet of Kirloskar Electric Company Limited, Bangalore as at March 31, 2012, the statement of Profit and Loss and also the Cash Flow statement for the year ended on that date annexed thereto.

1 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 by the Companies (Auditor's Report) (Amendment) Order 2004 issued by the Company Law Board, in terms of subsection 4A of section 227 of the Companies Act, 1956 ('Order'), we enclose in the annexure a statement on matters specified in paragraphs 4 and 5 of the Order.

Further to our comments in the annexure referred to above, we report that:

4 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.

5 In our opinion, subject to paragraph 8 of the annexure, the Company has kept proper books of account as required by law, so far as it appears from our examination of such books.

6 The report on the accounts of the Kuala Lumpur office in Malaysia not visited by us but audited by M/s Sundar & Associates, Chartered Accountants has been forwarded to us and has been dealt with in the manner considered appropriate by us while preparing our report.

7 The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the Books of Account and the audited returns received from the Kuala Lumpur office of the Company.

8 In our opinion, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply in all material respects with the mandatory accounting standards (AS) referred to in subsection (3C) of section 211 of the Companies Act, 1956 as applicable, subject to note 37 (b) to the financial statements (valuation of Inventories).

9 On the basis of written representations received from directors as on March 31, 2012 and taken on record by the Board of Directors, we report that none of the directors of the Company are disqualified as on that date from being appointed as a director under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

10 Attention of the members is invited to:

i Note 9 to the financial statements regarding complete particulars (including interest payable) of dues to micro, small and medium enterprises not being ascertained, with consequential non provision for interest due.

ii Note 36 to the financial statements regarding accounts of certain debtors, creditors, loans and advances, balances between the Company, its erstwhile subsidiary Kaytee Switchgear Limited and the operating business of Kirloskar Power Equipments Limited being subject to review/reconciliation/identification. Further debts above two years and considered as good by management is estimated at Rs. 2,386.24 lakhs. The relevant accounts are subject to adjustments, if required after management completes review, reconciliation and identification of further doubtful debts/advances.

iii. Note 2 of annexure to this report and Note 37 to the financial statements regarding SAP ERP systems being in the process of stabilization/cleansing of data and modifications required in the processes to bring the determination of cost and net realisable value of inventories at certain units in line with Accounting Standard 2. Accordingly, value of inventories adopted in the financial statements of Rs.13,174.60 lakhs is as certified by the management and could not be verified by us.

iv Note 39 to the financial statements regarding realizable value of assets held for sale of Rs. 793.09 lakhs being assessed by management without the support of an external valuation or quotations from prospective buyers.

v Note 40 to the financial statements regarding amounts due from certain companies of Rs.431.93 lakhs, which have incurred losses and whose net worth has been partially or wholly eroded, being considered good of recovery.

In all cases referred to above, effect on financial statements is not ascertainable. We do not express independent opinion in these matters.

11 In our opinion and to the best of our knowledge and according to the information and explanations given to us, the said accounts read with the other notes give the information as required by the Companies Act, 1956 in the manner so required and subject to paragraph

10 above, 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, 2012 B In the case of the Statement of Profit and Loss, of the profits of the Company for the year ended on that date and C In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

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

However comprehensive description of assets, their current location and accumulated depreciation need to be updated in the asset record.

b. The management during the year has physically verified fixed assets as per a program of verification. We understand that reconciliation is in progress and that difference, if any, will be assessed after completion of reconciliation. Fixed assets lying with third parties are subject to confirmation.

c. During the year, the Company has not disposed off a substantial part of its fixed assets and as such the provisions of clause 4(i) (c) of the Order are not applicable to the Company.

2. a. Inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. Certain stocks lying with third parties, stock lying at port and with inter-units are subject to confirmation/reconciliation.

b. The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business except at certain units where the same need to be strengthened.

c. The Company has implemented SAP ECC 6 systems at a majority of its units. Certain mistakes and omissions to the extent identified during the year have been corrected based on physical verification taken from time to time (refer note 37 (a) of the financial statements). The Company is in the process of quantifying the excess and shortages adjusted in the books of account on a comprehensive basis. Accordingly, we are unable to state whether the discrepancies between book records and inventory are material and whether they have been properly dealt with in the books of account.

d. We have relied on the representation of the management that the consumption of materials and components is in line with production/ industry norms.

3. a. The terms and conditions on which fixed deposits were accepted from a director and a relative of a director are prima facie not prejudicial to the interests of the Company. The maximum amount involved during the year and amount outstanding at the end of the year were Rs. 45.00 lakhs.

b. The Company has not granted any loans to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. For this purpose, we have relied on the representations of the management that monies due from parties referred to in note 40(a) to the financial statements are advances and not in the nature of loans.

4. Having regard to the explanations given to us that some of the bought items / assets are proprietary and / or are customised to the requirements of the Company and as such comparative quotations are not available and subject to notes 36 and 37 to the financial statements, there are adequate internal control procedures commensurate with the size of the Company and the nature its business with regard to purchases of inventory and fixed assets and for the sale of goods. We have not observed during the course of our audit any continuing failure to correct major weaknesses in the internal controls, subject to note 36 and 37 to the financial statements.

5. a. According to the information and explanations given to us, we are of the opinion that transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. Attention is invited to note 49 to the financial statements regarding prior approval of the Central Government not having been obtained in respect of certain contracts in which directors are interested, in terms of section 297 of the Act.

b. No comments can be made on the reasonability of the rates in respect of the transactions so made and exceeding Rs. 500,000 in respect of any one party since there are no similar transactions with third parties at the relevant time.

6. The Company has complied with the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to deposits accepted from the public.

7. We have been informed by the management that an independent agency has been appointed for conducting internal audit of certain units and their report is awaited. Under the circumstances, we cannot comment whether the Company's internal audit system is commensurate with its size and nature of business.

8. We have broadly reviewed the Cost Records maintained by the Company as prescribed by the Central Government under clause (d) of sub section (1) of 209 of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained, subject to paragraph 2(c) above regarding inventory records. We have not made a detailed examination to ensure their accuracy or completeness.

9. a. The Company has been regular in depositing undisputed statutory dues including provident fund, employees' state insurance, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other statutory dues with the appropriate authorities and barring delays in certain months and non payment of certain dues detailed in paragraph 9(b) below.

b. We have been informed by the management that the customs duty payable of Rs 4,119,078 referred to in our report dated June 25, 2007 to the members of the Company is old, not subsisting and not payable. Matured deposits aggregating to Rs. 244,000 have not been remitted to Investor Protection Fund, pending resolution of disputes regarding beneficiaries. According to the information and explanations given to us, pending completion of reconciliation in respect of professional tax, employees' state insurance and income tax deducted at source in respect of certain branches / offices, we are unable to identify amounts outstanding for more than 6 months, if any. However the following undisputed statutory dues were outstanding as at March 31, 2012 outstanding for a period of more than six months from the date they became payable:

Name of the Statute Nature of Dues Amount Period to Due Date Date of Payment Rs which it relates

The Finance Act, 1994 Service tax on Goods 19,816 April to 5th of subsequent Rs 3,654 paid on Transport Agency August 2011 month 21-May-2012 & Rs 19,816 paid on 21-May-2012

c. According to the information and explanations given to us, the following dues of sales tax, income tax, customs tax, excise duty, service tax and cess had not been deposited as at March 31, 2012 with the relevant authorities on account of disputes.

Name of the statute Nature of the dues Amount Period to Forum where dispute (Rs) which the is pending amount relates

Central Sales Tax Demands at Various Branches of the Company 781,446 1985 to 2001 Sales Tax Appellate Tribunal

Local Sales Tax at Demands at Various Branches of the Company 1,596,910 1985 to 2001 Sales Tax Appellate Tribunal Various Branches

Local Sales Tax at Demands at Various Branches of the Company 2,459,790 1999 to 2000 Joint Commissioner of Sales tax Various Branches

Central Sales Tax Demands at Various Branches of the Company 1,178,688 1999 to 2000 Joint Commissioner of Sales tax

Central Sales Tax Sales tax demand. 4,532,781 2002 to 2005 Commissioner of Sales Tax (A)

Bombay Sales Tax Act Sales tax demand 505,585 2002 to 2005 Commissioner of Sales Tax (A)

Central Sales Tax Sales tax demand. 54,648,404 1999-2000, Maharastra Sales Tax Tribunal, 2001-2002 & Mumbai 2002-2003

Bombay Sales Tax Act Sales tax demand 575,331 1999-2000, Maharastra Sales Tax Tribunal, 2001-2002 & Mumbai 2002-2003

Works Contract Tax Act Sales tax demanded 1,004,030 2001-2002 & Maharastra Sales Tax Tribunal, 2002-2003 Mumbai

Karnataka Sales Tax Act Resale tax demanded 36,912,070 2002 - 2005 High Court of Karnataka

Karnataka Value VAT penalty demanded 38,051,249 2005 - 2008 High Court of Karnataka Added Tax Act, 2003

The Customs Act, 1962. Customs demand 5,154,369 1994 to 1999 Asst. Commissioner of Customs

The Central Excise, 1944 Excise demand 217,927 April 1993 High Court of Karnataka

Works Contract Tax Act Sales tax demanded 1,253,188 1996-1997 & Joint Commissioner of sales Tax 1998-1999

Central Sales Tax Sales tax demand. 10,091,942 1996-1997 & Joint Commissioner of sales Tax 1998-1999

The Central Excise, 1944 Excise demand 129,023 September 2006 Central Excise and Service Tax Appellate Tribunal

The Central Excise, 1944 Excise demand 133,370 September 2007 Central Excise and Service Tax Appellate Tribunal

The Central Excise, 1944 Cenvat credit demand 574,282 April 2008 to Commissioner of Central Excise June 2009 (Appeals)

The Income Tax Act, 1961 Income tax demand 7,947,186 Assessment Commissioner of Income Tax year 2008-2009 (Appeals)

The Income Tax Act, 1961 Income tax demand 9,525,224 Assessment Commissioner of Income Tax year 2009-10 (Appeals)

10. In our opinion, the Company did not have accumulated losses as at year end. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year. This is without taking cognizance of our comments in paragraph 10 of our report.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks & financial institutions.

12 The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities and as such the provisions of clause 4(xii) of the Order are not applicable to the Company.

13. 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 Order are not applicable to the Company.

14. 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 Order are not applicable to the Company.

15. In our opinion, the terms and conditions on which the Company has given guarantees for loans taken by its wholly owned subsidiary from a bank is not prima facie prejudicial to its interest.

16. In our opinion, the Company had no terms loans outstanding from banks as at the year. Accordingly, the provisions of clause 4 (xvi) of the Order is not applicable.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report that Rs.6,341.76 lakhs funds raised on short- term basis have been used for long-term investment.

18. According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties covered in the register maintained under section 301 of the Act.

19. According to the information and explanations given to us, no debentures were outstanding at the end of the year. Accordingly, the provisions of clause 4 (xix) of the Order is not applicable

20. The Company has not raised any monies by public issue during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

21 According to the information and explanations given to us, no material frauds on or by the Company that causes material misstatement to the financial statement have been noticed or reported during the year.

For B. K. Ramadhyani & Co.,

Chartered Accountants

Firm Registration No 002878S

B. K. Ramadhyani & Co., CA. C R KRISHNA

4B, Chitrapur Bhavan Partner

8th Main, 15th cross, Malleswaram, Membership number 027990

Bangalore - 560 055

Date: May 28, 2012


Mar 31, 2011

We have audited the attached Balance Sheet of Kirloskar Electric Company Limited, Bangalore as at March 31, 2011, the Profit and Loss Account and also the Cash Flow statement for the year ended on that date annexed thereto.

1 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 by the Companies (Auditor's Report) (Amendment) Order 2004 issued by the Company Law Board, in terms of subsection 4A of section 227 of the Companies Act, 1956('Order'), we enclose in the annexure a statement on matters specified in paragraphs 4 and 5 of the Order.

Further to our comments in the annexure referred to above, we report that:

4 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.

5 In our opinion, subject to paragraph 8 of the annexure, the Company has kept proper books of account as required by law, so far as it appears from our examination of such books.

6 The report on the accounts of the Kuala Lumpur office in Malaysia not visited by us but audited by M/s Sundar & Associates, Chartered Accountants has been forwarded to us and has been dealt with in the manner considered appropriate by us while preparing our report.

7 The Balance Sheet, the Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the Books of Account and the audited returns received from the Kuala Lumpur office of the Company.

8 In our opinion, the Balance Sheet, the Profit and Loss Account and Cash Flow Statement dealt with by this report comply in all material respects with the mandatory accounting standards referred to in subsection (3C) of section 211 of the Companies Act, 1956 as applicable, subject to note 22 (b) of Schedule 'O' (valuation of Inventories) (AS 2).

9 On the basis of written representations received from directors as on March 31, 2011 and taken on record by the Board of Directors, we report that none of the directors of the Company are disqualified as on that date from being appointed as a director under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

10 Attention of the members is invited to:

i) Note 21 of schedule 'O' regarding accounts of certain debtors, creditors, loans and advances, reconciliation of balances between the Company, its erstwhile subsidiary KSL and operating business of KPEL being under review/reconciliation. The relevant accounts are subject to adjustments, if required after completion of review, reconciliation and identification of further doubtful debts/advances.

ii) Note 22 of schedule 'O' regarding SAP ECC 6 systems implemented being subject to stabilization/cleansing of data and modifications required in the processes to bring the determination of cost and net realizable value of inventories at certain units in line with Accounting Standard 2. Accordingly, value of inventories adopted in the financial statements is as assessed by the management and not verified by us.

iii) Note 24 of schedule 'O' regarding realizable value of assets held for sale being assessed by management without the support of an external valuation or quotations from prospective buyers

iv) Note 25 of schedule 'O' regarding amounts due from certain companies of Rs.23.692 million, which have incurred losses and whose net worth has been partially or wholly eroded.

In all cases referred to above, effect on revenue is not ascertainable. We do not express any independent opinion in these matters.

11 In our opinion and to the best of our knowledge and according to the information and explanations given to us, the said accounts subject to note 20 of schedule 'O' to the financial statements read with the other notes and schedules give the information as required by the Companies Act, 1956 in the manner so required and subject to paragraph 10 above, paragraph 2 of the annexure to this report 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, 2011

B In the case of the profit and loss account, of the profits of the Company for the year ended on that date and

C In the case of cash flow statement, of the cash flows of the Company for the year ended on that date.

ANNEXURE TO AUDITORS' REPORT (AS REFERRED TO IN PARA 3 OF OUR REPORT TO THE MEMBERS OF KIRLOSKAR ELECTRIC COMPANY LIMITED)

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

b. The management during the year has physically verified a portion of fixed assets in respect of certain units. We have been informed by the management that no material discrepancies were observed. However, a comprehensive physical verification needs to be carried out. Fixed assets lying with third parties are subject to confirmation.

c. During the year, the Company has not disposed off a substantial part of its fixed assets and as such the provisions of clause 4(i) (c) of the Order are not applicable to the Company.

2. a. Inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. Certain stocks lying with third parties are subject to confirmation.

b. The procedures of physical verification of inventories followed by the management need to be improved to make them reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company has implemented SAP ECC 6 systems at certain units. Certain mistakes and omissions noticed during the year have been corrected based on physical inventory taken from time to time (refer note 22(a) of schedule O). The Company is in the process of quantifying the excess and shortages adjusted in the book of account. Stock records at certain units are under updation. Accordingly, we are unable to state whether the discrepancies between book records and inventory are material and have been properly dealt with in the books of account

d. We have relied on the representation of the management that the consumption of materials and components is in line with production/ industry norms.

3. a. The terms and conditions on which two fixed deposits were accepted from a director and a relative of a director are prima facie not prejudicial to the interest of the Company. The maximum amount involved during the year and the amount outstanding as at the end of the year were Rs. 3.500 million.

b. The Company has not granted any loans to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. For this purpose, we have relied on the representations of the management that monies due from parties referred to in note 19 & 25(a) of schedule 'O' are advances and not in the nature of loans.

4. Having regard to the explanations given to us that some of the bought out items/assets are proprietary and/or special and/or are customised to the requirements of the Company and as such comparative quotations are not available and subject to notes 21 & 22 of schedule 'O', there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and for the sale of goods. We have not observed during the course of our audit any continuing failure to correct major weaknesses in internal controls, subject to note 21 of Schedule 'O'.

5. a. According to the information and explanations given to us, we are of the opinion that transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

b. No comments can be made on the reasonability of the rates in respect of the transactions so made and exceeding Rs. 500,000 in respect of any one party since there are no similar transactions with third parties at the relevant time.

6. The Company has complied with the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to deposits accepted from the public.

7. The Company's internal audit system needs to be strengthened in terms of coverage and periodicity to make the same commensurate with the size and nature of its business.

8. We have broadly reviewed the Cost Records maintained by the Company as prescribed by the Central Government under clause (d) of sub section (1) of 209 of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained, subject to paragraph 2(c) above regarding inventory records. We have not made a detailed examination to ensure their accuracy or completeness.

9. a. The Company has been regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income tax, sales tax, customs duty, excise duty, cess and other statutory dues with the appropriate authorities barring delays in certain months and non payment of certain dues detailed in paragraph 9(b) below. Further, since the Central Government has till date not prescribed the amount of cess payable under section 441 A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

b. We have been informed by the management that the customs duty payable of Rs. 4,119,078 referred to in our report dated June 25, 2007 to the members of the Company is old, not subsisting and not payable. Matured deposits aggregating to Rs. 244,000 have not been remitted to Investor Protection Fund, pending resolution of disputes regarding beneficiaries. According to the information and explanations given to us, the following undisputed statutory dues were outstanding as at March 31, 2011 outstanding for a period of more than six months from the date they became payable.

Name of the Statute Nature of Dues Amount Period to Due Date Date of Payment Rs. which it relates

The Maharashtra MVAT 784,648 2008-2009 March 31, 2010 Unpaid as on date VAT Act, 2002

The Service Tax Act Service tax on Goods 5,503 April 2010 to 5th of subsequent Unpaid as on date Transport Agency August 2010 month

c. According to the information and explanations given to us, the following dues of sales tax, income tax, customs tax, excise duty, service tax and cess had not been deposited as at March 31, 2011 with the relevant authorities on account of disputes.

Name of the statue Nature of the dues Amount Period to Forum where dispute is (Rs.) which the pending amount relates

Central Sales Tax Demands at Various Branches of the Company 781,446 1985 to 2001 Sales Tax Appellate Tribunal

Local Sales Tax at Demands at Various Branches of the Company 1,596,910 1985 to 2001 Sales Tax Appellate Tribunal Various Branches

Local Sales Tax at Demands at Various Branches of the Company 2,459,790 1999 to 2000 Joint Commissioner of Sales tax Various Branches

Central Sales Tax Demands at Various Branches of the Company 1,178,688 1999 to 2000 Joint Commissioner of Sales tax

Central Sales Tax Sales tax demand. 4,532,781 2002 to 2005 Commissioner of Sales Tax(A)

Bombay Sales Tax Act Sales tax demand 505,585 2002 to 2005 Commissioner of Sales Tax(A)

Central Sales Tax Sales tax demand. 54,648,404 1999- 2000, Maharastra Sales Tax Tribunal, 2001- 2002 & Mumbai 2002- 2003

Bombay Sales Tax Act Sales tax demand 334,085 1999- 2000, Maharastra Sales Tax Tribunal, 2001- 2002 & Mumbai 2002- 2003

Works Contract Tax Act Sales tax demanded 1,004,030 2001- 2002 & Maharastra Sales Tax Tribunal, 2002- 2003 Mumbai

Kamataka Sales Tax Act Resale tax demanded 36,906,894 2002 - 2005 High Court of Karnataka

Karnataka Value VAT penalty demanded 38,051,249 2005 - 2008 High Court of Karnataka Aded Tax Act, 2003

The Customs Act, 1962. Customs demand 5,154,369 1994 to 1999 Asst. Commissioner of Customs

The Central Excise, 1944 Excise demand 217,927 April 1993 High Court of Karnataka

The Central Excise, 1944 Excise demand 129,023 September 2006 Central Excise and Service Tax Appellate Tribunal

The Central Excise, 1944 Excise demand 133,370 September 2007 Central Excise and Service Tax Appellate Tribunal

The Central Excise, 1944 Cenvat credit demand 574,282 April 2008 to Commissioner of Central June 2009 Excise(Appeals)

The Income Tax Act, 1961 Income tax demand 9,306,736 Assessment Commissioner of Income Tax year 2008 -2009 (Appeals)

10. In our opinion, the Company does not have accumulated losses. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year. This is without taking cognizance of our comments in paragraph 10 of our report.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks & financial institutions except for delays in certain months.

12 The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities and as such the provisions of clause 4(xii) of the Order are not applicable to the Company.

13. 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 Order are not applicable to the Company.

14. 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 Order are not applicable to the Company.

15. In our opinion, the terms and conditions on which the Company has given guarantee for loan taken by its wholly owned subsidiary from a bank is not prima facie prejudicial to the interest of the company.

16. In our opinion, the Company has not taken any terms loans during the year and hence clause 4 (xvi) of the Order is not applicable.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that Rs.498.785 million funds raised on short- term basis have been used for long-term investment.

18. According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties covered in the register maintained under section 301 of the Act.

19. According to the information and explanations given to us, the debentures issued by the Company to the Industrial Development Bank of India to an extent of Rs.49.4 million in terms of the scheme of arrangement approved by the honourable High Court of Karnataka under sections 391 to 394 of the Companies Act, 1956 stand redeemed.

20. The Company has not raised any monies by public issue during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company.

21 According to the information and explanations given to us, no material frauds on or by the Company that causes material misstatement to the financial statement have been noticed or reported during the year.

For B.K.RAMADHYA Nl & CO.

Chartered Accountants

Firm Registration No 002878S

CA SHYAM RAMADHYANI

Bangalore Partner

Date: May 28, 2011 Membership number 019522

 
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