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Auditor Report of Kwality Ltd.

Mar 31, 2016

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of M/s Kwality Limited, which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

MANAGEMENT''S RESPONSIBILITY FOR THE 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 and presentation 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 Section133 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 Actor safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and 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 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 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 controls 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 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 March 31, 2016 and its profit 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 & obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

c. The Balance Sheet, the Statement of Profit and Loss, and 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 the written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

f. with respect to the adequacy of the internal financial controls over financial reporting of the Company and operating effectiveness of such controls, refer to our separate report in "Annexure-B" ; and

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

(i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements as referred to in Note 26.1 to the financial statements.

(ii) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, and as required on long-term contracts including derivative contracts.

(iii) There is no amount due to be transferred to the Investor Education and Protection Fund by the Company.

I. In respect of Fixed Assets :

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

1. b The company has a regular programme of physical verification of its fixed assets in a phased manner. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancy was noticed on such verification.

1. c According to the information and explanations given to us and on the basis of our examination of the records of the Company, all the title deeds are held in the name of the company.

2. The physical verification of the inventory has been conducted at reasonable intervals by the management and no material discrepancies were noticed during physical verification.

3. The Company has not granted any loan to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013 (''the Act'') .

4. In our opinion and according to the information and explanations given to us, the provisions of section 185 and 186 of the Companies Act, 2013 is not applicable to the Company during the year under review.

Nature of Statute

Nature of Dues

Amount unpaid (''In Lacs)

Year to which the amount relates

Forum where litigation is pending

Haryana Livestock Development Board, Gurgaon

Milk Cess

202.12 (169.09 deposited against 371.21 under protest)

2002-2016

Supreme Court Of India

---Do--

Interest on Milk Cess

1970.45

2002-2016

Supreme Court of India

Punjab VAT Act

VAT

22.04

2013-2014

Excise and Taxation Comm.(Appeal)

Kerala VAT Act

VAT

1.40

2013-2014

High Court ( Kerala)

UP VAT Act

VAT

42.93

2012-2015

Add. Comm. (Appeal) Ghaziabad, UP

Rajasthan VAT Act

VAT

34.26

2015-2016

Commercial Taxation Officer (Jaipur)

Haryana VAT Act.

VAT

12.00

2015-2016

Asstt. Commissioner (Haryana)

5. The Company has not accepted any deposits from the public.

6. We have broadly reviewed the cost records maintained by the company pursuant to the Companies (Cost Accounting Records ) Rules , 2011 prescribed by the Central Government under Section 148 of the Companies Act, 2013 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

7. In respect of Statutory dues :

7 a). According to the records of the Company examined by us, the Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including Provident fund, Employees'' state insurance, Income tax, Sales tax, Service tax, Custom duty, Excise duty, Value added tax, Cess and other Statutory dues with appropriate authorities except an undisputed amount of Income Tax liability of ''4163.12 Lacs (Previous Year ''4763.33 Lacs) outstanding as at the last day of the financial year for a period exceeding six months from the date it became payable.

7 b). According to the records of the Company examined by us and according to the information and explanations given to us, there are no dues of income-tax, sales tax, service tax, custom duty, excise duty, value added tax which have not been deposited on account of any dispute, except as under:-

8. The company has not defaulted in repayment of loans or borrowing or other dues to any financial institution, bank, Government or debenture holder.

9. The company has not raised any money by initial public offer, further public offer or debt instrument during the year. The money raised by term loan has been applied for the purpose it has been raised.

10. According to the information and explanations given to us, no fraud by the company or on the company by any officer or employee has been noticed or reported during the course of our audit.

11. According to the information and explanations given to us and based on our examination of the records of the company, the managerial remuneration paid during the year is in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

12. In our opinion and according to information and explanations given to us, the company is not a Nidhi Company. Accordingly, paragraph 3(xii) of the order is not applicable.

13. According to the information and explanations given to us and based on our examination of the records, all transactions with the related parties are in compliance with sections 177 and 188 of the Companies Act, 2013 and the relevant details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

14. During the year under review the Company has made preferential allotment of shares in compliance to the requirement of section 42 of the Companies Act 2013, and the amount so raised have been used for the purpose for which the fund were raised.

15. According to the information and explanations given to us and based on our examination of the records, the company has not entered into any non-cash transaction with directors or any person connected with them. Accordingly, paragraph 3(xv) of the Order is not applicable.

16. The company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section 143 of the Companies Act, 2013 (''the Act'')

We have audited the internal financial controls over financial reporting of Kwality Limited ("the Company") as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

MANAGEMENT''S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

AUDITORS'' RESPONSIBILITY

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting were established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company''s assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

OPINION

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For P. P. Mukerjee& Associates

Chartered Accountants

Firm''s Registration Number -023276N

Sd/-

P. P. Mukerjee

Place : New Delhi Proprietor

Date : 25th May, 2016 Membership Number 089854


Mar 31, 2012

We have audited the attached Balance Sheet of Kwality Dairy (India)Limited , as at 31st March 2012 and also the related Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on ouraudit.

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.

As required by the Companies (Auditor's Report) order, 2003, as amended by the Companies (Auditor's report) amendment order 2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

(I) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessaryforthe purposes of ouraudit;

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

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

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

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

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give the information required by the Companies Act, 1956, and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the BalanceSheet, of thestate of affairs of the Company as at 31st March, 2012;

b) In the case of Statement of Profit and Loss of the Profit for theyear ended on that date and

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

ANNEXURE TO THE AUDITOR'S REPORT OF KWALITY DAIRY (INDIA) LIMITED FOR THE YEAR ENDED 31ST MARCH 2012

1 In respect of Fixed Assets:

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

1b) All the assets have not been physically verified by the management duringthe year but there is a regular programme of verification of its fixed assets in a phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancy was noticed on such verification.

1c) During the year, the Company has not disposed off a substantial part of the fixed assets. Based on the information and explanation given by the management and on the basis of audit procedures performed by us, we are of the opinion that the sale of the fixed assets, if any, has not affected the going concern status of the Company.

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

2a) 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.

2b) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3 In respect of Loans, Secured or Unsecured, granted or taken by the Company to/from companies, firms or other parties covered in register maintained undersection 301of the Companies Act, 1956:

3a) The Company has given loans to its wholly owned subsidiary. In respect of said loans the maximum amount outstanding at any time duringthe year was Rs.56.34 Lacs and the year end balance is Rs.56.34Lacs(lnterest free Loan).

3b) The Company has taken unsecured loans from one company covered in the register maintained under section 301 of the Companies Act 1956. The maximum amount outstanding at any time duringthe year was Rs.5800.00 lacs and year end balance of is Rs. 5800.00 lacs.

3c) The Company had taken interest free loans from the parties covered in the register maintained under section 301 of the Companies Act,1956. In our opinion and according to the information and explanation given to us, the terms companies, firms or other parties listed in the registers maintained under Section 301 of the Companies Act, 1956, are not, prima facie, prejudicial to the interest of the Company.

3d) The Company is regular in repaying the principal amounts wherever stipulated and has been regular in the payment of Interest wherever agreed.

3e) There is no overdue amount of loans received from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. Duringthe course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control systems.

5 In respect of the contracts all arrangements referred to in Section 301of the Companies Act, 1956.

5a) Based on the audit procedures applied by us and accordingto the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained unde Section 301 of the Companies Act, 1956 have been so entered.

5b) According to information and explanations given to us, the transactions made in pursuance of contracts/ arrangements entered in the Register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Rs.5 Lac in respect of each party during the year have been made at prices which appear reasonable as per information available with the Company.

6 In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits covered by the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 and hence the provisions of clause 4 (vi) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

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

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

9 In respect of Statutory dues:

9a) Accordingto the records of the Company examined by us, the Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including, investor educations protection fund, employees' state insurance, sales tax ,Vat, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues with appropriate authorities. There have been delays in depositing undisputed Advance Income Tax and the amount outstanding as at the last day of the financial year for a period exceeding six months from the date they become payable, amounts to Rs.110.61 Lacs (previous year Rs.591.88 Lacs). There were no duesduringtheyeartowards Investor Education and Protection Fund and Excise Duty.

9b) Accordingto the records of the Company examined by us and accordingto the information and explanations given to us, there are no dues of income-tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of anydispute, except

Nature of Nature of Amount Year to Forum Where Statute dues unpaid which the pending (Rs.in lacs) amount relates

Haryana Milk cess 192.59 (79.22 2002-2009 Supreme Court Livestock deposited Development against 271.81 Board.Gurgaon under protest)

Sales Tax 48.61 1998-2008 Joint Excise & Sales Tax/ Vat /Vat (including Taxation Exemption 32.73 as Commissioner contingent (Appeals), interest Faridabad. liability)

10. The company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately precedingf inancial year.

11. Based on our audit procedures and according to the information and explanations given by the management, We are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks. The Company has not issued any debentures.

12. As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities the provisions of clause 4 (xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Comogj^^^—

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

14. According to the information and explanation given to us , the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause (xiv) of paragraph 4 of the Companies (Auditor's Report) order2003 (asamended) are not applicable to the Company.

15. According to the information and explanation given to us, the Company has not given any guarantee for loans taken by others from bankorfinancial institutions.

16. In our opinion and according to the information and explanations furnished to us, the term loans have been applied for the purpose for which they were obtained.

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 nof unds raised on short-term basis have been used for long-term investment.

18. The Company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301ofthe Companies Act, 1956.

19. As the Company has not issued any debentures the provisions of clause 4 (xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

20. As the Company has not raised any money by public issue the provisions relating to end use thereof as per clause 4 (xx) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

21. In our opinion and according to the information and explanation given to us, no material fraud on or by the Company has been noticed or reported duringthe year.

For P. P. Mukerjee & Associates Chartered Accountants

Sd/- Place : New Delhi P.P. Mukerjee

Date :14th August, 2012 Proprietor

Membership Number-089854 Firm Registration No:- 023276N


Mar 31, 2010

We have audited the attached Balance Sheet of Kwality Dairy (India)Limited , as at 31st March, 2010 and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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.

As required by the Companies (Auditors Report) Order, 2003,as amended by the Companies (Auditors report) amendment Order 2004 issued by the Central Government of India in terms of sub- section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records as we considered appropriate and according to the information and explanation given to us , we set out in the Annexure a statement on the matters specified in Paragraphs 4 and 5 of the said Order to the extent applicable to the Company.

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

(i) We have obtained all the information and explanations, which to best of our knowledge and belief were necessary for the purposes of our audit;

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

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

(iv) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March, 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010; and

b) in the case of the Profit and Loss Account of the Profit for the year ended on that date.

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

ANNEXURE TO THE AUDITORS REPORT OF KWALITY DAIRY (INDIA) LIMITED FOR THE YEAR ENDED 31ST MARCH 2010

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

1.b) All the assets have not been physically verified by the management during the year but there is a regular programme of verification of its fixed assets in a phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

1c) During the year, the Company has not disposed off a substantial part of the fixed assets. Based on the information and explanation given by the management and on the basis of audit procedures performed by us, we are of the opinion that the sale of the fixed assets, if any, has not affected the going concern status of the Company.

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

2a) 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.

2b) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3a) The Company has not granted loans, secured or unsecured , to companies firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

3b) The Company has taken unsecured loans from two companies covered in the register maintained under section 301 of the Companies Act 1956. The maximum amount involved during the year and year end balances of such loans aggregates to Rs. 4500.00 lacs. Besides the company has also received amounts under current account from three companies covered in the Register maintainer under section 301 of the Companies Act, 1956. The maximum amount involved during the year Rs. 3387.80 Lacs and year end balances of amount received from such companies were Rs. Nil.

3c) The Company had taken interest free loans from the parties covered in the register maintained under section 301 of the Companies Act,1956. In our opinion and according to the information and explanation given to us, the terms and conditions on which above mentioned loans have been taken from companies, firms or other parties listed in the registers maintained under Section 301 of the Companies Act, 1956, are not, prima facie, prejudicial to the interest of the Company.

3d) The Company is regular in repaying the principal amounts as stipulated and has been regular in the payment of Interest wherever agreed.

3e) There is no overdue amount of loans received from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control systems.

5a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

5b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, there are transactions referred to in above (a) above did not exceed the value of Rupees Five Lac in respect of any party during the year.

6 In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits covered by the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 and hence the provisions of clause 4 (vi) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. We recommend the enlargement of scope of work and frequency of internal audit of the Company.

8. We have broadly reviewed the books of accounts maintained by the company in respect of products where, pursuant to the Rules made by the Central Government of India , the maintenance of cost records has been prescribed under clause (d) of sub-section 209 of the Companies Act , 1956 and are of opinion that prima facie, prescribed accounts and records have been maintained. We have not, however carried out a detailed examination of the same.

9a). According to the records of the Company examined by us, the Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including, investor educations protection fund, employees state insurance, sales tax ,Vat, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues with appropriate authorities. There have been delays in depositing undisputed Advance Income Tax and the amount outstanding as at the last day of the financial year for a period exceeding six months from the date they become payable , amounts to Rs. 467.65Lacs (prev year Rs. 206.38 Lacs) . There were no dues during the year towards Investor Education and Protection Fund and Excise Duty.

9b). According to the records of the Company examined by us and according to the information and explanations given to us, there are no dues of income-tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute, except

Nature of Statute Nature of dues Amount unpaid Year to which Forum Where (Rs. in lakhs)the amount relates pending

Haryana Livestock Milk cess 221.39 2002-2010 High Court Development Board, Gurgaon

10. The company has no accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

11. Based on our audit procedures and in our opinion and according to the information and explanations given by the management, except for some delays in few cases the Company has not defaulted in repayment of dues to banks and financial institutions. The company has not issued any debenture.

12 As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities the provisions of clause 4 (xii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

13 In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society, hence the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

14. According to the information and explanation given to us , the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause (xiv) of paragraph 4 of the Companies (Auditors Report) order 2003 ( as amended) are not applicable to the Company.

15. According to the information and explanation given to us , the Company has not given any guarantee for loans taken by others from bank or financial institutions.

16 In our opinion and according to the information and explanations furnished to us, the term loans have been applied for the purpose for which they were obtained.

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 no funds raised on short-term basis have been used for long-term investment.

18. The Company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19. As the Company has not issued any debentures the provisions of clause 4 (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

20 As the Company has not raised any money by public issue the provisions relating to end use thereof as per clause 4 (xx) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

21. Based upon the audit procedures performed and according to the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

Place : Faridabad For & On Behalf of

Mukesh K Arora & Co. Date : August 30, 2010 Chartered Accountants

Firms Registration No.016877N

P. P. Mukerjee

Partner

Membership Number: 089854

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