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Auditor Report of LML Ltd.

Mar 31, 2016

INDEPENDENT AUDITORS'' REPORT

TO THE MEMBERS OF

LML LIMITED

1. Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of LML LIMITED ("the Company"), which comprise the standalone Balance Sheet as at March 31, 2016, and the standalone Statement of Profit and Loss and standalone Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash lows 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 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.

3. 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. 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.

4. Basis of Qualified Opinion

a) As mentioned in note no. 26 of standalone financial statements, balances of some of the trade receivable/ payable, lenders and loans and advances being subject to confirmation/ reconciliation and subsequent adjustments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statement for the year.

b) As mentioned in note no. 27 of standalone financial statements, the Company has valued the inventories except finished goods at cost instead of at cost or realizable value, whichever is iower which is not in compliance with the Accounting Standard 2 - Valuation of inventories prescribed in under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. As explained to us the process of possible utilization of slow / non-moving items of inventory will be undertaken upon - finalization of the product plan and the restructuring/revivaiplan and its implementation. Since the realizable value as on 31st March, 2016 has not been determined, we are unable to express any opinion as to the effect thereof on the standalone financial statement for the year

c) As mentioned in note 30 of standalone financial statements, the Company has become a Sick Industrial Company due to erosion of its net worth and it''s current liabilities have also exceeded its current assets by Rs. 70131.26 iakhs as at Balance Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company is in the process of restructuring/revivai of its business under the aegis of BIFR and had submitted the draft revival scheme and as directed by BiFR, the Company had also submitted the updated revival scheme, considering this the accounts have been prepared on a going concern basis. The Company''s ability to continue, as a going concern is dependent upon successful restructuring and revival of its business. In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Liabilities which are not ascertainable.

d) As mentioned in note no. 36 of standalone financial statements, regarding non compliance of requirements under Micro, Small and Medium Enterprises Development Act, 2006, in the absence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof if any, on the standalone financial statements for the year.

The consequential possible effects of sub Para (a), (b), (c) and (d) above on assets and liabilities as at 31st March, 2016 and loss for the year ended 31st March, 2016 are not ascertainable.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 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, 2016 and its loss and its cash flows for the year ended on that date.

6. Report on Other Legal and Regulatory Requirements

A. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act 2013, we give in the Annexure-A a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

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

(a) We have sought and except for the matters described in the Basis of Qualified Opinion paragraph 4 above, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) Except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

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

(d) Except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 above, in our opinion, the standalone Balance Sheet, standalone Statement of Profit and Loss, and standalone Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

(e) The matter described in the Basis for Qualified Opinion in paragraph 4 above, in our opinion, may have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from the directors as on March 31, 2016, and 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.

(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion in paragraph 4 above.

(h) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B"; and

(i) 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 - Refer Note 25 to the standalone financial statements.

ii. The Company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts - Refer Note 25 to the standalone financial statements.

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

[Referred to in above the Auditors'' Report of even date to the LML LIMITED on the Standalone Financial Statements for the year

ended 31st March 2016]

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situations of its Fixed Assets, however these records are in the process of updating.

(b) As per the information and explanations given to us, the Company has formulated a program of physical verification to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

(c) In our opinion and according to the information and explanation given to us, the title deeds of immovable properties are held in the name of the company.

2. As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the period. In our opinion, having regard to the nature and location of stocks, the frequency of physical verification is reasonable. In case of materials lying with other parties, they are subject to confirmations.

3. As per the information furnished, the Company has not granted any secured or unsecured loans to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Act.

In view of the above, provisions of clause 3(iii)(b) and (c) of the Order are not applicable.

4. In our opinion and according to the information and explanations given to us, the company has, in respect of loans, investments, guarantees, and security provisions, complied with section 185 and 186 of the Companies Act, 2013.

5. According to the information and explanation given to us, The Company has not accepted any deposits, whether the directives issued by the Reserve Bank of India, and the provisions of Section 73 to 76 or any other relevant provisions of the Companies Act, 2013. Hence the provisions of clause 3(v) are not applicable to the Company.

6. According to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013 for any products of the company.

7. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues including income tax, sales tax, employees state insurance, provident fund and other statutory dues applicable to it have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 31st March, 2016 for a period of more than six months from the date they became payable, are as under: -

SI.No.

Name of the Statute

Nature of Dues

Rs. In Lakhs

1)

Provident Fund

Employers Contribution

142.42

Employee Contribution

42.24

2)

Sales Tax

Sales Tax Dues

1065.47

3)

Employee State Insurance

Employer and Employees Contribution

23.47

4)

Income Tax Act

Income Tax Deducted at Source

90.81

Income Tax Collected at Source

1.29

Fringe Benefit Tax

178.00

(b) According to the records of the Company, the dues of Sales Tax/VAT, Income Tax, Excise Duty and Service Tax which has not been deposited on account of disputes and the forum where the dispute is pending, are as under:

Name of the Statute

Nature of the dues

Amount in Rs./lakhs

Period to which the amount relates

Forum where dispute is pending

The Central Excise Act 1944

Modvat credit, duty on off cuts or inputs, valuation, classification & cenvat

469.14

1989-90 to 2006-07

Commissioner Appeal, Tribunal (CESTAT), Supreme Court

Central Sales Tax Act , Local Sales Tax Act & Local Entry Tax Act

Non- submission of declaration forms, entry tax, penalty, interest, stock transfer and other issues

12823.48

1989-90 to 2007-08

Appellate Authority, Tribunal, High Court

Customs Act, 1962

(i) Duty

12.16

2001-02

Reassessment of amount, pending with Customs - Mumbai

(ii) Valuation & Concession

12.69

1986-87 & 1994-95

Assistant Commissioner

Income-Tax Act, 1961

Disputed Disallowances

2145.11

A.Y. 1997-98 to 2006-07

ITAT

Disputed Disallowances

1028.14

A.Y. 1995-96 to 1999 -2000

High Court

Disallowances/Penalty

222.29

A.Y. 2007 - 08 & 2010 - 11

CIT (A)

8. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28,2005. Based on our audit procedures and the information and explanations given to us, the Company is in default in respect to the payments to the Secured Lenders as given below.

Nature of the Dues

Period of Default

Amount (Rs in lakhs)

Principal

More than 12 months

10,308.81

Interest

More than 12 months

16,038.56

Interest

Jun-15

821.10

Interest

Sep-15

855.99

Interest

Dec-15

882.96

Interest

Mar-16

900.88

The Company is in Default in the payments of Interest to Foreign Currency Convertible Bonds holders:

Period of Default

Amount (Rs in lakhs)

More than 12 months

205.56

9. As per information given to us, no money was raised by way of initial public offer or further public offer (including debt instruments) and also no Term Loans taken during the year by the Company.

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

11. According to the information and explanation given to us and the books of accounts verified by us, the Managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with the Schedule V to the Companies Act. However, Company''s application for re-appointment and payment of remuneration of one of the Director is pending with Ministry of Corporate Affairs; refer note no. 37 of the standalone financial statement.

12. The Company is not a Nidhi Company, hence the provisions of clause 3(xii) are not applicable to the Company.

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

14. According to information and explanations given to us, the Company during the year, has not made any preferential allotment as private placement of shares or fully or partly convertible debentures, hence the provision of clause 3(xiv) are not applicable to the Company.

15. According to the information and explanation given to us and the books of accounts verified by us, the Company has not entered into any non-cash transaction with directors or persons connected with him.

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

ANNEXURE - B TO THE INDEPENDENT AUDITOR''S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF LML LIMITED AS ON 31st MARCH 2016. Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act. 2013 ("the Act") TO THE MEMBERS OF LML LIMITED

We have audited the internal financial controls over financial reporting of LML 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 control over Financial Reporting issued by the Institute of Chartered Accountants of India. 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.

Auditor''s 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 as specified 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 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 control 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 auditor''s 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 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, in reasonable detail, accurately and fairly refect 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 the generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; (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 Khandelwal Jain & Co. For PARIKH & JAIN

Chartered Accountants Chartered Accountants

Firm Regn. No. 105049W Firm Regn. No. 001105C

(Manish Singhal) (Anurag Jain) !

(Partner) (Partner)

ce: Gurgaon M. No. 502570 M. No. 076362

Date: 26th May, 2016


Mar 31, 2015

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

2. Management's Responsibility for the stand alone 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 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor's' Responsibility

Our responsibility is to express an opinion on these stand alone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing 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 standalone 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 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 on the standalone financial statements.

4. Basis of Qualified Opinion

a) As mentioned in note no. 26 of standalone financial statements, balances of some of the trade receivable/ payable, lenders and loans and advances being subject to confirmation/reconciliation and subsequent adjustments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statement for the year.

b) As mentioned in note no. 27 of standalone financial statements, the Company has valued the inventories except finished goods at cost instead of at cost or realizable value, whichever is lower which is not in compliance with the Accounting Standard 2 - Valuation of Inventories prescribed in under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. As explained to us the process of possible utilization of slow / non-moving items of inventory will be undertaken upon - finalization of the product plan and the restructuring/revival plan and its implementation. Since the realizable value as on 31st March, 2015 has not been determined, we are unable to express any opinion as to the effect thereof on the standalone financial statement for the year.

c) As mentionedin note 31 of standalone financial statements, the Company has become a Sick Industrial Company due to erosion of its net worth and it's current liabilities have also exceeded its current assets by Rs. 63269.13 lakhs as at Balance Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company is in the process of restructuring/revival of its business under the aegis of BIFR and has submitted the draft revival scheme and as directed by BIFR, the Company has also submitted the updated revival scheme, considering this the accounts have been prepared on a going concern basis. The Company's ability to continue, as a going concern is dependent upon successful restructuring and revival of its business. In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Liabilities which are not ascertainable.

d) As mentioned in note no. 38 of standalone financial statements, regarding non compliance of requirements under Micro, Small and Medium Enterprises Development Act, 2006, in the absence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof if any, on the standalone financial statements for the year.

The consequential possible effects of sub Para (a), (b), (c) and (d) above on assets and liabilities as at 31st March, 2015 and loss for the year ended 31st March, 2015 are not ascertainable.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 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 31st March, 2015 and its profit and its cash flows for the year ended on that date.

6. Report on Other Legal and Regulatory Requirements

A) As required by the Companies (Auditor's Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.

B) As required by Section 143 (3) of the Act, we report that:

(a) We have sought and, except for the matters described in the Basis of Qualified Opinion paragraph 4 above, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) Except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 above, In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

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

(d) Except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 above, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) The matter described in the Basis for Qualified Opinion in paragraph 4 above, in our opinion, may have an adverse effect on the functioning of the Company.

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

(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion in paragraph 4 above.

(h) 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 standalone financial statements - Refer Note 25 to the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses- Refer Note 25 to the financial statements;

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

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

Annexure referred to in paragraph 6A of the Independent Auditors' Report of even date to the Members of LML Limited on the standalone financial statements for the period ended 31 st March, 2015;

I. (a) The Company has maintained proper records showing full particulars including quantitative details and situations of its Fixed Assets, however these records are in the process of updation.

(b) As per the information and explanations given to us, the Company has formulated a programme of physical verification to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

II. (a) As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the period. In our opinion, having regard to the nature and location of stocks, the frequency of physical verification is reasonable. In case of materials lying with other parties, they are subject to confirmations.

(b) In our opinion, and according to the information and explanations given to us, procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. As explained to us, Company is in process of restructuring/revival of its business under the aegis of BIFR which, inter alia, includes finalization of the product plan and the restructuring/revival plan and its implementation. The process of possible utilization of slow/non-moving items of inventory will be undertaken inter-alia upon finalization of the product plan and restructuring/revival plan. The requisite accounting effect, if any, will be given upon such ascertainment / determination and approval of revival plan.

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

III. As per the information furnished, the Company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under Section 189 of the Companies Act, 2013. Accordingly, paragraphs 3(iii) (a) and (b) of the Order are not applicable.

IV. 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, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit no major weaknesses has been noticed in the internal controls.

V. The Company has not accepted any deposits within the meaning of the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under.

VI. According to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013 for the products of the company.

VII. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues

including, income tax, sales tax, employees state insurance, provident fund and other statutory dues applicable to it have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable, are as under: -

S.N Name of the Nature of Dues Rs. In Lakhs Statute

1) Provident Fund Employers Contribution 142.61

Employee Contribution 42.43

2) Sales Tax Sales Tax Dues 1065.47

3) Employee State Employer and Employees 23.47 Insurance Contribution 89.66 4) Income Tax Act Income Tax Deducted at Source 1.28 Income Tax Collected at Source 178.00 Fringe Benefit Tax

5) Professional Tax Professional Tax 0.63

(b) According to the records of the Company, the dues of Sales Tax/VAT, Income Tax, Excise Duty and Service Tax which has not been deposited on account of disputes and the forum where the disputes are pending, are as under:

Name of The Statute Nature of Due Amount Rs. in Lakhs)

The Central Excise Modvat credit, duty on off 469.14 Act 1944 cuts or inputs, valuation, classification & cenvat

Central Sales Tax Act, Non- submission of declaration 12909.08 Local Sales Tax Act & forms, entry tax, penalty, Local Entry interest, stock transfer and Tax Act other issues

Customs Act 1962 (i) Duty 12.16

(ii) Valuation & Concession 12.69



Income-Tax Act, 1961 Disputed Disallowances 2145.11

Disputed Disallowances 1028.14



Disallowances/Penalty 222.29

Name of The Statute Period Forum Where Pending

The Central Excise 1989-90 to Commissioner Appeal, Act 1944 2006-07 Tribunal (CESTAT), Supreme Court

Central Sales Tax Act, 1989-90 to Appellate Authority, Local Sales Tax Act & 2007-08 Tribunal, High Court Local Entry Tax Act

Customs Act 1962 2001-02 Reassessment of amount, pending with Customs - Mumbai

1986-87 & Assistant Commissioner 1994-95

Income-Tax Act, 1961 AY. 1997-98 ITAT to 2006-07

AY. 1995-96 High Court to 1999 - 2000

AY. 2007 - 08 & CIT (A) AY. 2010 - 11

(c) According to the information and explanations given to us and as certified by the management, there are no amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 2013 and rules made there under

VIII. The accumulated losses of the Company as at 31stMarch, 2015 are more than fifty percent of its net worth at the end of the financial year. The Company has incurred cash losses during the financial year and also in the immediately preceding financial year.

IX. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28, 2005. Based on our audit procedures and the information and explanations given to us, the Company is in default in respect to the payments to the Secured Lenders as given below.

Nature of the Period of Default Amount (Rs in lakhs) Dues

Principal More than 12 months 10,308.81

Interest More than 12 months 12,987.20

Interest Jun-14 726.01

Interest Sep-14 756.86

Interest Dec-14 780.70

Interest Mar-15 787.80

The Company is in Default in the payments of Interest to Foreign Currency Convertible Bonds holders:

Period of Default Amount (Rs in lakhs)

More than 12 months 194.17

X. Based on our examination of records and information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

XI. Based on our examination of the records and information and explanations given to us, no fresh term loan has been obtained by the Company during the year.

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

For Khandelwal Jain & Co. For PARIKH & JAIN Chartered Accountants Chartered Accountants Firm Regn. No. 105049W Firm Regn. No. 001105C

(Manish Singhal) (A. K. Jain) (Partner) (Partner) M. No. 502570 M. No. 071253

Place: Gurgaon Date: 29th May, 2015


Mar 31, 2014

1. Report on the Financial Statements:

We have audited the accompanying financial statements of LML Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and 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.

2. 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") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013 and other accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4. Basis of Qualified Opinion

a) As mentioned in note 26 of financial statements, the balances of some of the trade receivables, trade payables, lenders and loans and advances are subject to confirmation/reconciliation and subsequent adjustments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

b) As mentioned in note 27 of financial statements, the Company has valued the inventories except finished goods at cost instead of at cost or realizable value, whichever is lower which is not in compliance with the Accounting Standard 2 - Valuation of Inventories prescribed in the Companies( Accounting Standards) Rules, 2006. As explained to us the process of possible utilization of slow / non-moving items of inventory will be undertaken upon finalization of the product plan and the restructuring/revival plan. Since the realizable value as on 31st March, 2014 has not been determined, we are unable to express any opinion as to the effect thereof if any, on the financial statements for the year.

c) As mentioned in note 31 of financial statements, the Company has become a Sick Industrial Company due to erosion of its net worth and it''s current liabilities have also exceeded its current assets by Rs. 56404.55 lakhs as at Balance Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company is in the process of restructuring/revival of its business under the aegis of BIFR and has submitted the draft revival scheme and as directed by BIFR, the Company has also submitted the updated revival scheme, considering this the accounts have been prepared on a going concern basis. The Company''s ability to continue, as a going concern is dependent upon successful restructuring and revival of its business. In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Liabilities which are not ascertainable.

d) As mentioned in note no. 39 of financial statements, regarding non compliance of requirements under Micro, Small and Medium Enterprises Development Act, 2006, in the absence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof if any, on the financial statements for the year. The consequential effect of sub Para (a), (b), (c) and (d) above on assets and liabilities as at 31st March, 2014 and loss for the year ended 31st March, 2014 are not ascertainable.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matters described in the Basis of Qualified Opinion paragraph as mentioned above and read together with the other notes, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

(b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

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

6. Report on Other Legal and Regulatory Requirements

A. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

d. except for the matter described in the Basis for Qualified Opinion paragraph 4(b), in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956, read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013;

e. on the basis of written representations received from the Directors as on March 31, 2014, and taken on record by the Board of Directors, none of the Directors is disqualified as on March 31, 2014, from being appointed as a Director in terms of section 164(2) of the Companies Act 2013 (corresponding section 274(1)(g) of the Companies Act, 1956) to the extent applicable.

ANNEXURE TO THE AUDITORS''REPORT

Annexure referred to in paragraph 6(a) of the Auditors'' Report of even date to the Members of LML Limited on the accounts for the year ended 31st March, 2014;

I. (a) The Company has maintained proper records showing full particulars including quantitative details and situations of its Fixed Assets, however these records are in the process of updation.

( b) As per the information and explanations given to us, the Company has formulated a programme of physical verification to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

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

II. (a) The physical verification of inventories in Company''s custody was conducted by the management, wherever practicable, during or at the end of the year, in our opinion, is fairly reasonable. In case of materials lying with other parties, they are subject to confirmations.

(b) The procedure of physical verification of inventories followed by the management is, in our opinion, reasonable in relation to the size of the Company and the nature of its business. As explained to us, Company is in process of restructuring/revival of its business under the aegis of BIFR which, inter alia, includes finalization of the product plan and the restructuring/revival plan. The process of possible utilization of slow/non-moving items of inventory will be undertaken inter-alia upon finalization of the product plan and r estructuring/revival plan. The requisite accounting effect, if any, will be given upon such ascertainment / determination and approval of revival plan.

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

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

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

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

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

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

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

IX. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues including, income tax, sales tax, employees state insurance, provident fund and other statutory dues applicable to it have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 31st March, 2014 for a period of more than six months from the date they became payable, are as under:

S.N Name of the Statute Nature of Dues Rs. In Lakhs

1) Provident Fund Employers Contribution 142.71 Employee Contribution 42.34

2) Sales Tax Sales Tax Dues 1067.82

3) Employee State Insurance Employer and 23.47 Employees Contribution

4) Income Tax Act Income Tax Deducted at 92.71 Source

Income Tax Collected at 1.31 Source

Fringe Benefit Tax 333.95

5) Professional Tax Professional Tax 0.61

b) According to the records of the Company, the details of Statutory Dues, which have not been deposited on account of provisions of Clause 4(xiv) of disputes and the forum where the dispute is pending, are as under:

S.NO Name of The Statute Nature of Due Amount. (Rs. in Lakhs)

1 The Central Excise Modvat credit, 452.90 Act 1944 duty on off cuts or inputs, valuation, classification & cenvat

2 Central Sales Tax Act Non-submission of 12909.08 1956, Local Sales Tax declaration forms, Act & Local Entry Tax entry tax, penalty, Act interest, stock transfer and other issues

3 Customs Act 1962 (i) Duty 12.16

(ii) Valuation & 12.69 Concession

4 Income-Tax Act, 1961 Disalowances Disputed in 3949.98 ITAT

Disallowances Disputed in 375.24 High Court



S.NO Name of The Statute Period Forum Where Pending

1 The Central Excise 1989-90 to Commissioner Appeal, Act 1944 2006-07 Tribunal (CESTAT), Supreme Court 2 Central Sales Tax Act 1989-90 to Appellate Authority, 1956, Local Sales Tax 2007-08 Tribunal, High Court Act & Local Entry Tax Act

3 Customs Act 1962 2001-02 Reassessment of amount, pending with Customs-Mumbai

1986-87 & Assistant Commissioner 1994-95

4 Income-Tax Act, 1961 A.Y.1997-98 ITAT to 2006-07

A.Y.1995-96 High Court & 1996-97

X. The accumulated losses of the Company as at 31st March, 2014 are more than fifty percent of its net worth at the end of the financial year. The Company has incurred cash losses during the financial year and also in the immediately preceding financial year.

XI. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28, 2005. Based on our audit procedures and the information and explanations given to us, the Company is in default in respect to the payments to the Secured Lenders as given below.

Nature of the Dues Period of Default Amount (Rs in lakhs)

Principal More than 12 months 10308.81

Interest More than 12 months 10284.68

Interest Jun-13 643.17

Interest Sep-13 670.50

Interest Dec-13 691.63

Interest Mar-14 697.21

The Company is in Default in the payments of Interest to Foreign Currency Convertible Bonds holders:

Period of Default Amount (Rs in lakhs)

More than 12 months 186.33

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

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

XIV. In our opinion, and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause 4 (XIV) of the Companies (Auditors'' Report) Order, 2003 are not applicable to the Company.

XV. Based on our examination of records and information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

XVI. Based on our examination of the records and information and explanations given to us, no fresh term loan has been obtained by the Company during the year.

XVII. As per the information and explanations given to us and on an overall examination of the Balance Sheet of Company, we report that the Company, during the year has used funds by way of increase in current liabilities for long term assets (applications) to the extent of Rs. 135.85 lakhs (Refer Note 32 of the financial statement)

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

XIX. The Company has not issued any secured debentures during the year.

XX. The Company has not raised any money by public issue during the year ended March 31, 2014.

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



For Khandelwal Jain & Co. For PARIKH & JAIN Chartered Accountants Chartered Accountants Firm Regn. No. 105049W Firm Regn. No. 001105C

(Manish Singhal) (A. K. Jain) (Partner) (Partner) M.No. 502570 M.No. 071253

Place: Gurgaon Date : 24th May, 2014


Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying financial statements of LML Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and 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.

2. 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 presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor''s Responsibility

Our responsibility is to express an opinion on these financ- ial 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 audit opinion.

4. Basis of Qualified Opinion

a) As mentioned in note 25 of financial statements, the balances of some of the trade receivables, trade payables, lenders and loans and advances are subject to confirmation/ reconciliation and subsequent adjustments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

b) As mentioned in note 26 of financial statements, the Company has valued the inventories except finished goods at cost instead of at cost or realizable value, whichever is lower which is not in compliance with the Accounting Standard 2 - Valuation of Inventories prescribed in the Companies( Accounting Standards) Rules, 2006. As explained to us the process of possible utilization of slow I non-moving items of inventory will be undertaken upon finalization of the product plan and the restructuring/revival plan. Since the realizable value as on 31st March, 2013 has not been determined, we are unable to express any opinion as to the effect thereof if any, on the financial statements for the year.

c) As mentioned in note 30 of financial statements, the Company has become a Sick Industrial Company due to erosion of its net worth and it''s current liabilities have also exceeded its current assets by Rs. 50772.53 lakhs as af Balance Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company is in the process of restructuring/revival of its business under the aegis of BIFR and has submitted the draft revival scheme and as directed by BIFR, the Company is in process of submitting updated revival scheme, considering this the accounts have been prepared on a going concern basis. The Company''s ability to continue, as a going concern is dependent upon successful restructuring and revival of its business. In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Liabilities which are not ascertainable,

d) As mentioned in note no. 32 of financial statements, interest is provided on outstanding amount due to Banks /Financial Institutions (Secured Lenders) at the rate specified for the year amounting to Rs. 2383.18 lakhs as per Multi-partite Agreement (MPA) executed by the Company with the Secured Lenders. MPA provides different rates of interest for different periods as per schedule given therein with Yield to Maturity (YTM) rate of 6.5%. As compared to the YTM rate, there is an excess provision of interest of Rs. 35.30 - lakhs for the year which is equivalent to cumulative short provision in earlier years, whereby the loss for the year is higher by the said amount.

e) As mentioned in note no. 38 of financial statements, regarding non compliance of requirements under Micro, Small and Medium Enterprises Development Act, 2006, in the absence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof if any, on the financial statements for the year.

The consequential effect of sub Para (a), (b), (c) and (e) above on assets and liabilities as at 31si March, 2013 and loss for the year ended 31st March, 2013 are not ascertainable. Had the effect of above as stated in sub- para (d) have been given, the loss for the year would have been lower by Rs 35.30 lakhs.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matters described in the Basis of Qualified Opinion paragraph as mentioned above and read together with the other notes, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

(b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

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

6. Report on Other Legal and Regulatory Requirements

A. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

d. except for the matter described in the Basis for Qualified Opinion paragraph 4(b), in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the Directors as on March 31, 2013, and taken on record by the Board of Directors, none of the Directors is 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 Companies Act, 1956.

ANNEXURE TO THE AUDITORS''REPORT

Annexure referred to in paragraph 6(a) of the Auditors'' Report of even date to the Members of LML Limited on the accounts for the year ended 31st March, 2013;

I. (a) The Company has maintained proper records showing full particulars including quantitative details and situations of its Fixed Assets, however these records are in the process of updation.

(b) As per the information and explanations given to us, the Company has formulated a programme of physical verification to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

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

II. (a) The physical verification of inventories in Company''s custody was conducted by the management, wherever practicable, during or at the end of the year, in our opinion, is fairly reasonable. In case of materials lying with other parties, they are subject to confirmations.

(b) The procedure of physical verification of inventories followed by the management is, in our opinion, reasonable in relation to the size of the Company and the nature of its business. As explained to us, Company is in process of restructuring/revival of its business under the aegis of BIFR which, inter alia, includes finalization of the product plan. The process of possible utilization of slow/non- moving items of inventory will be undertaken inter-alia upon finalization of the product plan and restructuring/revival plan. The requisite accounting effect, if any, will be given upon such ascertainment / determination and approval of revival plan.

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

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

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

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

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

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

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

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

IX. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues including, income tax, sales tax, employees state insurance, provident fund and other statutory dues applicable to it have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 31st March, 2013 for a period of more than six months from the date they became payable, are as under: -

S. N Name of the Statute Nature of Dues Rs. In Lakhs

1) Provident Fund Employers Contribution 142.71

Employee Contribution 42.34

2) Sales Tax Sales Tax Dues 1072.73

3) Employee State Insurance Employer and Employees Contribution 23.47

4) Income Tax Act Income Tax Deducted at Source 153.20

Income Tax Collected at Source 1.23

Fringe Benefit Tax 312.59

5) Professional Tax Professional Tax 0.58

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

S. No. Name of The Statute Nature of Due Amount (Rs. in Lakhs)

1 The Central Excise Act 1944 Modvat credit, duty on off cuts or inputs, 414.00 valuation, classification & cenvat

2 Central Sales Tax Act 1956, Non-submission of declaration forms 12812.14 Local Sales Tax Act & Local entry tax, penalty, interest, stock Entry Tax Act transfer and other issues

3 Customs Act 1962 (i) Duty 12.16

(ii) Valuation & Concession 12.69

4 . Income-Tax Act, 1961 Disallowances Disputed in ITAT 3949.98

Disallowances Disputed in High Court 375.24



Name Period Forum Where Pending The Central Excise Act 1944 1989-90 to Commissioner Appeal, 2006-07 Tribunal (CESTAT), Supreme Court

Central Sales Tax Act 1956, 1989-90 to Appellate Authority, 2007-08 Tribunal, High Court

Customs Act 1962 (i) 2001-02 Reassessment of amount, pending with Customs - Mumbai 1986-87 & Assistant Commissioner 1994-95

Income-Tax Act, 1961 A.Y. 1997-98 ITAT to 2006-07_

Income-Tax Act, 1961 A.Y. 1995-96 High Court & 1996-97

X . The accumulated losses of the Company as at 31st March, 2013 are more than fifty percent of Its net worth at the end of the financial year. The Company has incurred cash losses during the financial year and also in the immediately preceding financial period.

XI. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28, 2005. Based on our audit procedures and the information and explanations given to us, the Company is in default in respect to the payments to the Secured Lenders as given below.

Nature of the Period of Default Amount Dues Involved (Rs)

Principal More than 12 months 863,650,441

Interest More than 12 months 790,150,501

Principal jun-12 42,921,639

Interest Jun-12 56,280,448

Principal Sep-12 42,921,639

Interest Sep-12 58,937,015

Principal Dec-12 42,921,639

Interest Pec-72 61,058,587

Principal Mar-13 42,923,215

Interest Mar-13 62,041,402

The Company is in Default in the payments of Interest to Foreign Currency Convertible Bonds holders:

Period of Default Amount Involved(Rs)

More than 12 months 16,864,879

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

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

XIV. In ouropinion, and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Companies (Auditors'' Report) Order, 2003 are not applicable to the Company.

XV Based on our examination of records and information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

XV|. Based on our examination of the records and information and explanations given to us, no fresh term loan has been obtained by the Company during the year.

XVII. As per the information and explanations given to us and on an overall examination of the Balance Sheet of Company, we report that the Company, during the year has used funds by way of increase in current liabilities for long term assets (applications) to the extent of Rs. 259.09 lakhs (Refer Note 31 of the financial statement).

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

XIX. The Company has not issued any secured debentures during the year.

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

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

For KHANDELWAL JAIN & CO. For PARIKH & JAIN

Chartered Accountants Chartered Accountants

Firm Regn. No. 105049W Firm Regn. No. 001105C

Akash Shinghal (A. K. Jain)

(Partner) (Partner)

M. No. 103490 M. No. 071253

Place: Gurgaon Date: 24th May, 2013


Mar 31, 2012

We have audited the attached Balance Sheet of M/s LML Limited (the Company) as at 31st March, 2012, the Statement of Profit and Loss and Cash Flow Statement of the Company for the year ended on that date , both annexed thereto, all of which we have signed under reference of this report. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. As mentioned in note 26 of financial statements, the balances of some of the sundry debtors, creditors, lenders and loans and advances are subject to confirmation/ reconciliation and subsequent adjust- ments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

b. As mentioned in note 27 of financial statements, the Company has valued the inventories except finished goods at cost instead of at cost or realizable value, whichever is lower which is not in compliance with the Accounting Standard 2 Valuation of Inventories prescribed in the Companiesf Accounting Standards) Rules, 2006. As explained to us the process of possible utilization of slow / non-moving items of inventory will be undertaken upon finalization of the product plan and the restructuring/revival plan. Since the realizable value as on 31st March, 2012 has not been determined, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

c. As mentioned in note 31 of financial statements, the Company has become a Sick Industrial Company due to erosion of its net worth and it's current liabilities have also exceeded its current assets by Rs. 45074.51 lakhs as at Balance Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company is in the process of restructuring/revival of its business under the aegis of BIFR and has already submitted the draft revival scheme, and considering this the accounts have been prepared on a going concern basis. The Company's ability to continue, as a going concern is dependent upon successful restructuring and revival of its business. In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Liabilities which are not ascertainable.

d. As mentioned in note no. 33 of financial statements, interest is provided on outstanding amount due to Banks / Financial Institutions (Secured Lenders) at the rate specified for the year amounting to Rs. 2077.25 lakhs as per Multi-partite Agreement (MPA) executed by the Company with the Secured Lenders. MPA provides different rates of interest for different periods as per schedule given therein with Yield to Maturity (YTM) rate of 6.5%. As compared to the YTM rate, there is an excess provision of interest of Rs. 90.04 lakhs for the year, whereby the loss for the year is higher by the said amount. Upto 31st March, 2012 there is cumulative short provision of Rs 35.30 lakhs on the basis of YTM and accumulated losses are lower by said amount.

e. As mentioned in note no. 39 of financial statements, regarding non compliance of requirements under Micro, Small and Medium Enterprises Development Act, 2006, in the absence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

The consequential effect of sub Para (a), (b), (c) and (e) above on assets and liabilities as at 31st March, 2012 and loss for the year ended 31st March. 2012 are not ascertainable. Had the effect of above as stated in subpara (d) have been given, the loss for the year would have been lower by Rs 90.04 lakhs, liabilities and debit balance in the statement of profit & loss would have been higher by Rs. 35.30 lakhs.

5. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

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

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

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards (AS) referred to in sub section (3C) of Section 211 of the Companies Act, 1956 except non compliance of AS 2 - Valuation of Inventories (Refer para 4(b) above).

e) 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 Director is prima-facie disqualified as on above date from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f) Subject to our remarks in para 4 above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes and significant account- ing policies thereon, give the information required by the Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

(iii) In the case of the 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 these records are in process of updation.

(b) As per the information and explanations given to us, the Company has formulated a programme of physical verification to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

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

2. (a) The physical verification of inventories in Company's custody was conducted only the management, wherever practicable, during or at the end of the year, in our opinion, is fairly reasonable. In case of materials lying with other parties, they are subject to confirmations.

(b) The procedure of physical verification of inventories followed by the management is, in our opinion, reasonable in relation to the size of the Company and the nature of its business. As explained to us, Company is in process of restructuring/revival of its business under the aegis of BIFR which, inter alia, includes finalization of the product plan. The process of possible utilization of slow/non-moving items of inventory will be undertaken inter-alia upon finalization of the product plan and restructuring/revival plan. The requisite accounting effect, if any, will be given upon such ascertainment / determination and approval of revival plan.

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

3. (a) As per the information furnished, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under section 301 of the Act. Accordingly, Clause 3 (b), (c) & (d) of the said order were not applicable.

(b) As per the information furnished, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, Clause 3 (f) and (g) of the said Order is not applicable.

4. In our opinion and according to information and explanations given to us, there are adequate internal control procedures which are fairly 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. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal controls.

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

6. The Company has not accepted or renewed any deposit during the year from the public within the meaning of the pro1, isions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956.

7. In our opinion and in accordance with the information and ex- planations provided by the management, the Company has an internal audit system which is fairly commensurate with the size of the company and nature of its business.

8. We have broadly reviewed the cost records maintained by the Company under section 209(1 )(d) of the Companies Act, 1956 for the year under review and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however not made a detail examination of the same.

9. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues including, income tax, sales tax, employees state insurance, provident fund, fringe benefit tax and other statutory dues applicable to it have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 31st March, 2012 fora period of more than six months from the date they became payable, are as under: -

S. No. Name of the Statute Nature of Dues Amount (Rs. In Lakhs)

1) Provident Fund Employers Contribution 142.71

Employee Contribution 42.34

2) Sales Tax 1072.73

3) Employee State Insurance 23.52

4) Income Tax Act Income Tax Deducted at Source 130.20

Income Tax Collected at Source 1.23

5) FBT FBT including interest 291.23

6) Professional Tax 0.57

(b) Details of statutory dues not deposited on account of dispute(s) are as under:

S. No. Name of the Statute Nature of Dues Amount Period Forum Where Pending (Rs.in Lakhs)

1 The Central Excise Act 1944 Modvat credit, duty on off cuts or inputs, 414.00 1989-90to Commissioner Appeal, valuation, classification & cenvat 2006-07 Tribunal (CESTAT), Supreme Court

2 Central Sales Tax Act 1956, Non-submission of declaration forms, 12812.14 1989-90to Appellate Authority, Local Sales Tax Act & Local entry tax, penalty, interest, stock transfer 2006-07 Tribunal, High Court Entry Tax Act and other issues

3 Customs Act 1962 (i) Duty 12.16 2001-02 Reassess ment of amount, pending with Customs - Mumbai

(ii) Valuation & Concession 12.69 1986-87 & Assistant Commissioner 1994-95

4 Income-Tax Act, 1961 Disallowances Disputed in ITAT 3415.15 A. Y. 1997-98 ITAT to 2000-01

Disallowances Disputed in High Court 218.24 A.Y. 1996-97 High Court

10. The accumulated losses qfi the Company as at 31st March, 2012 are more than fifty percent of its net worth at the end of the financial year. The Company has incurred cash losses during the financial year and also in the immediately preceding financial period,

11. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28, 2005. Based on our audit procedures and the information and explanations given to us, the Company is in default in respect to the payments to the Secured Lenders as given below.

Nature of the Period of Default Amount Dues Involved (Rs)

Principal More than 12 months 711,746,225

Interest More than 12 months 582,425,421

Principal Jun-11 42,921,639

Interest Jun-11 48,891,314

Principal Sep-11 42,921,639

Interest Sep-11 51,239,458

Principal Dec-11 42,921,639

Interest Dec-11 53,124,317

Principal Mar-12 42,921,639

Interest Mar-12 54,469,991

The Company is in Default in the payments of Interest to Foreign Currency Convertible Bonds holders:

Period of Default Amount Involved (Rs)

More than 12 months 16,587,091

12. Based on our examination of records and information and ex- planations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. As per the information and explanations given to us the provi- sions of any Special Statute applicable to Chit Fund do not apply to the Company. The Company is also not a nidhi/mutual benefit fund/society.

14. In our opinion, and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Companies (Auditors' Report) Order, 2003 are not applicable to the Company.

15. Based on our examination of records and information and expla- nations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

16. Based on our examination of the records and information and explanations given to us, no fresh term loan has been obtained by the Company during the year.

17. As per the information and explanations given to us and on an overall examination of the Balance Sheet of Company, we report that the Company, during the year has used funds by way of increase in current liabilities for long term investment (applications) to the extent of Rs. 297.19 lakhs (Refer Note 32 of the financial statement).

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

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by public issue during the year covered by our report.

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

For KHANDELWAL JAIN & CO. For PARIKH & JAIN

Chartered Accountants Chartered Accountants

Firm Regn. No. 105049W Firm Regn. No. 001105C

Akash Shinghal A. K. Jain

Partner Partner

(M. No. 103490) (M. No. 071253)

Place: Gurgaon

Date : 07th July, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of M/s LML Lim- ited (the Company) as at 31st March, 2011, the Profit and Loss account and Cash Flow Statement of the Company for the pe- riod ended on that date , both annexed thereto, all of which we have signed under reference of this report. These financial state- ments are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial state- ments based on our audit.

2. We have conducted our audit in accordance with auditing stan- dards 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 mis- statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting prin- ciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

4. Further to our comments in the Annexure referred to in para- graph 3 above, we report that:

a. As mentioned in note no.4 of Schedule 14, the balances of some of the sundry debtors, creditors, lenders and loans and advances are subject to confirmation/ reconciliation and subsequent adjustments, if any. As such, we are un- able to express any opinion as to the effect thereof on the financial statements for the period.

b. As mentioned stated in note no. 5 of Schedule 14, the Company has valued the inventories except finished goods at cost instead of at cost or realizable value, whichever is lower which is not in compliance with the Accounting Stan- dard 2 – Valuation of Inventories prescribed in the Com- panies( Accounting Standards) Rules, 2006. As explained to us the process of possible utilization of slow / non-mov- ing items of inventory will be undertaken upon - finaliza- tion of the product plan and the restructuring/revival plan. Since the realizable value as on 31st March, 2011 has not been determined, we are unable to express any opinion as to the effect thereof on the financial statements for the period.

c. As mentioned in note no. 9 of Schedule 14, the Company has become a Sick Industrial Company due to erosion of its net worth and it's current liabilities have also exceeded its current assets by Rs. 24676.63 lakhs as at Balance Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company is in the process of restructuring/revival of its business under the aegis of BIFR and has already submitted the draft re- vival scheme, considering this the accounts have been pre- pared on a going concern basis. The Company's ability to continue, as a going concern is dependent upon success- ful restructuring and revival of its business. In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Li- abilities which are not ascertainable.

d. As mentioned in note no.11 of Schedule 14, interest is pro- vided on outstanding amount due to Banks / Financial In- stitutions (Secured Lenders) at the rate specified for the period amounting to Rs. 2590.73 lakhs as per Multi-partite Agreement (MPA) executed by the Company with the Se- cured Lenders. MPA provides different rates of interest for different periods as per schedule given therein with Yield to maturity (YTM) rate of 6.5%. As compared to the YTM rate, there is an excess provision of interest of Rs. 239.20 lakhs for the period, whereby the loss for the period is higher by the said amount. Upto 31st March, 2011 there is cumulative short provision of Rs 125.34 lakhs on the basis of YTM and accumulated losses are lower by said amount.

e. As mentioned in note no. 17 of Schedule 14, regarding non compliance of requirements under Micro, Small and Medium Enterprises Development Act, 2006, in the ab- sence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the period.

The consequential effect of sub Para (a), (b), (c) and (e) above on assets and liabilities as at 31st March, 2011 and loss for the period ended 31st March, 2011 are not ascertainable. Had the effect of above as stated in sub- para (d) have been given, the loss for the period would have been lower by Rs 239.20 lakhs, assets and liabilities and debit balance in the profit & loss account would have been higher by Rs. 125.34 lakhs.

5. Further to our comments in the Annexure referred to in para- graph 3 above, we report that:

a) We have obtained all the information and explanations, which, to the best of our knowledge and belief were nec- essary for the purposes of our audit;

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

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

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards (AS) referred to in sub sec- tion (3C) of Section 211 of the Companies Act, 1956 ex- cept non compliance of AS 2 – Valuation of Inventories (Refer para 4(b) above).

e) On the basis of written representations received from the Directors, as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the Director is prima-facie disqualified as on above date from being appointed as a Director in terms of clause (g) of sub-sec- tion (1) of Section 274 of the Companies Act, 1956.

f) Subject to our remarks in para 4 above, in our opinion and to the best of our information and according to the expla- nations given to us, the said accounts read together with the notes and significant accounting policies thereon, give the information required by the Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally ac- cepted in India:

(i) In the case of the Balance Sheet, of the state of af- fairs of the Company as at 31st March, 2011;

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

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

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in Paragraph 3 of our Report of even date on the Accounts of LML Limited for the year ended 31st March, 2011).

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets, however these records are in process of updation.

(b) As per the information and explanations given to us, the Company has formulated a programme of physical verifi- cation to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the pe- riod and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

(c) During the period, the Company has not disposed off sub- stantial part of the fixed assets. However, at the period end the management has determined the impairment loss on certain fixed assets amounting to Rs. 435.37 lacs.

2. (a) The physical verification of inventories in Company's custody was conducted by the management, wherever practi- cable, during or at the end of the period, in our opinion, is fairly reasonable. In case of materials lying with other par- ties are subject to confirmations.

(b) The procedure of physical verification of inventories fol- lowed by the management is, in our opinion, reasonable in relation to the size of the Company and the nature of its business. As explained to us, Company is in process of restructuring/revival of its business under the aegis of BIFR which, inter alia, includes finalization of the product plan. The process of possible utilization of slow/non-moving items of inventory will be undertaken upon finalization of the product plan and restructuring/revival plan. The requi- site accounting effect, if any, will be given upon such as- certainment / determination and approval of revival plan.

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

3. (a) As per the information furnished, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained un- der section 301 of the Act. Accordingly, Clause 3 (b), (c) & (d) of the said order were not applicable.

(b) As per the information furnished, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accord- ingly, Clause 3 (f) and (g) of the said Order is not appli- cable.

4. In our opinion and according to information and explanations given to us, there are adequate internal control procedures which are fairly 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. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal controls.

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

6. The Company has not accepted or renewed any deposit during the period from the public within the meaning of the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956.

7. In our opinion and in accordance with the information and expla- nations provided by the management, the Company has an in- ternal audit system which is fairly commensurate with the size of the company and nature of its business.

8. We have broadly reviewed the cost records maintained by the Company under section 209(1)(d) of the Companies Act, 1956 for the period under review and are of the opinion that prima facie the prescribed accounts and records have been made and maintained for the two-wheeler unit. We have, however not made a detail examination of the same.

9. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues including, income tax, sales tax, employees state insur- ance, provident fund, fringe benefit tax and other statutory dues applicable to it have not been regularly deposited with the appropriate authorities and there have been de- lays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 31st March, 2011 for a period of more than six months from the date they became payable, are as under : -

Sl. Name of the Nature of Dues Amount No. Statute (Rs. in Lakhs)

1) Provident Fund Employer's Contribution 142.71

Employees' Contribution 42.34

2) Sales Tax 1072.73

3) Employees' State Insurance 23.52

4) Income Tax Act Income Tax Deducted 135.36 at Source Income Tax Collected 1.43 at Source

5) FBT FBT including interest 269.81

6) Professional Tax 0.59



(b) Details of statutory dues not deposited on account of dispute(s) are as under :

Sl. Name of the Nature of Dues Amount No. Statute (Rs.in Lakhs)

1 The Central Excise Modvat credit, Duty on off- 414.00 Act, 1944 cuts or Inputs, Valuation, Classification & Cenvat

2 Central Sales Non- submission of declara- 12221.72 Tax Act,1956, tion forms, Entry tax, Local Sales Tax Penalty,Act Interest, Act & Local Entry Stock transfer and Tax Other issues

3 Customs Act,1962 (i) Duty dispute 12.16 (ii) Valuation & Concession 12.69

4 Income-Tax Act, Disallowances disputed in 3470.16 1961 ITAT Disallowances disputed in 218.24 High Court

Name of the Statute Period Forum Where Pending

The Central Excise 1989-90 to Commissioner Appeal, Act, 1944 2006-07 Tribunal (Cestat), Supreme Court

Central Sales 1989-90 to Appellate Authority, Tax Act,1956 2006-07 Tribunal, High Court Local Sales Tax Act & Local Entry Tax

Customs Act,1962 2001-02 Supreme Court 1986-87 & Assistant 1994-95 Commissioner

Income-Tax Act, A.Y. 1997-98 ITAT 1961 to 2000-01 A.Y. 1996-97 High Court



10. The accumulated losses of the Company as at 31st March, 2011 are more than fifty percent of its net worth at the end of the finan- cial period. The Company has incurred cash losses during the financial period and also in the immediately preceding financial year.

11. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28, 2005. Based on our audit procedures and the information and expla- nations given to us, the Company is in default in respect to the payments to the Secured Lenders as given below.

Nature of the Period of Amount Dues Default Involved(Rs.)

Principal More than 454216391 18 months

Interest More than 323352425 18 months

Principal Dec-09 42921639

Interest Dec-09 39643217

Principal Mar-10 42921639

Interest Mar-10 40267873

Principal Jun-10 42921639

Interest Jun-10 42237743

Principal Sep-10 42921639

Interest Sep-10 44303137

Principal Dec-10 42921639

Interest Dec-10 45969455

Principal Mar-11 42921639

Interest Mar-11 46651571

The Company is also in Default in the payments of Interest to Foreign Currency Convertible Bonds holders :

Period of Default Amount Involved (Rs.)

More than 18 months 13969700

12. Based on our examination of records and information and ex- planations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. As per the information and explanations given to us the provi- sions of any Special Statute applicable to Chit Fund do not ap- ply to the Company. The Company is also not a nidhi/mutual benefit fund/society.

14. In our opinion, and according to the information and explana- tions given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accord- ingly, the provisions of Clause 4(xiv) of the Companies (Audi- tors' Report) Order, 2003 are not applicable to the Company.

15. Based on our examination of records and information and ex- planations given to us, the Company has not given any guaran- tee for loans taken by others from bank or financial institutions.

16. Based on our examination of the records and information and explanations given to us, no fresh term loan has been obtained by the Company during the period.

17. As per the information and explanations given to us and on an overall examination of the Balance Sheet of Company, we re- port that the Company has not used funds raised during the pe- riod on short-term basis for long term investment (application).

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

19. The Company has not issued any debentures during the period.

20. The Company has not raised any money by public issue during the period covered by our report.

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

For KHANDELWAL JAIN & CO. For PARIKH & JAIN Chartered Accountants Chartered Accountants Firm Regn. No. 105049W Firm Regn. No. 001105C AKASH SHINGHAL A K JAIN Partner Partner (M. No. 103490) (M. No. 071253)

Place : Gurgaon Dated : 27th May, 2011


Sep 30, 2009

1. We have audited the attached Balance Sheet of M/s LML Limited (the Company) as at 30th September 2009, the Profit and Loss account and Cash Flow Statement of the Company for the year ended on that date, both annexed thereto, all of which we have signed under reference of this report. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with auditing stan- dards 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 mis- statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting pnn- ciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

4 Further to our comments in the Annexure referred to in para- graph 3 above, we report that:

a. As stated in note no. 10 of Schedule 14, Esslon Synthet- ics Limited (ESLj is being wound up and an appeal is pend- ing in Honble Delhi High Court against confirmation of Order of injunction in respect of 2728706 shares of the Company held by the guarantor, Saraswati Trading Co Ltd.. Hence we are unable to express any opinion as to the toss, if any that might arise in respect of the sum of Rs.945 lakhs.

b. As stated in note no. 11 of Schedule 14, the Company has filed a suit in Honble Delhi High Court for recovery of a sum ofRs. 12 lakhs from Mr Sitaram Singhania The case has been transferred to the District Court and the matter is pending. Hence, we are unable to express any opinion as to the loss, if any, that might arise in respect of the sum of Rs. 12 lakhs.

c. As stated in note no. 12 of Schedule 14, the Company is pursuing for the recovery of its dues from VCCL Limited, whose net worth is negative and manufacturing operations continued to remain suspended. Pending fmatization of any concrete action for recovery ofCompanys dues from VCCL Ltd. we are unable to express any opinion as to the recov- erability of the amount and the extent of loss that might arise in respect of debts and advances aggregating to Rs 1516.52 lakhs.

A As stated in note no.4 of Schedule 14, regarding balances of some of the sundry debtors, creditors, lenders and loans and advances being subject to confirmation/reconciliation and subsequent adjustments, if any As such, we are un- able to express any opinion as to the effect thereof on the financial statements for the year

e. As stated in note no. 5 of Schedule 14, the Company has valued the inventories except finished goods at cost in- stead of at cost or realizable value, whichever is lower and non-ascertainment of slow/non-moving/obsolete items of inventories which are not in compliance with the Account- ing Standard 2 - Valuation of Inventories issued by the Institute of Chartered Accountants of India. As explained to us, the Company will ascertain possible utilization/real- ization of inventories uponfinalization and approval of re- vival plan under the aegis ofBIFR and since the realizable value as on 30th September, 2009 has not been deter- mined, we are unable to express any opinion as to the effect thereof on the financial statements for the year

f. As stated in note no 18 and 19 of Schedule 14, accounts have been prepared on a going concern basis as Com- pany is in the process of restructuring/revival of its busi- ness under the aegis ofBIFR. The Company has become a Sick Industrial Company due to erosion of its net worth. Further, the Companys Current Liabilities have also exceeded its Current Assets by Rs 20053.97 lakhs as at Balance Sheet date. These factors arise doubts about the ability of the Company to continue as a going concern. ¦ The Companys ability to continue, as a going concern is dependent upon successful restructuring and revival of its business In case the going concern concept is vitiated. necessary adjustments will be required on the carrying amount of Assets and Liabilities which are not ascertainable

g. As stated in note no 17 of Schedule 14. the Accounting Standard - 28 Impairment of Assets issued by The Insti- tute of Chartered Accountants of India, which has become applicable to the Company from 1st April 2005. The pro- cess of determining the impairment loss, if any, on its as- sets including capital work in progress will be undertaken upon Unalization and approval of its restructuring /revival plan under the aegis of B/FR. As the impairment loss if any, in terms ofAS-28 has not been determined, we are unable to express any opinion as to theeffect thereof on the financial statements for the year

h. As stated in note no. 14 of Schedule 14, interest is pro- vided on outstanding amount due to Banks I Financial In- stitutions (Secured Lenders) at the rate specified for the year amounting to Rs. 1113.95 lakhs as per Multi-partite Agreement (MPA) executed by the Company with the Se- cured Lenders. MPA provides different rates of interest for different periods as per schedule given therein with Yield to maturity (YTM) rate of 6.5%. As compared to the YTM rate, there is an excess provision.of interest of Rs. 193.93 lakhs for the year, whereby the loss for the year is higher by the said amount Upto 30th September 2009 there is cumulative short provision of Rs253.15 lakhs on the basis of YTM and accumulated losses are lower by said amount.

i. As stated in note ho. 22 of Schedule 14, regarding non compliance of requirements under Micro, Small and Me- dium Enterprises Development Act, 2006, in the absence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

The consequential effect of sub Para (a), (b), (c), (d), (e), (fj, (gj and (i) above on assets and liabilities as at 30th September 2009 and loss for the year ended 30th September 2009, are not ascertainable. Had the effect of above as stated in sub- para (h) have been given, the loss for the year would have been lower by Rs 193.93 lakhs, assets and liabilities and debit balance in the profit & loss account would have been higher by Rs. 253.15 lakhs.

5 Further to our comments in the Annexure referred to in para- , graph 3 above, we report that:

a) We have obtained all the information and explanations, which, to the best of our knowledge and belief were nec- essary for the purposes of our audit;

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

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

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards (AS) referred to in sub section (3C) of Section 211 of the Companies Act. 1956 except non compliance of AS 2 - Valuation of Inventories and AS 28 - Impairment of Assets (Refer para 4(e) and 4(g) above).

e) On the basis of written representations received from the Directors, as on 30th September, 2009 and taken on record by the Board of Directors, we report that none of the Director is primafacie disqualified as on above date from being appointed as a Director in terms of clause (g) of sub- section (1) of Section 274 of the Companies Act, 1956.

f) Subject to our remarks in para 4 above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes and significant accounting policies thereon, give the information required by the Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of af fairs of the Company as at 30th September, 2009,

(ii) In the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date, and

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

ANNEXURE TO THE AUDITORSREPORT

(Referred to in Paragraph 3 of our Report of even date on the Accounts of LML Limited for the year ended 30th September, 2009).

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets, however these records are in process of updation.

(b) As per the information and explanations given to us, the Company has formulated a programme of physical verifi- cation to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the year and no material discrepancies were noticed on such verifi- cation. In our opinion, the frequency of verification is rea- sonable, having regard to the size of the Company and nature of its business.

(c) During the year, the Company has not disposed off sub- stantial part of the fixed assets.

2. (a) The physical verification of inventories except work in pro cess, in Companys custody was conducted by the management, wherever practicable, during or at the end of the year, in our opinion, is fairly reasonable. Incase of materials lying with other parties are subject to confirmations.

(b) The procedure of physical verification of inventories followed by the management is, in our opinion, reasonable in relation to the size of the Company and the nature of its business. As explained to us, Company is in process of restructuring/revival of its business under the aegis OfBIFR which, inter alia, includes finalization of the product plan. The process of ascertainment of slow/non moving/obso- lete items of inventory and possible utilization I realization thereof will be undertaken upon finalization of the product plan and restructuring plan. The requsite accounting effect, if any, will be given upon such ascertainment I determination and approval of revival plan.

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

3. (a) As per the information furnished, the Company has not ¦ granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under section 301 of the Act. Accordingly, Clause 3 (b), (c) & (d) of the said order were not applicable.

(b) As per the information furnished, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, Clause 3 (f) and (g) of the said Order is not applicable.

4. In our opinion and according to information and explanations given to us, there are adequate internal control procedures which are fairly 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. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal controls.

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

6. The Company has not accepted or renewed any deposit during the year from the public within the meaning of the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956.

7. In our opinion and in accordance with the information and expla- nations provided by the management, the Company has an internal audit system which is fairly commensurate with the size of the company and nature of its business.

8. We have broadly reviewed the cost records maintained by the Company under section 209(1)(d), of the Companies Act, 1956 for the year under review and are of the opinion that prima facie the prescribed accounts and records have been made and main tained for the two-wheeler unit. We have, however npt made a detail examination of the same.

9. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues including, income tax, sales tax, employees state insurance, provident fund, fringe benefit tax and other statutory dues applicable to it have not been regularly deposited With the appropriate authorities and there have been delays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 30th September, 2009 for a period of more than six months torn the date they became payable, are as under: -

Sl. No. Name of the Statute Nature of Dues Amount (Rs. in Lakhs)

1) Provident Fund Employers Contribution 176.68 Employees Contibution 7163 2) Sales Tax 1156.95

3) Employees State Insurance 23.76

4) Income Tax Act Income Tax Deducted at Source 122.42

Income Tax Collected at Source 1.23

5) FBT FBTincluding interest 217.95

7) Professional Tax 0.34

TOTAL 1770.96

(b) Details of statutory dues not deposited on account of dispute(s) are as under:

Sl. Name of the Statute Nature of Dues Amount Period No (Rs.ln Lakhs)

1 Central Excise Act, 1944 Modvat credit, Duty on off- 414.00 1989-90 to cuts or Inputs, Valuation, 2006-07 Classification & Cenvat

2 Central Sales Tax Act, Non-submission of declara- 12395.94 1989-90 to 1956, Local Sales Tax Act tion form, Entry tax, Penalty, 2006-07 & Local Entry Tax Act Interest, Stock transfer and Other issues

3 Customs Act, 1962 (i) Duty dispute 12.16 2001-02

(ii) Valuation & Concession 12.69 1986-87 & 1994-95

4 Income-Tax Act, 1961 Disallowances disputed in 3445.59 A.Y. 1997-98 ITAT to 2000-01

Disallowances disputed in 218.24 A.Y. 1996-97 High Court



Name of the Statue Forum Where Pending

Central Excise Act, 1944 Commissioner Appeal, Tribunal (Cestat), Supreme Court

Central Sales Tax Act, 1956, Local Sales Tax Act & Local Entry Tax Act Appellate Authority, Tribunal, High Court

Customs Act, 1962 Supreme Court

Assistant Commissioner

Income-Tax Act, 1961 ITAT High Court

10. The accumulated tosses of the Company as at 30th September 2009 are more than fifty percent of its net worth at the end of the financial year The Company has incurred cash losses during the financial year and also in the immediately preceding finan- cial year.

11. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28,2005 Based on -our audit procedures and the information and expla- nations given to us, the Company is in default in respect to the payments to the Secured Lenders as given below.

Nature of the Period of Amount Dues Default lnvolved(Rs.)

Principal More than a year 282529835

Interest More than a year 184952730

Principal Dec-08 42921639

Interest Dec-08 37869787

Principal, Mar-09 42921639

Interest Mar-09 32005636

Principal Jun-09 42921639

Interest Jun-09 36354740

Principal Sep-09 42921639

Interest Sep-09 38170131

The Company is also in Default in the payments of Interest to Foreign Cunency Convertible Bonds holders:

Period of Default Amount Involved (Rs.)

More than a year 13060278

Mar-09 504033

12. Based on our examination of records and information and ex- planations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. As per the information and explanations given to us the provi- sions of any Special Statute applicable to Chit Fund do not ap ply to the Company The Company is also not a nidhj/mutual benefit fund/society.

14. In our opinion, and according to the information and explana- tions given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

15. Based on our examination of records and information and ex- planations given to us, the Company has not given any guaran tee for loans taken by others from bank or financial institutions.

16. Based on our examination of the records and information and explanations given to us, no fresh term loan has been obtained by the Company during the year.

17. As per the information and explanations given to us and on an overall examination of the Balance Sheet of Company, we re port that the Company has not used funds raised during the year on short-term basis for long term investment (application).

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

19. The Company has not issued any debentures during the period.

20. The Company has not raised any money by public issue during the year covered by our report.

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

For KHANDELWAL JAIN & CO. For PARIKH & JAIN Chartered Accountants Chartered Accountants

AKASH SHINGHAL ANURAQ JAIN

Partner Partner

(M. No. 103490) (M. No. 076362) Place : Gurgaon Dated : 30.12.2009

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