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Auditor Report of Mawana Sugars Ltd.

Dec 31, 2014

Report on the Financial Statements

We have audited the accompanying financial statements of MAWANA SUGARS LIMITED ("the Company"), which comprise the Balance Sheet as at December 31,2014, the Statement of Profit and Loss and the Cash Flow Statement for the fifteen months then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s 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 notified under the Companies Act, 1956 ("the Act") (which are deemed to be applicable as per Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014) and in accordance with the 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.

Auditors'' 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 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 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 Company''s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the 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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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:

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

(b) in the case of the Statement of Profit and Loss, of the loss of the Company for the fifteen months period ended on that date and

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

Emphasis of Matter

1. Attention is invited to note 1(B) of the financial statements regarding the Company being registered with Board for Industrial and Financial Reconstruction in September 2013 consequent to it becoming a "Sick Industrial Company" in terms of the provisions of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions), Act, 1985, as the Company''s net worth has been fully eroded and the Company has incurred cash losses during the current period and prior periods and its current liabilities are far in excess of current assets. However, the financial statements have been prepared by the Management of the Company on a going concern basis for the reasons stated in the said note.

2. Attention is invited to note 42 of the financial statements which sets out the position regarding remuneration paid in excess of remuneration approved by the Central Government to its chairman and managing director (ceased to be a director w.e.f from July 31,2014) for which a refund of Rs 7.04 million required in terms of Section 197(9) of the Companies Act, 2013 has not yet been obtained by the Company for the reason stated in the said note.

3. Attention is invited to note 38 of the financial statements. As stated in the note, remuneration paid to whole time director (ceased to be a director w.e.f close of business hours of December 31,2014) amounting to Rs 8.25 million is subject to the approval of the Central Government under the provisions of Companies Act, 2013.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order for the fifteen months period ended December 31,2014, to the extent the same are applicable to the Company.

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

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

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

c. The Balance Sheet, the Statement of Profit and Loss and the 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 comply with the Accounting Standards notified under the Act (which are deemed to be applicable as per Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014).

e. Since the provisions of Section 274(1) (g) of the Act are not in effect from April 1, 2014, the reporting requirement under Section 227(3) (f) of the Act is not applicable as of the balance sheet date.

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT (Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

Having regard to the nature of the Company''s business/activities/results during the period, clauses (xiii) and (xiv) of paragraph 4 of the Order are not applicable to the Company.

(i) In respect of its fixed assets:

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

(b) As explained to us, the Company has a program of verification of fixed assets to cover all the items in a phased manner over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the Management during the year. According to the information and explanations given to us no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company. However, refer to our comments under paragraph 1 of "Emphasis of Matter" section of our report of even date.

(ii) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

(iii) The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956 during the period the said section was applicable.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods. There is no sale of services during the year. During the course of our audit we have not observed any major weakness in such internal control system.

(v) In respect of contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered for the period the said Section was applicable.

(b) Where each of such transaction is in excess of Rs. 5 lakhs in respect of any party, the transactions have been made at prices which are, prima facie, reasonable having regard to the prevailing market prices at the relevant time.

(vi) During the period the provisions of sections 58A and 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the acceptance of deposits from the public were applicable, according to the information and explanation given to us, the Company has not accepted any deposits from the public during the period.

(vii) In our opinion, the internal audit functions carried out during the year by firms of Chartered Accountants appointed by the Management have been commensurate with the size of the Company and the 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, for the period the said Section was applicable. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) According to the information and explanations given to us in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at December 31,2014 for a period of more than six months from the date they became payable.

(b) There are no disputed dues of Wealth Tax, Cess and Customs Duty which have not been deposited on account of any dispute.

The details of dues of Sales Tax, Income-tax, Service Tax and Excise Duty which have not been deposited as at December 31,2014 on account of disputes are given below:

S. Name of the Nature Amount Amount Period to which No Statute No of involved Paid the amount dues (Rs. under relates Million) Protest (various (Rs. covering the Million) period)#

1 Sales Sales 6.36 - 2009-10 to 2013-14 Tax Laws tax 80.84 10.64 1976-77, 1977-78 , 1983-84 to 1996-97, 1998-99 to 2000-01, 2003-04, 2004-05, 2006-07 and 2011-12

2.53 - 1978-79 & 1979-80

2 Income Income 30.28 30.28 1994-95 and 1998-99 Tax Laws Tax

3 Central Excise 9.69 - 2007-08 to 2012-13 Excise Duty Laws 132.54 0.4 2005-06 to 2011-12 1.04 - 1999-2000to2002-03

125.69 0.68 1981-82 to 1984-85 1994-95 to 2001-02 2003-04, 2004-05 2012-13. 2013-14 and 2014-15 Service 0.19 - 2006-07 Customs Tax 7.54 0.02 2005-06 to 2009-10



S Name of the Statute Forum where No dispute is pending

1. Sales Tax Laws High Court Appellate Authority upto Commissioner''s level Tribunal

2 Income Tax Laws High Court

3 Central Excise Laws High Court

Customs Excise and Service Tax Appellate Tribunal (CESTAT) Supreme Court

Appellate Authority upto Commissioner''s level Customs Excise and Service Tax Appellate Tribunal (CESTAT) Appellate Authority upto Commissioner''s level

# Period in respect of income tax represents assessment year.

The following matters which have been excluded from the above table have been decided in favour of the Company but the department has preferred appeal at higher level:

S. Name of the Nature of dues Amount Period to which the Statute No involved amount relates # (Rs. Million)

1 Central Excise Excise Duty 0.21 1996-97 Laws

2 Income tax Laws Income tax 306.42 2001-02

S. Name of the Statute Forum where dispute is pending Customs Excise and Service Income tax Appellate Tribunal (CESTAT) Income Tax Appellate Tribunal (ITAT)

# Period in respect of income tax represents assessment year.

(x) The accumulated losses of the Company at the end of the financial year i.e December 31,2014 are not less than fifty percent of its net worth and the Company has incurred cash losses during the fifteen months period ended December 31, 2014 and the immediately preceding financial year ended September 30, 2013.

(xi) According to the records of the Company examined by us and the information and and explanations given to us, the Company, during the year, has not defaulted in repayment of dues to financial institutions and has not issued debentures.

During the year ended December 31, 2014, the Company has defaulted in repayment of following loans to banks:

Lender Amount Period of Delays (Rs. Million) up to December 31,2014 (in days)

Banks (including interest) 1376.46 0-518 days

(xii) As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, paragraph 4 (xii) of the Order, is not applicable.

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

(xiv) In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained.

(xv) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that short term funds of Rs. 5,681.49 million have been used for long term purposes.

(xvi) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956, during the period the said Section was applicable.

(xvii) As the Company has not issued any debentures during the year, paragraph 4 (xix) of the Order, is not applicable.

(xviii) As the Company has not raised any money by way of public issue during the year, paragraph 4(xx) of the Order, is not applicable.

(xix) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

For A.F. Ferguson & Co. Chartered Accountants (Firm Registration No. 112066 W)

Jaideep Bhargava 18th February, 2015 Partner New Delhi (Membership No. 090295)


Mar 31, 2011

1. We have audited the attached Balance Sheet of MAWANA SUGARS LIMITED ("the Company") as at March 31, 2011, the Profit and Loss Account and the Cash Flow Statement of the Company for the eighteen months ended on that date, both annexed thereto. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003 (CARO) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

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

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

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

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

(v) without qualifying our opinion, we draw attention to note 17 of schedule 11 relating to accounting for sugar cane purchase liability for the sugar season 2007-08 at Rs. 110 per quintal instead of State Advised Price of Rs. 125 per quintal fixed by the Uttar Pradesh State Government. Pending completion of legal proceedings in the matter, the effect thereof on these accounts cannot be determined at this stage;

(vi) various matters arisen/arising out of the reorganization arrangement of DCM Limited will be settled and accounted for as and when the liabilities/benefits are finally determined as stated in note 14 of schedule 11. The effect of these on the accounts has not been determined by the Company;

The matter referred to in paragraph (vi) above, to the extent covered here above, was also subject matter of qualification in our audit report on the financial statements for the year ended September 30,2009.

(vii) Subject to our comment in paragraph (vi) above and their consequential effect which could not be determined, on the loss for the eighteen months ended March 31, 2011 and year ended September 30,2009 and on the debit balance in profit and loss account as at March 31, 2011 and as at September 30, 2009, in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2011;

b. in the case of the Profit and Loss Account, of the loss of the Company for the eighteen months period ended on that date and

c. in the case of the Cash Flow Statement, of the cash flows of the Company for the eighteen months period ended on that date.

5. On the basis of the written representations received from the Directors as on March 31,2011 taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31,2011 from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS' REPORT (Referred to in paragraph '3' of our report of even date)

Having regard to the nature of the Company's business/activities/result, clauses (xiii) and (xiv) of Companies (Auditor's Report) Order, 2003 (hereinafter referred to as the Order) are not applicable.

(i) In respect of its fixed assets:

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

(b) The fixed assets were physically verified during the period by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the period, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

(ii) In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the period by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

(iii) According to the information and explanations given to us the Company has during the period neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

(v) According to the information and explanations given to us and having regard to the view taken by the Company that the transactions, which are subjected to the provisions of sub-section (6) of section 299 of the Companies Act, 1956 ("the Act"), are not required to be entered in the register maintained in pursuance of section 301 of the Act, there were no transactions during the period that were required to be entered in this register. Notwithstanding the Company's view regarding the provisions of sub-section (6) of section 299 of the Act in respect of certain transactions, exceeding the value of Rs. 5 lakhs entered into during the period with parties listed under the provisions of sub- section (3) of section 301 of the Act, these have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from the public during the year.

(vii) In our opinion, the internal audit functions carried out during the period by the firms of Chartered Accountants appointed by the Management has been commensurate with the size of the Company and the nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribed under section 209(1) (d) of the Companies Act, 1956 and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete.

(ix) According to the information and explanations given to us in respect of statutory dues:

(a) The Company has been regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income- tax, sales tax, wealth tax, customs duty, excise duty, cess and other material statutory dues applicable to it and has generally been regular in depositing undisputed statutory dues including tax deducted at source with the appropriate authorities. We are informed that there are no undisputed statutory dues as at the end outstanding for a period of more than six months from the date they became payable.

(b) There are no disputed dues of wealth tax, cess and customs duty which have not been deposited on account of any dispute.

The details of dues of sales tax, income-tax, service tax and excise duty which have not been deposited as at March 31,2011 on account of disputes are given below:

Name of Nature of Amount Amount the Statute dues involved paid under (Rs.Million) protest (Rs.Million)

Sales Tax Sales tax 5.27 2.03 Laws

3.03 0.34

186.81 20.11

Income Tax Income Tax 0.85 0.55 Laws 0.86 0.74 509.72 -

Central Excise Duty 0.10 - Excise 61.24 - Laws 68.96 40.13

Service Tax 0.05 0.02 0.23 -



Name of Nature of Period to which Forum where dispute the Statute dues the amount rel is pending ates (various years covering Sales Tax Sales tax 1986-87, 1989-90 High Court Laws 1978-79,1979-80, Sales Tax Tribunal 1987-88

1976-77, 1977-78, Appellate Authority upto 1983-84 to Commissioner's level 1996-97,1998-99 (0200-01, 2003- 04, 2004-05, 2006-07 and 2009 -10 Income Tax Income Tax 1994-95 High Court 2001-02 Income-tax Appellate Laws 1998-99,2001-02, Tribunal Appellate 2008-09,2009-10 Authority upto Commissioner's level

Central Excise Duty 1999-2000 to High Court Excise 2003-03 Laws 2000-01,2005-06 Customs Excise and to 2008-09 Service Tax Appellate Tribunal (CESTAT) Appellate Authority upto Commissioner's level Service Tax 2005-06,2006-07 Customs Excise and Service Tax Appellate Tribunal (CESTAT 2006-07 and 2008-09 Appellate Authority upto Commissioner's level # Period in respect of income tax represents assessment year.

The following matters which have been excluded from the above table have been decided in favour of the Company but the department has preferred appeal at higher level:

S. Name of Nature of Amount Period to which the amount No the Statute dues involved relates (Rs. Million)

1 Sales Tax Sales tax 3.13 2001-02 Laws

2 Income Tax Income Tax 0.55 2005-06 and 2006-07 Laws (Tax Collec ted at Source)

3 Central Excise Duty 69.13 1992-93 to 1997-98 Excise Laws 0.21 1996-97

S. Name of Forum where dispute is No the Statute pending

1 Sales Tax Supreme Court Laws

2 Income Tax High Court Laws

3 Central High Court Excise Laws Customs Excise and Service Tax Appellate Tribunal (CESTAT)

(x) According to the information and explanations given to us, without considering the items mentioned in paragraph 4(b) of our main report, the effect of which has not been determined and after considering the Capital Reserve of Rs. 991.46 million as part of free reserves for the purposes of computing net worth basis a legal opinion obtained by the Company in this regard (refer note 23 of schedule 11), the accumulated losses of the Company at the end of the financial period i.e. March 31,2011 are less than

fifty percent of its net worth. The Company has not incurred cash losses in the financial period ended March 31, 2011 and had incurred cash losses in the immediately preceding financial year ended September 30, 2009.

(xi) According to the records of the Company examined by us and the information and explanations given to us, the Company, during the year, has not defaulted in repayment of dues to financial institutions and has not issued debentures.

The Company has defaulted in repayment of dues to banks during the period and Rs. 31.04 million remains unpaid as at March 31,2011, which has been repaid subsequent to the period end:

(Rs. in million) Lender Amount Period of delay (in days)

Banks 29.17 1 - 30 3.28 31 - 60 135.86 61 - 90

(xii) As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, paragraph 4 (xii) of the Order is not applicable.

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

(xiv) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

(xv) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that short term funds of Rs. 755.60 million have been used to finance operating losses.

(xvi) As the Company has not made any preferential allotment of shares during the period, paragraph 4(xviii) of the Order is not applicable.

(xvii) As the Company has not issued any debentures during the period, paragraph 4 (xix) of the Order is not applicable.

(xviii) As the Company has not raised any money by way of public issue during the period, paragraph 4(xx) of the Order, is not applicable.

(xix) To the best of our knowledge and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the period.

For A.F. FERGUSON & CO. Chartered Accountants (Registration No. 112066 W)

MANJULA BANERJI Partner Membership No. 086423

Place: New Delhi Date :30th May, 2011


Sep 30, 2009

1. We have audited the attached balance sheet of Mawana Sugars Limited as at September 30, 2009 and also the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. 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, profit and 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 referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) on the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on September 30, 2009 from being appointed as a director in

terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

f) without qualifying our opinion, we draw attention to note 19 of schedule 12 relating to accounting for sugar cane purchase liability for the sugar season 2007-08 at Rs. 110 per quintal instead of State Advised Price of Rs. 125 per quintal fixed by the Uttar Pradesh State Government. Pending completion of legal proceedings in the matter, the effect thereof on these accounts cannot be determined at this stage.

g) various matters arisen/arising out of the reorganization arrangement of DCM Limited wili be settled and accounted for as and when the liabilities/benefits are finally determined as stated in note 14. The effect of these on the accounts has not been determined by the Company.

The matter referred to in paragraph (g) above, to the extent covered here above, was also subject matter of qualification in our audit report on the financial statements for the eighteen months ended September 30,2008.

Subject to our comment in paragraph (g) above and their consequential effect which could not be determined, on the loss for the year ended September 30, 2009 and eighteen months ended September 30,2008 and on the debit balance in profit and loss account as at September 30,2009 and as at September 30, 2008, in our opinion and to the best of our information and according to explanations given to us, said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as at September 30,2009;

(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 REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS REPORT TO THE MEMBERS OF MAWANA SUGARS LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED SEPTEMBER 30, 2009

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

(b) As explained to us, the Company has a programme of physically verifying all its fixed assets once in a period of three years, and in accordance therewith, fixed assets were physically verified by the management during the current year. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its fixed assets. The discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year.

ii) (a) During the year, the inventories have been physically verified by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

iii) According to the information and explanations given to us, the Company has, during the year, not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4 (iii) (b), (c) and (d) of the Order are not applicable.

According to the information and explanations given to us, the Company has, during the year, not taken any loan, secured or unsecured from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4 (iii) (f) and (g) 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 with regard to purchases of inventories and fixed assets and with regard to the sale of goods. There are no sale of services during the year. Further, on the basis of our examination and according to the information and explanations given to us, we

have neither come across nor have been informed of any instance of major weaknesses in the aforesaid internal control procedures.

v) According to the information and explanations given to us and having regard to the view taken by the Company that the transactions, which are subjected to the provisions of sub- section 6 of section 299 of the Companies Act, 1956 (the Act), are not required to be entered in the register maintained in pursuance of Section 301 of the Act, there were no transactions during the year that were required to be entered in this register. Notwithstanding the Companys view regarding the provisions of sub-section 6 of section 299 of the Act in respect of certain transactions, exceeding the value of Rs. 5 lacs entered into during the year with parties listed under the provisions of sub-section 3 of Section 301 of the Act, these have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

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

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

viii) We have broadly reviewed the books of account maintained by the Company in respect of products where pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribed under section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the 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 of the Company examined by us, the Company has been regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income- tax, sales tax, wealth tax, customs duty, excise duty, cess and other material statutory dues applicable to it and has generally been regular in depositing undisputed statutory dues including tax deducted at source with the appropriate authorities. We are informed that there are no undisputed statutory dues as at the year end outstanding for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no disputed dues of wealth tax, cess and customs duty which have not been deposited on account of any dispute!

The details of dues of sales tax, income-tax, service tax and excise duty as at September 30, 2009 which have not been deposited on account of disputes are as follows: -

S. Name of Nature of Amount Amount No the Statute dues involved paid under (Rs.Million) protest (Rs.Million)

1. Sales Tax Laws Sales tax 5.27 2.03

3.03 0.34

194.21 20.57

2 Income Tax Laws Income Tax 0.85 0.55 0.86 0.74

3 Central Excise Excise Duty 19.37 Laws

87.58 40.31

Service Tax 0.53



Central Excise Laws

Name of the Stalute Period to which the amount Forum where dispute relates (various years covering is pending the period)#

Sales Tax Laws 1986-87,1989-90 High Court 1978-79,1979-80, 1987-88 Sales Tax Tribunal and 1994-95

1976-77,1977-78 ,1983-84 to Appellate Authority upto 2000-01, 2003-04, 2004-05, Commissioners level

2006-07 and 2009-10

Income Tax Laws 1994-95 High Court 2001 -02 Income-tax Appellate Tribunal

Central Excise Laws 1998-99, 2000-01, 2005-06 Customs Excise and Service and 2007-08 Tax Appellate Tribunal ( CESTAT) 1981-82 to 1984-85,1990-91 to Appellate Authority upto 1992-93,1994-95 to 1998-99, Commissioners level 2000-01,2001-02, and 2005-06, to 2008-09 2003-04, 2004-05 to 2006-07 Appellate Authority upto and 2008-09 Commissioners level

# Period in respect of income tax represents assessment year.

The following matters which have been excluded from the above table have been decided in favour of the Company but the department has preferred appeal at higher level:

S. Name of Nature of Amount Period to which the amount No the Statute dues involved relates (Rs. Million)

1. Sales Tax Laws Sales tax 3.13 2000-01

2.59 2004-05

2 Income Tax Laws Income Tax 0.55 2005-06 and 2006-07 (Tax Collected at Source)

3 Central Excise Duty 69.13 1992-93 to 1997-98 Excise Laws 0.78 1996-97 and 2000-01 to 2002-03



Name of the Statute Forum where dispute is pending

Sales Tax Laws Supreme Court High Court

Income Tax Laws High Court

Central Excise Laws High Court Customs Excise and Service Tax Appellate Tribunal (CESTAT)

x) According to the information and explanations given to us, without considering the items mentioned in paragraph 4(g) of our main report, the effect of which has not been determined, the Companys accumulated losses at the year end i.e. September 30,2009, are less than fifty percent of its net worth. However, the Company has incurred cash losses during the year ended September 30, 2009 and in the immediately preceding financial period ended September 30, 2008.

xi) According to the records of the Company examined by us and the information and explanations given to us, the Company, during the year, has not defaulted in repayment of dues to financial institutions and banks. The Company has not issued debentures during the year.

xii) As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, paragraph 4(xii) of the Order is not applicable.

xiii) As the Company is not a chit fund or nidhi/mutual benefits funds/ society, paragraph 4(xiii) of the Order are not applicable to the Company.

xiv) As the Company is not dealing or trading in shares, securities, debentures and other investments, paragraph 4(xiv) of the Order is not applicable.

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

xvi) In our opinion and according to the information and explanations given to us, the term loans taken during the year have been applied for the purpose for which they were obtained.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that during the year short term funds have not been used to finance long term investments.

xviii) During the year, the Company has issued 43,83,561 equity shares on a preferential basis to a party covered in the register maintained under Section 301 of the Act. In our opinion and as per the information and explanations given to us the price at which the equity shares have been issued are not prejudicial to the interest of the Company.

xix) During the year, since the Company has not issued any debentures, paragraph 4(xix) of the Order is not applicable.

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

xxi) Based upon the audit procedures performed and information and explanations given by the management, we report that, no fraud on or by the Company has been noticed or reported during the course of our audit for the year ended September 30,2009.

For A.F. FERGUSON & CO.

Chartered Accountants

MANJULA BANERJI Place : New Delhi Partner

Date : 23.12.2009 Membership No. 086423

 
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