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Auditor Report of Mukta Arts Ltd.

Mar 31, 2016

Independent Auditors’ Report

To the Members of

MUKTA ARTS LIMITED Mumbai

Report on the Financial Statements

We have audited the accompanying standalone financial statements of MUKTA ARTS LIMITED (“the Company”), which comprise the Balance Sheet as at March 31, 2016, 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.

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

Auditor’s Responsibility

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

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

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

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. 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 opinion on the standalone financial statements.

Basis of Qualified Opinion

As explained in Note 3.40 to the accompanying Statement of Audited financial results, remuneration paid to the erstwhile managing director (including as film director fees) for earlier financial years from 2005-06 to 2014-15 (total remuneration paid aggregates to Rs.13,19,06,897/-) is in excess of the limits prescribed under Schedule XIII to the Companies Act, 1956. During the year 2011-12, the Company had received approval for part of excess remuneration paid (approval received for remuneration aggregating to Rs. 2,52,00,000/- for the financial years 2005-06, 2006-07, 2007-08) and made applications to the authorities requesting consideration/approval for the balance excess remuneration and for recognition of the erstwhile managing director as professionally qualified person under the Companies Act, 1956. Through its various communications, the Ministry of Corporate Affairs has directed the Company to recover the excess remuneration paid during the financial years 2008-09 to 2011-12. The company has requested the authorities to reconsider their Orders in respect of the above and also for his recognition as a professionally qualified person under this Act. Pending conclusion of this matter, no adjustment has been made in these standalone financial results.

As at March 31, 2016, the company’s investment in its subsidiary, Whistling woods International Limited (WWIL) a joint venture between the company and Maharashtra Film, Stage and Cultural Development Corporation Limited (MFSCDCL), aggregates to Rs.36,99,97,000/- and loans and advances, Accrued interest and deposits include Rs.28,74,78,014/-recoverable from WWIL. As fully explained in Note 3.41 to the accompanying Audited financial statements, the Order of February 9, 2012 passed by the High Court of judicature at Bombay (“High Court’), had quashed the joint Venture Agreement (‘JVA’) between the company and Maharashtra Film Stage Cultural Development Corporation (‘MFSCDCL’). Maharashtra Film Stage and Cultural Development Corporation (‘MFSCDC’) raised net demand of Rs. 59,19,66,210/- and asked WWIL to vacate the premises. WWIL’s petition for special leave to appeal filed with the Supreme Court of India had also been dismissed. The Company and WWIL had filed application to review the said order with the High Court and an Interim stay was granted on July 30, 2014 which required deposit of Rs.10,00,38,000/- by January 2015 against payment of arrears of rent for the year 2000-01 to 2013-14 and payment of Rs.45,00,000/- per annum from Financial Year 2014-15 till the settlement of the case, to MFSCDCL. As per the terms of the said Order, the Company paid Rs. 10,90,38,000/- by March 31, 2016. The State Govt. of Maharashtra and MFSCDCL challenged the order of the High Court in the Supreme Court which was dismissed by the Supreme Court on September 22, 2014. The amount so paid/being paid by the Company have been treated as Deposit in the standalone financial statements to be adjusted on the settlement of the case.

Further, WWIL’s net worth stands fully eroded as at March 31, 2016. Having regard to the circumstances explained above and pending final outcome of the matter under litigation, the Company has not made any adjustment to the carrying value of investment in and amounts due from WWIL and the deposit paid consequent to the High Court’s Orders. Accordingly the impact on the carrying value of investments, recoverability of loans and advances and consequential impact on loss for the year and reserves is not determinable.

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 matters described in the Basis of Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India,

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2016;

b. in the case of the Profit and Loss Account, 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.

Report on Other Legal and Regulatory Requirements

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.

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

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the 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 aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the Internal Financial Controls over Financial Reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure B, and

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements -Refer Notes No. 3.35 and 3.41 to the standalone financial statements.

ii. The Company does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses - Refer Note No. 3.45 to the standalone financial statements.

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

Annexure A referred to in Report on Other Legal and Regulatory Requirements Paragraph of Independent Auditor''s report of even date to the members of Mukta Arts Limited on the accounts for the year ended March 31, 2016

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of Fixed assets except that tagging of certain fixed assets is yet to be completed.

(b) As explained by the Management, fixed assets have been physically verified by the management at regular intervals, which in our opinion is reasonable having regard to the size of the company and nature of its business. In our opinion, there were no material discrepancies between book records and physical fixed assets that were noticed during the period.

(c) According to the information and explanation given to us and on the basis of our examination of the records of the company, the title deeds of immovable properties are held in the name of the company, except the following:

Number of Cases

Gross Block (as at March 31, 2016)

Net Block (as at March 31, 2016)

Remarks

1

75,00,000/-

71,09,329/-

Agreement yet to be registered.

ii) As explained by the Management, physical verification of Inventory of Food and Beverages has been conducted at reasonable intervals by the management. The company is maintaining proper records of inventory and no material discrepancies were noticed on such verification.

iii) Based on the audit procedures applied by us and according to the information and explanations given to us, the company has not granted any loans secured or unsecured to the firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause

(iii) (a), (b) and (c) of Para 3 of the Order are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, the Company has not granted any new loans or made any investments, or provided any guarantee or security to the parties covered under Section 185 and 186 of the Companies Act, 2013, except for following loans to below mentioned parties, which were given prior to Section 185 coming into effect. As per the information and explanations provided by the management, the Company is in the process of recovering the outstanding balances:

Sr.

No.

Name of Party

Amount Involved (Rs.)

Balance outstanding as at Balance Sheet Date

Rate of Interest

1.

Mukta Telemedia Limited

1,24,05,000/-

1,24,05,000/-

NIL

2.

Whistling Woods International Limited

32,70,00,000/-

23,29,00,000/-

10%

v) In our opinion and according to the information and explanation given to us the Company has not accepted any deposit from public within the provision of section 73 to 76 and other relevant provisions of the Companies Act, 2013 and the rules framed there under.

vi) As informed to us by management, 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 of the food and beverage item sold/services rendered by the company.

vii) (a) According to information and explanations given to us and on the basis of our examination of the books of account, and records, the Company has been generally regular in depositing undisputed statutory dues including Sales tax, Service Tax, Value added Tax, Cess and any other statutory dues with the appropriate authorities except that there have been few delays in depositing Provident Fund and Employees'' State Insurance and significant delays in depositing dues pertaining to Income Tax. As explained to us, the company did not have any dues on account of Custom Duty, Excise Duty.

According to the information and explanations given to us, the following undisputed statutory dues are outstanding as on March 31, 2016 for a period of more than six months from the date they became payable.

Name of the statute

Nature of dues

Amount (Rs.)

Period to which it relates

Due Date

The Income Tax Act 1961

Tax Deducted at Source

51,14,838/-

July 2015 to August 2015

August 2015 to September 2015

Except for the above, there are no undisputed statutory dues payable in respect of Provident Fund, Employees'' State Insurance, Income Tax, Value Added Tax, Sales Tax and other material statutory dues, which were in arrears as on March 31, 2016 for a period of more than 6 months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues payable in respect of wealth tax, sales tax, Vale Added Tax, customs duty and excise duty which have not been deposited on account of any disputes. The following dues of Service Tax & Income Tax have not been deposited by the company on account of dispute:

Name of the statute

Nature of dues

Amount

(Rs.)

Period to which the amount relates

Forum where the dispute is pending

Chapter V of the Finance Act, 1994

Service Tax

8,75,000/-*

November 1996 -November 2001

Customs, Excise & Service Tax Appelate Tribunal

Income Tax Act, 1961

Income Tax

88,08,700/-

Asst year 2013-14

Commissioner of Income Tax (Appeals)

15,08,440/-

Asst year 2012-13

82,97,120/-

Asst year 2010-11

Income Tax Appellate Tribunal

8,30,118/-

Asst year 2009-10

* Excludes Amount deposited under protest Rs. 8,00,000/-

viii) On the basis of verification of records and according to the information and explanations given to us and based on the records made available to us, the Company has not defaulted in repayment of any loans from Financial Institutions or from the Bank and has not issued Debentures.

ix) On the basis of verification of records and according to the information and explanations given to us and based on the records made available to us, the company has utilized the money raised by way of Term loan for the purpose for which they were raised. The Company did not raise any moneys by way of public issue/ follow-on offer including debt instruments.

x) Based upon the audit procedures performed and the information and explanations given to us, we report that no fraud by the Company or any fraud on the company by its officers or employees has been noticed or reported during the year.

xi) According to the information and explanations given to us and based on the examinations of the records of the company, the managerial remuneration has been paid/ provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

xii) The company is not a Nidhi Company. Accordingly, the provisions of clause (xii) of Para 3 of the order are not applicable to the company.

xiii) According to the information and explanations given to us, all transactions with the related parties are in compliance with Section 188 and 177 of Companies Act, 2013 and the details of such transactions have been disclosed in the Financial Statements as required by the accounting standards and Companies Act, 2013.

xiv) On the basis of verification of records and according to the information and explanations given to us and based on the records made available to us, the company has not made any preferential allotment / private placement of shares or fully or partly convertible debentures during the year under review.

xv) In our opinion and according to the information and explanations given to us, the company has not entered into noncash transactions with directors or persons connected with him.

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

For Uttam Abuwala & Co.

Chartered Accountants

Firm No. 111184W

CA. Urmish P. Mehta

(Partner)

Membership No. 137150

Date: May 26, 2016

Place: Mumbai


Mar 31, 2015

We have audited the accompanying standalone financial statements of Mukta Arts Limited ('the Company'), which comprise the Balance sheet as at 31 March 2015, the Statement of profit and loss and the Cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the standalone financial statements

The Company's Board of Directors 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

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

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made 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 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 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.

Basis of Qualified Opinion

(i) As explained in Note 3.40 to the standalone financial statements, remuneration paid to the erstwhile managing director (including as film director fees) for earlier financial years from 2005-06 to 2013-2014 (total remuneration paid aggregates to Rs 125,744,747) is in excess of the limits prescribed under Schedule XIII to the Companies Act, 1956. During the year 2011-12, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07 and 2007-08) and made applications to the authorities requesting reconsideration/ approval for the balance excess remuneration and for recognition of the erstwhile managing director as a professionally qualified person under the Companies Act,

Basis of Qualified Opinion (Continued)

1956. Through its various communications, the Ministry of Corporate Affairs has directed the Company to recover the excess remuneration paid during the financial years 2008-09 to 2010-11 and 2011-12 respectively. The Company has requested the authorities to reconsider their orders in respect of the above. Pending final communication from the authorities in this regard, no adjustment has been made in these standalone financial statements. This matter was also qualified in our report on the standalone financial statements for the year ended 31 March 2014.

(ii) As at 31 March 2015, the Company's investment in its subsidiary, Whistling Woods International Limited ('WWI'), a joint venture between the Company and Maharashtra Film, Stage and Cultural Development Corporation Limited ('MFSCDL'), aggregates to Rs 369,997,000 and loans, advances, accrued interest and deposits include Rs 394,188,264 recoverable from WWI. As more fully explained in Note 3.41 to the financial statements, through its Order of 9 February 2012, the Hon'bleHigh Court of Judicature at Bombay ("High Court') had quashed the Joint Venture Agreement ('JVA') between the Company and MFSCDCL and passed consequential orders. WWI's petition for special leave to appeal filed with the Supreme Court of India had also been dismissed. The Company and WWI had filed applications to review the said order with the High Court and an interim stay was granted on 30 July 2014 which required deposit of Rs 100,038,000 by January 2015 against payment of arrears of rent for the years 2000-01 to 2013- 14 and payment of Rs 4,500,000 per annum from financial year 2014-15 till the settlement of the case, to MFSCDCL. The State Government of Maharashtra and MFSCDCL challenged the Order of the High Court in the Supreme Court, which special leave petition was dismissed by the Supreme Court on 22 September 2014. The amounts so paid/being paid by the Company have been treated as Deposits in the standalone financial statements, to be adjusted on the settlement of the case.

Further, WWI's net worth stands fully eroded as at 31 March 2015. Having regard to the circumstances explained above and pending final outcome of the matter under litigation, the Company has not made any adjustment to the carrying value of investments in and amounts due from WWI and the deposit paid consequent to the High Court's Order. Accordingly, the impact on the carrying value of investments, recoverability of loan and advances and consequential impact on loss for the year and reserves is not determinable. This matter was also qualified in our report on the standalone financial statements for the year ended 31 March 2014.

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 matters described in the Basis of Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31 March 2015,and its loss and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

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

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

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

Report on Other Legal and Regulatory Requirements (Contd.)

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

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

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

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - refer Notes 3.35 and 3.41 to the standalone 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 3.45 to the standalone financial statements.

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

Annexure to Independent Auditors' Report - 31 March 2015

(Referred to in our report of even date)

i. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets except that tagging of certain fixed assets is yet to be completed.

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified annually. However, during the year the Company has not carried out a physical verification of any of its fixed assets.

ii. (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

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

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

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

iv. In our opinion and according to the information and explanations given to us,controls over recording of inventories (food and beverage items), purchase of fixed assets, customer contracting and tracking of amounts billable need to be further strengthened and having regard to the explanation that certain services rendered/rights sold are of a specialised nature and are rendered/sold to specific buyers and suitable alternative sources are not available to obtain comparable quotations, 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 inventories (food and beverage items), fixed assets and the sale of goods and services. We have not observed any other material weakness/continuing failure to correct weakness during the course of the audit.

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

vi. As informed to us by the management, the Central Government has not prescribed the maintenance of cost records under Section 148 (1) of the Act for any of the food and beverage items sold/ services rendered by the Company.

vii. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has been generally regular in depositing with appropriate authorities, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Service tax and other material statutory dues applicable except that there have been significant delays in depositing Valued added tax, Sales tax and Income tax and few delays in depositing Provident fund and Employees' State Insurance. As explained to us, the Company did not have any dues on account of Excise duty, customs duty and Wealth tax.

According to the information and explanations given to us, the following undisputed statutory dues are outstanding as at 31 March 2015 for a period of more than six months from the date they became payable.

Name of the Statute Nature of dues Amount (Rs)

Maharashtra Value Added Tax Act, 2002 Value-added tax 842,867

Gujarat Value Added Tax Act, 2003 Value-added tax 653,019

Gujarat Value Added Tax Act, 2003 Value-added tax 77,214



The Income tax Act, 1961 Tax deducted at 1,862,635 source

Name of the Statute Period to which Due date it relates

Maharashtra Value June 2014 July 2014 Added Tax Act, 2002

September 2013 October 2013 Gujarat Value Added to March 2014 to April 2014 Tax Act, 2003

Gujarat Value Added April 2013 to May 2013 to Tax Act, 2003 August 2013 September 2013 The Income tax June 2014 to July 2014 to Act, 1961 August 2014 September

Except for the above, there are no undisputed amounts payable in respect of Provident fund, Employees' State Insurance, Income tax, Service tax, Value added tax, Sales tax and other material statutory dues which were in arrears as at 31 March 2015 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Wealth tax, Income tax,Value added tax and Sales tax which have not been deposited on account of any dispute. The following dues of Service tax have not been deposited by the Company on account of dispute:

Name of the statute Nature of Amount dues (Rs)*

Chapter V of the Finance Service Tax 875,000 Act, 1994

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

Chapter V of the Finance November 1996 - Customs, Excise Act, 1994 & Service Tax November 2001 Appellate Tribunal

* excludes amount deposited under protest Rs 800,000

(c) According to the information and explanations given to us, the amount required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

viii. The accumulated losses of the Company is not more than 50% of its net worth. The Company has not incurred cash losses in the financial year and in the immediately preceding financial year.

ix. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institution or bank, except for default in re-payment of dues to one bank, details of which are stated below:

(Amount in Rupees)

Particulars Delay upto 30 Delay in range Delay in days 31-60 days range 61-90 days

Loan re-payment (including interest) to 48,733,982 14,325,876 7,108,813 Kotak Mahindra bank Limited

Particulars Delay in Total amount range 91-120 days

Loan re-payment (including interest) to 5,166,774 75,335,445 Kotak Mahindra bank Limited

The above dues have been paid before the year end and there is no continuing default as on the Balance sheet date. The Company did not have any dues to debenture holders during the year.

x. In our opinion and according to the information and explanations given to us, the term and conditions on which the Company has given guarantee for loan taken by subsidiary from a bank are not prima facie prejudicial to the interests of the Company.

xi. In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were obtained.

xii. 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 B S R & Co. LLP Chartered Accountants Firm's Registration No: 101248W/W-100022

Rajesh Mehra Mumbai Partner 29 May 2015 Membership No: 103145


Mar 31, 2014

We have audited the accompanying financial statements of Mukta Arts Limited (''the Company''), which comprise the Balance sheet as at 31 March 2014, the Statement of profit and loss and the Cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the 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 13 September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. 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.

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 qualified opinion.

Basis for Qualified Opinion

a. As explained in Note 3.39 to the financial statements, the remuneration paid to the managing director (including as film director fees) for the year ended 31 March 2014 amounting to Rs 15,138,588 and for earlier financial years from 2005-06 to 2012-2013 aggregating to Rs 110,606,159 is in excess of the limits prescribed under Schedule XIII to the Companies Act, 1956. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is proposed to be made. During the financial year 2011-12, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07 and 2007-08) and made applications to the authorities requesting reconsideration/approval for the balance excess remuneration. Pending final communication from the authorities in this regard, no adjustment has been made in these financial statements.

b. As at 31 March 2014, the Company''s investment in its subsidiary, Whistling Woods International Limited (WWI), a joint venture between the Company and Maharashtra Film, Stage and Cultural Development Corporation Limited (''MFSCDCL), aggregates to Rs 369,997,000 and loans, advances and deposits include Rs 445,870,587 recoverable from WWI. As more fully explained in Note 3.40 to these financial statements, through its order of 9 February 2012, the High Court of Judicature at Bombay ("High Court'') had quashed the Joint Venture Agreement (''JVA'') between the Company and MFSCDCL and passed consequential orders. WWI''s petition for special leave to appeal filed with the Supreme Court of India had also been dismissed. However, the Company and WWI have filed applications to review the said order with the High Court, which have not yet come up for hearing. Further, MAL has made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price of the building. WWI''s net worth stands fully eroded as at 31 March 2014 and the management is currently evaluating plans for the future.

Having regard to the circumstances explained above and pending final outcome of the matter under litigation, the Company has not made any adjustment to the carrying value of investments in and amounts due from WWI. Accordingly, the impact on the carrying value of investments, recoverability of loan and advances and consequential impact on loss for the year and reserves is not determinable.

Qualified opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matter relating to the investment in and loans and advances recoverable from the Company''s subsidiary WWIL referred to in paragraph (b) of the Basis for Qualified Opinion paragraph above, the outcome and consequent adjustments to the financial statements of which cannot be presently determined, and for the matter relating to the remuneration to the managing director referred to in paragraph (a) of the Basis for Qualified Opinion paragraph above, the said financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India:

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

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

(c) in the case of the Cash flow statement, of the cash flows of the Company for the year ended on that date.

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 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 said Order.

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

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

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

(c) the Balance sheet, the Statement of profit and loss and the Cash flow statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance sheet, the Statement of profit and loss, and the Cash flow statement dealt by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act, 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; and

(e) on the basis of written representations received from the directors of the Company as at 31 March 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Annexure to the Independent Auditors'' Report - 31 March 2014

(Referred to in our report of even date)

i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets except that tagging of certain fixed assets is yet to be completed.

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified annually. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. However, during the year the Company has not carried out a physical verification of any of its fixed assets.

(c) Fixed assets disposed off during the year were not substantial and, therefore, do not affect the going concern assumption.

ii) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

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

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Act.

(iv) In our opinion and according to the information and explanations given to us, controls relating to purchase of fixed assets, customer contracting and tracking of amounts billable need to be further strengthened, and having regard to the explanation that certain services rendered/ rights sold are of a specialised nature and are rendered/ sold to specific buyers and suitable alternative sources are not available to obtain comparable quotations, 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 inventories (food and beverage items) and with regard to sale of services. We have not observed any other material weaknesses / continuing failure to correct weaknesses during the course of audit.

(v) In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under Section 301 of the Act.

(vi) The Company has not accepted any deposits from the public.

(vii) The Company has an internal audit system which needs to be strengthened in terms of seeking updates on remedial actions taken by management, to make it commensurate with the size of the Company and the nature of its business.

(viii) The Central Government has not prescribed the maintenance of cost records under Section 209(1 )(d) of the Act for any of the services rendered/ food and beverages sold by the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the records, the Company has been generally regular in depositing with appropriate authorities undisputed statutory dues deducted/ accrued in the books of account including Provident fund, Employees'' State Insurance, Wealth tax, Service tax, and other material statutory dues applicable to it except that there have been significant delays in depositing Value added tax and few delays in depositing income tax dues with appropriate authorities. As explained to us, the Company did not have any dues on account of Excise duty, Customs duty and Investor Education and Protection Fund.

According to the information and explanations given to us, the following undisputed statutory dues are outstanding as at 31 March 2014 for a period of more than six months from the date they became payable: Name of the Statute Nature of dues Amount Maharashtra Value Value-added tax 1,173,077 Added Tax Act, 2002

Maharashtra Value Value-added tax 9,069,231 Added Tax Act, 2002

Maharashtra Value Value-added tax 4,138,462 Added Tax Act, 2002

Maharashtra Value Value-added tax 2,096,154 Added Tax Act, 2002

Maharashtra Value Value-added tax 1,580,769 Added Tax Act, 2002

Maharashtra Value Value-added tax 1,384,615 Added Tax Act, 2002

Gujarat Value Added Value-added tax 328,463 Tax Act, 2003

Gujarat Value Added Value-added tax 509,478 Tax Act, 2003

Karnataka Value Value-added tax 341,036 Added Tax Act, 2003

Name of the Statute Period to which it relates Due date Maharashtra Value April 2005 to March 2006 May 2005 to Added Tax Act, 2002 April 2006

Maharashtra Value April 2006 to March 2007 May 2006 to Added Tax Act, 2002 April 2007

Maharashtra Value April 2007 to March 2008 May 2007 to Added Tax Act, 2002 April 2008

Maharashtra Value April 2008 to March 2009 May 2008 to Added Tax Act, 2002 April 2009

Maharashtra Value April 2009 to March 2010 May 2009 to Added Tax Act, 2002 April 2010

Maharashtra Value April 2010 to March 2011 May 2010to Added Tax Act, 2002 April 2011

Gujarat Value Added September 2012 to March 2013 Octoberto Tax Act, 2003 2012 to April 2013

Gujarat Value Added April 2013 to August 2013 May 2013 to Tax Act, 2003 September 2013

Karnataka Value April 2013 to August 2013 May 2013 to Added Tax Act, 2003 September 201

"Credit available Rs 18,875,364 pending adjustment.

Except tor the above, there are no undisputed amounts payable in respect of Provident fund, Employees'' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, value added tax and other material statutory dues which were in arrears as at 31 March 2014 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Income tax, Sales tax and other material statutory dues which have not been deposited on account of any dispute. The following dues of Service tax have not been deposited by the Company on account of dispute:

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

Chapter v Service 875,000 November 1996 - Customs, Excise of the Tax November 2001 & Service Tax Finance Act Appellate 1994 Tribunal

*- excludes amount deposited under protest Rs 800,000

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current and in the immediately preceding financial year.

(xi) According to the information and explanations given to us and on the basis of our examination of the records, the Company has defaulted in the repayment of dues to one of its bankers. Loan amounting to Rs 56,932,251 which became due on 31 December 2013 was paid on 9 January 2014 and loan amounting to Rs 25,976,545 which became due on 31 March 2014 was paid on 21 April 2014. The Company has not defaulted in the repayment of dues to any financial institutions and the Company did not have any outstanding debentures during the year.

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

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or nidhi/ mutual benefit fund/ society.

(xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company had given guarantees for loans taken by others from banks are not prejudicial to the interest of the Company. The guarantee was cancelled during the year on repayment of the loan by the subsidiary.

(xvi) In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

(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 the Company has used short term funds aggregating Rs 302,413,814 to fund tangible assets and intangible assets under development.

(xviii) The Company has not made any preferential allotment of shares during the year to companies/ firms/ parties covered in the register maintained under Section 301 of the Act.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money by public issues during the year.

(xxi) 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 B S R & Co. LLP Chartered Accountants Firm''s Registration No: 101248W

Rajesh Mehra Place : Mumbai Partner Date : 29 May 2014 Membership No: 103145


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying fnancial statements of Mukta Arts Limited (''the Company''), which comprise the Balance sheet as at 31 March 2013, the Statement of proft and loss and the Cash fow statement for the year then ended, and a summary of signifcant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these fnancial statements that give a true and fair view of the fnancial position, fnancial performance and cash fows of the Company in accordance with the Accounting principles generaly accepted in india. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the fnancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these fnancial 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 fnancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fnancial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the fnancial 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 fnancial 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 fnancial statements.

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

Basis for Qualifed Opinion

a. As explained in Note 3.39 to the fnancial statements, the remuneration paid to the managing director of the Company for the year ended 31 March 2013 amounting to Rs 9,979,490 (including fees as flm director) and for earlier fnancial years from 2005-06 to 2011-2012 aggregating to Rs 100,626,669, is in excess of the limits prescribed under Schedule XIII to the Act. The Company has made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is proposed to be made. During the previous year, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the fnancial years 2005-06, 2006-07and 2007-08). The Company had made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending fnal communication from the authorities in this regard and application for the current year, no adjustment has been made in these fnancial statements.

b. As at 31 March 2013, the Company''s investment in its subsidiary, Whistling Woods International Limited (WWI), a joint venture between the Company and Maharashtra Film, Stage and Cultural Development Corporation Limited (''MFSCDCL''), aggregates to Rs 369,997,000 and loans, advances and deposits include Rs 424,096,877 recoverable from WWI. As more fully explained in Note 3.40 to these fnancial statements, through its order of 9 February 2012, the High Court of Judicature at Bombay (''High Court'') has quashed the Joint Venture Agreement (''JVA'') between the Company and MFSCDCL and passed consequential orders. WWI''s petition for special leave to appeal fled with the Supreme Court of India has been dismissed. However, the Company and WWI have fled applications to review the said order with the High Court, which have not yet come up for hearing. During the year, the Public Works Department (PWD) Engineer has given his valuation report based on the Balance sheet of WWI as at 31 March 2011. Further, MAL has made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. Also, WWI''s net worth stands fully eroded as at 31 March 2013 - management is currently evaluating plans for the future.

Having regard to the circumstances explained above and pending fnal outcome of the matter under litigation, the Company has not made any adjustment to the carrying value of investments in and amounts due from WWI. Accordingly, the impact on the carrying value of investments, recoverability of loan and advances, proft for the year and consequentially on the dividend for the year is not determinable.

Qualifed opinion

1. In our opinion and to the best of our information and according to the explanations given to us, except for the matter relating to the investment in and loans and advances recoverable from the Company''s subsidiary WWIL referred to in paragraph (b) of the Basis for Qualifed Opinion paragraph above, the outcome and consequent adjustments to the fnancial statements of which cannot be presently determined, and for the matter relating to the remuneration to the managing director referred to in paragraph (a) of the Basis for Qualifed Opinion paragraph above, the said fnancial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India:

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

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

(c) in the case of the Cash fow statement, of the cash fows of the Company for the year ended on that date.

Report on other Legal and Regulatory Requirements

2. 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 specifed in paragraphs 4 and 5 of the said Order.

3. 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 proft and loss and Cash fow statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance sheet, Statement of proft and loss and Cash fow statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act; and

(e) on the basis of written representations received from the directors of the Company as at 31 March 2013, and taken on record by the Board of Directors, none of the directors is disqualifed as on 31 March 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Annexure to the Independent Auditors'' Report - 31 March 2013

(Referred to in our report of even date)

i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fxed assets except that tagging of certain fxed assets is yet to be completed.

(b) The Company has a regular programme of physical verifcation of its fxed assets by which all fxed assets are verifed annually. In our opinion, this periodicity of physical verifcation is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verifcation during the year.

(c) The Company has not disposed off any fxed assets during the year.

ii) (a) The inventory has been physically verifed by the management during the year. In our opinion, the frequency of such verifcation is reasonable.

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

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verifcation between the physical stocks and the book records were not material.

(iii) The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, frms or other parties covered in the register maintained under Section 301 of the Act.

(iv) In our opinion and according to the information and explanations given to us, controls relating to purchase of fxed assets, customer contracting and tracking of amounts billable need to be further strengthened, and having regard to the explanation that certain services rendered/ rights sold are of a specialised nature and are rendered/ sold to specifc buyers and suitable alternative sources are not available to obtain comparable quotations, 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 inventories (food and beverage items) and fxed assets and with regard to sale of services and food and beverage items. We have not observed any material weaknesses during the course of audit.

(v) In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under Section 301 of the Act.

(vi) In our opinion and according to the information and explanations given to us, Company has not complied with the provisions of Sections 58A and 58AA of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the loan taken and repaid during the year from a director shareholder of the Company.

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

(viii) The Central Government has not prescribed the maintenance of cost records under Section 209(1)(d) of the Act for any of the services rendered/ food and beverages sold by the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of records of the Company, except for Value added tax dues aggregating to Rs 35,592,323 amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Provident fund, Employees'' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, and other material statutory dues have been generally regularly deposited during the year by the Company with appropriate authorities. As explained to us, the Company did not have any dues on account of Excise duty, Custom duty and Investor Education and Protection Fund.

According to the information and explanations given to us, the following undisputed statutory dues are outstanding as at 31 March 2013 for a period of more than six months from the date they became payable:

Name of the Statute Nature of dues Amount * Period to which it Due date relates

Maharashtra Value Added Value-added tax 1,173,077 April 2005 to March 2006 May 2005 to tax Act, 2002 April 2006

Maharashtra Value Added Value-added tax 9,069,231 April 2006 to March 2007 May 2006 to tax Act, 2002 April 2007

Maharashtra Value Added Value-added tax 4,138,462 April 2007 to March 2008 May 2007 to tax Act, 2002 April 2008

Maharashtra Value Added Value-added tax 2,096,154 April 2008 to March 2009 May 2008 to tax Act, 2002 April 2009

Maharashtra Value Added Value-added tax 1,580,769 April 2009 to March 2010 May 2009 to tax Act, 2002 April 2010

Maharashtra Value Added Value-added tax 1,384,615 April 2010 to March 2011 May 2010 to tax Act, 2002 April 2011

Maharashtra Value Added Value-added tax 952,380 April 2011 to August 2011 May 2011 to tax Act, 2002 September 2011

*Credit available Rs 12,885,786 pending adjustment.

Except for the above, there are no undisputed amounts payable in respect of Provident fund, Employees'' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, and other material statutory dues which were in arrears as at 31 March 2013 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the following dues of Service tax have not been deposited by the Company on account of dispute:

Name of the statute Nature of Amount dues (Rs)*

Chapter V of the Finance Service Tax 800,000 Act, 1994

Chapter V of the Finance Service Tax 875,000 Act, 1994

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

Chapter V of the Finance April 1999 -October Customs, Excise & Service Tax Appellate 2003 Tribunal

Chapter V of the Finance November 1996 Customs, Excise & Service Tax Appellate -November 2001 Tribunal

I *- excludes amount deposited under protest Rs 1,240,000

(x) The Company does not have any accumulated losses at the end of the fnancial year and has not incurred cash losses in the current and in the immediately preceding fnancial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or to any fnancial institutions. The Company did not have any outstanding debentures during the year.

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

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or nidhi/ mutual beneft fund/ society.

(xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or fnancial institutions are not prejudicial to the interest of the Company.

(xvi) In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance sheet of the Company, we are of the opinion that the funds raised on short-term basis have not been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares during the year to companies/ frms/ parties covered in the register maintained under Section 301 of the Act.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money by public issues during the year.

(xxi) 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 B S R & Co.

Chartered Accountants

Firm''s Registration No: 101248W

Bhavesh Dhupelia

Place : Mumbai Partner

Date : 28 May 2013 Membership No: 042070


Mar 31, 2012

We have audited the attached Balance sheet of Mukta Arts Limited ('the Company') as at 31 March 2012 and the related Statement of Profit and loss and the Cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

1 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 Companies Act, 1956 ('the Act'), we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2 As explained in Note 3.40 to the financial statements, the remuneration paid to the managing director of the Company for the period 1 April 2011 to 31 March 2012 amounting to Rs 12,997,900 and for earlier financial years 2005-06, 2006- 07, 2007-08, 2008-09, 2009-2010 and 2010-11 aggregating to Rs 87,628,769, is in excess of the limits prescribed under Section 198 of the Companies Act, 1956. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is being made. During the year, the Company has received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07and 2007-08). The Company has made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending final communication from the authorities in this regard and application for the current year, no adjustment has been made in these financial statements.

3 As at 31 March 2012, the Company's investment in its subsidiary, Whistling Woods International Limited (WWI), a joint venture between the Company and Maharashtra Film, Stage and Cultural Development Corporation Limited ('MFSCDCL'), aggregates to Rs 369,997,000 and loans, advances and deposits include Rs 391,595,281 recoverable from WWI. As more fully explained in Note 3.41 to the financial statements, through its order of 9 February 2012, the High Court of Judicature at Bombay ('High Court') has quashed the Joint Venture Agreement ('JVA') between the Company and MFSCDCL and passed consequential orders. WWI's petition for special leave to appeal filed with the Supreme Court of India has been dismissed. However, the Company and WWI have filed applications to review the said order with the High Court, which have not yet come up for hearing. Also, WWI's net worth stands fully eroded as at 31 March 2012 - management is currently evaluating plans for the future.

Having regard to the circumstances explained above and pending final outcome of the matter under litigation, the Company has not made any adjustment to the carrying value of investments in and amounts due from WWI. Accordingly, the impact on the carrying value of investments, recoverability of loan and advances, profit for the year and consequentially on the dividend for the year is not determinable.

4 Further to our comments in the Annexure referred to 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 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 the Cash flow statement dealt with by this report comply with the Accounting Standards referred to in sub-Section (3C) of Section 211 of the Act;

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

f. 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 Act in the manner so required and, except for the matter referred to in paragraph 3 above, the outcome and consequent adjustments to the financial statements of which cannot be presently determined, and subject to the matter referred to in paragraph 2 above, 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 31 March 2012;

(ii) in the case of the Statement of Profit and loss, of the profit 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 Auditors' Report- 31 March 2012

(Referred to in our report of even date)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. The management is in the process of performing a detailed exercise of tagging its fixed assets.

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified annually. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification during the year.

(c) Fixed assets disposed off during the year were not substantial and, therefore, do not affect the going concern assumption.

(ii) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

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

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 ('the Act').

(iv) In our opinion and according to the information and explanations given to us, controls relating to purchase of fixed assets, customer contracting and tracking of amounts billable need to be further strengthened, and having regard to the explanation that certain services rendered/ rights sold are of a specialised nature and are rendered/ sold to specific buyers and suitable alternative sources are not available to obtain comparable quotations, 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 inventories (food and beverage items) and fixed assets and with regard to sale of services and food and beverage items.

(v) In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under Section 301 of the Act.

(vi) The Company has not accepted any deposits from the public.

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

(viii) The Central Government has not prescribed the maintenance of cost records under Section 209(1)(d) of the Act for any of the services rendered/ food and beverages sold by the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of records of the Company, except for Value added tax dues aggregating to Rs. 24,889,325, amounts deducted /accrued in the books of account in respect of undisputed statutory dues including Provident fund, Employees' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, and other material statutory dues have been generally regularly deposited during the year by the Company with appropriate authorities. As explained to us, the Company did not have any dues on account of Excise duty, Custom duty and Investor Education and Protection Fund.

According to the information and explanations given to us, the following undisputed statutory dues are outstanding as at 31 March 2012 for a period of more than six months from the date they became payable:

Name of the statute Nature of dues Amount * period to which it relates Due date

Maharashtra Value Added tax Value-added tax 1,173,077 April 2005 to March 2006 May 2005 to Act, 2002 April 2006

Maharashtra Value Added tax Value-added tax 9,069,231 April 2006 to March 2007 May 2006 to Act, 2002 April 2007

Maharashtra Value Added tax Value-added tax 4,138,462 April 2007 to March 2008 May 2007 to Act, 2002 April 2008

Maharashtra Value Added tax Value-added tax 2,096,154 April 2008 to March 2009 May 2008 to Act, 2002 April 2009

Maharashtra Value Added tax Value-added tax 1,580,769 April 2009 to March 2010 May 2009 to Act, 2002 April 2010

Maharashtra Value Added tax Value-added tax 1,384,615 April 2010 to March 2011 May 2010 to Act, 2002 April 2011 to August 2011 April 2011

Maharashtra Value Added tax Value-added tax 952,380 May 2011 to Act, 2002 September 2011

*Credit available Rs 12,902,371 pending adjustment.

Except for the above, there are no undisputed amounts payable in respect of Provident fund, Employees' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, and other material statutory dues which were in arrears as at 31 March 2012 for a period of more than six months from the date they became payable

(b) According to the information and explanations given to us, the following dues of Service tax and Income-tax have not been deposited by the Company on account of dispute:

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

Chapter V of the Service Tax 800,000 April 1999 -October Customs, Excise & Finance Act, 1994 2003 Service Tax Appellate Tribunal

Chapter V of the Service Tax 875,000 November 1996 Customs, Excise & Finance Act, 1994 -November 2001 Service Tax Appellate Tribunal

*- excludes amount deposited under protest Rs 1,240,000

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or to any financial institutions. The Company did not have any outstanding debentures during the year

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

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or nidhi/ mutual benefit fund/ society.

(xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the Company.

(xvi) In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on short-term basis have not been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares during the year to companies/firms/parties covered in the register maintained under Section 301 of the Act.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money by public issues during the year.

(xxi) 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 B s R & Co.

Chartered Accountants

Firm's Registration No: 101248W

Bhavesh Dhupelia

Mumbai Partner

29 May 2012 Membership No: 042070


Mar 31, 2011

We have audited the attached Balance sheet of Mukta Arts Limited (‘the Company') as at 31 March 2011 and the related Profit and loss account and Cash fl ow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

1 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 Companies Act, 1956 (‘the Act'), we enclose in the Annexure, a statement on the matters specifi ed in paragraphs 4 and 5 of the said Order.

2 As more fully explained in Schedule 22.3 to the financial statements, the remuneration paid to a whole-time director of the Company for the period 1 April 2010 to 31 March 2011 and for earlier years ended 31 March 2010, 31 March 2009 and 31 March 2008 is in excess of the limits prescribed under Section 198 of the Companies Act, 1956. The Company has made an application to the Central Government seeking post-facto approval, which is awaited.

3 Further to our comments in the Annexure referred to 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 has 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 fl ow 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 fl ow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act;

e. on the basis of written representations received from the directors of the Company as at 31 March 2011, and taken on record by the Board of Directors, we report that none of the directors is disqualifi ed as on 31 March 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and

f. in our opinion and to the best of our information and according to the explanations given to us, subject to the effect of the matter stated in paragraph 2 above, the said accounts 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:

(vi) in the case of the Balance sheet, of the state of affairs of the Company as at 31 March 2011;

(vii) in the case of the Profit and loss account, of the loss of the Company for the year ended on that date; and

(viii) in the case of the Cash fl ow statement ,of the cash flows of the Company for the year ended on that date. Annexure to the Auditors' Report- 31 March 2011 (Referred to in our report of even date)

i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fi xed assets. The management is in the process of performing a detailed exercise of tagging its fi xed assets.

(b) The Company has a regular programme of physical verifi cation of its fi xed assets by which all fi xed assets are verifi ed during the year. In our opinion, this periodicity of physical verifi cation is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verifi cation during the year.

(c) Fixed assets disposed off during the year were not substantial and, therefore, do not affect the going concern assumption.

ii) The Company is a service company, primarily engaged in the business of film production, distribution, exhibition and related services. It does not hold any physical inventories. Accordingly, paragraph 4(ii) of the Order is not applicable.

(iii) The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, fi rms or other parties covered 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, controls relating to purchase of fi xed assets, customer contracting and tracking of amounts billable need to be strengthened, and having regard to the explanation that certain services rendered/ rights sold are of a specialised nature and are rendered/ sold to specifi c buyers and suitable alternative sources are not available to obtain comparable quotations, 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 fi xed assets and with regard to sale of services. The activities of the Company do not involve purchase of inventory and sale of goods.

v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that Section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs 5 lakhs are for the Company's specialised requirements for which suitable alternative sources are not available to obtain comparable quotations. However, on the basis of information and explanations provided, the same appear reasonable.

vi) The Company has not accepted any deposits from the public.

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

viii) The Central Government has not prescribed the maintenance of cost records under Section 209(1)(d) of the Act for any of the services rendered by the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of records of the Company, except for value added tax dues aggregating to Rs 19,442,308, amounts deducted /accrued in the books of account in respect of undisputed statutory dues including Provident fund, Employees' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, and other material statutory dues have been generally regularly deposited during the year by the Company with appropriate authorities. As explained to us, the Company did not have any dues on account of Excise duty, Custom duty and Investor Education and Protection Fund.

There were no dues on account of Cess under Section 441A of the Act since the date from which the aforementioned Section comes into force has not yet been notifi ed by the Central Government.

According to the information and explanations given to us, the following undisputed statutory dues are outstanding for a period of more than six months from the date they became payable as at 31 March 2011:

Name of the Statute Nature of dues Amount * Period to which it relates Due date

Maharashtra Value Value-added tax 1,173,077 April 2005 to March 2006 May 2005 to April 2006 Added tax Act, 2002

Maharashtra Value Value-added tax 9,069,231 April 2006 to March 2007 May 2006 to April 2007 Added tax Act, 2002

Maharashtra Value Value-added tax 4,138,462 April 2007 to March 2008 May 2007 to April 2008 Added tax Act, 2002

Maharashtra Value Value-added tax 2,096,154 April 2008 to March 2009 May 2008 to April 2009 Added tax Act, 2002

Maharashtra Value Value-added tax 1,580,769 April 2009 to March 2010 May 2009 to April 2010 Added tax Act, 2002

Maharashtra Value Value-added tax 1,000,000 April 2010 to March 2011 May 2010 to April 2011 Added tax Act, 2002

*Credit available Rs 11,500,000 pending adjustment.

Except for the above, there are no undisputed amounts payable in respect of Provident fund, Employees' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, and other material statutory dues which were in arrears as at 31 March 2010 for a period of more than six months from the date they became payable

(b) According to the information and explanations given to us, the following dues of Service tax and Income-tax have not been deposited by the Company on account of dispute.

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

Chapter V of the Service 440,000 April 1999 - Customs, Excise & Finance Act, 1994 Tax (Deposit made under October 2003 Service Tax Appellate protest Rs 440,000) Tribunal

Chapter V of the Service 1,675,000 November 1996 - Customs, Excise & Finance Act, 1994 Tax (Deposit made under November 2001 Service Tax Appellate protest - Rs 800,000) Tribunal

x) The accumulated losses of the Company are less than fi fty percent of its net worth and it has incurred cash losses in the current fi nancial year and in the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or to any financial institutions. The Company did not have any outstanding debentures during the year

xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures or other securities.

xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or nidhi/ mutual benefit fund/ society.

xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the Company.

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

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on short-term basis have not been used for long-term investment

xviii) The Company has not made any preferential allotment of shares to companies/fi rms/parties covered in the register maintained under Section 301 of the Act.

xix) The Company did not have any outstanding debentures during the year.

xx) The Company has not raised any money by public issues during the year.

xxi) 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 B S R & Co.

Chartered Accountants

Firm's Registration No: 101248W

Bhavesh Dhupelia

Mumbai Partner

27th May, 2011 Membership No: 042070


Mar 31, 2010

1. We have audited the attached Balance Sheet of Mukta Arts Ltd. as at 31st March 2010 and the related Proft and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These fnancial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these fnancial 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 fnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fnancial statements. An audit also includes assessing the accounting principles used and signifcant estimates made by management, as well as evaluating the overall fnancial 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 give in the Annexure a statement on the matters specifed in paragraphs 4 and 5 of the said Order.

4. As more explained in Note no. 2(f) in schedule “P” to the fnancial statements, the Company has disputed dues in respect of Service Tax is Rs 2.12 millions out of which Rs 0.88 millions has not been paid since the matter is pending before CESTAT.

5. As more explained in Note no. 2(g) in schedule “P” to the fnancial statements, the managerial remuneration paid to the Chairman is in excess of the limits prescribed under Section 198 of the Act. The Company has made an application to the Central Government seeking post-fact approval, which is awaited.

6. Further to our comments in the Annexure referred to in paragraph 3 above:

(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 appears from our examination of such books;

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

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

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

7. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with signifcant accounting policies and other notes 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, 2010;

(ii) in the case of Proft and Loss Account of the Loss of the Company for the year ended on that date, and

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

Annexure to the Auditors Report [Referred to in paragraph (3) thereof]

(i) The nature of the Companys business/ activities during the year is such that clauses (viii) and (xiii) of paragraph 4 of the Companies (Auditors Report) order, 2003 are not applicable to the Company for the year ending 31st March 2010.

(ii) In respect of fxed assets:

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

(b) The fxed assets of the company have been physically verifed by the management at the end of the year and we are informed that no discrepancies between book records and the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, the Company has not made any substantial disposals during the year.

(iii) In respect of inventories:

(a) As explained to us, inventories were physically verifed 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 verifcation of inventories followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its activity during the year.

(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 verifcation.

(iv) In respect of loans, secured or unsecured, granted or taken by the Company to or from companies, frms or other parties covered in the register maintained under section 301 of The Companies Act, 1956:

According to the information and explanations given to us the Company has given unsecured loan to a Subsidiary Company, the maximum outstanding balance during the year was Rs. 280.3 millions and the outstanding balance as on 31st March 2010 is Rs. 265.00 millions. The outstanding interest on unsecured loan as on 31.03.2010 is Rs. 20.53 millions. The same is not overdue and the rate of interest and other terms and conditions of loan is in our opinion not prima facie prejudicial to the interest of the Company. Apart from the above, the Company has neither granted nor taken any loans, secured or unsecured, to or from companies, frms or other parties covered in the register maintained under section 301 of The Companies Act, 1956.

(v) 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 nature of its business, for purchase of inventory and fxed assets. There are no sales of goods.

(vi) In respect of transactions entered in the register maintained in pursuance of section 301 of the Companies Act 1956:

(a) To the best of our knowledge and belief and according to the information and explanations given to us, transactions that needed to be entered into the register have been so entered.

(b) According to the information and explanations given to us, there are transactions/arrangements in excess of Rs 0.50 millions in respect of subsidiary companies in which directors are interested and prices are reasonable having regard to the prevailing market prices at the relevant time.

(vii) The Company has not accepted any deposits from the public to which the provisions of Section 58A and section 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975, are applicable.

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

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

(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Cess and any other statutory dues with the appropriate authorities during the year. There were no undisputed amount of outstanding statutory dues as at 31st March 2010 for more than six months from the date they became payable.

(b) Disputed dues in respect of Service Tax is Rs 2.12 millions out of which Rs 0.88 millions has not been paid since the matter is pending before CESTAT. (kindly refer Note no. 2(f) in schedule P)

(c) The managerial remuneration paid to the Chairman is in excess of the limits prescribed under Section 198 of the Act. The Company has made an application to the Central Government seeking post-fact approval, which is awaited. (kindly refer Note no. 2(g) in schedule P)

(x) The Company has no accumulated losses as at the end of the year. The Company has incurred cash losses during the fnancial year, however there were no cash losses during the previous year.

(xi) According to the information and explanations given to us, the Company was not liable to repay any dues to any fnancial institution and bank, and there were no debenture holders during the year.

(xii) According to the information and explanations given to us, the Company has not given any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The company is not a chit fund or a nidhi / mutual beneft fund / society. Therefore, the provisions of clause 4(xiii) of the companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiv) According to the information and explanations given to us and on the basis of our examination of the Companys records we are of the opinion that the Company is maintaining adequate records regarding transactions in its trading activities in the units of Mutual Funds (Debt Schemes) and timely entries have been made in these records. The investments have been held by the Company in its own name.

(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by subsidiary Whistling Woods International Limited from Punjab National Bank during the previous year.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, the Company has taken term loan during the year and was used for the purpose for which the loan was taken.

(xvii) According to the cash fow statement and other records examined by us and the information and explanations given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investment (fxed assets etc.) and vice versa.

(xviii)The Company has not made any preferential allotment during the year.

(xix) The Company has not issued any debentures during the year.

(xx) The Company has not raised any money by public issues during the year.

(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 was noticed or reported during the year.

For SHAMIT MAJMUDAR ASSOCIATES

Firm Registration No. 109881 W

Chartered Accountants

Place: Mumbai SHAMIT MAJMUDAR Dated: 12th August, 2010 Proprietor

Membership No. F-010595

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