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Auditor Report of Quadrant Televentures Ltd.

Mar 31, 2015

1 Report on the Standalone Financial Statements

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

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

3 Auditor's Responsibility

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

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

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

4 Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2015, and its loss and its cash flows for the year ended on that date.

5 Emphasis of Matters

We draw attention to Note No. 28 to the financial statements, the Company has incurred a net loss of Rs. 2,398,930,498/- during the year, the accumulated losses as at March 31, 2015 amounted to Rs. 16,290,302,925/-resulting in, the erosion of its net worth and has net current liabilities of Rs. 11,325,415,028/- as at March 31, 2015. These factors raise a doubt that the Company will not be able to continue as a going concern. The management is confident of generating cash flows from business operations through increasing subscribers' base and with the support of significant shareholders to fund its operating and capital fund requirements. Accordingly, these statements have been prepared on a going concern basis. Our opinion is not qualified in respect of this matter.

6 Report on Other Legal and Regulatory Requirements

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

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

i. 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.

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

iii. The standalone 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.

iv. 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.

v. The going concern matter described under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

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

vii. 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:

a. The Company's pending litigations comprise of claims against the Company and proceedings pending with Tax Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the impact of pending litigations on its financial position in its financial statements as referred to in Note No. 25 and 27 of the financial statements;

b. The Company periodically reviews all its long term contracts to assess for any material foreseeable losses. Based on such review, the Company has made adequate provisions for material foreseeable losses, if any on long term contracts in the books of account as required under any applicable law / Accounting Standard and as at March 31, 2015, the Company did not have any outstanding long term derivative contracts as referred to in Note No. 27 of the financial statements;

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

Annexure referred to in paragraph 6(A) of the Independent Auditors' Report of even date to the Members of Quadrant Televentures Limited on the standalone financial statements for the year ended 31st March, 2015, we report that:

I. (a) The Company has maintained proper records showing full particulars including quantitative details and situations of its Fixed Assets.

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

II. (a) As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the period. In our opinion, having regard to the nature and location of stocks, the frequency of physical verification is reasonable.

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

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

III. According to information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, paragraph 3(iii) of the Order is not applicable.

IV. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchase of inventory and Fixed Assets and for the sale of goods and services. During the course of our audit no major weaknesses has been noticed in the internal controls system in respect of these areas. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.

V. The Company has not accepted any deposits during the year from the public as per the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under.

VI. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Government under sub section (1) of section 148 of the Companies Act, 2013 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

VII. (a) According to the information and explanations given to us and records examined by us, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues wherever applicable to it with the appropriate authorities, though there has been a slight delay in few cases. According to information and explanations given to us no undisputed arrears of statutory dues were outstanding as at March 31, 2015 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the dues of Income Tax, which have not been deposited on account of disputes and the forum where the dispute is pending as under:

SL. Name of Nature Year Amounts Forum No. the Statute of Dues where dispute is pending

1 The Income 2000-01 70,04,687 Income Tax Income Tax Appellate Tax Act, Tribunal 1961

(c) According to the information and explanations given to us and as certified by the management, There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under.

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

IX. According to the information and explanations given to us and records examined by us, as at the Balance Sheet date the Company has not defaulted in repayment of dues to financial institution or banks or debenture holders.

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

XI. Based on our examinations of the records and information and explanations given to us during the year no term loan has been obtained.

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

Chartered Accountants

Firm's Registration No. 105049W

Naveen Jain

Place: Mohali (Partner)

Date: May 30, 2015 Membership No. 511596


Mar 31, 2014

We have audited the accompanying financial statements of Quadrant Televentures Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash fl ows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013 and other accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor''s Responsibility

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

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

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

4. Basis of Qualifi ed Opinion

As mentioned in Note 27 (8) (a) to the financial statements, based on Company''s request, the Corporate Debt Restructuring (''CDR'') Cell vide their letter dated August 13, 2009 (''CDR letter'') has revised the terms of CDR scheme with effect from April 1, 2009. The Company has accounted for the impact of revised CDR scheme as approved by CDR Cell after complying with the most of the terms and conditions stipulated therein, though compliance of some of them is still in process. These financial statements do not include any adjustment which may arise due to inability of the management to fulfi ll the remaining conditions precedent, the impact of which on the loss for the year, if any, is unascertainable.

5. Qualifi ed Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis of Qualifi ed Opinion paragraph the effect of which is unascertainable and read together with the other notes, the fi nancial 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, 2014;

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

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

6. Emphasis of Matter

We draw attention to Note 26 (1) (c) to the financial statements, the Company has incurred a loss of Rs 2,611,608,163/- during the year, the accumulated losses as at March 31, 2014 amounted to Rs 19,397,027,202 /- resulting in, the erosion of its net worth and has net current liabilities of Rs 9,171,780,281/- as at March 31, 2014. These factors raise a doubt that the Company will not be able to continue as a going concern. The management is confi dent of generating cash fl ows from business operations through increasing subscribers'' base and with the support of signifi cant shareholders to fund its operating and capital fund requirements. Accordingly, these statements have been prepared on a going concern basis. Our opinion is not qualifi ed in respect of this matter.

7. Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

e. on the basis of written representations received from such directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualifi ed as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS'' REPORT

Annexure referred to in paragraph 7A of the Auditors'' Report of even date to the Members of Quadrant Televentures Limited on the accounts for the year ended 31st March, 2014;

I. (a) The Company has maintained proper records

showing full particulars including quantitative details and situations of its Fixed Assets.

(b) As per the information and explanations given to us, there is a phased programme of physical verifi cation of fi xed assets adopted by the company and no material discrepancies were noticed on such verifi cation. In our opinion, the frequency of verifi cation is reasonable, having regard to the size of the Company and nature of its business and as informed, no material discrepancies were noticed on such verifi cation.

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

II. (a) As explained to us, inventories have been physically

verifi ed during the year by the management at reasonable intervals during the year. In our opinion, having regard to the nature and location of stocks, the frequency of verifi cation is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verifi cation 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 its inventories and no material discrepancies were noticed on such physical verifi cation.

III. (a) According to the information and explanations

given to us and on the basis of our examination of the books of account, the Company has not granted any loans, secured or unsecured, to companies, fi rms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) and (d) of the Order are not applicable.

(b) As per the information furnished, the Company has not taken any loan or advances from companies, fi rms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (e), (f) and (g) of the said Order are not applicable.

IV. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchase of inventories & fi xed assets and payment for expenses & for sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.

V. (a) Based on the audit procedure applied by us and

according to the information and explanations provided by the management, during the year, there has been no contract or arrangement that needed to be entered into the register maintained under section 301 of the Companies Act, 1956 and accordingly the clause (b) is not applicable.

VI. The Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Companies Act, 1956 and the rules framed there under.

VII. The Company has formal internal audit system commensurate with its size and nature of business.

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

IX. (a) As per the information and explanations given by the management, the company has generally regular in depositing undisputed statutory dues including Income Tax, Sales Tax, Wealth Tax, Provident Fund, custom duty and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payables in respect of such statutory dues as at 31st March, 2014 for period of more than six months from the date they become payable.

(b) According to the information and explanations given to us, the dues of Income tax, which have not been deposited on account of disputes and the forum where the disputes and the forum where the dispute is pending are as under:

Name of Nature of Year Amounts Forum where the Statute Dues dispute is pending

The Income 2000-01 70,04,687 Income Tax Income Tax Tax Appellate Act,1961 Tribunal

X. The accumulated loss of the Company as at March 31, 2014, is more than fi fty percent of its net worth as at that date. The Company has incurred cash loss during the period. In the immediately preceding fi nancial year also, the company had incurred cash loss.

XI. According to the records produced before us and the information and explanation given to us, the Company has not defaulted in the repayment of due to any financial institution or bank or Debenture holders.

XII. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

XIV. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, Clause 4 (xiv) of the said Order is not applicable.

XV. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks and financial institutions.

XVI. Based on our examinations of the records and information and explanations given to us during the year no term loan has been obtained.

XVII. According to the information and explanations given to us, and on an overall examination of the Balance Sheet of the Company as at the end of the year, funds raised on short term basis have not been used for long term investments.

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

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

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

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

For Khandelwal Jain & Co. Chartered Accountants Firm Regd. No. 105049W

(Naveen Jain) Partner Membership No. 511596 Place: Mohali Date: 30th May, 2014


Mar 31, 2013

1. Report on the Financial Statements

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

2. Management''s Responsibility for the Financial Statements

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

3. Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the - financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in .the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

4. Basis of Qualified Opinion

.As mentioned in Note 27 (8) (a) to the financial statements, based on Company''s request, the Corporate Debt Restructuring (''CDR'') Cell vide their letter dated August 13, 2009 (''CDR letter'') has revised the terms of CDR scheme with effect from April 1, 2009. The Company has accounted for the impact of revised CDR scheme as approved by CDR Cell after complying with the most of the terms'' and conditions stipulated therein, though compliance of some of them is still in process. These financial statements do not include any adjustment which may arise due to inability of the management to fulfill the remaining conditions precedent, the impact of which on the loss for the year, if any, is unascertainable.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis of Qualified Opinion paragraph the effect of which is unascertainable and read together with the other notes, the 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, 2013;

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

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

6. Emphasis of Matter

We draw attention to Note 26 (1) (c) to the financial statements, the Company has incurred a loss of Rs. 135,68,22,123/- during the year, die accumulated losses as at March 31, 2013 amounted to Rs. 1678,54,19,039/- resulting in, the erosion of its net worth and has net current liabilities of Rs. 725,19,09,437/- as at March 31, 2013. These factors raise a doubt that the Company will not be able to continue as a going concern. The management is confident of generating cash flows from business operations through increasing subscribers'' base and with the support of significant shareholders to fund its operating and capital fund requirements. Accordingly, these statements have been prepared on a going concern basis. Our opinion is not qualified in respect of this matter.

7. Report on Other Legal and Regulatory Requirements

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

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

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

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

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

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement - comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

The Annexure referred to in paragraph 7 of the Our Report of even date to the members of QUADRANT TELEVENTURES LIMITED on the accounts of the company for the year ended 31st March, 2013.

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 its fixed assets.

(b) As per the information and explanations given to us, there is a phased programme of physical verification of fixed assets adopted by the company and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

(c) In our opinion and according to the information and explanations given to us, the company has not disposed off any substantial part of the fixed asset and therefore does not affect the going concern assumption.

ii. (a) As explained to us, inventories have been physically verified during the year by the management at reasonable intervals during the year. In our opinion, having regard to the nature and location of stocks, the frequency of verification is reasonable.

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

(c) The Company is maintaining proper records of its inventories and no material discrepancies were noticed on such physical verification.

iii. (a) According to the information and explanations given to us and on the basis of our examination of the books of account,, the Company has not granted - any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) and (d) of, '' the Order are not applicable.

(b) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has not taken loans from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (e), (f) and (g) of the said Order are not applicable.

iv. In our opinion and according to the information and explanations given to us, there is adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventories & fixed assets and payment for expenses & for sale of goods. During the course of our audit, no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

v. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, during the year, there has been no contract or arrangement that needs to be entered into the register required to be maintained under section 301 of the Companies Act, 1956 and accordingly the clause (b) is not applicable..

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

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

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

ix. (a) According to the information and explanations given to us and records examined by us, the Company is generally regular in depositing undisputed statutory -dues with the appropriate authorities in respect of provident fund, employees'' state insurance, income tax deduced at source, income tax, wealth tax, excise duty, service tax and sales tax/works contract tax. According to information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at 31st March 2013 for period of more than six months from the date they become payable.

(b) According to the information and explanations given to us, the dues of Income tax, which have not been deposited on account of disputes and the forum where the disputes and the forum where the dispute is pending are as under:

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

Income Income 13,519,046 2000-01 Income Tax Tax Act, Tax dues Appellate 1961 including Tribunal interest

x. The accumulated loss of the Company as at March 31, 2013, is more than fifty percent of its net worth as at that date. The Company has incurred cash loss during the period. In the immediately preceding financial year also, the company had incurred cash loss.

xi. Based on our audit procedures and the information and explanations given to us, we are of the opinion that, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

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

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

xiv. The Company is not dealing in dr trading in shares, '' securities, debentures and other investments. Accordingly, Clause 4 (xiv) of the said Order is not applicable.

xv. Based on our examination of the records and information and explanations given to us, the Company has not given any guarantees for loans taken by others, from banks and financial institutions.

xvi. Based on our examinations of the records and information and explanations given to us during the year no term loans have been obtained by the Company.

xvii. According to the information and explanations given to us and on an overall examination of the balance - - sheet of the Company as at the end of the year, funds raised on short term basis have, prima facie, not been used for long term investment.

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

xix. The Company has allotted 3,19,69,088 Redeemable Secured Non-Convertible Debentures (''NCDs'') of Rs. 100 each aggregating to Rs. 319,69,08,800/- on January 21, 2013, pursuant to Revised CDR Scheme dated August 13, 2009 whereby the 50% of outstanding amount as on April 1, 2009 towards principal amount of term loans was to be converted in Redeemable NCDs. The Company has created security/ charges in respect of said Redeemable NCDs.

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

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



For KHANDELWAL JAIN & CO.

Chartered Accountants

Firm Registration No.-105049W

(Akash Shinghal)

Partner

Membership No. 103490

Place: Mohali

Date: 29th May, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of QUADRANT TELEVENTURES LIMITED ('the Company') as at 31st March, 2012, the Statement of Profit & Loss and also 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.

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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

4. Without qualifying our opinion we draw attention to Note 26 (1) (c) to the financial statements. The Company has incurred a loss of Rs. 1,791,601,978 during the year (accumulated loss of Rs.15,428,596,916) resulting into erosion of its net worth, and has a net current liabilities of Rs. 6,847,992,445 as at March 31, 2012. These factors raise a doubt that the Company will not be able to continue as a going concern. The management is confident of generating cash flows from business operations through increasing subscribers' base and with the support of significant shareholders to fund its operating and capital fund requirements. Accordingly, these statements have been prepared on a going concern basis.

5. As mentioned in Note 27 (8) (a) to the financial statements, based on Company's request Corporate Debt Restructuring ('CDR') Cell vide their letter dated August 13, 2009 ('CDR letter') has revised the terms of CDR scheme with effect from April 1, 2009. The Company has accounted for the impact of revised CDR scheme as approved by CDR Cell after complying with the most of the terms and conditions stipulated therein, however compliance of some of them is still in process. These financial statements do not include any adjustment which may arise due to inability of the management to fulfill the remaining conditions precedent.

6. Further to our comments in the Annexure referred to above paragraph, 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 Cash Flow Statement dealt with by this report are in agreement with the books of account;

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

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

f) Subject to matter stated in paragraph 5 above consequential effect whereof is not ascertainable in our opinion and to the best of our information and according to the explanations given to us, said accounts read together with the significant accounting policies and the 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, 2012;

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

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

Annexure referred to in paragraph 3 of the Auditors' Report of even date to the Members of QUADRANT TELEVENTURES LIMITED on the accounts for the year ended 31st March, 2012;

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situations of Fixed Assets.

(b) As per the information and explanations given to us, there is a phased programme of physical verification of fixed assets adopted by the Company and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

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

(ii) (a) As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the year. In our opinion, having regard to the nature and location of stocks, the frequency of physical verification is reasonable.

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

(c) The Company is maintaining proper records of Inventory and no material discrepancies were noticed on such physical verification.

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

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

(iv) In our opinion and according to information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services.

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

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

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

(viii) The Central Government has prescribed maintenance of the cost records under section 209(1) (d) of the Companies Act, 1956 in respect of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records.

(ix) (a) According to the information and explanations given to us and records examined by us, the Company is regular in depositing undisputed statutory dues with the appropriate authorities in respect of provident fund, employees' state insurance, income tax deduced at source, income tax, wealth tax, excise duty, service tax and sales tax/works contract tax. According to information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at 31st March 2012 for period of more than six months from the date they become payable.

(b) According to the records of the company, the dues of Income tax, which have not been deposited on account of disputes and the forum where the disputes and the forum where the dispute is pending are as under:

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

Income Tax Income 12,678,483 2000-01 Income Tax Act, 1961 Tax Appellate Tribunal

(x) The accumulated loss of the Company as at March 31, 2012, is more than fifty percent of its net worth as at that date. The Company has incurred cash loss during the period. In the immediately preceding financial year also, the company had incurred cash loss.

(xi) Based on our audit procedures and the information and explanations given to us, the Company doesn't have any amount due to any financial institution or bank.

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

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

(xiv) The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, Clause 4 (xiv) of the said Order is not applicable.

(xv) Based on our examination of the records and information and explanations given to us, the Company has not given any guarantees for loans taken by others, from banks and financial institutions.

(xvi) Based on our examinations of the records and information and explanations given to us during the year no term loans have been obtained by the Company.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company as at the end of the year, funds raised on short term basis have, prima facie, not been used for long term investment.

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

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

(xx) The Company has not raised any money by public issue during the year ended March 31, 2012.

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

For KHANDELWAL JAIN & CO.

Firm Registration No. 105049W

Chartered Accountants,

(Akash Shinghal)

Partner

Membership No. 103490

Place: Mohali

Dated: May 28, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of QUADRANT TELEVENTURES LIMITED (Formerly known as HFCL Infotel Limited) ('the Company') as at 31st March, 2011, the Profit & Loss Account and also 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.

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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

4. Without qualifying our opinion we draw attention to note 1 (c) of Schedule 21 to the financial statements. The Company has incurred a loss of Rs. 2,236,667,344 during the year (accumulated loss of Rs. 13,636,994,938) resulting into erosion of its net worth, and has a net current liabilities of Rs. 6,588,544,442 as at March 31, 2011. These factors raise a doubt that the Company will not be able to continue as a going concern. The management is confident of generating cash flows from business operations through increasing subscribers' base and with the support of significant shareholders to fund its operating and capital fund requirements. Accordingly, these statements have been prepared on a going concern basis.

5. As mentioned in Note 8 (a) of schedule 22 to the financial statements, based on Company's request Corporate Debt Restructuring ('CDR') Cell vide their letter dated August 13, 2009 ('CDR letter') has revised the terms of CDR scheme with effect from April 1, 2009. The Company has accounted for the impact of revised CDR scheme as approved by CDR Cell after complying with the most of the terms and conditions stipulated therein, however compliance of some of them is still in process. These financial statements do not include any adjustment which may arise due to inability of the management to fulfill the remaining conditions precedent.

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

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

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

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

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

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

f) Subject to matter stated in paragraph 5 above consequential effect whereof is not ascertainable in our opinion and to the best of our information and according to the explanations given to us, said accounts read together with the significant accounting policies and the 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, 2011;

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

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

ANNEXURE TO THE AUDITORS' REPORT

Annexure referred to in paragraph 3 of the Auditors' Report of even date to the Members of QUADRANT TELEVENTURES LIMITED (Formerly known as HFCL Infotel Limited) on the accounts for the year ended 31st March, 2011;

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situations of Fixed Assets.

(b) As per the information and explanations given to us, there is a phased programme of physical verification of fixed assets adopted by the Company and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

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

(ii) (a) As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the year. In our opinion, having regard to the nature and location of stocks, the frequency of physical verification is reasonable.

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

(c) The Company is maintaining proper records of Inventory and no material discrepancies were noticed on such physical verification.

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

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

(iv) In our opinion and according to information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services.

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

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

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

(viii)The Central Government has prescribed maintenance of the cost records under section 209(1) (d) of the Companies Act, 1956 in respect of the Company. We have broadly reviewed the accounts and records of the Company in this connection and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records.

(ix) (a) According to the information and explanations given to us and records examined, by us, the Company is regular in depositing undisputed statutory dues with the appropriate authorities in respect of provident fund, employees' state insurance, income tax deduced at source, income tax, wealth tax, excise duty, service tax and sales tax/works contract tax. According to information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at 31st March 2011 for period of more than six months from the date they become payable.

(b) According to the records of the company, the dues of Income tax, which have not been deposited on account of disputes and the, forum where the disputes and the forum where the dispute is pending are as under:

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

Income Income 11,837,921 2000-01 Income Tax Tax Act, Tax Appellate 1961 Tribunal

(x) The accumulated loss of the Company as at March 31, 2011, is more than fifty percent of its net wbfth as at that date. The Company has incurred cash loss during the period. In the immediately preceding financial year also, the company had incurred cash loss. "'',.--

(xi) According to the information and explanations given to us and records examined by us, during the year the Company has delayed interest payment to financial institution or banks in respect of the f ollowing:-

Name of the Lender Nature of the Dues Period of Default/ Delays Maximum Overdue during the year

IDBI Bank Interest April 2010 to June 2010 3,599,486

INGVYASA Bank Interest April 2010 to June 2010 269,890

LIC of India Interest April 2010 to June 2010 674,744

Oriental Bank of Commerce Interest April 2010 to June 2010 674,744

State Bank of Patiala Interest April 2010 to June 2010 226,633

There is no over dues amounts as at Balance Sheet date.

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

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

(xiv)The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, Clause 4 (xiv) of the said Order is not applicable.

(xv) Based on our examination of the records and information and explanations given to us, the Company has not given any guarantees for loans taken by others, from banks and financial institutions.

(xvi) Based on our examinations of the records and information and explanations given to us during the year no term loans have been obtained by the Company.

(xvii)According to the information and explanations given to us and on an overall examination of the balance sheet of the Company as at the end of the year, funds raised on short term basis have, prima facie, not been used for long term investment.

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

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

(xx) The Company has not raised any money by public issue during the year ended March 31,2011.

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

For KHANDELWAL JAIN & CO.

Firm Registration No. 105049W

Chartered Accountants,

(Akash Shinghal)

Place: Mohali Partner

Dated: May 30,2011 Membership No. 103490


Mar 31, 2010

1. We have audited the attached Balance Sheet of HFCL INFOTEL LIMITED, as at March 31, 2010, and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Without qualifying our opinion, we draw attention to Note 1(c) of Schedule 22 to the financial statements, the Company has incurred a loss of Rs 206,447,327 during the year (accumulated loss of Rs 11,400,327,594) resulting into erosion of its net-worth, and has a net current liability of Rs 3,973,000,819 as at March 31, 2010. The ability of the Company to continue as a going concern is significantly dependent on its ability to successfully achieve financial closure to fund its operating and capital funding requirements and to substantially increase its subscriber base. The management in view of its business plans and support from promoters is confident of generating cash flows to fund the operating and capital requirements of the Company. Accordingly, these statements have been prepared on a going concern basis.

5. Attention is invited to :

a) Note 16 (b) of Schedule 23 of the financial statements wherein the Company has obtained advance of Rs. 1,517,500,000 from a non shareholder Company/ Promoter to fund the entry fee for using alternate technology under existing Unified Access Service License (UASL)for Punjab Service Area during March 31,2008. Tlie terms and conditions with respect to tenure, interest, rights and obligations etc. are yet to be finalised hence we are unable to comment on the carrying value and thereby

its impact on the profit and loss for the year. Our audit report on the financial statements for the year ended March 31, 2009 was modified, accordingly;

b) Note 9 (a) of Schedule 23 of the financial statements wherein based on Companys request Corporate Debt Restructuring Cell (CDR) vide their letter no CDR (JCP) No 563 / 2009-10 dated August 13, 2009(CDR letter) has revised the terms of CDR scheme with effect from April 1, 2009. During the year ended March 31, 2010, based on confirmations from lenders and the ability of the management to fulfill all conditions in the precedent to the implementation of the Revised CDR Scheme, the Company has given effect to the terms of the Revised CDR Scheme (without considering any interest costs based on yield with respect to proposed restructuring of 25 percent loan into Cumulative Redeemable preference Shares) and recognised interest costs for the period from April 1, 2009 based on such Scheme and, accordingly, reversed the provision for interest and interest costs of Rs 1,025,846,205. The Company is confident of fulfilling the remaining conditions precedent for the implementation of the Revised CDR Scheme and would fully implement the terms of the Revised CDR Scheme on the completion of such approvals and conditions precedent. The Company has also not made any provision for license fee on such reversal as based on the judgement of Telecom Disputes Settlement & Appellate Tribunal (TDSAT) as it believes that no license fee is leviable. Had the Company followed the old CDR scheme the loss before taxes would have been higher by Rs 724,507,265 before taxes. These financial statements do not include any adjustment which may arise due to inability of the management to complete balance conditions precedent.

6. Further to our comments in 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, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

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

(f) Subject to matter stated in paragraph 5 above consequential effect whereof is not ascertainable in our opinion and to the best of our information and according to the explanations given to us, the said accounts, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as at March 31,2010;

(ii) in the case of the profit and loss account, of the loss for the year ended on that date; and

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

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE Re: HFCL INFOTEL LIMITED

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

(b) AH fixed assets are physically verified by the management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and physical verification have been noticed.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory of network maintenance consumables at reasonable intervals during the year.

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

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) The Company has neither granted nor taken any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Act. Accordingly, clauses (iii) of the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 are not applicable to the Company for the current year.

(iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

(v) According to the information and explanations given to us there were no transactions referred to in section 301 that are required to be entered in the register maintained under section 301 of the Companies Act, 1956 and accordingly the clause (b) is not applicable.

(vi) As more fully discussed in Note 21 on Schedule 23, the Company had surrendered its NBFC licence to the Reserve Bank of India (RBI) and foreclosed the fixed deposits and deposited the amount in an escrow account as directed by the RBI. The Company has not accepted any deposits from the public in the current year within the meaning of Sections 58A and 58AA of the Act and the rules framed there under. Therefore, in our opinion, clause (vi) of Para 4 of the Companies (Auditors Report) Order, 2003 (as amended) is not applicable to the Company for the current year.

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

(viii)We have broadly reviewed the books of account maintained by the Company in respect of services where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we are neither required to nor have we carried out any detailed examination of such accounts and records.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, sales-tax, wealth tax, customs duty, cess and other material statutory dues applicable to it have generally been regularly deposited with the appropriate authorities except there has been delays in many cases in respect of deposit of service tax and withholding tax. The provisions relating to excise duty is not applicable to the Company.

Further, since the Central Governent has till date not prescribed the amount of cess payable under section 441 A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the company in depositing the same.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, cess and other material undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, there are no dues outstanding of income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty and cess on account of any dispute, other than the following:

Name of the Statute Nature of Amount Amount Paid

Dues (Rs) (Rs.)

Income Tax Act, Tax 10,997,359 - 1961

Net Amount (Rs.) Financial Forum where dispute

Year is pending

Income Tax Act, 10,997359 2000-01 Income Tax Appelate 1961 Tribunal

(x) Without considering the matters reported in paragraph 5 of our main audit report, the effects of which are currently not ascertainable the accumulated losses of the Company as at March 31,2010, are more than fifty percent of its net worth as at that date. The Company, has incurred a cash loss of Rs 74,798,095 and Rs 881,292,798 during the year and immediately preceding financial year before considering interest provision on yield basis ofRs 227,329,338 and Rs 66,602,849 respectively.

(xi) Based on our audit procedures and as per the information and explanations given by the management, the Company has defaulted in payment of interest due to a financial institution and banks as presented below. The Company has no outstanding dues to debenture holders.

Name of Due date IDBIBANK Financial Institution / Bank

Interest for Due Paid on Amount

the Month date for Paid

payment Interest

Apr 09 l-May-09 5-Oct-09 1,737,401

May 09 l-Jun-09 5-Oct-09 1,795,314

June 09 l-Jul-09 5-Oct-09 1,737,401

July 09 l-Aug-09 5-Oct-09 1,795,314

Aug 09 l-Sep-09 5-Oct-09 1,795,314

Sep 09 l-Oet-09 5-Oft-09 1,759,249

Oct 09 l-Nov-09 27-Jan-10 1,800,783

Nov 09 l-Dec-09 27-Jan-10 1,741,832

Dec 09 l-Jan-10 22-Mar-10 1,804,324

Jan 10 l-Feb-10 29-Mar-10 1,808,259

FeblO l-Mar-10 29-Mar-10 1,629,855

Total 19,405,045

INGVYSYABANK LIC OF INDIA 0

Paid on Amount Paid on Amount Paid on

Paid Paid

-Interest -Interest Apr 09 25-Feb-l0 130,274 29-Mai-10 325,686 30-Mai-10

May 09 25-Feb-10 134,727 29-Mar-l0 336,818 30-Mar-10

June 09 25-Feb-l0 130,599 29-Mar-10 326,498 30-Mar-10

July 09 25-Feb-l0 135,288 29-Mar-10 338,221 30-Mar-10

Aug 09 25-Feb-l0 135,739 29-Mar-10 339,348 30-Mar-10

Sep 09 25-Feb-l0 133,552 29-Mar-10 333,881 30-Mar-10

Oct 09 25-Feb-l0 139,018 29-Mar-10 347,546 30-Mar-10

Nov 09 25-Feb-l0 135,641 29-Mar-10 339,101 30-Mar-10

Dec 09 25-Feb-l0 141,409 29-Mar-10 353,524 30-Mar-10

Jan 10 25-Feb-l0 142,788 29-Mar-10 356,971 30-Mar-10

Febl0 22-Mar-10 130,030 29-Mar-10 325,813 30-Mar-10

Total 1,489,068 3,723,407

OBC SBOP

Amount Paid on Amount

Paid Paid

-Interest -Interest

Apr 09 325,686 28-Jan-l0 108,562

May 09 336,818 28-Jan-10 112,181

June 09 326,498 28-Jan-10 108,562

July 09 338,221 28-Jan-l0 112,181

July 09 339348 28-Jan-l0 112,181

Sep 09 333,881 28-Jan-l0 109,927

Oct 09 347,546 28-Jan-l0 113,868

Nov 09 339,101 28-Jan-l0 110,471

Dec 09 353,524 22-Mar-10 114,430

Jan 10 356,971 29-Mar-10 114,523

Febl0 325,813 29-Mar-10 101,841

Total 3,723,407 1,218,727

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

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

(xiv) As informed to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company.

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

(xvi) Based on the information and explanations given to us by the management, the term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet and cash flow statement of the Company, we report that at the year end, the Company has used funds amounting to Rs 4,724,502,525 raised on short-term basis (primarily representing loans and Creditors) have been used for long-term investment (primarily representing accumulated losses).

(xviii)The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

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

(xx) The Company has not raised any money by public issue.

(xxi) Based on the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For S.R. Batliboi & Associates

Firm registration number:101049W

Chartered Accountants

per Prashant Singhal

Place: Mumbai Partner

Date : June 25,2010 Membership No. 93283

 
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