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Auditor Report of Ruby Mills Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of THE RUBY MILLS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 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 Financial Statements

The Company's Board of Directors is responsible forthe 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 of 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, whetherduetofraud orerror.

Auditor's Responsibility

Our responsibility is to express an opinion on these 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 whetherthe 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, whetherdueto fraud orerror. In making those risk assessments, the auditor considers internal financial control relevantto the Company's preparation of the financial statements that give a true and fairview in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whetherthe Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of 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 that we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 25.1 to the financial statements regarding pending approval of the applications made by the Company to the Central Government for the Managerial Remuneration paid to the Chairman, Managing Director, Joint Managing Directorand Executive Director.

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 Section 143(11) 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.

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 forthe purpose of ouraudit.

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 ofthose 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 31,2015 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.

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

i. the Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 29 to the financial statements;

ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as required underthe applicable law or accounting standards;

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

Referred to in paragraph 1 underthe heading of"Report on Other Legal and Regulatory Requirements" of our Independent Auditor's Report of even date on the financial statements for the year ended March 31,2015.

We report that:

i. a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets where item wise particulars and tagging of fixed assets are still in the process of updation in the fixed assets register.

b. As explained to us, the fixed assets have been physically verified by the management according to a phased programme designed to cover all the fixed assets over a period of three years, which in our opinion, is at reasonable intervals having regard to the size of the Company and the nature of its assets. No material discrepancies have been noticed on such verification.

ii. a. Inventories, otherthan stocks lying with third parties, have been physically verified bythe management at the year-end.

In our opinion, the frequency of such verification is reasonable. In case of stocks lying with third parties, certificates confirming such stocks have been received in respect of stocks held as on March 31,2015.

b. In our opinion, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size ofthe Company and the nature of its business.

c. In our opinion, the Company has maintained proper records of its inventories and no material discrepancies have been noticed on physical verification between the physical stocks and book records.

iii. As the Company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 ofthe Act, Clause 3(iii)(a) ofthe Order regarding regularity ofthe receipt of principal amount and interest and Clause 3(iii)(b) ofthe Order regarding steps for recovery of overdue amount of more than rupees one lakh, are not applicable.

iv. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size ofthe 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 have been observed in such internal control system.

v. In our opinion and according to the information and explanations given to us, as the Company has not accepted any deposit from the public, Clause 3(v) ofthe Order to comment on whether the Company has complied with the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions ofthe Act andthe rules framed there under, are notapplicable.

vi. Though the cost records are required to be maintained bythe Company pursuant to the Companies (Cost Records and Audit) Rules, 2014 as specified bythe Central Government under Section 148(1) ofthe Act in respect of its products with effect from April 1,2015, the Company has maintained such costs records which we have broadly reviewed and are ofthe opinion that, prima facie, the accounts and records have been made and maintained as aforesaid. However, we have not made a detailed examination of the said records with a view to determine whether they are accurate or complete.

vii. a. According to the information and explanations given to us and on the basis ofthe books and records examined by us, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax, Sales-tax,Wealth tax, Service tax, Customs Duty, Excise Duty, Value Added tax Cess and other statutory dues as applicable to it with the appropriate authorities and there are no arrears of outstanding statutory dues as at the last day ofthe financial year, for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us and on the basis ofthe books and records examined by us, as may be applicable, given hereinbelow are the details of dues of Income-tax, Sales-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess which have not been deposited on account of disputes and the forum where the dispute is pending:

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

High Court Income-tax, interest and penalty

The Income tax Act, Income-tax Income-tax and interest 1961 Appellate Tribunal

Commissioner of Income-tax and interest Income-tax (Appeals)

Assistant Excise duty Commissioner of Central Excise

The Central Excise Commissioner of Excise duty Act, 1944 Central Excise

Customs, Excise and Interest and Penalty Service Tax Appellate Tribunal

Name of the Statute Period to which the Amount (Rs) amount relates

The Income Tax Act 1961 Assessment Years 1,13,84,000 1998-99, 2000-01, 2002-03 and 2005-06

Assessment Year 1998-99 47,000 Assessment Years 10,66,60,415 2006-07 to 2010-11

The Central Excise Act Financial Years 18,52,964 1944 1980-81, 1993-94, 1995-96, 1996-97 to 2000-01, 2001-02

Financial Years 3,26,73,717 2001-02 to 2002-03

Financial Year 20,08,705 2001-02 and 2005-06

Amount deposited or adjusted isRs. 2,44,60,160. c. According to the information and explanations given to us, the amounts which were required to be transferred to the Investor Education and Protection Fund in accordance with the provisions of the Companies Act, 1956 (1 of 1956) and rules underthereunder have been transferred to such fund within time.

viii. There are no accumulated losses of the Company at the end of the financial year and the Company has not incurred any cash losses during such financial year and in the immediately preceding financial year.

ix. According to the information and explanations given to us, as also on the basis of the books and records examined by us, the Company has delayed repayment of dues to banks in respect of instalments and interest onTUF loans andTerm Loans. Details of the period and amount of defaults are as follows:

Name of Bank The Aggregate The Aggregate Period of Delay of Amount of Amount of Principal Interest

Axis Bank Limited

- TUFV Loan 2,50,00,000 1,28,47,973 From 3 to 60 days

- Term Loan 84,25,00,000 23,78,49,956 From 4 to 90 days

Allahabad Bank Limited

- Term Loan 91,95,093 93,04,907 1 day

UCO Bank Limited

- TUF Loan 1,25,00,000 6,03,322 From 13 to 31 days

IDBI Bank Limited

- TUF Loan 1,14,79,590 1,14,73,835 From 4 to 55 days

The Company has neither taken any loan from financial institution nor has issued any debenture.

x. According to the information and explanations given to us, as the Company has not given any guarantee for loans taken by others from banks or financial institutions, the requirement of Clause 3(x) of the Order to comment on whether the terms and conditions whereof are prejudicial to the interest of the Company is not applicable.

xi. According to the information and explanations given to us, the term loans have been applied for the purpose for which they were obtained.

xii. Based on the audit procedures performed and 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 year.

For B. S. MEHTA & CO. Chartered Accountants Firm Registration No. 106190W

PARESH H. CLERK PLACE : MUMBAI Partner DATED: 15thMay, 2015 Membership No. 36148


Mar 31, 2014

We have audited the accompanying financial statements of THE RUBY MILLS LIMITED ("the Company") which comprise the Balance Sheet as at March 31, 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 principles generally accepted in India including Accounting Standards notified under the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated September 13, 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 fair 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 the disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, 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 that we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

ii. in the case of Statement of Profit and Loss, of the profit for the year ended on that date; and

iii. in the case of Cash Flow Statement, of the 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, 2003 ("the Order"), as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004, issued by the Central Government in terms of section 227(4A) of the Act, we enclose in the Annexure a statement on the matters specified in the paragraphs 4 and 5 of the 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 it appears from our examination of those books;

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

d. In our opinion, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013;

e. On the basis of the written representations received from the directors of the Company as on March 31, 2014, taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2014 from being appointed as a director in terms of section 274(1)(g) of the Act.

Annexure to Independent Auditors'' Report

[Referred to in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date to the members of THE RUBY MILLS LIMITED on the financial statements for the year ended March 31, 2014]

On the basis of such checks as we considered appropriate and in terms of information and explanations given to us, we report that:

i a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets except in case of certain assets where item wise particulars and tagging of fixed assets are still in the process of updation in the fixed asset register.

b. The Company has adopted a policy of verifying all its fixed assets in a phased manner designed to cover all the fixed assets over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and nature of its assets. As explained to us, no material discrepancy was noticed between book records and such verification.

c. The Company has not disposed off any substantial part of its fixed assets during the year so as to affect its going concern.

ii a. Inventories have been physically verified by the management at the year-end. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its business. In case of stocks lying with third parties, certificates confirming such stocks have been received in respect of stocks held as on March 31, 2014.

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 inventory. The discrepancies noticed on verification between physical inventories and book records were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii a. As per the information furnished, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956.

As the company has not granted any loans, Clause (iii)(b) of the Order relating to the rate of interest and other terms and conditions, whether prima facie prejudicial to the interest of the Company, Clause (iii)(c) relating to the regularity of the receipt of principal amount and interest and Clause (iii)(d) relating to steps for recovery of overdue amount of more than rupees one lakh, are not applicable.

b. As per the information furnished, the Company has taken unsecured loans from ten parties covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was ?38,14,25,000 and the year-end balance of loan taken from such parties was ? 37,80,50,000.

In our opinion, the rate of interest and other terms and conditions on which loans have been taken from Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.

The Company is regular in repayment of the principal amounts as stipulated and as also in the payment of interest.

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

v a. According to the information and explanations given to us and the records of the Company examined by 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; and

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements (including purchase of services) entered into the register in pursuance of Section 301 of the Act and exceeding the value of Rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable, having regard to prevailing market prices at the relevant time, wherever applicable.

vi In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from the public during the year and hence, the question of complying with the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the rules framed thereunder, does not arise.

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

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

ix a. According to the information and explanations given to us and the records examined by us, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-Tax, Sales-Tax, Wealth-Tax, Service-Tax, Customs Duty, Excise Duty, Cess and other material Statutory dues applicable to it and there were no arrears of such Statutory dues as on 31st 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, as may be applicable, given herein below are the details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess which have not been deposited on account of disputes and the forum where the dispute is pending:

Name of Forum where Nature of the Dues the Statute Dispute is Pending The Income- High Court Income-tax and penalty on account tax Act, of treatment of sale of leasehold 1961 land and national interest on ICD

Income-tax Income-tax on account of disallowances Appellate due to classification and valuation of Tribunal immovable property Commissioner of Income-tax and applicable interest Income-tax thereon on account of various Additions (Appeals) and disallowances

The Central Assistant Excise duty on account of additions due Excise Act, Commissioner of to classification, valuation and 1944 Central Excise disallowance of MODVAT Credit

Commissioner of Excise duty on account of disallowance Central Excise of MODVAT Credit on inter-unit transfer

Customs, Excise Interest and Penalty due to disallowances and Service Tax on account of CENVAT Credit and Appellate Tribunal valuation of Sales



Name of Period to which the Amount (Rs.) the Statute amount relates The Income- Assessment: Year 1998-99, 2000-01, 4,28,39,000 tax Act, 1961 2002-03 and 2005-06 Assessment: Year 1998-99 47,000 Assessment: Year 2006-07 to 2010-11 10,35,70,918 The Central Financial Year 1980-81, 1993-94, 20,02,964 Excise Act, 1995-96, 1996-97 to 2000-01, 2001-02 1944 Financial Year 2001-02 to 2002-03 3,26,73,717 Financial Year 2001-02 and 2005-06 20,08,705

x. There are no accumulated losses of the Company as on March 31, 2014 and the Company has not incurred any cash losses during such financial year and in the immediately preceding financial year.

xi According to the information and explanations given to us and records of the Company examined by us, the Company has delayed repayment of dues to banks in respect of instalments and interest on Term Loans as also of one credit facility. Details of the period and amount of defaults are as follows:

Name of Bank The Aggregate The Aggregate Period of Delay of Amount of Amount of Interest Principal Rs. Rs.

IDBI Bank Limited * TUF Loan 1,14,79,590 1,12,46,263 From 27 to 30 days

UCO Bank Limited * TUF Loan 2,20,84,000 43,31,730 From 1 to 63 days

Axis Bank Limited * Term Loan 13,49,32,519 9,34,00,055 From 1 to 28 days * TUF V Loan 3,73,83,353 2,34,13,646 From 1 to 90 days

Allahabad Bank Limited * Term Loan * Current Account 7,37,79,000 NIL From 1 to 61 days Account 7,71,51,648 NIL From 3 to 78 days

The Company has neither taken any loan from financial institution nor has issued any debenture.

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

xiii As the Company is not a chit fund, Nidhi, mutual benefit fund or a society, Clause 4 (xiii) of the Order is not applicable.

xiv According to the information and explanations given to us, as the Company is not dealing or trading in shares, securities, debentures and other investments, the requirements of Clause 4(xiv) of the Order relating to the maintenance of the proper records of the transactions and contracts and making of timely entries therein are not applicable.

xv According to the information and explanations given to us, as the Company has not given any guarantee for loans taken by others from banks or financial institutions, the requirement of Clause 4 (xv) of the Order to comment on whether the terms and conditions, whereof are prejudicial to the interest of the Company, is not applicable.

xvi According to the information and explanations given to us on an overall basis, the term loans have been applied for the purposes 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 funds raised on short-term basis have not been utilised for long-term investment.

xviii According to the information and explanations given to us, as the Company has not made any preferential allotment of shares during the year, Clause 4(xviii) of the Order is not applicable.

xix According to the information and explanations given to us, as the Company has not issued any debenture, the question of creating security or charges in respect thereof does not arise.

xx As the Company has not raised any money by public issues during the year, Clause 4 (xx) of the Order is not applicable.

xxi Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud (i.e. intentional material misstatements resultant from fraudulent financial reporting and misappropriation of assets) on or by the Company has been noticed or reported during the course of our audit.

For B. S. MEHTA & CO. Chartered Accountants Firm Registration No. 106190W

PARESH H. CLERK Place : Mumbai Partner Date : May 17, 2014 Membership No. 36148


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of THE RUBY MILLS LIMITED ("the Company") which comprise the Balance Sheet as at March 31, 2013, 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 principles generally accepted in India including accounting standards referred to in section 211(3C) of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and fair 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 judgement, 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 that we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

ii. in the case of Statement of Profit and Loss, of the profit for the year ended on that date; and

iii. in the case of Cash Flow Statement, of the Cash Flow 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"), as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004, issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in the paragraph 4 of the 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 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 Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act;

e. On the basis of the written representations received from the directors of the Company as on March 31, 2013, taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2013 from being appointed as a director in terms of Section 274(1)(g) of the Act.

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT

[Referred to in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date to the members of THE RUBY MILLS LIMITED on the financial statements for the year ended March 31, 2013]

On the basis of such checks as we considered appropriate and in terms of information and explanations given to us, we report that:

I. a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets except in case of certain assets where item wise particulars and tagging of fixed assets are in the process of updation in the fixed asset register.

b. The Company has adopted a policy of verifying all its fixed assets in a phased manner, which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. As explained to us, no material discrepancy was noticed between book records and such verification.

c. The Company has not disposed off any substantial part of its fixed assets during the year so as to affect its going concern.

ii. a. Inventories have been physically verified by the management at the year-end. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its business. In case of stocks lying with third parties, certificates confirming such stocks have been received in respect of stocks held as on March 31, 2013.

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 inventory. The discrepancies noticed on verification between physical inventories and book records were not material in relation to the operations of the Company and the same have been properly dealt with in the books of accounts.

iii. a. As per the information furnished, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956.

As the company has not granted any loans, Clause (iii)(b) of the Order relating to the rate of interest and other terms and conditions, whether prima facie prejudicial to the interest of the Company, Clause (iii)(c) relating to the regularity of the receipt of principal amount and interest and Clause (iii)(d) relating to steps for recovery of overdue amount of more than rupees one lakh, are not applicable.

b. As per the information furnished, the Company has taken unsecured loans from ten parties covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was " 31,38,10,000 and the year end balance of loan taken from such parties was " 29,74,45,000.

In our opinion, the rate of interest and other terms and conditions on which loans have been taken from Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.

The Company is regular in repayment of the principal amounts as stipulated and as also in the payment of interest.

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

v. a. According to the information and explanations given to us and the records of the Company examined by us, we are of the opinion that the particulars of all contracts or arrangements that need to be entered into the register maintained under section 301 of Act have been so entered; and

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements (including purchase of services) entered into the register in pursuance of Section 301 of the Act and exceeding the value of Rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable, having regard to prevailing market prices at the relevant time, wherever applicable.

vi. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from the public during the year and hence, the question of complying with the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the rules framed thereunder, does not arise.

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

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

ix. a. According to the information and explanations given to us and the records examined by us, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-Tax, Sales-Tax, Wealth-Tax, Service–Tax, Customs Duty, Excise Duty, Cess and other material Statutory dues applicable to it and there were no arrears of such Statutory dues as on March 31, 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, as may be applicable, given herein below are the details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess which have not been deposited on account of disputes and the forum where the dispute is pending:

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

Disallowance of expenditure/ deductions

Taxability of notional income by way of interest High Court Taxability of notional income by way of interest and disallowance of loss

Disallowance of expenditure/deductions

Income-tax The Income- Appellate Tribunal Levy of Penalty under Section 271(1)(c) tax Act, 1961

Disallowance of expenditure/ deductions, granting short credit for Tax Deducted at Source, Levy of Interest for short payment/non- payment of taxes u/s-234B/234C/234D Commissioner of

Income-tax Disallowance of expenditure/ deductions, (Appeals)

Levy of Interest for short payment /non-payment u/s-234B/234C/234D

Disallowance of expenditure/deductions Adverse Test Results Sourced Parachutes Cloth Classification Valuation of fabrics selling distribution Assistant profit and administration and interest Commissioner of The Central

Central Excise Double Multiple (folded) Yarn Excise Act, 1944 MODVAT Credit on Empty Drums

MODVAT Credit wrongly availed

Commissioner of MODVAT Credit on Inputs received from Central Excise Dhamni Unit

Name Period to which the Amount (Rs.) amount relates

Assessment Year 1995-96 45,000

Assessment Year 1998-99, 2,29,70,000 2000-01 and 2002-03

Assessment Year 1,13,84,000 2001-02

Assessment Year 47,000 1998-99

Assessment Year 49,92,000 2005-06

Assessment Year 1,40,39,000 2007-08

The Income- Assessment Year 93,82,000 2008-09 Assessment Year 2,22,33,000 2009-10

Financial Year 23,000 1980-81

Financial Year 7,23,711 1993-94

Financial Year 1996-97 to 8,06,022 2000-01

Financial Year 1,46,727 1995-96

Financial Year 95,738 2001-02

Financial Year 2,07,766 1997-98

Financial Year 2001-02 to 3,26,73,717 2002-03

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

Differential Value from Depot Sales Customs, Excise and Service Tax Appellate Tribunal Interest and Penalty on Cenvat Credit Availed on Capital Goods

The Finance Customs, Excise Service tax on GTO Act, and Service Tax 1994 Appellate Tribunal

Employees Employees'' Dues of Apprentices paid under protest Provident Provident Fund Fund Act, Appellate 1952 Tribunal

Name Period to which the Amount (Rs.) amount relates

Financial Year 2001-02 4,33,248

Financial Year 2005-06 15,75,457

Financial Year 1997-98 and 76,546 2000-01

The Finance Financial Year 2000-01 to 15,65,934 2006-07

x. There are no accumulated losses of the Company as on March 31, 2013 and the Company has not incurred any cash losses during such financial year and in the immediately preceding financial year.

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

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

xiii. As the Company is not a chit fund, Nidhi, mutual benefit fund or a society, Clause 4 (xiii) of the Order is not applicable.

xiv. According to the information and explanations given to us, as the Company is not dealing or trading in shares, securities, debentures and other investments, the requirements of Clause 4(xiv) of the Order relating to the maintenance of the proper records of the transactions and contracts and making of timely entries therein are not applicable.

xv. According to the information and explanations given to us, as the Company has not given any guarantee for loans taken by

others from banks or financial institutions, the requirement of Clause 4 (xv) of the Order to comment on whether the terms and conditions, whereof are prejudicial to the interest of the Company, is not applicable.

xvi. According to the information and explanations given to us on an overall basis, the term loans have been applied for the purposes 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 funds raised on short-term basis have not been utilised for long-term investment.

xviii. According to the information and explanations given to us, as the Company has not made any preferential allotment of shares during the year, Clause 4(xviii) of the Order is not applicable.

xix. According to the information and explanations given to us, as the Company has not issued any debenture, the question of creating security or charges in respect thereof does not arise.

xx. As the Company has not raised any money by public issues during the year, Clause 4 (xx) of the Order is not applicable.

xxi. Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud (i.e. intentional material misstatements resultant from fraudulent financial reporting and misappropriation of assets) on or by the Company has been noticed or reported during the course of our audit. For B. S. MEHTA & CO.

Chartered Accountants

Firm Registration No. 106190W

PARESH H. CLERK

Place : Mumbai Partner

Date : May 28, 2013 Membership No. 36148


Mar 31, 2012

1. We have audited the attached Balance Sheet of The Ruby Mills Limited as at March 31, 2012 and the Statement of Profit and Loss of the Company for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003, as amended, issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as considered appropriate and according to the information and explanations to us, we enclose in the Annexure a Statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

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

b. In our opinion, proper books of account as required by law, have been kept by the Company so far as appears from our examination of such 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 sub-section (3C) of Section 211 of the Companies Act, 1956;

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

f. In our opinion and to the best of our knowledge and according to the explanations given to us, the said financial statements read with Notes (including Significant Accounting Policies) forming part thereof, 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 31,2012;

ii. in the case of Statement of Profit and Loss, of the profit for the year ended on that date; and

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

Annexure to the Auditor's Report (Referred to in Paragraph (3) to of 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 in case of certain assets where item wise particulars and tagging of fixed assets are in the process of updation in the fixed asset register.

b. The Company has adopted a policy of verifying all its fixed assets in a phased manner, which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. As explained to us, No material discrepancy was noticed between book records and such verification.

c. The Company has not disposed off any substantial part of its fixed assets during the year so as to affect its going concern.

ii. a. Inventories have been physically verified by the management at the year-end. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its business. In case of stocks lying with third parties, certificates confirming such stocks have been received in respect of stocks held as on March 31, 2012.

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 inventory. The discrepancies noticed on verification between physical inventories and book records were not material in relation to the operations of the Company and the same have been properly dealt with in the books of accounts.

iii. a. As per the information furnished, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956.

As the company has not granted any loans, Clause (iii)(b) of the Order relating to the rate of interest and other terms and conditions, whether prima facie prejudicial to the interest of the Company, Clause (iii)(c) relating to the regularity of the receipt of principal amount and interest and Clause (iii)(d) relating to steps for recovery of overdue amount of more than rupees one lakh, are not applicable.

b. As per the information furnished, the Company has taken unsecured loans from ten parties covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 26,45,00,000 and the year end balance of loan taken from such parties was Rs. 24,25,00,000 respectively.

In our opinion, the rate of interest and other terms and conditions on which loans have been taken from Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.

The Company is regular in repayment of the principal amounts as stipulated and as also in the payment of interest.

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

v. a. According to the information and explanations given to us and the records of the Company examined by 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; and

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements (including purchase of services) entered into the register in pursuance of Section 301 of the Act and exceeding the value of Rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable, having regard to prevailing market prices at the relevant time, wherever applicable.

vi. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from the public during the year and hence, the question of complying with the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the rules framed thereunder, does not arise.

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

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

ix. a. According to the information and explanations given to us and the records examined by us, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-Tax, Sales-Tax, Wealth-Tax, Service-Tax, Customs Duty, Excise Duty, Cess and other material Statutory dues applicable to it and there were no arrears of such Statutory dues as on March 31, 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, as may be applicable, given herein below are the details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess which have not been deposited on account of disputes and the forum where the dispute is pending:

Name of the Nature of Dues Period to which the Statute amount relates

The Income Interest Capitalisation Assessment Year 1995-96 tax Act, 1961 ICD Interest rationally taxed Assessment Year 1998-99, 2000-01 and 2002-03

ICD Interest notionally taxed Assessment Year 2001-02 and Bad Debt written off

Treatment of Khandala Holiday Assessment Year 1998-99 Home as non business asset and valuation of other immovable asset

Treatment of Sale of CIDCO Assessment Year 2005-06 leasehold rights Penalty under Section Assessment Year 2005-06 271 (1)(c) Addition under Section 145 Assessment Year 2007-08 and Section 69C Mark to Market derivative losses, Depreciation on Assessment Year 2008-09 Leased assets

Depreciation Assessment Year 2009-10 of Leased assets, Foreign Exchange Loss

The Central Adverse Test Results Financial Year 1980-81 Excise Act, 1944 Sourced Parachutes Cloth Financial Year 1993-94 Classification

Valuation of fabrics Financial Year 1996-97 selling distribution profit 2000-01 and to administration and interest

Double Multiple (folded) Yarn Financial Year 1995-96

MODVAT Credit on Empty Drums Financial Year 2001-02

The Central MODVAT Credit wrongly availed Financial Year 1997-98 Excise Act, 1944 MODVAT Credit on Inputs Financial Year 2001-02 received from Dhamni Unit to 2002-03

Differential Value from Financial Year 2001-02 Depot Sales

Interest and Penalty on Financial Year 2005-06 Cenvat Credit Availed on Capital Goods

The Finance Service tax on GTO Financial Year 1997-98 Act, 1994 and 2000-01

Employees Dues of Apprentices paid Financial Year 2000-01 Provident under protest to 2006-07 Fund Act, 1952



Name of the Nature of Dues Amount (Rs.) Forum statue where dispute is pending

The Income Interest Capitalisation 45,000 High Court tax Act, 1961 ICD Interest rationally 2,29,70,000 High Court taxed 2000-01 and 2002-03

ICD Interest notionally 1,13,84,000 High Court taxed and Bad Debt written off

Treatment of Khandala 47,000 Income-tax Holiday Home as non appellate business asset and Tribunal valuation of other immovable asset

Treatment of Sale of CIDCO leasehold rights 34,93,000 Income-tax appellate Tribuanal

Penalty under Section 53,85,000 Income-tax 271 (1)(c) appellate Tribuanal Addition under Section 1,40,39,000 Commissioner 145 and Section 69C of Income-tax (Appeals)-XIII

Mark to Market derivative 1,03,07,000 Commissioner losses, Depreciation on of Income-tax Leased assets (Appeals)-XIII Depreciation 2,22,33,000 Commissioner of Leased assets, Foreign of Income-tax Exchange Loss (Appeals)-XIII

The Central Adverse Test Results 23,000 Assistant Excise Act, Commissioner 1944 of Central Excise

Sourced Parachutes Cloth 7,23,711 Assistant Classification Commissioner of Central Excise

Valuation of fabrics selling distribution 8,06,022 Assistant profit Commissioner and to administration and of Central interest Excise

Double Multiple (folded) 1,46,727 Assistant Yarn Commissioner of Central Excise

MODVAT Credit on Empty 95,738 Assistant Drums Commissioner of Central Excise

The Central MODVAT Credit wrongly 2,07,766 Assistant Excise Act, availed Commissioner 1944 of Central Excise

MODVAT Credit on Inputs received from Dhamni Unit 3,26,73,717 Commissioner of Central Excise, Mumbai IV Differential Value from 4,33,248 Customs, Depot Sales Excise and Service Tax Appellate Tribunal

Interest and Penalty on 15,75,457 Customs, Cenvat Credit Availed on Excise and Capital Goods Service Tax Appellate Tribunal

The Finance Service tax on GTO 76,546 Customs, Act, 1994 Excise and Service Tax Appellate Tribunal

Employees Dues of Apprentices paid 15,65,934 Employees' Provident under protest Provident Fund Act, Fund 1952 Appellate Tribunal



x. There are no accumulated losses of the Company as on March 31,2012 and the Company has not incurred any cash losses during such financial year and in the immediately preceding financial year.

xi. According to the information and explanations given to us and records of the Company examined by us, the Company has delayed repayment of dues to Financial Institutions and Banks in respect of Term Loan. The following are the details of the delays:

Name of Bank Amount Overdue Period of Delays (Rs. in Lakhs)

Bank of Baroda 10,97,27,033 Up to 53 days

12,13,62,546 Up to 101 days

9,64,54,602 Up to 60 days

3,05,88,800 Up to 60 days

2,14,95,287 Up to 86 days

Axis Bank 10,65,62,091 Up to 80 days

10,65,46,611 Up to 81 days

Allahabad Bank 21,32,701 Up to 46 days

2,52,69,617 Up to 18 days

As amounts have been paid for such delays before the year end, no default exists as at March 31,2012.

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

xiii. As the Company is not a chit fund, Nidhi, mutual benefit fund or a society, Clause 4 (xiii) of the Order is not applicable.

xiv. According to the information and explanations given to us, as the Company is not dealing or trading in shares, securities, debentures and other investments, the requirements of Clause 4(xiv) of the Order relating to the maintenance of the proper records of the transactions and contracts and making of timely entries therein are not applicable.

xv. According to the information and explanations given to us, as the Company has not given any guarantee for loans taken by others from banks or financial institutions, the requirement of Clause 4 (xv) of the Order to comment on whether the terms and conditions, whereof are prejudicial to the interest of the Company, is not applicable.

xvi. According to the information and explanations given to us on an overall basis, the term loans have been applied for the purposes 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 funds raised on short term basis have not been utilised for long term investment.

xviii. According to the information and explanations given to us, as the Company has not made any preferential allotment of shares during the year, Clause 4(xviii) of the Order is not applicable.

xix. According to the information and explanations given to us, as the Company has not issued any debenture, the question of creating security or charges in respect thereof does not arise.

xx. As the Company has not raised any money by public issues during the year, Clause 4 (xx) of the Order is not applicable.

xxi. Based on the audit procedures performed and information and explanations given to us by the management, we report that no fraud (i.e. intentional material misstatements resultant from fraudulent financial reporting and misappropriation of assets) on or by the Company has been noticed or reported during the course of our audit.



For B.S. MEHTA & CO. Chartered Accountants Firm Registration Number: 106190W

PARESH H. CLERK Partner Membership No. 36148

PLACE : MUMBAI DATED : August 14, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of The Ruby Mills Limited as at 31st March 2011 and the Profit & Loss Account and the Cash Flow Statement of the Company 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 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 amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies' (Auditor's Report) Order, 2003, as amended, issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as considered appropriate and according to the information and explanations to us, we enclose in the Annexure a Statement on the matters specified in paragraph 4 & 5 of the said Order.

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

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

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

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

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

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

vi. In our opinion and to the best of our knowledge and according to the explanations given to us, the said accounts read together with 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:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2011;

b) In the case of the Profit and Loss Account, of the profit for the year ended on that date; and

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

Annexure to the Auditors' Report [Referred to in Paragraph (3) of our report of even date]

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

b. In our opinion, the fixed assets have been physically verified by the management at reasonable intervals, having regard to the size of the Company and the nature of assets. No material discrepancies have been noticed.

c. In our opinion and according to the information and explanation given to us, on such verification a substantial part of the fixed assets has not been disposed of by the Company during the year.

ii. a. As explained to us, inventories have been physically verified by the management at regular intervals, except for inventories lying with third parties at the year end for which confirmations have been obtained in most of the cases. In our opinion, the frequency of verification is reasonable.

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

c On the basis of our examination of the inventory records of the Company, we are of the opinion that the Company is maintaining proper records of its inventories. As explained to us, there were no material discrepancies noticed on physical verification of inventory as compared to the book records.

iii. a 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. As the Company has not granted any loans, secured or unsecured, to parties listed in the Register maintained under Section 301 of the Companies Act, 1956, Paragraphs 4 (iii) (b), (c) and (d) of the Order, are not applicable.

b. The Company has taken unsecured loans from eight parties covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved at any time during the year and year-end balance of such loans aggregate to Rs. 18,44,75,000 and Rs. 18,06,95,000 respectively.

c. In our opinion and according to the information and explanations given to us, the rate of interest, wherever applicable and other terms and conditions of loans taken by the Company are not prima facie prejudicial to the interest of the Company.

d. In respect of loans taken by the Company, the interest payments are regular and the principal amount is repayable on demand.

iv. 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, fixed assets and for the sale of goods. Further on the basis of our examination of the books and records of the Company no major weakness in internal control has been noticed or reported.

v. a. According to the information and explanations given to us and the records of the Company examined by us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered into 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 or arrangements entered into the register in pursuance of Section 301 of the Act and exceeding the value of Rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable, having regard to prevailing market prices at the relevant time, wherever applicable.

vi. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public during the year and hence, the question of complying with the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the rules framed there under does not arise.

vii. On the basis of the internal audit reports broadly reviewed by us, we are of the opinion that, the coverage of internal audit functions carried out by the firm of chartered accountants appointed by the management is commensurate with the size of the company and the nature of its business.

viii. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956 in respect of the Company's products to which the said rules are made applicable, and 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 records with a view to determine whether they are accurate or complete.

ix. a. According to the information and explanations given to us and the records examined by us, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues have generally been regularly deposited with the appropriate authorities.

b. According to the information and explanations given to us and the records examined by us, the particulars of dues of Sales Tax, Income Tax, Wealth-Tax and Excise Duty, wherever applicable, as at March 31, 2011, which have not been deposited on account of a dispute, are referred to in Annexure "A".

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

xi. According to the information and explanations given to us, as also on the basis of the books and records examined by us, during the year, the Company has defaulted in repayment of dues to banks. An amount of Rs. 14,07,52,372 which was due on December 31, 2010; an amount of Rs.5,50,89,401 which was due on February 7, 2011 and the amount of Rs. 25,36,48,725 which was due at the balance sheet date have remained unpaid on the respective due dates; these amounts have since been paid.

xii. According to the information and explanations given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

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

xiv. In our opinion and according to the information and explanations given to us, as the Company is not dealing or trading in shares, securities, debentures and other investments, Paragraph 4 (xiv) of the Order relating to the maintenance of the proper records of the transactions and contracts and making of timely entries therein are not applicable. All the invest- ments are held by the Company in its own name.

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

xvi. According to the information and explanations given to us on an overall basis, the term loans have been applied for the purposes for which they were raised.

xvii. Based on the information and explanations given to us and on an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on a short term basis which have been used for long term investment.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956 during the year.

xix. As the Company has no debentures outstanding any time during the year, paragraph 4(xix) of the Order is not applicable to the Company.

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

xxi. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company noticed or reported during the year, nor have we been informed of such a case by the Management.

For B.S. Mehta & Co.

Chartered Accountants

Firm's Registration Number: 106190W

KRUPA R. GANDHI (MS.)

Place : Mumbai Partner.

Dated : 11th August 2011 Membership No. 49392.

 
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