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Auditor Report of SBEC Sugar Ltd.

Mar 31, 2015

Report on the Standalone Financial Statements

We have audited the accompanying financial statements of SBEC Sugar Limited ("the company"),which comprise the Balance Sheet as at 31 March 2015, the Statement of Profit and Loss, 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 for the matters 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 the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the 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 internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

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

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give true and fair view 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 Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

i) The Company has not made provision for interest, on late payment of cane dues for the year of Rs.3541.64 lacs & for earlier years Rs. 2504.79 lacs aggregating to Rs. 6046.43 lacs. Accordingly manufacturing expense and net losses for the year would have been higher by Rs. 3456.78lacs and its consequential impact on current liabilities and EPS.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the affects of matter described in the Basis for Qualified Opinion paragraph, the aforesaid financial statements, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;

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.

Emphasis of Matters

We draw attention to the following matters in the Notes to the financial statements:

a) The Companies financials have been prepared on "Going Concern" as the company has continued its normal manufacturing operations during the season 2014-15.

Note No.41 in the financial statements indicates that The company in terms of Board of Director's resolution dated 6th July 2013 has fled a reference with the Board for Industrial and Financial Reconstruction (BIFR) U/S 15(1) of the Sick Industrial companies (Special Provisions) Act 1985 (SICA) vide its letter dated 24th July 2013 and as per communication received from BIFR vide its letter No. 3/(S-22)/ BC/2013 dated 21st August 2013, The said reference has been registered by BIFR as case No. 58/2013. The BIFR has declared the company as Sick u/s 3(1)(0) of SICA and appointed IDBI as operating agency u/s 17(3) of the Act. in its hearing held on dated 04.02.2014& the Draft Rehabilitation Scheme is under compilation.

b) Note No. 45 in the financial statement regarding accounting of subsidy of Rs. 2566.06 lacs, as per PNCM Cabinet Decision dated 12th November 2014 issued by State Government of Uttar Pradesh subject to approval of appropriate authority.

Our opinion is not modified in respect of these matters.

Report on other Legal and Regulatory Requirements

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

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

b) In our opinion proper books of account as required by law have been kept by the Company so far as 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, 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) The going concern matter described in sub-paragraph (b) under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

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

g) With respect to the other matters included in the Auditor's Report and to our 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 32 (iii) & (iv) to the financial statements and except for the possible effects of the matter described in paragraph of the "Basis of Qualified Opinion".

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses

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

ANNEXURE TO AUDITORS' REPORT

(Annexure referred to in our report of even date)

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

(b) The Fixed assets have not been physically verified by the management during the year therefore discrepancies, if any, could not be determined.

ii. (a) The inventory has not been physically verified by the management during the year.

(b) Though the physical verification programme for inventory as envisaged by the management is, in our opinion, reasonable and ad- equate in relation to the size of the Company and nature of its business. However no physical verification of inventories has been done during the year.

(c) In our opinion, the Company is maintaining proper records of inventory. The discrepancies, if any, compared to book records could not be determined in absence of physical verification.

iii. The company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act.

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

v. The company has deposits from public accepted during previous years. As per compliance of Section 74 of Companies Act 2013 company has to repay the deposits till 31st March 2015. The company has obtained expert legal opinion that since company is in BIFR and it is not required to repay the amount of deposit till the final order of BIFR/AAIFR. As on the date of balance sheet the outstanding amount of public deposits was Rs.6,58,25,000 and accrued interest thereon is Rs.19,04,634.

vi. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company as specified by the Central Government of India under section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate and complete.

vii. (a) According to the records of the Company, 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 other material statutory dues have generally been regularly deposited during the year with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employee employees' state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable, except the company has not paid Water Cess of Rs. 5,62,265 and interest of Rs. 1,59,674 to U.P. Pollution Control Board for the year 2012-13 for which a fresh demand order has been received by the company.

(c) According to the information and explanations given to us and as per the books and records examined by us, the particulars of statutory dues of the specified statue as at the year, which have not been deposited on account of a dispute are referred to in Annexure "B".

(d) According to the records of the Company and as explained to us the company did not have any dues on account of investor education and protection fund.

viii. In Our Opinion, the accumulated losses of the company are more than fifty percent of its net worth. During the year company had incurred cash loss of Rs. 2580.31 Lacs. In the immediately preceding financial year also, the company had incurred cash loss. The company is a Sick Industrial Company within the meaning of Sick Industrial Companies (Special Provision) Act, 1985& is registered with BIFR.

ix. According to the information and explanations given to us and as per the books and records examined by us, the Company has not defaulted in repayment of dues to any financial institution or bank.

x. The Company has provided guarantee to SREI Infrastructure Finance Ltd. and the Government of Jharkhand is respect of loans taken by SBEC Bio Energy Limited (a subsidiary company) and Bihar Sponge Iron Limited respectively. The terms and conditions of the guarantees are prima facie, not prejudicial to the interest of the Company.

xi. In our opinion, and according to the information and explanations given to us, the term loans raised during the year by the company have been applied for the purpose for which the said loans were obtained, where such end use has been stipulated by the lender.

xii. 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, 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 case by the management.

ANNEXURE "B" TO AUDITORS' REPORT

Referred in Paragraph 7(C) of Annexure "A" a statement on the matters specified in the Companies (Auditors' Report) Order, 2015 for the Year ended 31st March 2015.

Name of the Statute Name of Dues Amount Period to which (Rs. in Lacs) amount relates

UP VAT Act , 2008 Entry Tax imposed on Sugar Purchased and Sold 760.56 2010-11

UP VAT Act , 2008 VAT imposed on Molasses, 622.68 2010-11 Bagasse and old scrap sold

UP VAT Act , 2008 CST imposed on 70.00 2010-11 Molasses sold

Central Excise, 1944 Cess on Sugar 4.35 01.01.2009- Scale 30.09.2009

Finance Act, 1994 Service Tax on Commission 16.83 01.04.2008- 01.12.2010

Finance Act, 1994 Service Tax on Lease Rent 1.81 2012-13

Finance Act, 1994 Service Tax on Lease Rent 1.12 April 2011- March 2012

Finance Act, 1994 Service Tax on Commission 150.88 2003-04

Name of the Statute Forum where dispute is pending

UP VAT Act, 2008 Application Filed with Deputy

Commissioner for reopen the same u/s 32

UP VAT Act, 2008 Application Field with Deputy

Commissioner for reopen the same u/s 32

UP VAT Act, 2008 Application Field with Deputy

Commissioner for reopen the same u/s 32

Central Excise, 1944 Appeal submitted before CESTAT by the department against the the Commissioner (Appeals) Meerut

Finance Act, 1994 Appeal fled before Commissioner (Appeals), Meerut

Finance Act, 1994 Appeal fled before Commissioner (Appeals), Meerut

Finance Act, 1944 Appeal fled before Commissioner (Appeals), Meerut

Finance Act, 1944 CESTAT has sent back the case to Commissioner Appeals, Meerut-1 for Remand



For Doogar & Associates

Chartered Accountants

Firm Regn. No. 000561N

Mukesh Goyal

Place: New Delhi Partner

Dated: 30th May 2015 Membership No.-081810


Mar 31, 2014

Report on the financial statements

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

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 sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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 qualified audit opinion.

Basis for Qualified Opinion

i) The Companies financials have been prepared on "Going Concern" as the company has continued its normal manufacturing operations during the season 2013-14.

The company in terms of Board of Director''s resolution dated 6th July 2013 has filed a reference with the Board for Industrial and Financial Reconstruction (BIFR) U/S 15(1) of the Sick Industrial companies (Special Provisions) Act 1985 (SICA) vide its letter dated 24th July 2013 and as per communication received from BIFR vide its letter No. 3/(S-22)/BC/2013 dated 21st August 2013, The said reference has been registered by BIFR as case No. 58/2013. The BIFR has declared the company as Sick u/s 3(1)(0) of SICA and appointed IDBI as operating agency u/s 17(3) of the Act. in its hearing held on dated 04.02.2014.

(ii) The company''s has not made provision for interest, on late payment of cane dues amounting to Rs2241.12 Lacs. Accordingly manufacturing expenses and net losses would have been higher by Rs2241.12 lacs respectively & its consequential impact on EPS.

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 for Qualified Opinion paragraph, 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, 2014;

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

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

Emphasis of matter

Without qualifying our opinion, we draw attention to:

Note no - 33 To these financial statements wherein company had executed a deed of assignment with a subsidiary company "SBEC Bioenergy Limited" to transfer its claim and all securities and charges created by Modi Industries Limited in its favor for a consideration of Rs12,500 lacs of which Rs 8,300 lacs shall be received as per the mutually agreed installments within a period of five years from the date of execution of the deed. The recoverability of the carrying value of the said amount due from by SBEC Bioenergy Limited as at 31 March 2014 is dependent on its ability to generate positive cash flow from operations. The uncertainty mentioned above may affect the ultimate recoverability of the carrying value of the said amount due from SBEC Bioenergy Limited. These financial statements do not include any adjustments that might result from the uncertainty mentioned above.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure ''A'' a statement on the matters specified in 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 appears from our examination of those books;

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

d. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet and Statement of Profit & 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 Companies Act, 1956, to the extent applicable.

e. On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, we report that none of the directors is disqualified 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 "A" TO AUDITORS'' REPORT

(Referred to in the Auditors'' Report of even date to the members of SBEC Sugar Limited for the year ended 31st March, 2014)

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

(b) Though the Company has a programme of physical verification of its fixed assets in phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets, however the Fixed assets have not been physically verified by the management during the year therefore discrepancies, if any, could not be determined.

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

2. (a) The inventory has not been physically verified by the management during the year.

(b) Though the physical verification programme for inventory as envisaged by the management is, in our opinion, reasonable and adequate in relation to the size of the Company and nature of its business. However no physical verification of inventories has been done during the year.

(c) In our opinion, the Company is maintaining proper records of inventory. The discrepancies, if any, compared to book records could not be determined in absence of physical verification.

3. (a) The Company has not granted any loan, secured or unsecured to Companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, Paragraph 3 (b), 3 (c) & 3 (d) of the order are not applicable.

(b) The company has taken loans from three companies & another party, covered under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs435.45 lacs, Rs536.51 lacs, Rs 88.47lacs & Rs81.79 lacs and the yearend balance of loan taken from such companies & another party were Rs435.45 lacs, Rs480.82 lacs, Rs85 lacs & NIL respectively.

(c) In our opinion and according to information and explanations given to us , the rate of interest and other term & conditions for such loans are not prima facie prejudicial to the interest of the Company.

(d) In respect of loan taken, as explained to us the same are re-payable on demand.

4. In our opinion, and according to the information and explanations given to us during the course of audit, there are adequate internal control procedures 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. We did not observe any major weakness in internal control during the course of our audit.

5. (a) Based upon the audit procedures applied by us and according to the information and explanations given to us, we are of the opinion that the transactions required to be entered into the register maintained under section 301 of the Companies Act, 1956 have been entered.

(b) In respect of certain transaction of the value of Rs 12,500.00 lacs with subsidiary company, the management has informed us that the transaction dealt is of a special nature and therefore comparable prices are not available. In our opinion, and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to rupees five lacs or more in respect of each party have been made at prices which are reasonable having regard to market prices for such transactions, prevailing at the relevant time, where such market prices are available.

6. The Company has accepted deposits from public and in our Opinion Company has complied with the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

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

8. We have broadly reviewed the Cost Accounting records, including the books of account maintained by the company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act 1956, and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We, are however, not required to make a detailed examination of such books and records.

9. (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income-Tax, Sales-Tax, Wealth-Tax, Service-Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information & explanations given to us, no undisputed amount payable in respect of Provident Fund, Investor Education and Protection Fund, Income Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other undisputed Statutory dues were outstanding, at the year end, for a period more than six months from the date they become payable.

(c) According to the information and explanations given to us and the records of the company examined by us, the particulars of statutory dues of the specified status as at the end of the year, which have not been deposited on account of a dispute are referred to in "Annexure - B".

10. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth. During the year company has incurred cash loss of Rs 4762.65 lacs. In the immediately preceding financial year also, the company had incurred cash loss. Thus as per the current financials the Company is a Sick Industrial Company within the meaning of Sick Industrial Companies (Special Provision) Act, 1985.

11. According to the information and explanations given to us and as per the books and records examined by us, the Company has not defaulted in repayment of dues to any financial institution or bank.

12. According to the 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.

13. The Company does not fall within the category of chit fund/ Nidhi/ Mutual Benefit/ Society and hence the related reporting requirements are not applicable.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments and hence the related reporting requirements are not applicable.

15. The Company has provided guarantee to SREI and the Government of Jharkhand in respect of loans taken by SBEC Bioenergy Limited (a subsidiary company) and Bihar Sponge Iron Limited respectively. The terms and conditions of the guarantees are prima facie, not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, the term loans raised during the year by the company have been applied for the purpose for which the said loans were obtained, where the lender has stipulated such end use.

17. According to the information and explanations given to us and as per the books and records examined by us, no funds raised on short-term basis have been used for long-term investment by the company.

18. The Company has not made any preferential allotment of shares to parties and Companies covered in the registered maintained under section 301 of the Companies Act, 1956.

19. The Company has not issued debentures of any type during the Year.

20. The Company has not raised any money by public issue during the Year.

21. Based on our examination of the books and records of the Company 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.

ANNEXURE "B" TO AUDITORS'' REPORT

Referred in Paragraph 9(b) of Annexure "A" a statement on the matters specified in the Companies (Auditors'' Report) Order, 2003 as amended by the Companies Auditor''s Report (Amendment) Order, 2004 for the Year ended 31st March 2014.

Name of the Statute Name of Dues Amount (Rs. in Lacs)

UP VAT Act , 2008 VAT on Baggasse 50.05

UP VAT Act , 2008 Entry Tax on Sugar 169.56 Sold in Local Area

UP VAT Act , 2008 Entry Tax on Sugar Purchased and Sold 400.00 in Local Area

UP VAT Act , 2008 VAT imposed on Molasses, 802.50 Bagasse and old scrap sold during the year 2009-10

UP VAT Act , 2008 CST imposed on 40.00 Molasses sold during 2009-10

Central Excise, 1944 Cess on Sugar Cess 4.35 Molasses sold during 2009-10

Central Excise, 1944 Penalty on Scrap 2.61 Scale Finance Act, 1994 Service Tax on Commission 16.83

Finance Act, 1994 Service Tax on Lease Rent 7.24 Finance Act, 1994 Service Tax on Commission 150.88

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

UP VAT Act , 2008 2008-09 Additional Commissioner, Grade 1, Meerut, 1st Appeals

UP VAT Act , 2008 2010-11 Deputy Commissioner, Assessment

UP VAT Act , 2008 2009-10 Application Filed for reopen the the same u/s 32

UP VAT Act , 2008 2009-10 Application Filed for reopen the same u/s 32 UP VAT Act , 2008 2009-10 Application Filed for reopen CESTAT by the department

Central Excise, 1944 30.01.2009- Appeal filed before CESTAT by 30.09.2009 the department against the Commissioner (Appeals) Meerut

Central Excise, 1944 30.11.2004- Appeal submitted before 31.03.2008 CESTAT Finance Act, 1994 01.04.2008- Appeal filed before Commissioner 01.12.2010 Appeals), Meerut

Finance Act, 1994 2012-13 Appeal filed before Commissioner (Appeals), Meerut Finance Act, 1994 2003-04 CESTAT has sent back the case to Commissioner Appeals, Meerut-1 for Remand

For Doogar & Associates Chartered Accountants Firm Regn. No. 000561N

Mukesh Goyal Place : New Delhi Partner Dated : 6th July, 2013 M. No. 081810


Mar 31, 2013

Report on the financial statements

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

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 sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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 qualified audit opinion.

Basis for Qualified Opinion

(i) These financial statements have been prepared on a going concern basis even though the Company has incurred operating losses during the current year and also in the previous year and the company''s networth is fully eroded. As explained to us by the management, reference will be made to BIFR for measures to be adopted by the company. The Management has also initiated certain steps to improve the operational and financial position of the company failing which, provision would then have to be made for any loss that might arise when the company''s assets are realised.

(ii) The company''s has not made provision for interest, on late payment of cane dues amounting to Rs. 346.52 Lacs. Accordingly manufacturing expenses and net losses would have been higher by Rs. 346.52 lacs respectively & its consequential impact on EPS.

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 for Qualified Opinion paragraph, 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.

Emphasis of matter

Without qualifying our opinion, we draw attention to:

Note no – 33 To these financial statements wherein company had executed a deed of assignment with a subsidiary company "SBEC Bioenergy Limited" to transfer its claim and all securities and charges created by Modi Industries Limited in its favour for a consideration of Rs.12,500 lacs of which Rs. 8,300 lacs shall be received as per the mutually agreed installments within a period of five years from the date of execution of the deed. The recoverability of the carrying value of the said amount due from by SBEC Bioenergy limited as at 31 March 2013 is dependent on its ability to generate positive cash flow from operations. The uncertainty mentioned above may affect the ultimate recoverability of the carrying value of the said amount due from SBEC Bioenergy Limited. These financial statements do not include any adjustments that might result from the uncertainty mentioned above.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure ''A'' a statement on the matters specified in 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 appears from our examination of those books;

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

d. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet and Statement of Profit & 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 Companies Act, 1956, to the extent applicable.

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, we report that none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE "A" TO AUDITORS'' REPORT

(Referred to in the Auditors'' Report of even date to the members of SBEC Sugar Limited for the year ended 31st March, 2013)

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

(b) Though the Company has a programme of physical verification of its fixed assets in phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets, however the Fixed assets have not been physically verified by the management during the year therefore discrepancies, if any, could not be determined.

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

2. (a) The inventory has not been physically verified by the management during the year.

(b) Though the physical verification programme for inventory as envisaged by the management is, in our opinion, reasonable and adequate in relation to the size of the Company and nature of its business. However no physical verification of inventories has been done during the year.

(c) In our opinion, the Company is maintaining proper records of inventory. The discrepancies, if any, compared to book records could not be determined in absence of physical verification.

3. (a) The Company has not granted any loan, secured or unsecured to Companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, Paragraph 3 (b), 3 (c) & 3 (d) of the order are not applicable.

(b) The company has taken loans from three companies & another party, covered under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 435.45 lacs, Rs. 543.78 lacs, Rs. 87.89 lacs & Rs. 85.00 lacs and the year end balance of loans taken from such companies & another party were Rs. 435.45 lacs, Rs. 480.82 lacs, Rs. 85.00 lacs & Rs. 74.70 lacs respectively.

(c) In our opinion and according to information and explanations given to us, the rate of interest and other term & conditions for such loans are not prima facie prejudicial to the interest of the Company.

(d) In respect of loans taken, as explained to us the same are re-payable on demand.

4. In our opinion, and according to the information and explanations given to us during the course of audit, there are adequate internal control procedures 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. We did not observe any major weakness in internal control during the course of our audit.

5. (a) Based upon the audit procedures applied by us and according to the information and explanations given to us, we are of the opinion that the transactions required to be entered into the register maintained under section 301 of the Companies Act, 1956 have been entered.

b) In respect of certain transaction of the value of Rs. 12,500 lacs with subsidiary company, the management has informed us that the transaction dealt is of a special nature and therefore comparable prices are not available. In our opinion, and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to rupees five lacs or more in respect of each party have been made at prices which are reasonable having regard to market prices for such transactions, prevailing at the relevant time, where such market prices are available.

6. The Company has accepted deposits from public and in our opinion Company has complied with the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

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

8. We have broadly reviewed the Cost Accounting records, including the books of accounts maintained by the company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act 1956, and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We, are however, not required to make a detailed examination of such books and records.

9. (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor

Education and Protection Fund, Income-Tax, Sales-Tax, Wealth-Tax, Service-Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information & explanations given to us, no undisputed amount payable in respect of Provident Fund, Investor Education and Protection Fund, Income Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other undisputed Statutory dues were outstanding, at the year end, for a period more than six months from the date they become payable.

(c) According to the information and explanations given to us and the records of the company examined by us, the particulars of statutory dues of the specified status as at the end of the year, which have not been deposited on account of a dispute are referred to in "Annexure – B".

10. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth. During the year company has incurred cash loss of Rs. 452.35 lacs. In the immediately preceding financial year also, the company had incurred cash loss. Thus as per the current financials the Company is a Sick Industrial Company within the meaning of Sick Industrial Companies (Special Provision) Act, 1985.

11. According to the information and explanations given to us and as per the books and records examined by us, the Company has not defaulted in repayment of dues to any financial institution or bank.

12. According to the 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.

13. The Company does not fall within the category of chit fund/ Nidhi/ Mutual Benefit/ Society and hence the related reporting requirements are not applicable.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments and hence the related reporting requirements are not applicable.

15. The Company has provided guarantee to SREI and the Government of Jharkhand in respect of loans taken by SBEC Bioenergy Limited (a subsidiary company) and Bihar Sponge Iron Limited respectively. The terms and conditions of the guarantees are prima facie, not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, the term loans raised during the year by the company have been applied for the purpose for which the said loans were obtained, where the lender has stipulated such end use.

17. According to the information and explanations given to us and as per the books and records examined by us, no funds raised on short-term basis have been used for long-term investment by the company.

18. The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Companies Act, 1956.

19. The Company has not issued debentures of any type during the Year.

20. The Company has not raised any money by public issue during the Year.

21. Based on our examination of the books and records of the Company 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.

ANNEXURE "B" TO AUDITORS'' REPORT

Referred in Paragraph 9(b) of Annexure "A" a statement on the matters specified in the Companies (Auditors'' Report) Order, 2003 as amended by the Companies Auditor''s Report (Amendment) Order, 2004 for the Year ended 31st March 2013.



Name of the Statute Name of Dues Amount (Rs. Lacs)

UP VAT Act , 2008 VAT on Baggasse 45.05

UP VAT Act , 2008 Entry Tax on Sugar

Sold in Local Area 139.59

Central Excise ,1944 Cess on Sugar Cess 4.35

Central Excise ,1944 Penalty on Scrap Scale 2.61

Finance Act , 1994 Service Tax on Commission 16.83

Finance Act , 1994 Service Tax on Lease Rent 1.81

Finance Act , 1994 Service Tax on Commission 150.88

Period to which Forum where dispute amount relates is pending

2008-09 Additional Commissioner,

Grade 1, Meerut, 1st Appeals

2010-11 Deputy CommissionerAssessment

01.01.2009 to Commission Appeals 30.09.2009

30.11.2004 to CESTAT, New Delhi 31.03.2008

01.04.2008 to CESTAT, New Delhi 01.12.2010

2012-13 Commissioner Appeals

2003-04 Commission Central Excise

For & on behalf of

Doogar & Associates

Chartered Accountants

Firm Regn. No. 000561N

Mukesh Goyal

Place: New Delhi

Mg. Partner

Dated: 6th July, 2013

Membership No. 081810


Mar 31, 2012

We have audited the attached Balance Sheet of SBEC Sugar Ltd. as at 31st March 2012,the statement of Profit & Loss 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.

We have conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion.

As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies Auditor''s Report (Amendment) Order, 2004 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 we considered appropriate and according to the information and explanation given to us, we enclose in the Annexure "A" a statement on the matters specified in paragraph 4 and 5 of the said order.

Attention of the members is invited to note no-45 regarding the financial statements of the Company having been prepared on a going concern basis, notwithstanding the fact that its net worth is eroded as at 31st March''2012 (considering the qualifications as mentioned below). The appropriateness of the said basis is interalia dependent on the management plans for further actions in improving the networth.

Further to our comments in the Annexure referred to above, we report that:

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

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

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

d) In our opinion, the Balance Sheet, Statement of Profit & 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, to the extent applicable.

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 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 information and according to the explanations given to us, subject to

i) Levy stock liability is to be accounted for as defined in Govt. of India notification no F.No. 5-5(Legal-21)/2009-SCII dated 30th November, 2010. The Company has decided to account for levy orders at the time of actual dispatches, which was hitherto being valued as per the orders pending for execution. The above treatment is not in line with the fundamental accounting assumptions of "Consistency" and "Accrual" as defined in AS-1""Disclosure of Accounting Policies". Levy stock if determined for the pending and/or expected levy orders, the company would be required to make provision of Rs. 1867.15 Lacs being the differential between the lower of ''current cost or market price'' and levy price,

ii) Inventory has been stated at its cost, which is in excess of its net realisable value. Management''s computation, which we have reviewed, shows that inventory, if valued at the lower of cost and net realisable value as required by Accounting Standard (AS) 2, "Valuation of Inventories" notified by the Central Government under the Companies (Accounting Standards) Rules, 2006, would have been lower by Rs. 774.89 Lacs .

iii) Non provision of liability for Rs 321.15 Lacs regarding differential amount of custom duty under EPCG Scheme as per the final order of Supreme court of India dated 07th February, 2011.

Had the impact as per (i),(ii) and (iii) above being taken in the financial results, the loss for the year would have increased by an even amount & its consequential effect on other accounts & EPS, the said accounts, read with the Accounting policies and 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 Balance Sheet, of the state of affairs of the Company as at 31st March, 2012

ii) In the case of statement of Profit & Loss , of the loss for the year ended on that date;

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

ANNEXURE "A" TO AUDITORS'' REPORT

(Referred to in the Auditors'' Report of even date to the members of SBEC Sugar Limited for the year ended 31st March, 2012)

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

(b) The Company has a programme of physical verification of its fixed assets in phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Management has physically verified fixed assets during the year. The discrepancies notice on physical verification of fixed assets as compared to book records were not material and have been properly dealt with in the books of accounts.

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

2. (a) The inventory, except material lying with third parties, has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

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

(c) In our opinion, the Company is maintaining proper records of inventory. The discrepancies, if any, noticed on physical verification of inventory as compared to books records were not material and have been properly dealt with in the books of accounts.

3. (a) The Company has not granted any loan, secured or unsecured to Companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, Paragraph 3 (b), 3 (c) & 3 (d) of the order are not applicable.

(b) The company has taken loan from three companies, covered under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 435.45 lacs, Rs. 500.00 lacs, & Rs. 103.36 lacs and the year end balance of loan taken from such companies were Rs.435.45 lacs, Rs. 399.91 lacs & Rs. 85.00 lacs respectively.

(c) In our opinion and according to information and explanations given to us , the rate of interest and other term & conditions for such loans are not prima facie prejudicial to the interest of the Company.

(d) In respect of loan taken, as explained to us the same is re-payable on demand.

4. In our opinion, and according to the information and explanations given to us during the course of audit, there are adequate internal control procedures 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. We did not observe any major weakness in internal control during the course of our audit.

5. (a) Based upon the audit procedures applied by us and according to the information and explanations given to us, we are of the opinion that the transactions required to be entered into the register maintained under section 301 of the Companies Act, 1956 have been entered.

(b) In our opinion, and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to rupees five lacs or more in respect of each party have been made at prices which are reasonable having regard to market prices for such transactions, prevailing at the relevant time, where such market prices are available.

6. The Company has accepted deposits from public and in our opinion Company has complied with the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

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

8. We have broadly reviewed the Cost Accounting records, including the books of account maintained by the company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under clause (d) of sub- section 209 of the Act, and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We, are however, not required to make a detailed examination of such books and records.

9. (a) According to the information & explanations given to us, no undisputed amount payable in respect of Provident Fund, Income Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other undisputed Statutory dues were outstanding, at the year end, for a period more than six months from the date they become payable.

(b) According to the information and explanations given to us and the records of the company examined by us, the particulars of statutory dues of the specified status as at the end of the year, which have not been deposited on account of a dispute are referred to in "Annexure - B".

10. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth. During the year company has incurred cash loss of Rs. 2768.06 lacs and there were no cash losses in the immediately preceding financial year.

11. According to the information and explanations given to us and as per the books and records examined by us, the Company has not defaulted in repayment of dues to any financial institution or bank.

12. According to the 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.

13. The Company does not fall within the category of chit fund/ Nidhi/ Mutual Benefit/ Society and hence the related reporting requirements are not applicable.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments and hence the related reporting requirements are not applicable.

15. The Company has provided guarantee to SREI and the Government of Jharkhand in respect of loans taken by SBEC Bioenergy Limited (a subsidiary company) and Bihar Sponge Iron Limited respectively. The terms and conditions of the guarantees are prima facie, not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, the term loans raised during the year by the company have been applied for the purpose for which the said loans were obtained, where the lender has stipulated such end use.

17. According to the information and explanations given to us and as per the books and records examined by us, no funds raised on short-term basis have been used for long-term investment by the company.

18. The Company has not made any preferential allotment of shares to parties and Companies covered in the registered maintained under section 301 of the Companies Act, 1956.

19. The Company has not issued debentures of any type during the Year.

20. The Company has not raised any money by public issue, during the Year.

21. Based on our examination of the books and records of the Company 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.

Name of the Statute Name of Dues Amount Rs. Lacs

Service Tax Act Service Tax 150.88

Service Tax Act Service Tax 16.83

Central Excise and Demand of Custom 321.15 Custom Act duty on import of capital goods against EPCG License

Central Excise and Penalty on Scrap Sale 2.61 Custom Act

Central Excise and Cess on Sugar Cess 4.35 Custom Act

U P Tax on Entry Entry Tax on Sugar Sold 137.41 of Goods Act in Local Area

U P VAT Act VAT on Baggase 12.27

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

Service Tax Act 01.10.1999 to Commissioner (Appeals) of Central 31.03.2003 Excise Meerut 1,U.P

Service Tax Act 01.04.2008 to Commissioner (Appeals) of Central 31.12.2010 Excise Meerut 1,U.P

Central Excise and Custom Act 01.04.1997 to Deputy Commissioner of Customs 30.06.1998 (Bond Section), Mumbai

Central Excise and Custom Act 30.11.2004 to CESTAT, New Delhi 31.03.2008

Central Excise and Custom Act 01.01.2009 to CESTAT, New Delhi 30.09.2009

UP Tax on Entry of Goods Act A Y 2010-11 Commercial Tax Tribunal, Meerut, U.P

U P VAT Act A Y 2007-08 Additional Comm Appeals, Commercial Tax Meerut

For and on behalf of

DOOGAR & ASSOCIATES

CHARTERED ACCOUNTANTS

Firm Regn.No-000561N

Place : New Delhi (MUKESH GOYAL)

Date : 12th November, 2012 Mg. Partner

Membership No. : 081810


Mar 31, 2010

We have audited the attached Balance Sheet of SBEC Sugar Ltd. as at 31st March 2010 and also the Profit & Loss Account and the Cash Flow Statement of the Company for the period 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.

We have conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on 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 the management, as well as evaluating the overall financial statement presentation.

We believe that our audit provides reasonable basis for our opinion.

As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies Auditors Report (Amendment) Order, 2004 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 we considered appropriate and according to the information and explanation given to us, we enclose in the Annexure "A" a statement on the matters specified in paragraph 4 and 5 of the said order.

Further to our comments in the Annexure referred to above, we report that:

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

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

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

d) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement, dealt with by this report, comply with the Accounting Standards referred to in the Companies (Accounting Standard) Rules, 2006 issued by the Central Government in exercise of the power conferred under sub-section (1)(a) of section 642 of the Companies Act, 1956 to the extent applicable.

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

f) Without qualifying our opinion, we draw your attention to note no.4 of schedule 14(B) relating to the accounting for sugar cane purchase liability for the sugar season 2007-08 at an interim price of Rs.110/- per quintal which is as per the directions of Honble Supreme Court instead of State Advisory prices of Rs. 125/130 per quintal fixed by the State Government.

g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read with the Accounting policies and 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 Balance Sheet, of the state of affairs of the Company as at 31st March, 2010

ii) In the case of Profit & Loss Account, of the Profit for the period ended on that date;

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

ANNEXURE "A" TO AUDITORS REPORT (Referred to in the Auditors Report of even date to the members of SBEC Sugar Limited for the period ended 31st March, 2010)

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

(b) The Company has a programme of physical verification of its fixed assets in phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Management has physically verified fixed assets during the period. The discrepancies notice on physical verification of fixed assets as compared to book records were not material and have been properly dealt with in the books of accounts.

(c) Fixed assets disposed off during the period were insignificant and therefore do not affect the going concern assumption.

2. (a) The inventory, except material lying with third parties, has been physically verified by the management during the period. In our opinion, the frequency of such verification is reasonable.

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

(c) In our opinion, the Company is maintaining proper records of inventory. The discrepancies, if any, noticed on physical verification of inventory as compared to books records were not material and have been properly dealt with in the books of accounts.

3. (a) The Company has not granted any loan, secured or unsecured to Companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, Paragraph 3 (b), 3 (c) & 3 (d) of the order are not applicable.

(b) The company has taken loan from three companies, covered under section 301 of the Companies Act, 1956. The maximum amount involved during the period was Rs. 345.45 lacs, Rs. 64.47 lacs, & Rs. 18.71 lacs and the period end balance of loan taken from such companies were Rs. 345.45 lacs, Rs. 34.47 lacs & Rs. Nil respectively.

(c) In our opinion and according to information and explanations given to us , the rate of interest and other term & conditions for such loans are not prima facie prejudicial to the interest of the Company.

(d) In respect of loan taken, as explained to us the same is re-payable on demand.

4. In our opinion, and according to the information and explanations given to us during the course ot audit, there are adequate internal control procedures 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 sate of goods. We did not observe any major weakness in internal control during the course of our audit.

5. (a) Based upon the audit procedures applied by us and according to the information and explanations given to us, we are of the opinion that the transactions required to be entered into the register maintained under section 301 of the Companies Act, 1956 have been entered. (b) ki our opinion, and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the period to rupees five lacs or more in respect of each party have been made at prices which are reasonable having regard to market prices for such transactions, prevailing at the relevant time, where such market prices are available.

6. The Company has accepted deposits from public and in our opinion Company has complied with the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

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

8. We have broadly reviewed the Cost Accounting records, including the books of account maintained by the company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under clause (d) of sub-section 209 of the Act, and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We, are however, not required to make a detailed examination of such books and records.

9. (a) According to the information & explanations given to us, no undisputed amount payable in respect of Provident Fund, Income Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other undisputed Statutory dues were outstanding, at the period end, for a period more than six months from the date they become payable. (b) According to the information and explanations given to us and the records of the company examined by us, the particulars of statutory dues of the specified status as at the end of ihe period,,which have not been deposited on account of a dispute are referred to in "Armexure - B".

10. There are accumulated losses in the Company. The Company has not incurred any cash loss during the current period (9 months), and in the immediately preceding period (15 months).

11. According to the information and explanations given to us and as per the books and records examined by us, the Company has not defaulted in repayment of dues to any financial institution or bank.

12. According to the 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.

13. The Company does not fall within the category of chit fund/ Nidhi/ Mutual Benefit/ Society and hence the related reporting requirements are not applicable.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments and hence the related reporting requirements are not applicable.

15. The Company has provided guarantee to SREI and the Government of Jharkhand in respect of loans taken by SBEC Bioenergy Limited (a subsidiary company) and Bihar Sponge Iron Limited respectively. The terms and conditions of the guarantees are prima facie, not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, the term loans raised during the period by the company have been applied for the purpose for which the said loans were obtained, where the lender has stipulated such end use.

17. According to the information arid explanations given to us and as per the books and records examined by us, no funds raised on short-term basis have been used for long-term investment by the company,

18. The Company has not made any preferential allotment of shares to parties and Companies covered in the registered maintained under section 301 of the Companies Act, 1956.

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

20. The Company has not raised any money by public issue, during the period.

21. Based on our examination of the books and records of the Company and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the period.

Name of the Statute Name of Dues Amount Rs. Lacs

Service Tax Act Service Tax 151.67

Central Excise and Demand of Custom 627.06 Custom Act duty on import of capital goods against EPCG License

U P Tax on Entry Entry Tax on Machinery 4.50 of Goods Act

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

Service Tax Act 01.10.1999 to Commissioner of Central 31.03.2003 Excise, Meerut-1, U.P.

Central Excise and Custom Act 01.04.1997 to The Supreme Court of India 30.06.1998

U P Tax on Entry of Goods Act A.Y. 2000-01 Trade Tax Tribunal, Meerut, U.P.







For and on behalf of

DOOGAR & ASSOCIATES

CHARTERED ACCOUNTANTS

Firm Regn.No-000561N

Place: New Delhi (MUKESH GOYAL)

Date : 25th August, 2010 Mg. Partner

Membership No. : 081810

 
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