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Auditor Report of Shah Alloys Ltd.

Mar 31, 2015

Report on the Financial Statements

We have audited the accompanying financial statements of Shah Alloys Limited ('the Company'), which comprise the Balance sheet as at March 31, 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 stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

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

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

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

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

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

Basis for Qualified Opinion

1. As informed to us, Management is of the view that they do not anticipate execution of its ongoing project of Cold Rolling Mill (CRM) Plant. However, due and adequate provision / write off / impairment which should have been made in the books of accounts has not been made. Out of the total book value of Capital work in progress of Rs. 18,31,84,363/-, the management has charged back only expense of pre-operative expense, trial run expense and borrowing cost element for Rs. 5,72,84,008/- to the statement of profit and loss during the current year which was earlier capitalized. For the remaining balance of the book value of Capital work in progress, the company has not carried out any Techno-economic assessment during the year ended 31 March 2015 for the valuations of its ongoing Capital Project and hence identification of impairment loss and provision thereof, if any, has not been made. The same is not in accordance with notified Accounting Standard 28 on "Impairment of asset" which states that impairment loss is recognized when the carrying amount of the an asset exceeds its recoverable amount . The consequential impact of adjustment, if any, on the financial results due to non-provision / write off / impairment is currently not ascertainable and therefore we are unable to comment on its consequential financial impact, if any, on the financial results.

2. The Company has not provided for foreign exchange loss in the financial statements on the Principal amount of 1,00,00,000 USD and on the Premium amount of 48,25,500 USD of the Foreign Currency Convertible Bonds(FCCB) which had become due for payment on September 22, 2011 and remain unpaid as at March 31, 2015, which constitutes a departure from the Accounting Standard - 11, "The Effects of Changes in Foreign Exchange Rates", which requires that each foreign currency monetary items should be reported using the closing rate as at the balance sheet date. Non provision of the foreign exchange loss on the aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium amount relates to the period from September 23, 2011 to March 31, 2015. The Company's record indicate that had management done the provision, the Exchange loss for the financial year 2014-15 would have been more by Rs. 3,69,30,321/-. Accordingly, loss for the current financial year 2014-15 has been under-stated by Rs. 3,69,30,321/- and reserves and surplus has been overstated by Rs. 20,41,51,583/-.

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 above , 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:

1) In case of the Balance Sheet ,of the state of affairs of the Company as at March 31, 2015 ,

2) In case of the Statement of profit and loss, of the loss for the year ended on that date

3) In 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:

1) Note No 38A to the financial statements regarding the Company having accumulated losses and its net worth has been fully eroded. The Financial Statements indicates that the Company has incurred a net loss/net cash loss during the current and previous year(s) and, the Company's current liabilities exceeded its current assets as at the current and previous year balance sheet date. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis for the reasons stated in the said Note 36 to the financial statements.

2) Note No 34 to the financial statements, regarding the transfer/assignment of secured loans with all their rights, title and interest in the financial documents by banks to the Asset Reconstruction companies.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

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

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

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

(b) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above , in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

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

(d) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above , 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 as described in sub-paragraph (1) 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 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; and

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

(i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 21 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;

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

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.)

i) In respect of its Fixed Assets:

a) The company has maintained proper records showing full particulars including quantitative details and situation of the fixed assets on the basis of available information.

b) As explained to us, a major portion of the fixed assets has been physically verified by the management during the year in accordance with a phased program of verification adopted by the Company. In our opinion, the frequency of verification is reasonable having regard to the size of the company and nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

ii) In respect of its inventories:

a) As explained to us, inventories (excluding Goods in Transit and Goods lying at Port) were physically verified by the management at reasonable intervals during the year. In our opinion, the frequency of the 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 nature of its business.

c) In our opinion and according to the information and explanations given to us, the company has maintained proper records of inventories. As explained to us, there was no material discrepancies noticed on Physical Verification of Inventories as compared with the book records.

iii) In respect of Loans, Secured or Unsecured granted by the companyto companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013:

According to the information and explanations given to us and on the basis of the records produced before us, the company has not granted any Loan, Secured or Unsecured to the companies or firms or other parties covered in the register maintained under section 189 of the Companies Act 2013 and hence sub-clause (a) & (b) of paragraph 3 of the Companies Auditor's Report Order 2015 are not applicable to the Company.

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 purchases of inventory, fixed assets and for the sales of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls system.

v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit and hence the provisions of Section 73 to 76 or any other relevant provisions of the Companies Act and the Companies (Acceptance of Deposits) Rules, 2014 with regard to the deposits accepted are not applicable to the Company. Therefore, the provisions of Clause (v) of paragraph 3 of the Companies Auditor's Report Order 2015 are not applicable to the Company. According to the information and explanations given to us, no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

vi) We have broadly reviewed the cost records maintained by the Company as specified Central Government under sub Section (1) of Section 148 of the Companies Act, 2013 and are of the opinion that 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.

vii) In respect of the Statutory dues:

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 any other statutory dues have not been generally regularly deposited during the year with the appropriate authorities. On the basis of records produced before us for our verification and according to the information & explanation given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2015 for a period of more than six months from the date of becoming payable.

b) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed dues of Rs. 7,64,25,452/- have not been deposited as on 31st March, 2015 on account of matters pending before the appropriate authorities. The details of which are as under :

Sr. Name of the Statute Nature of Period to which No. the Dues the amount relates

1 Income Tax Act, 1961 Income Tax 1997-98

2 Sales Tax Act Sales Tax 1995-96

3 Gujarat Value Added Value Added Tax 2006-07 Tax Act, 2003

4 Central Excise Act, 1944 Excise Duty 1997-98, and Service Tax 1998-99 and 2004-05 to 2013-14

Name of the Statute Forum where the Amount dispute is pending involved (in Rs.)

Income Tax Act, 1961 Gujarat High court 1,30,000/-

Sales Tax Act Deputy commissioner of 6,99,000/- Sales Tax (Tribunal) Ahmedabad

Gujarat Value Added Tax Act, 2003 Deputy Commissioner, 3,81,27,791/- VAT Ahmedabad

Central Excise Act, 1944 Central Excise & 3,74,68,661/- Service tax Appellate Tribunal / Joint / Deputy Commissioner of Central Excise/ Additional Commissioner of Central Excise

viii) On the basis of information and explanations given to us and on the basis of records produced before us, the company's accumulated losses at the end of the financial year are more than fifty percent of its net worth. The company has incurred cash losses amounting to Rs 108,89,32,013/- during the current year .The company has incurred cash losses amounting to Rs 156,64,00,658/- in the immediately preceding financial year.

ix) Consequent upon the sanction of the restructuring package given under CDR mechanism by banks & financial institution, the company was required to start repaying the loans sanctioned by banks/institutions and debenture holders from June 2011 onwards, however the company has made default in repaying the dues as per the terms stipulated in the CDR rework proposal. The Amount and the period of default in respect of Term Loan, WCTL and Non-convertible Debentures are as under:

Particulars Period to which Default Period for which the default relates (Amount in Rs.) the default subsists

Term Loan 2011-12 17,37,96,292 1095-1370 days

2012-13 19,60,41,787 730-1005 days

2013-14 19,60,41,790 365-640 days

2014-15 20,90,51,014 1-270 days

Working Capital Term Loan From Bank 2011-12 18,64,03,089 1095-1370 days

2012-13 22,36,83,707 730-1005 days

2013-14 22,36,83,707 365-640 days

2014-15 22,36,83,707 1-270 days

Non-Convertible Debenture 2011-12 10,41,66,667 1095-1370 days

2012-13 12,50,00,000 730-1005 days

2013-14 12,50,00,000 365-640 days

2014-15 12,50,00,000 1-270 days

As per the CDR Terms, Interest on Term Loan, Working capital term loan (WCTL) and Non-convertible debentures (NCD) had to be parked up to May 2011 into a separate account called Funded Interest Term loan (FITL). However, from June 2011 onwards, the interest on Term Loan, Working capital term loan (WCTL) and Non-convertible debentures (NCD) has to be serviced as and when due.

However, the company has defaulted in payment of interest on Term Loan, Working capital term loan (WCTL) and Non-convertible debentures (NCD). The Amount and the period of default are as listed under:

Particulars Period to which Default Period for which the default relates (Amount in Rs.) the default subsists

Interest on Term Loan 2011-12 12,04,69,127 1095-1431 days

2012-13 15,73,65,814 730-1066 days

2013-14 13,33,73,691 365-700 days

2014-15 9,47,04,719 1-335 days

Interest on Working Capital Term Loan 2011-12 14,95,31,027 1095-1431 days

2012-13 17,89,46,966 730-1066 days

2013-14 17,89,46,953 365-700 days

2014-15 13,53,05,256 1-335 days

Interest on Non-Convertible Debenture 2011-12 8,18,90,411 1095-1431 days

2012-13 9,80,00,000 730-1066 days

2013-14 9,80,00,000 365-700 days

2014-15 8,90,00,000 1-335 days

As per the terms of the CDR, Principal and Interest on funded interest term loan (FITL) was required to be paid as and when it was due. The company has made the default in payment of Principal and interest on FITL. The amount and the period of default are as mentioned below:

Particulars Period to which Default Period for which the default relates (Amount in Rs.) the default subsists

Funded Interest Term Loan (FITL) 2013-14 13,37,23,870 365-455 days

2014-15 26,74,47,740 1-270 days

Interest on Funded Interest Term Loan(FITL) 2010-11 4,31,63,185 1461-1704 days

2011-12 7,98,16,025 1096-1339 days

2012-13 8,25,18,348 730-1066 days

2013-14 7,71,66,458 365-700 days

2014-15 6,13,23,453 1-335 days

As per the terms of the CDR, Interest on working capital facilities was required to be paid as and when it was due. The company has made the default in payment of interest on the working capital facilities. The amount and the period of default are as mentioned below:

Particulars Period to which Default Period for which the default relates (Amount in Rs.) the default subsists

Interest on working capital facilities 2010-11 22,69,93,827 1461-1734 days

2011-12 37,17,47,750 1096-1369 days

2012-13 39,44,65,648 730-1066 days

2013-14 44,18,08,307 365-700 days

2014-15 31,15,15,625 1-335 days

Moreover, the Company, in September 2006, has raised US $ 10 million through Unsecured Zero Coupon Foreign Currency Convertible Bonds (FCCB), due on 22nd September, 2011. On full conversion of FCCB, the FCCB will be converted in to 26,41,143 Equity shares of Rs 10 each at a premium of f 165 per share, at the option of the Bondholders at any time before the maturity of the bonds. On Conversion, Capital will increase by f 2,64,11,430 and Share Premium by Rs. 43,57,88,570/-. If Bonds are not converted, the company will have to repay the bonds at a premium & in US Dollars. The company has provided the premium till 22nd September, 2011 which has been adjusted against Security Premium in accordance with Section 52 of the Companies Act, 2013.

However, the company has defaulted in repayment of the foreign currency convertible bond (FCCB) dues on its maturity. The default is subsisting since 1286 days

x) In our opinion, the terms & conditions on which the company has given guarantee for loans taken by others from Banks or financial institutions are not prejudicial to the interest of the company.

xi) According to the information & explanations given to us, the Company has not raised any term loan during the year under audit.

xii) In our opinion and according to the information and explanations given to us and based on management representation, no material fraud on or by the company has been noticed or reported during the financial year covered by the audit.

For Talati & Talati

Chartered Accountants

(Firm Reg. No. : 110758W)

Umesh Talati

Place : Ahmedabad Partner

Date : May 22, 2015 Membership No: 034834


Mar 31, 2014

We have audited the accompanying financial statements of M/s SHAH ALLOYS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2014, 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 Standards notified under the Companies Act, 1956 ("the Act") read with General Circular 15/2013 dates 13th September 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.

Auditors'' Responsibility

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

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 controls 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 Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Basis for Qualified Opinion

The Company has not provided for foreign exchange loss in the financial statements on the Principal amount of1,00,00,000 USD and on the Premium amount of48,25,500 USD of the Foreign Currency Convertible Bonds(FCCB) which had become due for payment on September 22, 2011 and remain unpaid as at March 31,2014, which constitutes a departure from the AS- 11, "The Effects of Changes in Foreign Exchange Rates" Accounting Standards notified under the Companies Act, 1956 ("the Act") read with General Circular 15/2013 dates 13th September 2013, which requires that each foreign currency monetary items should be reported using the closing rate as at the balance sheet date. Non provision of the foreign exchange loss on the aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium amount relates to the period from September 23,2011 to March 31,2014. The Company''s record indicate that had management done the provision, the Exchange loss for the financial year 2013-14 would have been more by '' 8,46,61,018/-. Accordingly, loss for the current financial year 2013-14 has been understated by '' 8,46,61,018/- and reserves and surplus has been overstated by '' 16,72,21,262/-. 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

We draw your attention to Note No 36 to the financial statements, regarding the transfer/assignment of secured loans with all their rights, title and interest in the financial documents by banks to the Asset Reconstruction companies.

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 Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

d. except for the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013;

e. On the basis of the written representations received from the directors as on March 31, 2014, taken on record by the Board of Directors, 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 Companies Act, 1956.

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

i. In respect of its Fixed Assets

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

(b) As explained to us, a major portion of the fixed assets has been physically verified by the management during the year in accordance with a phased program of verification adopted by the company. In our opinion, the frequency of verification is reasonable having regard to the size of the company & nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

(c) According to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year and the going concern status of the Company is not affected.

ii. In respect of its inventories:

(a) As explained to us, inventories (excluding goods in transit) were physically verified by the management at reasonable intervals during the year.

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

(c) In our opinion and according to the information and explanations given to us, the company is maintaining proper records of inventory. The discrepancies, noticed on verification, between the physical stocks and the book records were not material.

iii. In respect of Loans secured or unsecured , granted or taken by the company to / from companies, firm or other parties covered in the

register maintained under section 301 of the Companies Act, 1956:

(a) According to the information & explanations given to us and on the basis of records produced before us, the company has granted a loan to a company in earlier years, covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was '' 80,00,00,000/- and the year-end balance of loan granted to such party is '' 80,00,00,000/-.

(b) In our opinion, the rate of interest and other terms and conditions on which loan has been granted to the company listed in the register maintained under section 301 of the Act are not prejudicial to the interest of the company.

(c) On the basis of information and explanation given to us and on the basis of records produced before us in respect of loans granted by the company in the earlier years to a party covered under the register maintained under section 301 of the Companies Act, 1956, recovery of the said loan has been fixed by the Corporate Debt Restructuring (CDR) Cell. As per the terms of CDR, the company has to recover '' 10,00,00,000/- in the financial year 2011-12; ''20,00,00,000/- in the financial year 2012-13 and ''20,00,00,000/- in 2013-14, totaling to '' 50,00,00,000 as at March 31, 2014 . However till date, the company has not recovered the same.

(d) Based on our audit procedures and the information and explanation made available to us, reasonable steps have been taken by the Management of the company for recovery of the principal amount.

(e) According to information and explanation given to us and on the basis of records produced before us during the Year 2013-14, the company has taken loan from three parties covered in the register maintained under section 301 of the Companies Act, 1956 amounting to '' 16,08,51,000. The Maximum amount involved during the year is '' 16,01,72,787 and the year-end balance of loans taken from such parties is '' 14,81,72,787.

(f) In our opinion, the rate of interest and other terms and conditions on which loan has been taken from the parties listed in the register maintained under section 301 of the Act are not prejudicial to the interest of the company.

(g) On the basis of records produced before us and on the basis of information and explanation given to us and as per the schedule stipulated for the terms and condition in respect of loans taken by the company, the repayment of the said loan is not due for repayment during 2013-14.

iv. In our opinion & according to the information & explanations given to us, there are adequate internal control systems commensurate with

the size of the company & nature of its business for the purchase of inventory, fixed assets and also for the sales of goods and services.

During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls systems.

v. In respect of the contracts or arrangements referred to in section 301 of the Companies Act, 1956:

(a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under section 301 of the Companies Act, 1956.

(b) In our opinion, and according to information and explanation given to us, the transactions of Purchase of goods and materials, sale of goods and materials and services 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 '' 5,00,000/- or more in respect of each party, have been made at prices which are reasonable, having regard to the prevailing market prices for such goods, materials & services or the prices at which the transactions for similar goods, materials & services have been made with other parties.

vi. According to information and explanation given to us, the Company has not accepted any deposit from the public during the year.

Therefore, the provisions of Clause (vi) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

vii. The Company has appointed internal auditors and has carried out internal audit during the year. In our opinion the scope needs to be

strengthened to make it commensurate with the size of the company & the nature of its business.

viii. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that 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. In respect of the Statutory dues:

(a) According to the records of the company, undisputed Statutory dues including provident fund, employees State Insurance, Investors Education & Protection Fund, Income-tax, Wealth-tax, Service Tax, Sales-tax, Customs duties, excise duty, Cess and other statutory dues have not been generally regularly deposited during the year with the appropriate authorities. On the basis of records produced before us for our verification and according to the information & explanation given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2014 for a period of more than six months from the date of becoming payable.

(b) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed Income Tax, Sales Tax, Excise and Service Tax dues aggregating to '' 40,79,95,054/- (Net of Payments) that have not been deposited as on 31st March, 2014 on account of matters pending before appropriate authorities, are as under.

Name of the Statute Nature Period to Forum where the of the which the dispute is pending Dues amountrelates

Income Tax Act, 1961 Income Tax 1997-98 Gujarat High court

Sales Tax Act Sales Tax 1995-96 Deputy commissioner of Sales tax (Tribunal) Ahmedabad

Gujarat Value Added Value 2006-07 Deputy Commissioner, Tax Act, 2003 Added Tax VAT Ahmedabad

Gujarat Value Added Value 2007-08 Deputy Commissioner, Tax Act, 2003 Added Tax VAT Ahmedabad

Central Excise Excise Duty 2004-05 to Central Excise & Service Act, 1944 and Service to 2013-14 tax Appellate Tribunal / Joint /Tax Deputy Commissioner of Central Excise

Name of the Statute Amount involved (in Rs)

Income Tax Act, 1961 1 30 000/-

Sales Tax Act 6 99 000/-

Gujarat Value Added Tax Act, 2003 4 06 27 791/-

Gujarat Value Added Tax Act, 2003 33 91 08 911/-

Central Excise Act, 1944 2 74 29 352/-

x. The company''s accumulated losses at the end of financial year are more than fifty percent of its net worth. It has incurred cash losses amounting to '' 156 64 00 658/- during the current year and the company has incurred '' 138 07 80 940/- cash losses in the immediately preceding previous year.

xi. Consequent upon the sanction of the restructuring package given under CDR mechanism by banks & financial institution, the company was required to start repaying the loans sanctioned by banks/institutions and debenture holders from June 2011 onwards, however the company has made default in repaying the dues as per the terms stipulated in the CDR rework proposal. The Amount and the period of default in respect of Term Loan, WCTL and Non convertible Debentures are as under:

Particulars Period to which the Default Period for which default relates (Amount in Rs) default subsists

2011-12 17 37 96 292 730-1005 days

Term Loan 2012-13 19 60 41 787 365-640 days

2013-14 19 60 41 790 1-270 days

2011- 12 18 64 03 089 730-1005 days

Working Capital Term Loan 2012- 13 22 36 83 707 365-640 days from Bank 2013- 14 22 36 83 707 1-270 days

2011-12 10 41 66 667 730-1005 days

Non Convertible Debenture 2012-13 12 50 00 000 365-640 days

2013-14 12 50 00 000 1-270 days

As per the CDR Terms, Interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures (NCD) had to be parked up to May 2011 into a separate account called Funded Interest Term loan (FITL). However, from June 2011 onwards , the interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures(NCD) has to be serviced as and when due.

However, the company has defaulted in payment of interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures (NCD). The Amount and the period of default are as listed under:

Particulars Period to which the Default Period for which default relates (Amount in Rs) default subsists

2011-12 12 04 69 127 730-1066 days

Interest on Term Loan 2012-13 15 73 65 814 365-700 days

2013-14 13 33 73 691 1-335 days

2011- 12 14 95 31 027 730-1066 days

Interest on Working 2012- 13 17 89 46 966 365-700 days

Capital Term Loan 2013- 14 17 89 46 953 1-335 days

2011- 12 8 18 90 411 730-1066 days

Interest on Non Convertible 2012- 13 9 80 00 000 365-700 days

Debenture 2013- 14 9 80 00 000 1-335 days

As per the terms of the CDR, Principal and Interest on funded interest term loan (FITL) was required to be paid as and when it was due. The company has made the default in payment of Principal and interest on FITL. The amount and the period of default are as mentioned below:

Particulars Period to which the Default Period for which default relates (Amount in Rs) default subsists

Funded Interest Term Loan 2013-14 13 37 23 870 1-90 days (FITL)

2010-11 4 31 63 185 1096-1339 days

Interest on Funded Interest 2011-12 7 98 16 025 730-1066 days Term

Loan(FITL) 2012-13 8 25 18 348 365-700 days

2013-14 7 71 66 458 1-335 days

As per the terms of the CDR, Interest on working capital facilities was required to be paid as and when it was due. The company has made the default in payment of interest on the working capital facilities. The amount and the period of default are as mentioned below:

Particulars Period to which the Default Period for which default relates (Amount in Rs) default subsists

2010-11 22 69 93 827 1096-1369 days

Interest on working 2011-12 37 17 47 750 730-1066 days

capital facilities 2012-13 39 44 65 648 365-700 days

2013-14 44 18 08 307 1-335 days

Moreover, the Company, in September 2006, has raised US $ 10 million through Unsecured Zero Coupon Foreign Currency Convertible Bonds (FCCB), due on 22nd September, 2011. On full conversion of FCCB, the FCCB will be converted in to 26,41,143 Equity shares of '' 10 each at a premium of '' 165 per share, at the option of the Bondholders at any time before the maturity of the bonds. On Conversion, Capital will increase by '' 2,64,11,430 and Share Premium by '' 43,57,88,570/-. If Bonds are not converted, the company will have to repay the bonds at a premium & in US Dollars. The company has provided the premium till 22nd September, 2011 which has been adjusted against Security Premium in accordance with Section 78 of the Companies Act, 1956.

However, the company has defaulted in repayment of the foreign currency convertible bond (FCCB) dues on its maturity. The default is subsisting since 921 days .

xii. In our opinion & according to the information & explanation given to us, no loans & advances have been granted by the company on the basis of security by way of pledge of shares, debentures & other securities.

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

xiv. According to the information & explanations given to us, the company is not dealing or trading in shares, securities debentures & other investments. Therefore, the provisions of Clause (xiv) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company

xv. In our opinion, the terms & conditions on which the company has given guarantee for Loans taken by others from Banks or financial institutions are not prejudicial to the interest of the company.

xvi. According to the information & explanations given to us, the Company has not raised any term loan during the year under audit.

xvii. According to the information and explanations given to us and on an overall examination of the financial statements and other records of the company and after placing reliance on the reasonable assumptions made by the company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

xviii. During the period covered under audit report, the company has not made any preferential allotment of shares to the parties and Companies covered in the register maintained under section 301 of the Act.

xix. During the period covered under audit report, the company has not issued any debentures accordingly the provisions of clause (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

xx. During the period covered under audit report, the company has not raised any money by way of public issue during the year.

xxi. In our opinion and according to the information and explanations given to us and based on the management representation, no material fraud on or by the company has been noticed or reported during the financial year covered by the audit.

For, Talati & Talati Chartered Accountants Firm Regn No.: 110758W

Umesh Talati Place: Ahmedabad Partner Date: May 28, 2014 Membership No.: 034834


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of M/s SHAH ALLOYS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2013, 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 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 presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

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

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

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

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:

We report that:

No foreign exchange loss has been provided in the financial statements on the Principal amount of 1,00,00,000 USD and on the Premium amount of 48,25,500 USD of the Foreign Currency Convertible Bonds(FCCB) which had become due for payment on September 22, 2011 and remain unpaid as at March 31, 2013. Non provision of the foreign exchange loss on the aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium amount relates to the period from September 23, 2011 to March 31, 2013. This is contrary to Accounting Standard (AS) 11, "The Effects of Changes in Foreign Exchange Rates", which requires that each foreign currency monetary items should be reported using the closing rate as at the balance sheet date. Had this Accounting Standard been followed, the Exchange loss for the financial year 2012-13 would have been more by Rs. 4,79,27,876/-. Accordingly, loss for the current financial year 2012-13 has been under-stated by Rs. 4,79,27,876/- and reserves and surplus has been overstated by Rs. 8,25,60,244/-.

Without qualifying our opinion, we would like to draw your attention to Note No. 40, regarding expense on account of purchase of Power in the last financial year 2011-12 due to which the results of the company are not comparable to the extent of Rs. 31,09,85,750/- (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.

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 Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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 any so far as appears from our examination of those books.

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

d. In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement 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 as on March 31, 2013, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of Section 274(1)(g) of the Act.

Annexure to Independent Auditor''s Report

Referred to in Paragraph 1 under the heading of "report on other legal and regulatory requirements" of our report of even date

i. In respect of its Fixed Assets

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

(b) As explained to us, a major portion of the fixed assets has been physically verified by the management during the year in accordance with a phased program of verification adopted by the company. In our opinion, the frequency of verification is reasonable having regard to the size of the company & nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

(c) According to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year and the going concern status of the Company is not affected.

ii. In respect of its inventories:

(a) As explained to us, inventories (excluding goods in transit) were physically verified by the management at reasonable intervals during the year.

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

(c) In our opinion and according to the information and explanations given to us, the company is maintaining proper records of inventory. The discrepancies, noticed on verification, between the physical stocks and the book records were not material.

iii. In respect of Loans secured or unsecured , granted or taken by the company to / from companies, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

(a) According to the information & explanations given to us and on the basis of records produced before us, the company has granted a loan to a company in earlier years, covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 80,00,00,000/- and the year-end balance of loan granted to such party is Rs. 80,00,00,000/-.

(b) In our opinion, the rate of interest and other terms and conditions on which loan has been granted to the company listed in the register maintained under section 301 of the Act are not prejudicial to the interest of the company.

(c) On the basis of information and explanation given to us and on the basis of records produced before us in respect of loans granted by the company in the earlier years to a party covered under the register maintained under section 301 of the Companies Act, 1956, recovery of the said loan has been fixed by the Corporate Debt Restructuring (CDR) Cell. As per the terms of CDR, the company has to recover Rs. 10,00,00,000/- in the financial year 2011-12 and Rs. 20,00,00,000/- in the financial year 2012-13 .However till date, the company has not recovered the same.

(d) Based on our audit procedures and the information and explanation made available to us, reasonable steps have been taken by the Management of the company for recovery of the principal amount.

(e) According to information and explanation given to us and on the basis of records produced before us during the Year 2012-13, the company has taken loan from two parties covered in the register maintained under section 301 of the Companies Act, 1956 amounting to Rs. 1,25,00,000/- . The Maximum amount involved during the year and the year- end balance of loans taken from such parties is Rs. 1,25,00,000/-.

(f) In our opinion, the rate of interest and other terms and conditions on which loan has been taken from the parties listed in the register maintained under section 301 of the Act are not prejudicial to the interest of the company.

(g) On the basis of records produced before us and on the basis of information and explanation given to us and as per the schedule stipulated for the terms and condition in respect of loans taken by the company, the repayment of the said loan is not due for repayment during 2012-13.

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

v. In respect of the contracts or arrangements referred to in section 301 of the Companies Act, 1956:

(a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under section 301 of the Companies Act, 1956.

(b) In our opinion, and according to information and explanation given to us, the transactions of Purchase of goods and materials, sale of goods and materials and services 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 Rs. 5,00,000/- or more in respect of each party, have been made at prices which are reasonable, having regard to the prevailing market prices for such goods, materials & services or the prices at which the transactions for similar goods, materials & services have been made with other parties.

vi. According to information and explanation given to us, the Company has not accepted any deposit from the public during the year. Therefore, the provisions of Clause (vi) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

vii. The Company has appointed internal auditors and has carried out internal audit during the year. In our opinion, based on the size, nature and extent of the business, the internal audit system of the company is commensurate with the size and nature of the business.

viii. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that 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. In respect of the Statutory dues:

(a) According to the records of the company, undisputed Statutory dues including provident fund, employees State Insurance, Investors Education & Protection Fund, Income-tax, Wealth-tax, Service Tax, Sales-tax, Customs duties, excise duty, Cess and other statutory dues have not been generally regularly deposited during the year with the appropriate authorities. On the basis of records produced before us for our verification and according to the information & explanation given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2013 for a period of more than six months from the date of becoming payable.

(b) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed Income Tax, Sales Tax, Excise and Service Tax dues aggregating to Rs. 40,36,36,953/- (Net of Payments) that have not been deposited as on 31st March, 2013 on account of matters pending before appropriate authorities, are as under.

Sr. Name of the Nature Period to No. Statute of the which the Dues amount relates

1 Income Tax Act, 1961 Income Tax 1997-98

2 Sales Tax Act Sales 1995-96 Tax

3 Gujarat Value Added Value 2006-07 Tax Act, 2003 Added Tax

4 Gujarat Value Added Value 2007-08 Tax Act, 2003 Added Tax

5 Central Excise Excise Duty 2004-05 to Act, 1944 and Service to 2011-12 Tax

Forum where the Amount dispute is pending involved (in Rs.)

Gujarat High court 1,30,000/-

Deputy commissioner of Sales 6,99,000/-

Tax (Tribunal) Ahmedabad

Deputy Commissioner, 4,06,27,791/-

VAT Ahmedabad

Deputy Commissioner, 33,91,08,911/-

VAT Ahmedabad

Central Excise & Service tax 2,30,71,251/-

Appellate Tribunal / Joint / Deputy Commissioner of Central Excise



x. The company''s accumulated losses at the end of financial year are more than fifty percent of its net worth. It has incurred cash losses amounting to Rs. 138,07,80,940/- during the current year and the company has incurred Rs. 207,77,08,543/- cash losses in the immediately preceding previous year.

xi. Consequent upon the sanction of the restructuring package given under CDR mechanism by banks & financial institution, the company was required to start repaying the loans sanctioned by banks/institutions and debenture holders from June 2011 onwards, however the company has made default in repaying the dues as per the terms stipulated in the CDR rework proposal. The Amount and the period of default in respect of Term Loan, WCTL and Non convertible Debentures are as under:

Particulars Period to which the Default Period for which the default relates (Amount inRs.) default subsists

Term Loan 2011-12 17,37,96,290 91-731 days

2012-13 19,60,41,787 1-270 days

Working Capital Term Loan 2011-12 18,64,03,089 91-731 days

2012-13 22,36,83,707 1-270 days

Non Convertible Debenture 2011-12 10,41,66,667 91-731 days

2012-13 12,50,00,000 1-270 days



As per the CDR Terms, Interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures (NCD) had to be parked up to May 2011 into a separate account called Funded Interest Term loan (FITL). However, from June 2011 onwards, the interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures(NCD) has to be serviced as and when due.

However, the company has defaulted in payment of interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures (NCD). The Amount and the period of default are as listed under:

Particulars Period to which the Default Period for which the default relates (Amount inRs.) default subsists

Interest on Term Loan 2011-12 12,04,69,127 91-731 days

2012-13 15,73,65,814 1-335 days

Interest on Working Capital 2011-12 14,95,31,027 91-731 days

Term Loan 2012-13 17,89,46,966 1-335 days

Interest on Non Convertible 2011-12 8,18,90,411 91-731 days

Debenture 2012-13 9,80,00,000 91-365 days



As per the terms of the CDR, Interest on funded interest term loan (FITL) was required to be paid as and when it was due. The company has made the default in payment of interest on FITL. The amount and the period of default are as mentioned below:

Particulars Period to which the Default Period for which the default relates (Amount in Rs.) default subsists

Interest on Funded Interest 2010-11 4,31,63,185 91-1065 days

Term Loan(FITL) 2011-12 7,98,16,025 91-731 days

2012-13 8,25,18,348 1-335 days



As per the terms of the CDR, Interest on working capital facilities was required to be paid as and when it was due. The company has made the default in payment of interest on the working capital facilities. The amount and the period of default are as mentioned below:

Particulars Period to which the Default Period for which the default relates (Amount inRs.) default subsists

Interest on working 2010-11 22,69,93,827 1-1064 days

capital facilities 2011-12 37,17,47,750 1-701 days

2012-13 39,44,65,648 1-335 days

Moreover, the Company, in September 2006, has raised US $ 10 million through Unsecured Zero Coupon Foreign Currency Convertible Bonds (FCCB), due on 22nd September, 2011. On full conversion of FCCB, the FCCB will be converted in to 26,41,143 Equity shares of Rs. 10 each at a premium of Rs. 165 per share, at the option of the Bondholders at any time before the maturity of the bonds. On Conversion, Capital will increase by Rs. 2,64,11,430 and Share Premium by Rs. 43,57,88,570/-. If Bonds are not converted, the company will have to repay the bonds at a premium & in US Dollars. The company has provided the premium till 22nd September, 2011 which has been adjusted against Security Premium in accordance with Section 78 of the Companies Act, 1956.

However, the company has defaulted in repayment of the foreign currency convertible bond (FCCB) dues on its maturity. The default is subsisting since 556 days.

xii. In our opinion & according to the information & explanation given to us, no loans & advances have been granted by the company on the basis of security by way of pledge of shares, debentures & other securities.

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

xiv. According to the information & explanations given to us, the company is not dealing or trading in shares, securities debentures & other investments. Therefore, the provisions of Clause (xiv) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company

xv. In our opinion, the terms & conditions on which the company has given guarantee for loans taken by others from Banks or financial institutions are not prejudicial to the interest of the company.

xvi. According to the information & explanations given to us, the Company has not raised any term loan during the year under audit.

xvii. According to the information and explanations given to us and on an overall examination of the financial statements and other records of the company and after placing reliance on the reasonable assumptions made by the company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

xviii. During the period covered under audit report, the company has not made any preferential allotment of shares to the parties and Companies covered in the register maintained under section 301 of the Act.

xix. During the period covered under audit report, the company has not issued any debentures accordingly the provisions of clause (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

xx. During the period covered under audit report, the company has not raised any money by way of public issue during the year.

xxi. In our opinion and according to the information and explanations given to us and based on the management representation, no material fraud on or by the company has been noticed or reported during the financial year covered by the audit.



For, Talati & Talati

Chartered Accountants

(Firm Reg. No : 110758W)



Sd/-

Umesh Talati

Place: Ahmedabad Partner

Date: May 28, 2013 Membership No: 034834


Mar 31, 2012

1) We have audited the attached Balance Sheet of M/s SHAH ALLOYS LIMITED as at March 31, 2012, the Statement of Profit and Loss and the Cash-flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3) As required by the Companies (Auditor's Report) Order, 2003 as amended by the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section(4A) of Section 227 of the companies Act 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said order to the extent applicable.

4) Further to our comments in the Annexure referred to in paragraph-3 above, we report as under:-

(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 the books;

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

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

We report that:

No foreign exchange loss has been provided in the financial statements on the Principal amount of 1,00,00,000 USD and on the Premium amount of 48,25,500 USD of the Foreign Currency Convertible Bonds (FCCB) which had become due for payment on September 22, 2011 and remain unpaid as at March 31, 2012. Non provision of the foreign exchange loss on the aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium amount relates to the period from September 23, 2011 to March 31, 2012. This is contrary to Accounting Standard (AS) 11, "The Effects of Changes in Foreign Exchange Rates", issued by the Institute of Chartered Accountants of India which requires that each foreign currency monetary items should be reported using the closing rate as at the balance sheet date. Had this Accounting Standard been followed, the Exchange loss for the financial year would have been more by Rs. 3,46,32,368/-. Accordingly, loss for the current financial year 2011-12 has been under-stated and reserves and surplus has been overstated to that extent.

Without qualifying our opinion, we would like to draw your attention to Note No. 40, regarding expense on account of purchase of Power due to which the results of the company are not comparable to the extent of Rs. 31,09,85,750/- (e) On the basis of the written representations received from the directors, as on March 31, 2012 and taken on record by the Board of Directors, we report that none of the directors of the company are disqualified as on March 31, 2012 from being appointed as 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, the said financial statements read together with the significant 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 the Balance Sheet , of the State of affairs of the Company as at March 31, 2012 and

ii. In the case of the Statement of Profit and loss, of the Loss of the company for the year ended on that date and

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

Annexure to Auditor's Report Referred to in Paragraph 3 of our report of even date

i. In respect of its Fixed Assets

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

(b) As explained to us, a major portion of the fixed assets has been physically verified by the management during the year in accordance with a phased program of verification adopted by the company. In our opinion, the frequency of verification is reasonable having regard to the size of the company & nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

(c) According to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year and the going concern status of the Company is not affected.

ii. In respect of its inventories:

(a) As explained to us, inventories (excluding goods in transit) were physically verified by the management at reasonable intervals during the year.

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

(c) In our opinion and according to the information and explanations given to us, the company is maintaining proper records of inventory. The discrepancies, noticed on verification, between the physical stocks and the book records were not material.

iii. In respect of Loans secured or unsecured , granted or taken by the company to/from companies, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

(a) According to the information & explanations given to us and on the basis of records produced before us, the company has granted a loan to a company in earlier years, covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 80,00,00,000/- and the year-end balance of loan granted to such party is Rs. 80,00,00,000/-.

(b) In our opinion, the rate of interest and other terms and conditions on which loan has been granted to the company listed in the register maintained under section 301 of the Act are not prejudicial to the interest of the company.

(c) On the basis of information and explanation given to us and on the basis of records produced before us in respect of loans granted by the company in the earlier years to a party covered under the register maintained under section 301 of the Companies Act, 1956, recovery of the said loan has been fixed by the Corporate Debt Restructuring (CDR) Cell. As per the terms of CDR, the company has to recover Rs. 10,00,00,000/- in the financial year 2011-12. However, the company has not recovered the same.

(d) Based on our audit procedures and the information and explanation made available to us, reasonable steps have been taken by the Management of the company for recovery of the principal amount.

(e) According to information and explanation given to us and on the basis of records produced before us during the Year 2011- 12, the company has taken loan from a party covered in the register maintained under section 301 of the Companies Act, 1956 amounting to Rs. 3,25,00,000/- . The Maximum amount involved during the year and the year-end balance of loans taken from such parties is Rs. 4,86,21,787/- (f) In our opinion, the rate of interest and other terms and conditions on which loan has been taken from the parties listed in the register maintained under section 301 of the Act are not prejudicial to the interest of the company

(g) On the basis of records produced before us and on the basis of information and explanation given to us and as per the schedule stipulated for the terms and condition in respect of loans taken by the company, the repayment of the said loan is not due for repayment during 2011-12.

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

v. In respect of the contracts or arrangements referred to in section 301 of the Companies Act, 1956:

(a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under section 301 of the Companies Act, 1956.

(b) In our opinion, and according to information and explanation given to us, the transactions of Purchase of goods and materials, sale of goods and materials and services 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 Rs. 5,00,000/- or more in respect of each party, have been made at prices which are reasonable, having regard to the prevailing market prices for such goods, materials & services or the prices at which the transactions for similar goods, materials & services have been made with other parties.

vi. According to information and explanation given to us, the Company has not accepted any deposit from the public during the year. Therefore, the provisions of Clause (vi) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

vii. The Company has appointed internal auditors and has carried out internal audit during the year. In our opinion , based on the size, nature and extent of the business, the internal audit system of the company is commensurate with the size and nature of the business.

viii. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that 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. In respect of the Statutory dues:

(a) According to the records of the company, undisputed Statutory dues including provident fund, employees State Insurance, Investors Education & Protection Fund, Income-tax, Wealth-tax, Service Tax, Sales-tax, Customs duties, excise duty, Cess and other statutory dues have not been generally regularly deposited during the year with the appropriate authorities. On the basis of records produced before us for our verification and according to the information & explanation given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2012 for a period of more than six months from the date of becoming payable.

(b) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed Income Tax, Sales Tax, Excise and Service Tax dues aggregating to Rs. 39,37,62,797/- (Net of Payments) that have not been deposited as on 31st March, 2012 on account of matters pending before appropriate authorities, are as under.

Sl. Name of the Statute Nature of Period to which No. the Dues the amount relates

1 Income Tax Act, 1961 Income Tax 1997-98

2 Sales Tax Act Sales Tax 1995-96

3 Gujarat Value Added Value Added Tax 2006-07 Tax Act, 2003

4 Gujarat Value Added Value Added Tax 2007-08 Tax Act, 2003

5 Central Excise Act, Excise Duty 2004-05 to 1944 and Service Tax 2011-12





Sl. Name of the Statute Forum where the Amount No. dispute is pending involved (in Rs. )

1 Income Tax Act, 1961 Gujarat High court 1,30,000/-

2 Sales Tax Act Deputy commissioner of 6,99,000/- Sales Tax (Tribunal) Ahmedabad

3 Gujarat Value Added Deputy Commissioner, 4,06,27,791/- VAT Ahmedabad Tax Act, 2003

4 Gujarat Value Added Deputy Commissioner, 33,91,08,911/- VAT Ahmedabad Tax Act, 2003

5 Central Excise Act, Central Excise & 1,31,97,095/- 1944 Service tax Appellate Tribunal/Joint/ Deputy Commissioner of Central Excise

x. The company's accumulated losses at the end of financial year are more than fifty percent of its net worth. It has incurred cash losses amounting to Rs. 207,77,08,543/- during the current year and the company has incurred Rs. 152,46,80,000/- cash losses in the immediately preceding previous year.

xi. Consequent upon the sanction of the restructuring package given under CDR mechanism by banks & financial institution, the company was required to start repaying the loans sanctioned by banks/institutions and debenture holders from June 2011 onwards, however the company has made default in repaying the dues as per the terms stipulated in the CDR rework proposal. The Amount and the period of default in respect of Term Loan, WCTL and Non convertible Debentures are as under:

Particulars Default Period for which (Amount the default subsists in Rs.)

Term Loan 17,37,96,290 91-366 days

Working Capital Term Loan 18,64,03,089 91-366 days

Non Convertible Debenture 10,41,66,667 91-366 days

Total 46,43,66,046

As per the CDR Terms, Interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures (NCD) had to be parked up to May 2011 into a separate account called Funded Interest Term loan (FITL). However, from June 2011 onwards , the interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures(NCD) has to be serviced as and when due.

However, the company has defaulted in payment of interest on Term Loan, Working capital term loan (WCTL) and Non convertible debentures (NCD) during the year 2011-12. The Amount and the period of default are as listed under:

Particulars Default Period for which (Amount the default in Rs.) subsists

Interest on Term Loan 12,04,69,127 91-366 days

Interest on Working Capital Term Loan 14,95,31,027 91-366 days

Interest on Non Convertible Debenture 8,18,90,411 91-366 days

Total 35,18,90,565

As per the terms of the CDR, Interest on funded interest term loan (FITL) was required to be paid as and when it was due. The company has made the default in payment of interest on FITL. The amount and the period of default are as mentioned below:

Particulars Period to Default Period for which which the (Amount the default default in Rs.) subsists relates

Interest on Funded Interest Term Loan (FITL) 2010-11 4,31,63,185 457-700 days

Interest on Funded Interest Term Loan (FITL) 2011-12 7,98,16,025 91-427 days

Total 12,29,79,210

As per the terms of the CDR, Interest on working capital facilities was required to be paid as and when it was due. The company has made the default in payment of interest on the working capital facilities. The amount and the period of default are as mentioned below:

Particulars Period to Default Period for which which the (Amount the default default in Rs.) subsists relates Interest on working capital facilities 2010-11 22,69,93,827 457-792 days

Interest on working capital facilities 2011-12 37,17,47,750 91-427 days

Total 59,87,41,577

Moreover, the Company, in September 2006, has raised US $ 10 million through Unsecured Zero Coupon Foreign Currency Convertible Bonds (FCCB), due on 22nd September, 2011. On full conversion of FCCB, the FCCB will be converted in to 26,41,143 Equity shares of Rs. 10 each at a premium of Rs. 165 per share, at the option of the Bondholders at any time before the maturity of the bonds. On Conversion, Capital will increase by Rs. 2,64,11,430 and Share Premium by Rs. 43,57,88,570/-. If Bonds are not converted, the company will have to repay the bonds at a premium & in US Dollars. The company has provided the premium till 22nd September, 2011 which has been adjusted against Security Premium in accordance with Section 78 of the Companies Act, 1956.

However, the company has defaulted in repayment of the foreign currency convertible bond (FCCB) dues on its maturity. The default is subsisting since 282 days .

xii. In our opinion & according to the information & explanation given to us, no loans & advances have been granted by the company on the basis of security by way of pledge of shares, debentures & other securities.

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

xiv. According to the information & explanations given to us, the company is not dealing or trading in shares, securities debentures & other investments. Therefore, the provisions of Clause (xiv) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company

xv. In our opinion, the terms & conditions on which the company has given guarantee for loans taken by others from Banks or financial institutions are not prejudicial to the interest of the company.

xvi. According to the information & explanations given to us, the Company has not raised any term loan during the year under audit.

xvii. According to the information and explanations given to us and on an overall examination of the financial statements and other records of the company and after placing reliance on the reasonable assumptions made by the company, we are of the opinion that funds raised on short term basis have not been used for long term investment.

xviii. During the period covered under audit report, the company has not made any preferential allotment of shares to the parties and Companies covered in the register maintained under section 301 of the Act.

xix. During the period covered under audit report, the company has not issued any debentures accordingly the provisions of clause (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

xx. During the period covered under audit report, the company has not raised any money by way of public issue during the year.

xxi. In our opinion and according to the information and explanations given to us and based on the management representation, no material fraud on or by the company has been noticed or reported during the financial year covered by the audit.

For Talati & Talati

Chartered Accountants (Firm Reg. No. : 110758W)

Umesh Talati Partner Membership No: 034834

Place : Ahmedabad Date : June 30, 2012


Mar 31, 2010

1) We have audited the attached Balance Sheet of M/s SHAH ALLOYS LIMITED as at 31st March 2010, and the Profit and Loss A/c and also the Cash-flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3) As required by the companies (Auditors Report) order 2003 and the Companies (Auditors Report) (Amendment) Order,2004 issued by the Central Government of India in terms of sub- section(4A) of Section 227 of the companies Act 1956, we annex here to a statement on the matters specified in paragraphs 4 &5 of the said order to the extent applicable.

4) Further to our comments in the Annexure referred to in paragraph-3 above, we report as under:

(a) We have obtained all the information and explanations, which to the best of our knowl- edge 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 the books.

(c) The Balance Sheet and the Profit and Loss Account & Cash flow statement dealt with by this report are in agreement with the books of account.

(d) In our opinion the Balance Sheet, Profit & Loss Account & Cash Flow Statement comply with Accounting Standards referred to in section 211(3C) of the Companies Act, 1956

(e) On the basis of the written representations received from the directors, as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors of the company are disqualified as on March, 31 2010 from being appointed as 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, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the account- ing principles generally accepted in India. :-

i) In the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2010 and

ii) In the case of the profit and loss account, of the Loss of the company for the year ended on that date and

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

ANNEXURE TO THE AUDITORSREPORT Referred to in Paragraph 3 of our report of even date

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

b) As explained to us, a major portion of the fixed assets has been physically verified by the management during the year in accordance with a phased program of verification adopted by the company. In our opinion, the frequency of verification is reasonable having regard to the size of the company & nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

c) According to the information and explanations given to us, No Fixed Assets were disposed off during the year.

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

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

c) In our opinion and according to the information and explanations given to us, the com- pany is maintaining proper records of inventory. The discrepancies, noticed on verifica- tion, between the Physical stocks and the book records were not material.

iii) In respect of Loans secured or unsecured , granted or taken by company to/from compa nies, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956:

a) According to the information & explanations given to us and on the basis of records produced before us, during the year Company has not granted or taken any loans from or to any parties covered under the register maintained under section 301 of the companies Act, 1956 and hence sub clause b, c, d, e, f & g of clause 4(iii) are not applicable. On the basis of information and explanation given to us and on the basis of records produced in respect of loans given by the company in the year 2008 to SAL Steel Ltd , the repayment of the loan given to the said party has been fixed by the Corporate Debt Restructuring (CDR) cell and thus principal amount of Rs 80.00 Crores is not due for repayment as at 31st March, 2010.

iv) In our opinion & according to the information & explanations given to us, there are adequate internal control systems commensurate with the size of the company & nature of its business for the purchase of inventory, fixed assets & also for the sales of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weak- nesses in internal controls systems.

v) a) In our opinion and according to the information & explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under section 301 of the Compa- nies Act, 1956.

b) In our opinion, and according to information and explanation given to us, the transac- tions of Purchase of goods and materials, Sale of goods and materials and Services 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 the prevailing market prices for such Goods ,Materials &Services or the prices at which the transactions for similar Goods ,Materials & Services have been made with other parties.

vi) In our opinion and according to information & explanation given to us, company has complied with the provisions of Section 58A, 58AA of the Companies Act, 1956 and the rules framed there under.

vii) During the year the company has appointed a firm of Chartered Accountants as internal auditor and in our opinion, the internal audit system of the company is commensurate with its size & nature of its business.

viii) The Central Government has prescribed maintenance of Cost records under Section 209 (I) (d) of the Companies Act, 1956. On the basis of report received from the practicing cost accoun- tant, appointed by the Company we are of the opinion that the Company has prima facie maintained prescribed records & accounts. We have however not made a detailed examination of the same.

ix) a) According to the records of undisputed Statutory dues including provident fund, In- come-tax, Wealth-tax, Service Tax, Sales-tax Customs duties, excise duty, cess and other statutory dues have not been regularly deposited during the year with the appropriate authorities. On the basis of records produced before us for our verification and according to the information & explanation given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2010 for a period of more than six months from the date of becoming payable.

b) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed Income Tax, Sales Tax, Customs and Service Tax dues aggregating to Rs 354.99 lakhs (Net of Payments) that have not been deposited as on 31st March, 2010 on account of matters pending before appropriate authorities, the details of which are as under.

Sr. No Nature of the Financial Year to Forum where Amount Dues Which the the Matter (Rs. in Lacs) matter relates is pending (Net of Payments)

1 Income Tax 1996-97 ITAT, A bad 30.40

2 Income Tax 2002-03 ITAT, Abad 57.15

3 Income Tax 2003-04 ITAT, Abad 217.52

4 Income Tax 1997-98 Gujarat High Court 1.30

5 Sales Tax 1995-96 DC of Sales Tax (Tribunal) 6.99 Ahmedabad

6 Service Tax 2006-07& 2007-08 CESTAT,Ahmedabad 41.63

x) The companys accumulated losses at the end of financial year are more than fifty percent of its net worth. It has incurred cash losses amounting to Rs. 5104.36 lacs during the current year and the company has incurred Rs. 12169.88 lacs cash losses in the immediately preceding previous year.

xi) During the period under review, the company is not required to make any payment of install- ment and interest on its term loan and non convertible debenture as per restructuring package given under CDR Mechanism by the banks & financial Institution.

On the basis of information and explanation given to us and on the basis of records produced, consequent upon the sanction of restructuring package, there are no defaults in respect of loan sanctioned by banks / institutions and debenture holders as at 31.3.2010.

xii) In our opinion & according to the information & explanation given to us, no loans & advances have been granted by the company on the basis of security by way of pledge of shares, debentures & other securities.

xiii) In our opinion, the company is not a chit fund or a nidhi / mutual benefit fund/ society.

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

xv) In our opinion, the terms & conditions on which the company has given guarantee for loans taken by others from Banks or financial institutions are prima facie, not prejudicial to the interest of the company.

xvi) The company has not raised any term loan during the year.

xvii) According to the information and explanations given to us and on an overall examination of the Balance sheet of the Company and after placing reliance on the reasonable assumptions made by the company, fund raised on short term basis to the extent of Rs. 1.26 Crores have been used for long term purpose.

xviii) During the period covered under audit report, the company has not made any preferential allotment of shares to the parities and Companies covered in the register maintained under section 301 of the Act.

xix) During the period covered under audit report, the company has not issued any debentures accordingly the provisions of clause (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

xx) During the period covered under audit report, the company has not raised any money by way of public issue during the year.

xxi) According to the information & explanations given to us, no fraud on or by the company has been noticed or reported during the course of our Audit.

FOR TALATI & TALATI

CHARTEREDACCOUNTANTS

FRNo:110758W

UMESH TALATI

PARTNER

M.No 34834

PLACE: AHMEDABAD

DATE: - 15.04.2010

 
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