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Auditor Report of Shree Bhawani Paper Mills Ltd.

Mar 31, 2015

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

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134 (5) of the Companies Act, 2013 ("the Act") with respect to the preparation and presentation 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 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 others irregularities; selection and application of appropriate accounting policies; making judgements 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 statement are free from material misstatement.

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

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

Basis of Qualified Opinion

(a) As mentioned in Note No 41 of financial statements, the balances of some of the trade receivables, trade payables, lenders, and loans and advances are subject to confirmation / reconciliation and subsequent adjust- ments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

(b) As mentioned in Note No. 43 of financial statements, the Company became a sick industrial company within the meaning of Section 3 (1) (O) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) due to erosion of its entire net worth and the Company was declared a sick Industrial company by BIFR on 26th September 2013. The Company has provided interest on Term Loan and other Bank Loans of Indian Bank and Bank of Baroda @ 10.50% with effect from 1st January 2013. Had the liability of interest been considered at the rate as sanctioned by the Banks the Loss for the year would have been Rs. 66,85,89,531/- as against the reported loss of Rs. 55,51,30,637/-.

(c) As mentioned in Note No. 29 of financial statements, the Company has not recognized additional net Deferred Tax Asset during the year. Net Deferred Tax Assets of Rs.14 crores was recognized for the year ended 31.03.2012 based on the future profitability projections by the management. We are unable to express our opinion in this respect.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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 31,2015.

(b) In case of the Profit & Loss A/c of the loss for the period ended on that date, and

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

Report on other legal and regulatory requirements

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

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

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

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

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

d. In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014.

e. Note No. 33 the liability for Gratuity has been made on the basis of liability determined by the management.

f. On the basis of written representations received from the Directors as on March 31,2015, and 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 statement - Refer Note 23 and 44 to the financial statements.

ii. The Company has no long-term contracts as at March 31,2015.

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

ANNEXURE TO THE INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 1 of our report of even date on accounts for the year ended March 31,2015 of Shree Bhawani Paper Mills Limited

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

(b). The Company has physically verified certain assets during the year in accordance with a programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

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

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

(c) . The Company is maintaining proper records of inventory. We are informed that the discrepancies identified on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

(iii) As informed to us, the Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013. Consequently, the requirements of clauses (iii) (a) and (b) of paragraph 3 of the Order are not applicable for the current year.

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

(v) The Company has not accepted any deposits from the public during the year. As informed no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

(vi) The Central Government has prescribed maintenance of cost records under Section 148 (1) of the Act in repect of the products of the Company. We have broadly reviewed the books of account and records maintained by the company in this connection and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the same.

(vii) (a) According to the records of the Company, undisputed statutory dues including Provident Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom duty, Excise Duty, Value Added Tax, Cess and other statutory dues have not generally been regularly deposited with the appropriate authorities.Further details of such dues which were outstanding for a period of more than six months from the date they became payable are as follows.

Name. of Statute Period to which Due Date amount relates

Employees State Insurance June 2013 to Sept. July 2013 to Oct. 2014 2014

Employees Provident Fund Aug. 2012 to Sept. Sept. 2012 to Oct 2014 2014

Finance Act, 1994 April 2013 to Sept. May 2013 to Oct. Service Tax 2014 2014

Income Tax Act, 1961 TDS March 2014 to Sept. April 2014 to Oct 2014 2014

Name. of Statute Amount Date of payment (Rupees)

Employees State Insurance 33,41,092 Not yet deposited

Employees Provident Fund 1,65,86,121 Rs. 4,00,00/- paid on 28/4/2015

Finance Act, 1994 7,67,247 Rs. 2,40,392/- paid Service Tax on 28/4/2015

Income Tax Act, 1961 TDS 26,33,255 Rs. 8,500/- paid on 28/4/2015

Total 2,33,27,715

(b) According to the information and explanations given to us, the amounts which were required to be transferred to the investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under has been transferred to such fund within time.

(viii) The accumulated losses of the Company at the end of the year are more than its net worth. It has incurred cash losses, both in the financial year under report and the immediately preceeding financial year.

(ix) On the basis of the records and as per the information and explanations given by the management, the Company has delayed in repayments of dues to the Banks during the year ended March 31,2015. Details of such dues are as follows.

(Amount in Rupees)

Name of Banks Instalments due as Interest due as on March 31,2015 on March 31,2015

Bank of Baroda T/L-III 8,25,00,000/- 5,98,08,330/-

Bank of Baroda T/L-IV 70,70,723/- 62,75,081/-

Indian Bank T/L-IV 54,68,750/- 58,07,763/-

Indian Bank T/L-III 8,25,00,000/- 5,98,18,755/-

Bank of Baroda T/L-V 2,12,50,000/- 2,95,64,207/-

Bank of Baroda WCTL (New) Installment will be 6,55,50,950/- due from June 2015

Bank of Baroda Corporate 1,00,00,000/- 3,44,95,431/- Loan (New)

Indian Bank T/L-V 2,12,50,000/- 2,94,43,328/-

Indian Bank T/L-VI 2,00,00,000/- 5,41,46,555/-

Bank of Baroda (CC A/c) - -

Indian Bank (CC A/c) - -



Name of Banks Total overdue as on March 31, 2015

Bank of Baroda T/L-III 14,23,08,330/- Instalment paid upto June 2012 interest paid upto July 2012.

Bank of Baroda T/L-IV 1,33,45,804/- instalment paid upto June 2012 interest paid upto July 2012.

Indian Bank T/L-IV 1,12,76,513/- Instalment paid upto June 2012 interest paid upto July 2012.

Indian Bank T/L-III 14,23,18,755/- Instalment paid upto June 2012 interest paid upto July 2012.

Bank of Baroda T/L-V 5,08,14,207/- Instalment paid Nil, commenced from 1st quarter of 2013-14 Interest paid upto July 2012.

Bank of Baroda WCTL (New) 6,55,50,950/- Interest paid upto July 2012

Bank of Baroda Corporate 4,44,95,431/- Instalment paid Nil, Loan (New) commenced from 1st quarter of 2013-14 Interest paid upto July 2012.

Indian Bank T/L-V 5,06,93,328/- Instalment paid Nil, commenced from 1st quarter of 2013-14 Interest paid upto July 2012.

Indian Bank T/L-VI 7,41,46,555/- Interest paid upto July 2012-

Bank of Baroda (CC A/c) 16,12,74,248/-

Indian Bank (CC A/c) 51,21,43,369/-



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

(xi) Based on our examination of records and information and explanations given to us, no fresh term loan has been obtained by the Company during the year. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the Company has used short term funds during the year for financing the operating losses of the Company.

(xii) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

FOR P.L. GUPTA & CO., CHARTERED ACCOUNTANTS FIRM REGISTRATION NO. 011575C

PLACE : ALLAHABAD (P.L. GUPTA) DATE : 30th MAY, 2015 PARTNER Membership No. 009444


Mar 31, 2014

We have audited the accompanying financial statements of Shree Bhawani Paper Mills Limited, ("the Company"), which comprise the Balance Sheet as at March 31, 2014 the Statement of Profit and Loss and Cash Flow Statement for fifteen months period 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 statement that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Sub-section (3C) of Section 211 of the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, Implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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 of Qualified Opinion

(a) As mentioned in Note No 41 of financial statements, the balances of some of the trade receivables, trade payables, lenders, and loans and advances are subject to confirmation / reconciliation and subsequent adjust- ments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

(b) As mentioned in Note No. 42 of financial statements, the company became a sick industrial company within the meaning of Section 3 (1) (O) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) due to erosion of its entire net worth and the company was declared a sick Industrial company by BIFR on 26th September 2013. The Company has submitted the Draft Rehabilitation Scheme (DRS) to operating agency, Bank of Baroda. The Company has provided interest on Term Loan and other Bank Loans of Indian Bank and Bank of Baroda @ 10.50% with effect from 1st January 2013. Had the liability of interest been considered at the rate as sanctioned by the Banks the Loss for the year would have been Rs. 78,28,41,197/- as against the reported loss of Rs. 68,09,45,875/-.

(c) As mentioned in Note No. 29 of financial statements, the company has not recognized additional net Deferred Tax Asset during the year. Net Deferred Tax Assets of Rs.14 Crores was recognized for the year ended 31.03.2012 based on the future profitability projections by the management. We are unable to express our opinion in this respect.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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 case of the Profit & Loss A/c of the loss for the period ended on that date and.

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

Report on other legal and regulatory requirements

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

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

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

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

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

d. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow statement comply with the Accounting standards referred to Sub-section (3C) of Section 211 of the Companies Act, 1956 read with the General circular 15/2013 dated 13th September 2013 of the Ministry of Corporate affairs in respect of Section 133 of the Companies Act, 2013 except for comment in para (e) below.

e. Note 33 the liability for Gratuity has been made on the basis of liability determined by the management.

f. On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2014, from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Referred to in paragraph 1 of our report of even date on accounts for the year ended 31st March, 2014 of Shree Bhawani Paper Mills Limited

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

(b). The Company has physically verified certain assets during the year in accordance with a programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c). Fixed assets disposed off during the year were not substantial and therefore do not effect the going concern status of the Company.

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

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

(c). The Company is maintaining proper records of inventory. We are informed that the discrepancies identified on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

(iii) (a). As informed to us, the Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Conse- quently, the requirements of clauses (iii) (b), (c) and (d) of paragraph 4 of the Order are not applicable for the current year.

(b). The company has taken loans from the companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. Loans taken of Rs. 1287 lacs were outstanding in case of 3 parties. The maximum amount due during the year was Rs. 1287 lacs.

(c). The rate of interest and other terms and conditions of the loans taken were prima facie not prejudicial to the interest of the company.

(d). The payment of principal loan and interest are as per terms of the loans taken.

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

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered in the register in pursuance of Section 301 of the Companies Act, 1956 have been entered.

(b) According to the information and explanations given to us, there is no transaction (excluding the loans reported in para (iii)(b) above) in respect of any party and hence the question of reasonable prices in respect of such transactions with regard to the prevailing market price does not arise.

(vi) The Company has not accepted any deposits from the public during the year. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (I) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of such accounts and records with a view to determine whether they are accurate or complete.

(ix) According to the records of the Company, undisputed statutory dues including provident fund, investors education & protection fund, Income tax, Sales Tax, Wealth Tax, Service Tax, Custom duty, Excise duty, Cess & material Statutory dues applicable to it have generally been deposited with the appropriate authorities. Though there has been some delays in some cases. Further Rs. 1,90,75,604/- of such dues which were outstanding as on Balance Sheet date are as follows.

Nature of Statute Period to which Due Date amount relate

Employees State Insurance June 13 to March 14 July 13 to April 14

Employees Provident Fund Aug. 12 to March 14 Sept.12 to April 14

Service Tax Feb. 14 & March 14 March 14 to April 14

Income Tax (TDS) Jan. 14 to March 14 Feb. 14 to April 14



Nature of Statute Amount (Rs.) Remarks Employees State Insurance 22,75,698 Not yet deposited

Employees Provident Fund 1,29,68,484 Not yet deposited

Service Tax 6,08,413 Rs. 75,128/- Not yet deposited

Income Tax (TDS) 32,23,009 Not yet deposited

Total 1,90,75,604*

* Including Rs. 88,20,784/- outstanding for more than six months as on balance sheet date.

X. The accumulated losses of the Company at the end of the period are more than its net worth. It has incurred cash losses, both in the financial year under report and the immediately preceeding financial year.

XI. On the basis of the records and as per the information and explanation given by the management, the company has delayed in repayments of dues of Term Loans to the Banks during the period ended March 31, 2014. Further Rs. 353507853/- of such dues were in arrears as on 31st March 2014.

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

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

XIV. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

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

XVI. Based on our examination of records and information and explanations given to us, no fresh term loan has been obtained by the Company 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, we report that the Company has used short term funds during the year for financing the operating losses of the Company.

XVIII. The Company has not made any preferential allotment of shares during the year.

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

XX. The Company has not raised any money by a public issue during the year. Accordingly, the provisions of clause 4 (xx) of the Companies (Auditor''s Report) Order are not applicable.

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

FOR P.L. GUPTA & CO. CHARTERED ACCOUNTANTS FIRM REGISTRATION NO. 011575C

PLACE : ALLAHABAD (P.L. GUPTA) DATE : 30th MAY, 2014 PARTNER Membership No. 009444


Dec 31, 2012

We have audited the accompanying financial statements of Shree Bhawani Paper Mills Limited, which comprise the Balance Sheet as at 31st December, 2012, and the Statement of Profit and Loss and Cash Flow Statement for the period of nine month ended on that date, 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 statement that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting standards referred to in Sub section (3C) of Section 211 of the Companies Act,1956, ''The Act''. The 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 requirment and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judment, including the assessment of 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 eveluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the 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 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 December 31, 2012;

(b) In case of the Profit & Loss A/c of the loss for the period ended on that date, and

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

Report on other legal and regulatory requirements

1. As required by the Companies (Auditors Report) Order, 2003 (''The Order'') issued by the Central Government of India in terms of Sub section (4A) of Section 227 of the Act, we give in the annexure a statement on the matters specified in paragraphs 4 & 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 audlt.

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

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

(d) In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 except for comment in para (e) below.

(e) Note No. 36 & 37- The liability for gratuity and leave encashment has been made on the basis of liability determined by the management.

(f) Without qualifying our opinion, attention is drawn to the follwing notes:

i. Regarding net deferred tax assets of Rs.14 crore recognized in the accounts for the year ended 31.03.2012 based on the future profitability projections made by the management. We are unable to express any opinion on the said projections and their consequential effects, if any.

ii. Note No 40- As at the balance sheet date, the accumulated losses of the Company stand at Rs. 765412542/- which is in excess of the shareholder''s fund of Rs. 381437871/- as on that date. Based on the business plan and profitability estimates of the Company, the financial statements for the period have been drawn up by the management as per the going concern assumptions.

(g) On the basis of written representations received from the Directors as on December 31, 2012 and taken on record by the Board of Directors, none of the directors is disqualified as on December 31, 2012 from being appointed as a Director in terms of clause (g) of Sub section (1) of Section 274 of the Companies Act, 1956.

(h) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITORS'' REPORT

RE: SHREE BHAWANI PAPER MILLS LIMITED

Referred to in paragraph 1 of our report of even date;

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

(b) The Company has physically verified certain assets during the year in accordance with a program of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the Company has not disposed off a substantial part of its Fixed Assets, so as to affect its going concern status.

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

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

(c) The Company is maintaining proper records of inventory. We are informed that the discrepancies identified on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

III. (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the requirements of clauses (III) (b), (c) & (d) of para 4 of the order are not applicable.

(b) The Company has not taken any loans from the companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. Unsecured fixed deposits of Rs. 4.20 Lacs were outstanding in case of 6 parties covered in the register maintained u/s 301 of the Companies Act, 1956, the maximum amount due during the year was Rs. 4.60 Lacs.

(c) The rate of interest and other terms and conditions of the fixed deposits were prima-facie not prejudicial to the interest of the Company.

(d) The payment of principal amount and interest on the aforesaid Fixed Deposits were regular.

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

V. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered in the register in pursuance of Section 301 of the Companies Act, 1956 have been entered.

(b) According to the information and explanations given to us, there is no transaction (excluding the loans reported in para (iii)(b) above) in respect of any party and hence the question of reasonable prices in respect of such transactions with regard to the prevailing market price does not arise.

VI. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58A and 58AA or any other relevant provisions of the Act. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

VIII. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima-facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of such accounts and records.

IX. According to the records of the Company, undisputed statutory dues including provident fund, investors education & protection fund, income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess & material Statutory dues applicable to it have generally been regulary deposited with the appropriate authorities. Though there has been some delays in some cases. Further, Rs. 6539973/- of such dues which were outstanding as on balance sheet date are as follows:

Nature of Statute Period to which Amount relate Amount Remarks

Employees State Insurance Nov. 12 to Dec.12 463749 Not yet deposited

Employees Provi. Fund Aug. 12 to Dec.12 3915064 Not yet deposited

Income Tax (TDS) July 12 to Dec. 12 2161160* Not yet deposited

Total 6539973

* Including Rs. 102726/- outstanding for more than six months as on balance sheet date.

X. The accumulated losses of the Company at the end of the period are more than of its net worth. It has incurred cash losses, both in the financial year under report and the immediately preceding financial year.

XI. On the basis of the records and as per the information and explanation given by the management, the Company has delayed in repayments of dues of Term Loans to the banks during the period ended 31.12.2012. Further Rs. 96327807/- of such dues were in arrears as on 31st December 2012.

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

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

XIV. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

XV. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Accordingly, clause 4(xv) of the Companies (Auditor''s Report) Order, 2003 is not applicable to the Company.

XVI. According to the information and explanations given to us, we have to state that the Company has applied the term loans for the purposes for which they were obtained.

XVII. According to the information and explanations received, the Company has not applied short term borrowings for long term use and vice-versa, other than temporary deployment pending application.

XVIII. The Company has not made any preferential allotment of shares during the period.

XIX. The Company has not issued any debentures during the period.

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

XXI. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the period.

FOR P. L. GUPTA & CO.,

CHARTERED ACCOUNTANTS

REGISTRATION NO. 011575C

PLACE : NEW DELHI (P.L. GUPTA)

DATE : 18TH MARCH, 2013 PARTNER

Membership No. 9444


Mar 31, 2012

1. We have audited the attached Balance Sheet of Shree Bhawani Paper Mills Limited, as at 31st March, 2012, the Statement of Profit and Loss and also 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 and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

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

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

(iii) 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;

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

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

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with significant Accounting Policies & Notes on Financial Statements and attached thereto give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

(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 cash flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

RE: SHREE BHAWANI PAPER MILLS LIMITED

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 fixed assets.

(b) The Company has physically verified certain assets during the year in accordance with a programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year the Company has not disposed off a substantial part of its Fixed Assets, so as to affect its going concern status.

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

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

(c) The Company is maintaining proper records of inventory. We are informed that the discrepancies identified on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

III. (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the requirements of clauses (III) (b), (c) & (d) of para 4 of the order are not applicable.

(b) The Company has not taken any loans from the companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. Unsecured fixed deposits of Rs. 4.60 Lacs were outstanding in case of 7 parties covered in the register maintained u/s 301 of the Companies Act, 1956, the maximum amount due during the year was Rs. 12.70 Lacs.

(c) The rate of interest and other terms and conditions of the fixed deposits were prima-facie not prejudicial to the interest of the Company.

(d) The payment of principal amount and interest on the aforesaid Fixed Deposits were regular.

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

V. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered in the register in pursuance of Section 301 of the Companies Act, 1956 have been entered.

(b) According to the information and explanations given to us, there is no transaction (excluding the loans reported in para (iii)(b) above) in respect of any party and hence the question of reasonable prices in respect of such transactions with regard to the prevailing market price does not arise.

VI. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58A and 58AA or any other relevant provisions of the Act. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

VIII. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956 and we are of the opinion that prima-facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of such accounts and records.

IX. (a) According to the records of the Company, undisputed statutory dues including provident fund, investors education & protection fund, income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess & material Statutory dues applicable to it have generally been regulary deposited with the appropriate authorities.

(b) According to the information and explanations given to us, TDS amounting to Rs. 15.10 Lacs was outstanding as at 31st March, 2012 for a period of more than 6 months from the date it became payable.

X. The accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth. It has incurred cash losses, both in the financial year under report and the immediately preceding financial year.

XI. The company has since paid aggregating Rs. 261.27 Lacs to Financial Institutions & Banks against the dues amounting to Rs. 335.27 Lacs which fell due in January-March 2012.

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

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

XIV. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

XV. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Accordingly, clause 4(xv) of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company.

XVI. According to the information and explanations given to us, we have to state that the Company has applied the term loans for the purposes for which they were obtained.

XVII. According to the information and explanations received, the Company has not applied short term borrowings for long term use and vice-versa, other than temporary deployment pending application.

XVIII. The Company has made preferential allotment of shares to parties & companies covered in the register maintained u/s 301 of the Act and the price at which shares have been issued is not prejudicial to the interest of the Company.

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

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

XXI. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

FOR P. L. GUPTA & CO.,

CHARTERED ACCOUNTANTS

REGISTRATION NO. 011575C PLACE : ALLAHABAD (P.L. GUPTA)

DATE : 30th MAY, 2012 PARTNER

Membership No. 9444


Mar 31, 2011

1. We have audited the attached Balance Sheet of Shree Bhawani Paper Mills Limited, as at 31st March, 2011, the Profit and Loss Account and also 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 and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

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

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

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

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

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

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

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

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

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

ANNEXURE TO THE AUDITORS' REPORT RE: SHREE BHAWANI PAPER MILLS LIMITED 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 fixed assets.

(b) The Company has physically verified certain assets during the year in accordance with a programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year the Company has not disposed off substantial part of its Fixed Assets, so as to affect its going concern.

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

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

(c) The Company is maintaining proper records of inventory. We are informed that the discrepancies identified on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

III. (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(b) The Company has not taken any loans from the companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. Unsecured fixed deposits of Rs. 12.70 Lacs were outstanding in case of 15 parties covered in the register maintained u/s 301 of the Companies Act, 1956, the maximum amount due during the year was Rs. 12.70 Lacs.

(c) The rate of interest and other terms and conditions of the fixed deposits were prima-facie not prejudicial to the interest of the Company.

(d) The payment of principal amount and interest on the aforesaid Fixed Deposits were regular.

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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system.

V. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered in the register in pursuance of Section 301 of the Companies Act, 1956 have been entered.

(b) According to the information and explanations given to us, there is no transaction (excluding the loans reported in para (iii)(b) above) in respect of any party and hence the question of reasonable prices in respect of such transactions with regard to the prevailing market price does not arise.

VI. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58A and 58AA or any other relevant provisions of the Act. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

VIII. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima-facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of such accounts and records.

IX. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income-tax, wealth-tax, sales-tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2011 for a period of more than six months from the date they became payable.

X. The accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth. It has incurred cash losses, both in the financial year under report and the immediately preceding financial year.

XI. The company has since paid aggregating Rs. 177.34 Lacs to Financial Institutions & Banks against the dues amounting to Rs. 456.44 Lacs which fell due in January-March 2011.

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

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

XIV. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

XV. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Accordingly, clause 4(xv) of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company.

XVI. According to the information and explanations given to us, we have to state that the Company has applied the term loans for the purposes for which they were obtained.

XVII. According to the information and explanations received, the Company has not applied short term borrowings for long term use and vice-versa, other than temporary deployment pending application.

XVIII. The Company has not made any preferential allotment of shares during the year.

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

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

XXI. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

FOR P.L. GUPTA & CO., CHARTERED ACCOUNTANTS REGISTRATION NO. 011575C

(P.L. GUPTA) PARTNER Membership No. 9444

PLACE : ALLAHABAD DATE : 30th MAY, 2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of Shree Bhawani Paper Mills Limited, as at 31st March, 2010, the Profit and Loss Account and also 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 and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

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

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

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

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

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

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

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

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

ANNEXURE TO THE AUDITORS REPORT RE: SHREE BHAWANI PAPER MILLS LIMITED 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 fixed assets.

(b) The Company has physically verified certain assets during the year in accordance with a programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year the Company has not disposed off substantial part of its Fixed Assets, so as to affect its going concern.

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

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

(c) The Company is maintaining proper records of inventory. We are informed that the discrepancies identified on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

III. (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or

other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(b) The Company has not taken any loans from the companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. Unsecured fixed deposits of Rs. 12.70 Lacs were outstanding in case of 15 parties covered in the register maintained u/s 301 of the Companies Act, 1956, the maximum amount due during the year was Rs. 72.95 Lacs.

(c) The rate of interest and other terms and conditions of the fixed deposits were prima-facie not prejudicial to the interest of the Company.

(d) The payment of principal amount and interest on the aforesaid Fixed Deposits were regular.

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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system.

V. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered in the register in pursuance of Section 301 of the Companies Act, 1956 have been entered.

(b) According to the information and explanations given to us, there is no transaction (excluding the loans reported in para (iii)(b) above) in respect of any party and hence the question of reasonable prices in respect of such transactions with regard to the prevailing market price does not arise.

VI. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58A and 58AA or any other relevant provisions of the Act. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

VIII. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima-facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of such accounts and records.

IX. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income-tax, wealth-tax, sales-tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2010 for a period of more than six months from the date they became payable.

X. The accumulated losses of the Company at the end of the financial year are less than fifty percent of its net worth. It has incurred cash losses, both in the financial year under report and the immediately preceding financial year.

XI. According to the information and explanations given to us, the Company has been generally regular in repaying its dues to the banks except some delays due to the financial difficulties. Repayment of installments in respect of working capital term loan amounting to Rs. 60 Lacs, which became due on 31st March, 2010 has since been paid.

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

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

XIV. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

XV. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Accordingly, clause 4(xv) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

XVI. According to the information and explanations given to us, we have to state that the Company has applied the term loans for the purposes for which they were obtained.

XVII. According to the information and explanations received, the Company has not applied short term borrowings for long term use and vice-versa, other than temporary deployment pending application.

XVIII. The Company has not made any preferential allotment of shares during the year.

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

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

XXI. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.





FOR P.L. GUPTA & CO., CHARTERED ACCOUNTANTS REGISTRATION NO. 011575C

PLACE : ALLAHABAD (P.L. GUPTA) DATE : 29th MAY, 2010 PARTNER

Membership No. 9444

 
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