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Auditor Report of Som Distilleries & Breweries Ltd.

Mar 31, 2016

TO THE MEMBERS OF SOM DISTILLERIES & BREWERIES LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of SOM DISTILLERIES & BREWERIES LIMITED, NEW DELH ["the Company''), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss, the Cosh Flaw 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 slated in sub section 5 of Section 134 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 genera accepted in India, including the Accounting Standards specified under Section 133 of The Act, read with Rule 7 of The Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments arid 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 end 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 Dosed on

our audit. We have taken into account the provisions of the Act, The accounting and auditing standards and mailers which are required of be included in 1he audit report under The provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under sub section 10 of Section 143 of the Ad. 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 for 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 the material misstatement of the financial statements, whether due to fraud or error. I 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, taut 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 control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Deriders, as well as evaluating The overall presentation of The financial statements. We believe that the audit evider.ee we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of offal’s of me Company as at 31r March, 2016, and its profit and its 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. 2016, issued by the Central Government of India in terms Of subsection 11 of section 143 of the Act (hereinafter referred to as The "Order''''), anti on the basis of such checks Of the books and records of the Company as we considered appropriate and according to information and explanations given to us, we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by subsection 3 of Section 143 of The Act, we report that:

a) We have sought and obtained all the Information and explanations which for the best of our Knowledge and belief were necessary for the purposes of our audio.

b) In our opinion, proper books account as required by law have been kept by the Company sc far as It appears from cur 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 aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) On the basis of the written represent lions received from the Directors as on 31” March, 2016 token on record by the Board of Directors, none of the Directors are disqualified as on 31H March, 2016 from being appointed a Director in terms of subsection 2 of 5ectlon 164 of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting if the Company and the operating effectiveness such controls, refer to our separate Report in Annexure

B.

g) With respect to the other matters to b e 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 33 to the financial statements;

ii. As per the information given to us, the Company does not foresee any losses on any long-term contracts and has therefore not made any provision. We have been informed that the Company has not entered into any derivative contracts.

III. As at 311 March, 2016, as per its records, there were no amounts required to be transferred by the Company to the Investor Education and Protection Fund.

Referred to in Para 1 under ''Repent on other Legal and Regulatory Requirements'' section of our Report of even dote)

T, (a) As per the Information given to us, the Company has maintained proper records showing full particulars, including quantitative details and situation of Its fixed assets, ) We have Seen informed that the fixed chisels have been physically verified by the Management at the date of the financial year no discrepancies ore reported have been noticed on such verification.

(c) As per the records and information and explanations given to us, the title deeds of immovable properties ore held in the name Of the company,

ii. As per the information given to us the Inventory has been physically verified, at reasonable intervals, during The year, by the Management and no material discrepancy ore stated to have been noticed,

lil. As per the Information and explanations given to us, the Company not granted any loans, secured or unsecured, to Companies, firms. Limited Liability Partnerships or other parties covered In the register maintained under 5ection 189 of the Act. Accordingly, the provisions of Paragraph 3(iii) are not applicable,

iv. in our opinion, and according to the Information and explanations given lo us, the Company has complied with the provisions of Section 195 and 186 of the Act in respect of the loans and guarantees and security provided by it, to the extent applicable,

v. According to the Information given to us, the Company has not, accepted any deposits from the public within the meaning of Sections 73,7-1,75 and 76 of the Act and the Rules framed there under to the extent notified,

vl. As per the explanations given to us,, the Central Government has not specified maintenance of cost records in respect of the Company''s products.

vll. (a) According to the records of the Company, Provident Fund, Income Tax.Sales Tax, Custom duty, State Excise duty, Value Added Tax. cess and other statutory dues have been regularly deposited with the appropriate authorities.

We have been Informed that the Employees Slate Insurance Scheme Is not applicable to the Company,

(b) As per the information and explanations given to us, the statutory dues which have not been deposited on account of disputes are as follows:

Name of Statute

Nature of

does

Amount (Rupees in Iocs)

Period To which the amount

Relates

Forum where dispute is pending

1V1 p Entry Tax Act, 1976

Entry Tax

48.94

2007-06

MP Commercial Tax Appeal Board, Bhopal

M P VAT Tax Act, 2002

Entry Tax

13.95

2012-13

Additional Commissioner Commercial Tax. Bhopal

jVi P VAT Tax Act, 2002

C5T

69,48

2006-07

MP High Court

M P VAT Tax Act, 2002

C5T

23.76

2007-08

MP High Court

M P VAT Act/2002

C5T

16B.20

2008-09

MP High Court

M P VAT Act, 2002

C5T

490

2010-11

MP High Court

M P VAT Act, 2002

C5T

454.37

2011-12

MP High Court

M P VAT Act, 2002

CST

413.69

2012-13

Additional Commissioner Co m metrical Tax, Bhopal

MPVAT Act, 2002

Entry Tax

17.45

2012-13

Additional Commissioner Commercial Tax, Bhopal

income Tax Act, 1961

Tax After Assessment

217-5

2012-13

Commissioner of income Tax Appeals

Income Tax Act,1961

Tax After Assessment

70.2B

2013-14

Commissioner of Income Tax Appeals

(c) As per the records of the company, during the year, no amount was required to he transferred to the investor Education and Projection Fund.

vlll. As per the records of The Company examined by us and the information and explanation given to us, the Company has not defaulted in repayments of loans or borrowings to any financial institutions or bank or Government or dues to debenture holders, as applicable, as at balance sheet date.

lx. According to the information and explanations given to us (he moneys raised by way of term loans ha ye been applied, on an overall basis, for the purpose for which they were obtained. The Company has not raised any moneys by way of initial public offer or any other further public offer (including debt instruments).

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

xi. As per its records this Company has not, during The year paid any managerial remuneration.

xii, As it is no1 a Nidhi company and the nidhi Rules 2014 are not applicable to it, the provisions at Clause 3

(xil) of the Order are not applicable to the Company.

xiii. The Company has entered into transactions with related parties in compliance with the provisions of section 177 o n d 169 of the Act. The details at relayed party financial have been disclosed in the financial statements as required by the applicable accounting standards,

xiv. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of Clause 3{xiv) of the order are not applicable the Company.

xv. A$ per the Information given to us. the Company has not entered into any non cash transactions with as Directors or persons connected with him, Accordingly, the provisions of Clause 3(xv) of the order are not applicable 1o the Company.

xvi. The Company is not required to be registered under section 45-lA of the Reserve Bank of Indio Act, 1934. Accordingly, the provisions of clause

3 (xvl) of the order are not applicable to The Company.

Management Responsibility for Internal Financial Controls

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Act.

We have audited the internal financial controls over financial reporting of SOM DISTILLERIES & BREWERIES LIMITED, NEW DELHI (''the Company"), as of 3r March, 2016, in conjunction with our audit of the financial statements of the Company for the year ended on that date.

The Company''s management Is responsible for establishing and maintaining internal financial controls based on the internal control aver financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI ). These responsibilities include the design, Implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of the business, including adherence Jo company''s policies, the safeguarding of its assets, the prevention detection of and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial Information, as required under the Act.

Auditors'' Responsibility

1. Our responsibility Is to express an opinion on the Company''s internal financial controls aver financial reporting based on our audit. We conducted our audit in accordance with The Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (The "Guidance Note") and the Standards on Auditing deemed to be prescribed under Subsection 10 of section 143 of the Act to the extent applicable to an audit of internal financial controls, both applicable to an audit of internal financial controls and both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit lo obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects,

2. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of Internal financial controls over financial re porting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements. Whether due to fraud or error,

3, We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting,

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies procedures that (1) pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary !o permit preparation of financial statement in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only In accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal! financial controls over financial reporting, Including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not detected. Also, of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or Thai the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has an adequate Internal financial control system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 37si March, 2016, based on the internal control over financial reporting criteria established by The Company considering the essential components of internal control stated in the Guidance Note Audit of Internal Financial Controls Over Financial Reporting Issued by the institute of Chartered Accountants of India.

However, despite It being a less complex Company, for more effective financial controls it needs to:

a)Formally codify the system of internal financial controls,

b}Document operations and effectively monitor controls, and

c) More effectively segregate duties.

We have considered the matters identified and reported above and they do not affect our opinion on the financial statements of the company.

For K.C. KHANNA & Co.

Chartered Accountants

12, Zone II, M.P. Nagar, Firm Registration No. 000481N

BHOPAL 462 011

Dated: 13.08.2016 Harsha Chandra

Partner

Membership No. 080489


Mar 31, 2015

We have audited the accompanying financial statements of SOM DISTILLERIES & BREWERIES UMITED, NEW DELHI ('the Company'), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

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

Auditors' 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 there under.

We conducted our audit in accordance with the Standards on Auditing specified under sub section 10 of Section 143 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 control. 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.

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, of the state of affairs of the Company as at 31 st March, 2015, and its profit and its 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, 2015 ("the Order") issued by the Government of India, in exercise of powers conferred upon it under subsection 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 subsection 3 of Section 143 of the Act, we report that:

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

b) In our opinion, proper books of account as required by law have been kept by the Company so far as 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) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) On the basis of the written representations received from the Directors as on 31st March, 2015 taken on record by the Board of Directors, none of the Directors are disqualified as on 31st March, 2015 from being appointed as a Director in terms of subsection 2 of Section 164 of the Act.

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

(f-i.) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 33 to the financial statements;

(f-ii.) As per the information given to us, the Company does not foresee any losses on any long-term contracts and has therefore not made any provision. We have been informed that the Company has not entered into any derivative contracts.

(f-iii.) As at March 31,2015, as per its records, there were no amounts required to be transferred by the Company to the Investor Education and Protection Fund.

Annexure to the Independent Auditors' Report SOM DISTILLERIES & BREWERIES LIMITED Year ended 31.03.2015 (Referred to in para 1 under 'Report on other Legal and Regulatory Requirements' section of our Report of even date)

1. (a) As per the information given to us, the Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets.

(b) We have been informed that the fixed assets have been physically verified by the Management at the close of the financial year and no discrepancies are reported have been noticed on such verification.

2. (a) As per the information given to us the inventory has been physically verified, at reasonable intervals, during the year, by the Management. In our opinion, the frequency of such verification is reasonable.

(b) The procedures for the 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 stated to be maintaining proper records of inventory, No material discrepancies are stated to have been noticed on such verification.

3. As per the information given 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 Act. However, the Company has an account in the nature of a current account with a company under the same management. It has been explained to us that the transactions with this company are in the ordinary course of business. The maximum amount due from that company at any time during the year wasRs. 46,24,74,613 (previous year Rs. 3,62,41,381) and the year end debit balance was Rs. 22,72,12,413 (previous year Rs.7,43,93,832).

(a) Not applicable.

(b) Not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. However, procedures for purchase of inventory need to be strengthened.

5. According to the information given to us, the Company has not, during the year, accepted any deposits from the public in accordance with the provisions of sections 73 to 76 of the Act and the Rules framed thereunder.

6. As per the explanations given to us, the Central Government has not specified maintainence of cost records in respect of the Company's products.

7. (a) According to the records of the Company, provident fund dues, State excise and related dues and other statutory dues have been regularly deposited with the appropriate authorities.

We have been informed that the Employees State Insurance Scheme is not applicable to the Company. As per the records of the Company and the information and explanations given to us, there are no undisputed statutory dues outstanding as at 31.03.2015 for a period of more than six months from the date they became payable.

(b) As per the information and explanations given to us, the statutory dues which have not been deposited on account of disputes are as follows:

Name of Nature of Amount Statute dues (Rupees in lacs)

M P Entry Entry Tax 48.94 Tax Act, 1976

MPVAT CST 454.37 Tax Act, 2002

MPVAT CST 413.69 Tax Act, 2002

MPVAT Entry Tax 17.45 Tax Act, 2002

Income Tax Tax after 217.5 Act, 1961 assessment

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

M P Entry Tax Act, 1976 2007-08 MP Commercial Tax Appeal Board, Bhopal

MPVAT Tax Act, 2002 2011-12 MP High Court

MPVAT Tax Act, 2002 2012-13 Additional Commissioner Commercial Tax, Bhopal

MPVAT Tax Act, 2002 2012-13 Additional Commissioner Commercial Tax, Bhopal Income Tax Act, 1961 2012-13 Commissioner of Income Tax Appeals

(c) As per the records of the company, during the year, no amount was required to be transferred to the Investor Education and Protection Fund.

8. The Company has no accumulated losses. Further, the Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

9. As per the records of the company, and the information given to us, the company has not defaulted in repayment of dues to any financial institutional or bank.

10. According to the information given to us, the Company had given a corporate guarantee to a bank for a loan taken by another company. As per the explanations given to us, the terms and conditions of such guarantee are not prejudicial to the interests of the company.

11. As per the information given to us, the term loans have been applied for purposes for which they were obtained.

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

12, Zone II, N.P. Nagar, For K.C. KHANNA & Co.

BHOPAL 462 011 Chartered Accountants

Firm Registration No. 000481N

Dated: 27.07.2015 Harsha Chandra

Partner

Membership No. 080489


Mar 31, 2014

We have audited the accompanying financial statements of SOM DISTILLERIES & BREWERIES LIMITED, NEW DELHI (''the Company''), which comprise the Balance Sheet as at 31st March, 2014 and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

MANAGEMENT''S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 read with the General Circular 15/ 2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and 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 of 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 whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amount 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.

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

c) in the case of the Cash Flow Statement, of the cash flows of the Companyfor 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 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 ouraudit;

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 the 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 the Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with the general circular 15/2013 dated September 13,2013 of the Ministry of Corporate Affairs in respect of section 133 of the companies act, 2013;

e) on the basis of 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 March 31, 2014, from being appointed as a director in terms of section 274 (1 )(g) of the Act.

SOM DISTILLERIES 8 BREWERIES LIMITED ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT (Referred to in para 1 under ''Report on other Legal and Regulatory Requirements'' section of our Report of even date)

1. (a) As per the information given to us the Company has maintained records showing full particulars, including quantitative details and situation of its fixed assets.

(b) We have been informed that the fixed assets other than Office Equipments and Furniture and Fixtures are stated to have been physically verified by the Management at the close of the financial year and no discrepancies have been noticed on such verification.

(c) No fixed assets, otherthan a vehicle, have been disposed off during the year.

2. (a) As per the information given to us the inventory has been physically verified, during the year, by the Management. In our opinion, the frequency of verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventories followed by the Management are adequate in relation to the size of the Company and the nature of its business.

(c) The Company is stated to be maintaining proper records of inventory. No material discrepancies are stated to have been noticed on verification between the physical stocks as compared to book records.

3. (a) As per the information given to us, the Company has not granted any loans, secured or unsecured, to Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

The Company has an account in the nature of a current account with a company under the same management. The maximum amount due to and due from that company at anytime during the year was Rs. 13,49,45,179 (previous yearRs. 11,27,57,155) and Rs. 3,62,41,381 (previous year Rs. 6,94,27,229) respectively and the year end debit balance was Rs. 7,43,93,8321 (previousyear Rs. NIL).

(b) It has been explained to us that since the current account mentioned above is not in the nature of a loan, there are no stipulations for levy of interest.

(c) Not applicable.

(d) Not applicable.

(e) During the year the Company has not obtained any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Act.

(f) Not applicable.

(g) Not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and forthe sale of goods and services. Such procedures for purchase of inventory need to be strengthened.

5. (a) According to information and explanation given to us, we are of the opinion that 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 underthat section.

(b) In our opinion and according to information and explanation given to us, the transactions made in pursuance of such contracts or arrangements, exceeding the value of rupees five lacs in respect of any party, during the year, have been made at prices which are reasonable having regard to prevailing market price at that time.

6. According to the information and explanations given to us, the Company has not, during the year, accepted any deposits from the public.

7. In our view a regular system of internal audit of all areas of the Company''s operations needs to be put in place and implemented.

8. As per the information given to us, the Company has made and maintained cost accounting records pursuant to The Companies (Cost Accounting Records) Rules 2011 prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956.

9. (a) According to the records of the Company, provident fund dues, State excise and related dues have been regularly deposited with the appropriate authorities.

We have been informed that the Employees State Insurance Scheme is not applicable to the Company.

As per the records of the Company and the information and explanations given to us, there are no undisputed statutory dues outstanding as at 31.03.2014 for a period exceeding a period of six months from the date they became payable.

(b) As per the information and explanations given to us, the statutory dues which have not been deposited on account of disputes are as follows:

Name of Nature of Amount Period to Forum where Statute dues Rupees Which the Dispute is In Lacs amount relates Pending MP Entry MP Commercial Tax Act 1976 Entry Tax 48.94 2007-08 Tax Appeal Board, Bhopal

10. The Company has no accumulated losses. Further, the Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. As per the records of the company, as at the year end, there were no amounts outstanding/due to any financial institution, bank or debenture holders.

12. As per the information given to us, the Company has not granted, during the year, any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. 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 Order are not applicable to the Company.

14. As per the information given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

15. According to the information given to us, during the year, the Company has given a corporate guarantee for a loan taken by others from a bank. In the absence of necessary information, we are unable to comment as to whether the terms and conditions of such guarantee are prejudicial to the interests of the company or not.

16. As per the information given to us, the term loans have been applied for purposes for which they were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

18. During the year, the Company has not made any preferential allotment of shares to anyone.

19. According to the information given to us, during the period covered by our Report the Company did not issue any debentures. Hence, the provisions of Clause 4 (xix) of the Order are not applicable to the Company.

20. The Company has not raised any money by way of public issue during the year. Accordingly, the provisions of Clause 4 (xx) of the Order are not applicable to the Company.

21. 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 K.C. KHANNA & Co. Harsha Chandra Chartered Accountants Partner Firm Registration No. 000481N Membership No. 080489 23, Zone II, MP. Nagar, Dated: 30.05.2014 BHOPAL 462 011


Mar 31, 2012

We have audited the attached Balance Sheet of SOM DISTILLERIES & BREWERIES LIMITED, NEW DELHI ('The Company') as at 31st March, 2012 and also the Profit & Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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 misstatements. 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.

As required by the Companies (Auditor's Report) Order, 2003 as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 issued by the Government of India under sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above and on the basis of the audit indicated herein, we report that:

1. 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.

2. 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.

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

4. In our opinion, the Balance Sheet, Profit and Loss Account and the 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.

5. Based on written representations received from the Directors, as at 31st March, 2012 and taken on record by the Board of Directors, we report that none of the Directors are, prima facie, as at 31st March, 2012, disqualified from being appointed as Directors of the Company under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

6. In our opinion and to the best of our information and according to the explanations given to us, the financial statement together with the notes thereon and the Note 1 to 38 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 the Company's affairs as at 31st March, 2012

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

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

1. (a)As per the information given to us the Company has maintained records showing full particulars, including quantitative details and situation of its fixed assets.

(b) We have been informed that the fixed assets other than Office Equipments and Furniture and Fixtures are stated to have been physically verified by the Management at the close of the financial year and no discrepancies have been noticed on such verification.

(c) No fixed assets have been disposed off during the year.

2. (a) As per the information given to us 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 adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. No material discrepancies are stated to have been noticed on verification between the physical stocks as compared to book records.

3. (a) As per the information given to us, the Company has not granted any loans, secured or unsecured, to Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

The Company has an account in the nature of a current account with a company under the same management. The maximum amount due to and due from that company at any time during the year was Rs. 12,42,68,528 and Rs. 10,59,79,284 respectively and the year end debit balance was Rs. 36,90,977.

(b) Not applicable.

(c) Not applicable.

(d) Not applicable.

(e) During the year the Company has not obtained any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Act.

(f) Not applicable.

(g) Not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and for the sale of goods and services. Such procedures for purchase of inventory need to be strengthened.

5. (a) According to information and explanation given to us, we are of the opinion that 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 that section.

(b) In our opinion and according to information and explanation given to us, the transactions made in pursuance of such contracts or arrangements, exceeding the value of rupees five lacs in respect of any party, during the year, have been made at prices which are reasonable having regard to prevailing market price at that time.

6. According to the information and explanations given to us, the Company has not, during the year, accepted any deposits from the public.

7. In our view a regular system of internal audit of all areas of the Company's operations needs to be put in place and implemented.

8. The Central Government has not prescribed maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 for any of the Company's products.

9. (a) According to the records of the Company, provident fund dues, State excise and related dues have been regularly deposited with the appropriate authorities.

We have been informed that the Employees State Insurance Scheme is not applicable to the Company.

As per the records of the Company there are no undisputed statutory dues outstanding as at 31.03.2012 for a period exceeding a period of six months from the date they became payable other than Income tax for the assessment year 2011-12 aggregating to Rs. 2,45,62,000. As per the details made available to us, this liability has been cleared before the signing of this report.

(b) As per the information and explanations given to us, the statutory dues which have not been deposited on account of disputes are as follows:

Name of Statue Nature of dues Amount period to which Forum where (Rupees in lacs) the amount relates dispute is pending

M P Entry Entry Tax 48.94 2007-2008 MP Commercial Tax Act, 1976 Tax Appeal Board, Bhopal

10. The Company has no accumulated losses. Further, the Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. The inter corporate deposit obtained from the Madhya Pradesh Industrial Development Corporation Ltd. (MPSIDC), a state level financial institution is outstanding. As per the explanations given to us, there are differences of opinion on certain matters between the Management of the Company and MPSIDC. We are therefore unable to comment on the requirements under this para. (Refer Note No. 5 to the Accounts).

12. As per the information given to us, the Company has not granted, during the year, any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. 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 Order are not applicable to the Company.

14. As per the information given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

15. The Company has given Corporate guarantees for loans obtained by a company under the same management. As has been explained to us, the terms and conditions thereof are not prejudicial to the interest of the Company.

16. As per the information given to us, the term loans have been applied for purposes for which they were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

18. During the year, the Company has not made any preferential allotment of shares to anyone.

19. According to the information given to us, during the period covered by our Report the Company did not issue any debentures. Hence, the provisions of Clause 4 (xix) of the Order are not applicable to the Company.

20. The Company has not raised any money by way of public issue during the year. Accordingly, the provisions of Clause 4 (xx) of the Order are not applicable to the Company.

21. 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 K.C. KHANNA & Co.

Chartered Accountants

Firm Registration No. 000481N

Harsha Chandra

Partner

12, Zone II, M.P. Nagar, Bhopal - 462 011 Membership No. 080489

Dated: 31.08 2012


Mar 31, 2011

We have audited the attached Balance Sheet of SOM DISTILLERIES & BREWERIES LIMITED, NEW DELHI as at 31st March, 2011 and also the Profit & Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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 misstatements. 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.

As required by the Companies (Auditor's Report) Order, 2003 as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 issued by the Government of India under sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above and on the basis of the audit indicated herein, we report that:

1. 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.

2. 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.

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

4. In our opinion, the Balance Sheet, Profit and Loss Account and the 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.

5. Based on written representations received from the Directors, as at 31st March, 2011 and taken on record by the Board of Directors, we report that none of the Directors are, prima facie, as at 31st March, 2011, disqualified from being appointed as Directors of the Company under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

6. In our opinion and to the best of our information and according to the explanations given to us, the financial statement together with the notes thereon and the Schedules A to L 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 the Company's affairs as at 31st March, 2011

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

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

Annexure to the Auditors' Report

(Referred to in our Report of even date)

1. (a) As per the information given to us the Company has maintained records showing full particulars, including quantitative details and situation of its fixed assets.

(b) We have been informed that the fixed assets other than Office Equipments and Furniture and Fixtures are stated to have been physically verified by the Management at the close of the financial year and no discrepancies have been noticed on such verification.

(c) No fixed assets have been disposed off during the year.

2. (a) As per the information given to us 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 adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. No material discrepancies are stated to have been noticed on verification between the physical stocks as compared to book records. ,

3. (a) As per the information given to us, the Company has not granted any loans, secured or unsecured, to Companies covered in the register maintained under Section 301 of the Companies Act, 1956. .

(b) Not applicable.

(c) Not applicable.

(d) Not applicable.

(e) During the year the Company has not obtained any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Act. However, in the earlier years, an unsecured loan had been obtained from one such company, which had been repaid during the year.

In addition thereto, the Company has an account in the nature of a current account with the same company. The maximum amount due to that company at any time during the year was Rs. 2,65,32,425 and the year end balance was Rs. nil.

(f) As per the information given to us, there are no stipulations as to the rate of interest and there are no other terms and conditions attached thereto. In our view, this is not prima facie, prejudicial to the interest of the Company.

(g) As per the information given to us, there are no stipulations as to the repayment of the principal amount and interest.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and for the sale of goods and services. Such procedures for purchase of inventory need to be strengthened.

5. (a) According to information and explanation given to us, we are of the opinion that 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 that section.

(b) In our opinion and according to information and explanation given to us, the transactions made in pursuance of such contracts or arrangements, exceeding the value of rupees five lacs in respect of any party, during the year, have been made at prices which are reasonable having regard to prevailing market price at that time.

6. According to the information and explanations given to us, the Company has not, during the year, accepted any deposits from the public.

7. In our view a regular system of internal audit of all areas of the Company's operations needs to be put in place and implemented.

8. The Central Government has not prescribed maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 for any of the Company's products.

9. (a) According to the records of the Company, provident fund dues, State excise and related dues have been regularly deposited with the appropriate authorities.

We have been informed that the Employees State Insurance Scheme is not applicable to the Company.

As per the records of the Company there are no undisputed statutory dues outstanding as at 31.03.2011 for a period exceeding a period of six months from the date they became payable.

(b) As per the information and explanations given to us, the statutory dues which have not been deposited on account of disputes are as follows:

Amount Period to which Name of Nature (Rupees Forum where Statute of dues in Lacs) the amount dispute is relates pending

M P Entry Entry 4.85 1999-2000 Appeal Court, Tax Act, Tax Commercial Tax, 1976 Bhopal

10. The Company has no accumulated losses. Further, the Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. As per the information given to us, the Company has not repaid the inter corporate deposit obtained from the Madhya Pradesh Industrial Development Corporation Ltd. (MPSIDC), a state level financial institution. The amount outstanding, since October 2002 is principal Rs. 7.00 crores plus applicable interest (refer Note B10 of Schedule L to the Accounts).

As per its records, the repayment of the loans from the Kotak Mahindra Bank Ltd., (KMBL) has not been in accordance with the initially accepted terms. As per the explanations given to us, this is due to the difference of opinion on certain matters between the Management of the Company and KMBL. We are therefore unable to determine the period of default, if any (refer Note B11 of Schedule L to the Accounts).

12. As per the information given to us, the Company has not granted, during the year, any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. 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 Order are not applicable to the Company.

14. As per the information given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

15. The Company has given Corporate guarantees for loans obtained by a company under the same management. As has been explained to us, the terms and conditions thereof are not prejudicial to the interest of the Company.

16. As per the information given to us, the term loans have been applied for purposes for which they were obtained. '

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

18. During the year, the Company has not made any preferential allotment of shares to anyone.

19. According to the information given to us, during the period covered by our Report the Company did not issue any debentures. Hence, the provisions of Clause 4 (xix) of the Order are not applicable to the Company.

20. The Company has not raised any money by way of public issue during the year. Accordingly, the provisions of Clause 4 (xx) of the Order are not applicable to the Company.

21. 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 K.C. KHANNA & Co.

Chartered Accountants

Firm Registration No. 00048IN

Harsha Chandra

Partner

Membership No. 080489

12, Zone II, M.P. Nagar, BHOPAL 462 011

Dated: 30.05.2011


Mar 31, 2010

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

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 misstatements. 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.

As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Government of India under sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above and on the basis of the audit indicated herein, we report that:

1. 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.

2. 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.

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

4. In our opinion, the Balance Sheet, Profit and Loss Account and the 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 except Accounting Standards AS (15): "Employee Benefits" and (AS) 22: "Accounting for Taxes on Income".

5. Based on written representations received from the Directors, as at 31st March, 2010 and taken on record by the Board of Directors, we report that none of the Directors are, prima facie, as at 31st March, 2010, disqualified from being appointed as Directors of the Company under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

6. In our opinion and to the best of our information and according to the explanations given to us, subject to

i)Note no. B11 of Schedule L regarding non provision of interest on the inter corporate deposit from the Madhya Pradesh State Industrial Development Corporation Ltd. (MPSIDC) as stated in the said Note;

ii)Note no. B24 of Schedule L regarding balances at debit/credit in the accounts of various parties being subject to confirmation and reconciliation; in the context of debit balances, particularly old outstanding amounts, we are unable comment as to whether and the extent to which provision is required upto the year end;

the financial statement together with the notes thereon and the Schedules A to L 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 the Companys affairs as at 31st March, 2010

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

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

Annexure to the Auditors Report (Referred to in our Report of even date)

1 • (a) As per the information given to us the Company has maintained records showing full particulars, including quantitative details and situation of its fixed assets.

(b) We have been informed that the fixed assets other than Office Equipments and Furniture and Fixtures are stated to have been physically verified by the Management at the close of the financial year and no discrepancies have been noticed on such verification.

(c) No fixed assets have been disposed off during the year.

2. (a) As per the information given to us 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 adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. No material discrepancies are stated to have been noticed on verification between the physical stocks as compared to book records.

3. (a) As per the information given to us, the Company has not granted any loans, secured or unsecured, to Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(b) Not applicable.

(c) Not applicable.

(d) Not applicable.

(e) During the year the Company has not obtained any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Act. However, in the earlier years, an unsecured loan had been obtained from one such company, part of which had been repaid during the year.

In addition thereto, the Company has an account in the nature of a current account with the same Company. The maximum amount due at any time during the year was Rs. 3,33,12,644 and the yearend balance was Rs. 47,62,521.

(f) As per the information given to us, there are no stipulations as to the rate of interest and there are no other terms and conditions attached thereto. In our view, this is not prima facie, prejudicial to the interest of the Company.

(g) As per the information given to us, there are no stipulations as to the repayment of the principal amount and interest.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and for the sale of goods and services. Such procedures for purchase of inventory need to be strengthened.

5. (a) According to information and explanation given to us, we are of the opinion that 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 that section.

(b) In our opinion and according to information and explanation given to us, the transactions made in pursuance of such contracts or arrangements, exceeding the value of rupees five lacs in respect of any party, during the year, have been made at prices which are reasonable having regard to prevailing market price at that time.

6. According to the information and explanations given to us, the Company has not, during the year, accepted any deposits from the public.

7. In our view a regular system of internal audit of all areas of the Companys operations needs to be put in place and implemented.

8. The Central Government has not prescribed maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 for any of the Companys products.

9. (a) According to the records of the Company, provident fund dues, State excise and related dues have been regularly deposited with the appropriate authorities.

We have been informed that the Employees State Insurance Scheme is not applicable to the Company.

As per the records of the Company there are no undisputed statutory dues outstanding as at 31.03.2010 for a period exceeding a period of six months from the date they became payable.

(b) As per the information and explanations given to us, the statutory dues which have not been deposited on account of disputes are as follows:

Name of Nature of Amount Period to which the Statute dues (Rupees in Lacs) amount relates

M P Entry Tax Act, Entry Tax 4.85 1999-2000 1976

Name of Statue Forum where dispute is pending

M P Entry Tax Act, 1976 Appeal Court, Commercial Tax, Bhopal

10. The Company has no accumulated losses. Further, the Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. As per the information given to us, the Company has not repaid the inter corporate deposit obtained from the Madhya Pradesh Industrial Development Corporation Ltd. (MPSIDC), a state level financial institution. The amount outstanding, since October 2002 is principal Rs. 7.00 crores plus applicable interest (Refer Note no. B11 of Schedule L).

12. As per the information given to us, the Company has not granted, during the year, any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. 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 Order are not applicable to the Company.

14. As per the information given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

15. The Company has given Corporate guarantees for loans obtained by a company under the same management. As has been explained to us, the terms and conditions thereof are not prejudicial to the interest of the Company.

16. As per the information given to us, the term loans have been applied for purposes for which they were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

18. According to the information and explanations given to us, the Company has, during the year made preferential allotment of shares on the conversion of share warrants issued in an earlier year to parties then covered in the register maintained under section 301 of the Companies Act, 1956. In our opinion, the price at which such shares have been issued is not prejudicial to the interest of the Company.

19. According to the information given to us, during the period covered by our Report the Company did not issue any debentures. Hence, the provisions of Clause 4 (xix) of the Order are not applicable to the Company.

20. The Company has not raised any money by way of public issue during the year. Accordingly, the provisions of Clause 4 (xx) of the Order are not applicable to the Company.

21. 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 K.C.KHANNA & Co. Chartered Accountants

23, Zone II, MP. Nagar,

BHOPAL 462 011 Harsha Chandra

Partner Dated: 22nd July, 2010 Membership No. 080489

Firm Registration No. 000481N

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