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Auditor Report of Spice Mobility Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of Spice Mobility Limited (formerly known as S Mobility Limited) ("the Company"), which comprise the Balance Sheet as at 31 March 2015, the Statement of Profit and Loss, the Cash Flow Statement for the period then ended, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

Auditor's Responsibility

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

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

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

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

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

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 March 2015, and its loss and its 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 theAnnexure 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 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 the 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 31 March 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 26 to the financial statements;

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

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

Annexure A referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date

Re: Spice Mobility Limited (formerly known as S Mobility Limited) ('the Company')

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

(b) Fixed assets have been physically verified by the management during the year in accordance with a planned programme of verifying them once in two years which, in our opinion is reasonable having regard to the size of the Company and the nature of assets. No material discrepancies were identified on such verification.

ii) (a) The Company's business does not involve inventories and, accordingly, the requirements under paragraph 4(ii) of the Order are not applicable to the Company.

iii) (a) According to the information and explanations 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 Companies Act, 2013. Accordingly, the provisions of clause 3(iii)(a) and (b) of the Order are not applicable to the Company and hence not commented upon.

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 fixed assets and for rendering of services. The activities of the Company do not involve purchase of inventory and the sale of goods. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

v) The Company has not accepted any deposits from the public.

vi) To the best of our knowledge and as explained, the Central Government has not specified the maintenance of cost records under clause 148(1) of the Companies Act, 2013, for the products/services of the Company.

vii) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, value added tax, cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, value added tax, cess and other material statutory dues were outstanding, at the period end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, value added tax and cess on account of any dispute, are as follows:

Name of the statute Nature of dues Amount Period to which Forum where dispute Rs. (000) the amount is pending relates

Central Excise Act, 1944 Demand for excise duty 64,263 1990-91 to 1993-94 CESTAT, Delhi

including penalty Foreign Trade Penalty on account of 40,860 1991-92 High Court, Delhi (Development and non-fulfilment of export Regulation) Act, 1992 obligation

Income Tax Act, 1961 Demand for income Tax on 14,235 2011-12 Commissioner of Income

certain disallowances Tax (Appeals), Meerut

MAT Credit not considered

including interest

Income Tax Act, 1961 Demand for income Tax 108 2012-13 Commissioner of Income on certain disallowances Tax (Appeals), Meerut including interest

Income Tax Act, 1961 Demand for TDS and 19,831 2008-09 to 2013-14 Commissioner of Income Interest on TDS Tax (Appeals), Noida

(d) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

viii) The Company has no accumulated losses at the end of the financial period and it has not incurred cash losses (without considering exceptional items) in the current and immediately preceding financial year.

ix) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bankThe Company did not have outstanding dues to any financial institutions and did not have any outstanding debentures during the period.

x) According to the information and explanations given to us, the Company has given guarantee for loans taken by a subsidiary company from a bank, the terms and conditions whereof, in our opinion, are not prima-facie prejudicial to the interest of the Company. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from financial institutions.

xi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

xii) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the period.

For S. R. Batliboi & Co. LLP

Chartered Accountants

Firm registration number: 301003E

per Anil Gupta

Partner

Membership No : 87921

Place: Noida Date : May 11, 2015


Jun 30, 2014

We have audited the accompanying financial statements of Spice Mobility Limited (formerly known as S Mobility Limited) ("the Company"), which comprise the balance sheet as at June 30, 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 accounting principles generally accepted in India, including the Accounting Standards notified under the Companies Act, 1956 ("the Act") read with General Circular 8/2014 dated 04 April 2014, issued by the Ministry of Corporate Affairs. 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.

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 30 June 2014;

(b) In the case of the statement of profit and loss, of the profit for the year ended on that date, and

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

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of 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 notified under the Companies Act, 1956 read with General Circular 8/2014 dated 04 April 2014, issued by the Ministry of

(e) On the basis of written representations received from the directors as on 30 June 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 30 June 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Annexure referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date

Re: Spice Mobility Limited (''the Company'')

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

(b) Fixed assets have been physically verified by the management during the previous year in accordance with a planned programme of verifying them once in two years which, in our opinion is reasonable having regard to the size of the Company and the nature of assets. No material discrepancies were identified on such verification.

(c) During the year, the fixed assets pertaining to the Mobile Handset division of the Company has been transferred to Spice Retail Limited as part of business transfer under a slump sale agreement. Based on the information and explanations given by the management and on the basis of audit procedures performed by us, we are of the opinion that the transfer of the said fixed assets has not affected the going concern status of the Company.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory 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 and no material discrepancies were noticed on physical verification.

(iii) (a) The Company has granted loan to two wholly owned subsidiary companies covered under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 2,437,160 thousand and the closing balance of loans granted to such companies was Rs. 2,424,090 thousand.

(b) The Company has made interest free loans to the two wholly owned subsidiaries. According to the information and explanations given to us, and having regard to management''s representation that the interest free loans are given to wholly owned subsidiaries of the Company in the interest of the Company''s business, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(c) The loans granted and interest thereon, are re-payable on demand. We are informed that the principal amount to the extent demanded by the Company has been received and Company has not demanded repayment of balance loan during the year, and thus, there has been no default on the part of the parties to whom the money has been lent. The loans given to these companies are interest free.

(d) There is no overdue amount of loans granted to the companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

(e) According to information and explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(iii)(e) to (g) of the Order are not applicable to the Company and hence not commented upon.

(iv) Purchase of the traded goods including mobile handsets is stated to be of proprietary nature, and hence, in such cases, the comparison of prices with the market rates or with purchases with other parties cannot be made. Read with above, 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 fixed assets and inventory and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct major weakness in the internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956, for the products of the Company.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales tax, wealth tax, custom duty, service tax, excise duty, cess and other material statutory dues have generally been regularly deposited by the Company with the appropriate authorities though there has been a slight delay in a few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales- tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the statute Nature of dues Amount Rs. (Rs.000)

Central Excise Act, Demand for excise duty 64,263 1944 including penalty

Foreign Trade Penalty on account of 40,860 (Development and non-fulfillment of export Regulation) Act, 1992 obligation

Income Tax Act, 1961 Demand for income Tax 6,739 on certain disallowances including interest

Income Tax Act, 1961 Demand for income Tax 14,615 on certain disallowances and MAT Credit not considered including interest

Income Tax Act, 1961 Demand for TDS and 15,546 Interest on TDS

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

Central Excise Act, 1990-91 to 1993-94 CESTAT, Delhi 1944

Foreign Trade 1991-92 High Court, Delhi (Development and Regulation) Act, 1992

Income Tax Act, 1961 2010-11 Commissioner of Income Tax (Appeals), Meerut

Income Tax Act, 1961 2011-12 Commissioner of Income Tax (Appeals), Meerut

Income Tax Act, 1961 2008-09 to 2011-12 Commissioner of Income Tax (Appeals), Noida

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The Company did not have outstanding dues to any financial institutions and did not have any outstanding debentures during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, 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 (as amended) 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 (as amended) are not applicable to the Company.

/(xv) According to the information and explanations given to us, the Company has given guarantee for loans taken by a subsidiary company from a bank, the terms and conditions whereof, in our opinion, are not prima-facie prejudicial to the interest of the Company. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from financial institutions.

(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(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 no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money by way of a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.

For S.R. BATLIBOI & CO. LLP Chartered Accountants ICAI Firm registration number: 301003E

per Anil Gupta Partner Membership No.: 87921

Place : Noida Date : August 27, 2014


Jun 30, 2013

Report on the financial statements

We have audited the accompanying financial statements of S Mobility Limited ("the Company"), which comprise the balance sheet as at June 30, 2013, and the statement of profit and loss and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s responsibility for the financial statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s responsibility

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

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

Matter of Emphasis

We draw attention to the fact that the Company has made investments of Rs. 878,375 thousand and, given unsecured interest free loans of Rs. 2,405,590 thousand to and has outstanding receivable of Rs. 369,469 thousand from its two subsidiary companies (including one subsidiary of a subsidiary company) whose net worth as per books is lower than the carrying value of the Company''s investments in these companies. No provision has been made against the above in view of strategic long term investment of the Company in these subsidiaries, their future profitable projections and/or the fair value of these companies as at June 30, 2013. Our opinion is not qualified in respect of this matter.

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 30 June 2013

(b) In the case of the statement of profit and loss, of the profit for the year ended on that date, and

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

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of 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 in sub-section (3C) of Section 211 of the Companies Act, 1956.

(e) On the basis of written representations received from the directors as on 30 June 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on 30 June 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Annexure referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date

Re: S Mobility Limited (''the Company'')

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

(b) Fixed assets have been physically verified by the management during the year in accordance with a planned programme of verifying them once in two years which, in our opinion is reasonable having regard to the size of the Company and the nature of assets. No material discrepancies were identified on such verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory 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 and no material discrepancies were noticed on physical verification.

(iii) (a) The Company has granted loan to three wholly owned subsidiary companies covered under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 2,470,640 thousand and the closing balance of loans granted to such companies was Rs. 2,405,590 thousand.

(b) The Company has made interest free loans to the two wholly owned subsidiaries. According to the information and explanations given to us, and having regard to management''s representation that the interest free loans are given to wholly owned subsidiaries of the Company in the interest of the Company''s business, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(c) The loans granted and interest thereon, are re-payable on demand. We are informed that the principal amount to the extent demanded by the Company has been received and Company has not demanded repayment of balance loan during the year, and thus, there has been no default on the part of the parties to whom the money has been lent. The loans given to these companies are interest free.

(d) There is no overdue amount of loans granted to the companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

(e) According to information and explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(iii)(e) to (g) of the Order are not applicable to the Company and hence not commented upon.

(iv) Purchase of raw materials for manufacturing mobile handsets and the major portion of the traded goods including mobile handsets are stated to be of proprietary nature, and hence, in such cases, the comparison of prices with the market rates or with purchases with other parties cannot be made. Read with above, 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 fixed assets and inventory and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct major weakness in the internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(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, related to the manufacture of mobile handsets, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales tax, wealth tax, custom duty, service tax, excise duty, cess and other material statutory dues have generally been regularly deposited by the Company with the appropriate authorities though there has been a slight delay in a few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales- tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable except for an amount of Rs. 4,038 thousand in respect of Madhya Pradesh entry tax, which has not been paid since September 2010 and Rs. 7,374 thousand in respect of Chattisgarh entry tax payable for the years 2006-07 to 2011-12 (excluding for the year 2008-09 against which Company has filed appeal with Deputy Commissioner of Commercial taxes (Appeals), Raipur).

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the statute Nature of dues Amount (Rs.000)

Tamil Nadu General Tax on transfer 814 Sales Tax Act, 1959 /replacement of material under Annual Maintenance Contract

West Bengal Sales Tax Demand for Local 6,924 Act, 1956 Sales Tax

Central Sales Tax Act, Demand for Central 737 1956 Sales Tax

Delhi Sales Tax Act, Demand against non 408 1975 submission of Form ''C and treating exempted sales as sales

Central Sales Tax Act, Demand against non 4,864 1956 read with the submission of Sales Tax Delhi Sales Tax Act, forms 1975

Central Sales Tax Act, Demand against non 850 1956 submission of Form ''F''

Central Sales Tax Act, Demand against Sales 1,500 1956 Tax

Entry Tax Act, 1976 Demand for Entry Tax 833

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

Tamil Nadu General 1993-94 & 1996-97 High Court, Chennai

Tamil Nadu General 2005-06 and 2007-08 Joint Commissioner of Commercial Taxes, Kolkata

West Bengal Sales Tax 2005-06 Joint Commissioner of Commercial Taxes, Kolkata

Central Sales Tax Act 2002-03 Additional Commissioner Appeals, Delhi

Central Sales Tax Act 2002-03 to 2004-05 Additional Commissioner Appeals, Delhi

Central Sales Tax Act 2005-06 to 2008-09 Joint Commissioner of Commercial Taxes, Bhubaneshwar

Central Sales Tax Act 2006-07 Joint Commissioner of Commercial Taxes, Patna

Central Sales Tax Act 2008-09 Deputy Commissioner of Commercial Taxes (Appeals), Raipur

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current financial year. However, the Company had incurred cash losses in the immediately preceding financial period.

(xi) The Company did not have outstanding dues to any financial institutions or banks and did not have any outstanding debentures during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, 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 (as amended) 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 (as amended) 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.

(xvi) The Company did not have any term loans outstanding 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 no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money by way of a public issue during the year.

(xxi) We have been informed that an accountant of the Company had misappropriated funds amounting to Rs. 709 thousand during the year under audit. The accountant has been dismissed. The Company has withheld his terminal benefits and the amount misappropriated over and above the terminal benefits and amount already recovered, amounting to Rs. 666 thousand, has been provided for as doubtful by the Company.

For S. R. Batliboi & Co. LLP

Chartered Accountants

Firm registration number: 301003E

per Anil Gupta

Partner

Membership No: 87921

Place : New Delhi

Date : August 26, 2013


Jun 30, 2012

1. We have audited the attached Balance Sheet of S Mobility Limited (Formerly Spice Mobility Limited) ('the Company') as at June 30, 2012 and also the Statement of profit and loss and the cash flow statement for the fifteen months period 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) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our opinion, we draw attention to Note No. 42 of the financial statements. The Company has made investments of Rs. 1,264,587 thousand in, given unsecured interest free loans of Rs. 2,470,640 thousand to and has outstanding receivable of Rs. 210,736 thousand from its subsidiary companies whose net worth as per books is lower than the carrying value of the Company's investments in these companies. As more fully discussed in Note No. 42, no provision has been made against the above in view of strategic long term investment of the Company in these subsidiaries, their future profitable projections and / or the fair value of these companies as at June 30, 2012.

5. 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 the written representations received from the directors, as on June 30, 2012, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on June 30, 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 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 June 30, 2012;

b) in the case of the statement of profit and loss, of the loss for the fifteen months period ended on that date; and

c) in the case of cash flow statement, of the cash flows for the fifteen months period ended on that date.

Annexure referred to in paragraph 3 of our report of even date S Mobility Limited (Formerly Spice Mobility Limited) ('the Company')

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

(b) All fixed assets were physically verified by the management in the previous year in accordance with a planned programme of verifying them once in two years 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) There was no substantial disposal of fixed assets during the period.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the period.

(b) The procedures of physical verification of inventory 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 and no material discrepancies were noticed on physical verification.

(iii) (a) The Company has granted loan to four wholly owned subsidiary companies covered under Section 301 of the Companies Act, 1956. The maximum amount involved during the period was Rs. 2,672,080 thousand and the closing balance of loans granted to such companies was Rs. 2,470,640 thousand.

(b) The Company has made interest free loans to four wholly owned subsidiaries. According to the information and explanations given to us, and having regard to management's representation that the interest free loans are given to wholly owned subsidiaries of the Company in the interest of the Company's business, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(c) The loans granted and interest thereon, are re-payable on demand. We are informed that the Company has not demanded repayment of any such loan during the period, and thus, there has been no default on the part of the parties to whom the money has been lent. The loans given to three companies are interest free.

(d) There is no overdue amount of loans granted to the companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

(e) The Company had taken unsecured loan from a company covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the period was Rs. 1,500,000 thousand and the period end balance of loan taken from such party was Rs. NIL.

(f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for the above loan were prima facie not prejudicial to the interest of the Company.

(g) In respect of loan taken, there was no default in the repayment of principal and interest amount.

(iv) Purchase of raw materials for manufacturing mobile handsets and the major portion of the traded goods including mobile handsets are stated to be of proprietary nature, and hence, in such cases, the comparison of prices with the market rates or with purchases with other parties cannot be made. Read with above, 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 fixed assets and inventory and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct major weakness in the internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial period at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(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(I)(d) of the Companies Act, I956, related to the manufacture of mobile handsets, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales tax, wealth tax, custom duty, service tax, excise duty, cess and other material statutory dues have generally been regularly deposited by the Company with the appropriate authorities though there has been a slight delay in a few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the period end, for a period of more than six months from the date they became payable except for an amount of Rs. 4,038 thousand in respect of Madhya Pradesh entry tax, which has not been paid since September 2010.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the Nature of dues Amount statute (Rs. 000)

Tamil Nadu General Tax on transfer / replacement 814 Sales Tax Act, 1959 of material under Annual Maintenance Contract

West Bengal Sales Demand for Local Sales Tax 394 Tax Act, 1956

Central Sales Tax Act, Demand for Central Sales 7,267 1975 Tax

Delhi Sales Tax Act, Demand against non 408 1975 submission of Form 'C' and treating exempted sales as sales

Central Sales Tax Act, Demand against non 4,864 1956 read with the submission of Sales Tax forms Delhi Sales Tax Act, 1975

Central Sales Tax Act, Demand against non 850 1975 submission of Form 'F

Central Sales Tax Act, Demand against Sales Tax 1,500 1975

Entry Tax Act, 1976 Demand for Entry Tax 833

Entry Tax Act, 1976 Demand for Entry Tax 4,523

Central Excise Act, Demand for excise duty 64,263 1944 including penalty

Foreign Trade Penalty on account of 40,860 (Development and non-fulfillment of export Regulation) Act, 1992 obligation

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

Tamil Nadu General Sales, Tax Act, 1959 1993-94 & 1996-97 High Court, Chennai

West Bengal Sales Tax Act, 1956 2005-06 Joint Commissioner of Commercial Taxes, Kolkatta

Central Sales Tax Act, 1975 2005-06 & 2007-08 Joint Commissioner of Commercial Taxes, Kolkatta

Delhi Sales Tax Act, 1975 2002-03 Additional Commissioner Appeals, Delhi

Central Sales Tax Act, 1956 read with the Delhi Sales Tax Act, 1975 2002-03 to 2004-05 Additional Commissioner Appeals, Delhi

Central Sales Tax Act, 1975 2005-06 to 2008-09 Joint Commissioner of Commercial Taxes, Bhubaneshwar

Central Sales Tax Act, 1975 2006-07 Joint Commissioner of Commercial Taxes, Patna

Entry Tax Act, 1976 2008-09 Deputy Commissioner of Commercial Taxes (Appeals), Raipur

Entry Tax Act, 1976 2011-12 & 2012-13 Hon'ble High Court of Himachal Pradesh, Shimla

Central Excise Act, 1944 1990-91 to 1993-94 CESTAT, Delhi

Foreign Trade (Development and Regulation) Act, 1992 1991-92 High Court, Delhi

(x) The Company has no accumulated losses at the end of the financial period. However, it has incurred cash losses in the current period. The Company has not incurred cash losses in the immediately preceding financial year.

(xi) The Company did not have outstanding dues to any financial institutions or banks and did not have any outstanding debentures during the period.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, 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 (as amended) 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 (as amended) 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.

(xvi) The Company did not have any term loans outstanding during the period.

(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 no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the period.

(xx) The Company has not raised any money by way of a public issue during the period.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the period.

For S.R. BATLIBOI & cO.

Chartered Accountants

Firm registration number: 30I003E

per Anil Gupta

Partner

Membership No.: 87921

Place: New Delhi

Date: 24th August, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of Spice Mobility Limited (Formerly Spice Mobiles Limited) ('the Company') as at March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan 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) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our opinion, we draw attention to Note No. 10 (iii) in Schedule 21 of the financial statements. The Company has made investments of Rs 1,358,137 thousand (including share application money of Rs 132,750 thousand) in, given unsecured interest free loans of Rs 2,375,283 thousand to and has outstanding receivable of Rs 455,790 thousand from its subsidiary companies (including two subsidiaries of a subsidiary company) whose net worth as per books is lower than the carrying value of the Company's investments in these companies. As more fully discussed in Note No. 10 (iii) in Schedule 21, no provision has been made against the above in view of strategic long term investment of the Company in these subsidiaries, their future profitable projections and / or the fair value of these companies as at March 31, 2011.

5. Further to our comments in the Annexure referred to in para 3 above, we report that:

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

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of 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 the written representations received from the directors, as on March 31, 2011, and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on March 31, 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 March 31, 2011;

b) in the case of the profit and loss account, of the profit for the year ended on that date; and

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

Annexure referred to in paragraph 3 of our report of even date

Re: Spice Mobility Limited (Formerly Spice Mobiles Limited) ('the Company')

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

(b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification.

(c) There was no disposal of a substantial part of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory 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 and no material discrepancies were noticed on physical verification.

(iii) (a) The Company has granted loans to three wholly owned subsidiary companies and a director covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 2,385,283 thousand and the year- end balance of loans granted to such parties was Rs. 2,385,283 thousand.

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan granted to the director are not prima facie prejudicial to the interest of the Company. The Company has made interest-free loans to three wholly-owned subsidiaries. According to the information and explanations given to us, and having regard to management's representation that the interest free loans are given to wholly-owned subsidiaries of the Company in the interest of the Company's business, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(c) The loans granted are re-payable on demand. We are informed that the Company has not demanded repayment of any such loan during the year, and thus, there has been no default on the part of the parties to whom the money has been lent. The loans given to three companies are interest free. The payment of interest by the director has been regular.

(d) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

(e) As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(iii) (e), (f) and (g) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company and hence not commented upon.

(iv) Purchase of raw materials for manufacturing mobile handsets and the major portion of the traded goods including mobile handsets are stated to be of proprietary nature, and hence, in such cases, the comparison of prices with the market rates or with purchases with other parties cannot be made. Read with above, in our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(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, related to the manufacture of mobile handsets, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, or employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty and excise duty and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases.

Further, since the Central Government has till date not prescribed the amount of cess payable under Section 441 A of the Companies Act,1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the Nature of dues Amount Period to which Forum where dispute statute (Rs '000) the amount is pending relates

Tamil Nadu General Tax on transfer /replacement 814 1993-94 & High Court, Chennai

Sales Tax Act, 1959 of material under Annual 1996-97 Maintenance Contract

Delhi Sales Tax Act, Demand against non 408 2002-03 Additional Commissioner 1975 submission of Form 'C' and Appeals, Delhi treating exempted sales as sales

Central Sales Tax Act, Demand against non 4,864 2002-03 to Additional Commissioner 1956 read with the submission of Sales tax forms 2004-05 Appeals, Delhi Delhi Sales Act, 1975

Central Sales Tax Act, Demand for Sales Tax 737 2005-06 Joint Commissioner of 1956 Commercial Taxes, Kolkata

West Bengal Sales Demand for Sales Tax 394 2005-06 Joint Commissioner of Tax Act, 1956 Commercial Taxes, Kolkata

Central Sales Tax Act, Demand for Sales Tax 346 2005-06 Joint Commissioner

1956 of Commercial Taxes Karnataka

Madhya Pradesh Sales Demand for Sales tax 4,820 2010-11 Deputy Commissioner Tax Act, 1956 of Commercial Taxes (Appeals)-Bhopal

Central Sales Tax Act, Demand for Sales Tax 1,142 2005-09 Joint Commissioner 1956 of Commercial Taxes Bhubaneshwar

Central Excise Act, Demand for Excise duty 64,263 1990-91 to CESTAT, Delhi

1944 including penalty 1993-94

Foreign Trade Penalty on account of non- 40,860 1991-92 High Court, Delhi (Development and fulfillment of export obligation Regulation) Act, 1992.

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) The Company did not have outstanding dues to any financial institutions or banks and did not have any outstanding debentures during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced before us, 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 (as amended) 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 (as amended) 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.

(xvi) The Company did not have any term loans outstanding 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 no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised money by way of public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.

For S.R. BATLIBOI & CO.

Firm registration number: 301003E

Chartered Accountants

per Anil Gupta

Partner

Membership No.: 87921

Place: New Delhi

Date: 30th May 2011


Mar 31, 2010

1. We have audited the attached balance sheet of Spice Mobiles Limited (the Company) as at March 31, 2010 and also the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan 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 signifi cant estimates made by management, as well as evaluat- ing 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) issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 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 the written representations received from the directors, as on March 31, 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2010 from being appointed as a direc- tor 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 March 31, 2010;

b) in the case of the profit and loss account, of the profit for the year ended on that date; and

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

Annexure referred to in paragraph 3 of our report of even date Re: Spice Mobiles Limited (the Company)

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

(b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verifi cation.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verifi cation of inventory at reasonable intervals during the year.

(b) The procedures of physical verifi cation of inventory 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 and no material discrepancies were noticed on physical verifi cation.

(iii) (a) The Company has granted loan to one director covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding during the year and the year-end balance of the loan was Rs.10,000,000.

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for the loan are not prima facie prejudicial to the interest of the Company.

(c) The loan granted is re-payable on demand. As informed, the Company has not demanded repayment of the loan during the year, thus, there has been no default on the part of the director to whom the money has been lent. The payment of interest has been regular.

(d) There is no overdue amount of the loan granted to the director of the Company.

(e) As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(iii) (e), (f) and (g) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company.

(iv) Purchase of components for manufacturing passbook printers and mobile handsets and the major portion of the traded goods including mobile handsets are stated to be of proprietary nature, and hence, in such cases, the comparison of prices with the market rates or with purchases with other parties cannot be made. Read with the above, in our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(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 are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, or employees state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty and excise duty have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases.

Further, since the Central Government has till date not prescribed the amount of cess payable under Section 441 A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

(b) According to the information and explanations given to us, no undisputed dues in respect of provident fund, investor education and protection fund, employees state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other statutory dues were outstanding at the year end for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the Nature of dues Amount Period to which the Forum where dispute statute (Rs 000) amount relates is pending

Tamil Nadu Tax on transfer/ replacement of 814 1993-94 & 1996-97 High Court, Chennai

General Sales Tax material under Annual maintenance

Act, 1959 Contract

Delhi Sales Tax Demand against non submission 408 2002-03 Additional Commissioner

Act, 1975 of form C and treating exempted Appeals, Delhi

sales as sales

Central Sales Tax Demand against non submission of 3,289 2002-03 and 2003-04 Additional Commissioner

Act, 1956 read with Form C Appeals, Delhi

the Delhi Sales Tax

Act, 1975

Central Sales Tax Demand for Sales Tax 737 2005-2006 Joint Commissioner of

Act, 1956 Commercial Taxes, Kolkata

West Bengal Sales Demand for Sales Tax 394 2005-2006 Joint Commissioner of

Tax Act, 1994 Commercial Taxes, Kolkata

Central Excise Act, Demand for Excise duty including 64,263 1990-91 to 1993-94 CESTAT, Delhi

1944 penalty (x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current year and immediately preceding financial period.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to banks. The Company did not have outstanding dues to any financial institutions and did not have any outstanding debentures during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, 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 (as amended) 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 (as amended) 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.

(xvi) The Company did not have any term loans outstanding 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 no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised money by way of public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For S.R. BATLIBOI & CO.

Firm Registration No.: 301003E

Chartered Accountants

per Anil Gupta

Partner

Membership No.: 87921

Place: Gurgaon Date: 15th May 2010

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