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Auditor Report of Thirumalai Chemicals Ltd.

Mar 31, 2016

TO THE MEMBERS OF THIRUMALAI CHEMICALS LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Thirumalai Chemicals Limited (“the Company”), which comprise the balance sheet as at 31 March 2016, 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 Standalone 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 standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone 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 standalone 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 issued by the Institute of Chartered Accountants of India as 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 standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone 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 standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. 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 standalone 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 standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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 2016 and its profit and its cash flows for the year ended on that date.

Emphasis of Matter:

We refer to Note E.9 to the standalone financial statements regarding appointment of and remuneration of Rs.22,78,994 paid to a whole time director during the year as approved by the Board of Directors. The same is subject to ratification and approval by members in ensuing annual general meeting.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements As required by the Companies (Auditor''s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of subsection (11) of section 143 of the Act, we give in Annexure ''A'' a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.

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

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;

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;

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;

In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014; the basis of the written representations received from the directors as on 31 March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2016 from being appointed as a director in terms of Section 164 (2) of the Act; and With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure ''B''.

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:

The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note

C.32 (B) to the standalone financial statements;

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

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

The Annexure referred to in paragraph 1 under ''Report on the Other Legal and Regulatory Requirements'' in the Independent Auditors''

Report of even date to the members of the Company on the standalone financial statements for the year ended 31 March 2016:

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

(b) As per the information and explanations given to us, the fixed assets have been physically verified by the management during the year in accordance with the phased programme of verification adopted by the Company and discrepancies noticed on such verification have been properly dealt with in the books of account;

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

(ii) As per the information and explanations given to us, the inventories have been physically verified during the year by the management. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable;

In our opinion, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification of the same were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account;

(iii) As informed, during the year, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Hence, clause 3(iii) (a),3(iii)(b) and 3(iii)(c) of the order are not applicable;

(iv) In our opinion and as explained to us, in respect of loans, investments, guarantees, and security, the Company has complied with provisions of section 185 and 186 of the Act;

(v) In our opinion and as explained to us, the Company has not accepted any deposits with in the provisions of Section 73 to 76 of the Act read with The Companies (Acceptance of Deposits) Rules, 2014 and other relevant provisions of the Act;

(vi) We have broadly reviewed the books of account maintained by the Company in respect of products where maintenance of cost records has been specified by the Central Government under Section 148(1) of the Act and we are of the opinion that prima-facie, the prescribed accounts and cost records have been made and maintained. We have not, however, made a detailed examination of the cost records with a view to determining whether they are accurate or complete;

(vii) (a) According to the information and explanations given to us and the records examined by us, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues and there are no undisputed statutory dues outstanding as at 31st March 2016, for a period of more than six months from the date they became payable;

(b) Disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of the Statute

Nature of the dues

Amount

(Rs.)

Financial year/s to which the amount relates

Forum where dispute is pending

Tamilnadu General Sales Tax Act

Sales tax and Interest on belated payments of tax

84,48,007

2000-01 to 2005-06

Madras High Court

Income Tax Act

Penalty

400,000

2003-04

Income Tax

Appellate

Tribunal

Income Tax Act

Regular Tax

2,00,24,980

2013-14

Commission of Income Tax, Appeals

Amounts paid under protest and not charged to Statement of Profit and Loss have not been included above. [Refer Note C.32(B) to the standalone financial statements]

(viii) According to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to a financial institution, bank or government or dues to debenture holders;

(ix) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year. According to information and explanations given to us, during the year the Company has not raised any term loans and term loans raised in past were applied for the purpose for which those are raised;

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

(xi) According to the information and explanations given to us, The Managerial remuneration has been paid or provided in accordance with requisite approvals mandated by the provisions of Section 197 read with Schedule V of the Companies Act, except in case of remuneration paid / payable of Rs.22,78,994 to executive director which is subject to approval by shareholders at ensuing general meeting. (refer note E.9 of standalone financial statements);

(xii) According to the information and explanations given to us, the Company is not a nidhi company. Accordingly, para 3 (xii) of the order is not applicable.

(xiii) According to the information and explanations given to us, all transactions with the related parties are in compliance with Section 177 and 188 of The Companies Act, 2013 where applicable and the details have been disclosed in the financial statements as required by the applicable accounting standard;

(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;

(xv) According to the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with him;

(xvi) According to the information and explanations given to us, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

The Annexure referred to in paragraph 3(f) under ''Report on Other Legal and Regulatory Requirements'' our Independent Auditors'' Report to the members of the Company on the standalone financial statements for the year ended 31 March 2016.

Report on the Internal Financial Control u/s.143 (3)(i) of The Companies Act, 2013 (‘the Act’)

We have audited the internal financial controls over financial reporting of Thirumalai Chemicals Limited (''the Company'') as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial control 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 on audit of internal financial controls over financial reporting issued by the Institute of Chartered Accountants of India. 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 its business, including adherence to Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of the reliable financial information, as required under the Companies Act, 2013;

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over 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, to the extent applicable to an audit of internal financial control, both issued by the Institute of Chartered Accountants of India. Those Standards and the guidance note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial control over financial reporting was established and maintained and if such controls operated effectively in all material respects.

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 control over financial reporting included obtaining and understanding of internal financial control over financial reporting, 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 judgment, including the assessment of the risks of material misstatements of the financial statement, whether due to fraud or error.

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 and 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 to permit preparation of financial statements 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 be detected. Also, projections 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 that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 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 on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

For and on behalf of CNK & Associates LLP

Chartered Accountants

Firm Registration No.: 101961W

H. V. Kishnadwala

Partner

Membership No.: 037391

Place: Mumbai

Date: 14th May, 2016


Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub- section (3C) of section 211 of the Companies Act, 1956("the Act") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity''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 entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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 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, 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 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure 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 read with the General Circular 15/2013 dated September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013; and

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 clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Referred in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date.

On the basis of such checks as considered appropriate and in terms of the information and explanations given to us, we state as under:

1 (a) The company is maintaining proper records showing full

particulars including quantitative details and situation of the fixed assets;

(b) As per the information and explanations given to us, the fixed assets have been physically verified by the management during the year in accordance with the phased programme of verification adopted by the Company and no material discrepancies were noticed on such verification;

(c) During the year, the company has discontinued its Maleic Anhydride plant and has disposed off part of the plant. However, the fixed assets disposed off by the company were not substantial and therefore does not affect the going concern assumption;

2 (a) As explained to us, the inventories have been physically verified during the year by the management. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable;

(b) In our opinion and according to the information and explanations given to us, 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) In our opinion, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification of the same were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account;

3 (a) As per the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any company, form or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence, clause 3(b), 3(c) and 3(d) of the Order are not applicable for the year;

(b) As per the information and explanations given to us, the Company has not taken any unsecured loans from parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence, clause 3(f) and 3(g) of the Order are not applicable for the year;

4 In our opinion and as explained to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fxed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls and there is no continuing failure for the same;

5 (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered;

(b) In our opinion and as explained to us, the terms and conditions of the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 are reasonable having regard to the prevailing market prices at the relevant time;

6 In our opinion and according to the explanations given to us, the Company has generally complied with the provisions of Section 58A and 58AA or any other relevant provision of the Companies Act, 1956 and rules made there under for the deposits accepted from the public;

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

8 We have broadly reviewed the books of account maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima-facie, the prescribed accounts and cost records have been made and maintained. We have not, however, made a detailed examination of the cost records with a view to determining whether they are accurate or complete;

9 (a) According to the information and explanations given

to us and the records examined by us, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise-duty, cess and other statutory dues and there are no undisputed statutory dues outstanding as at 31st March 2014, for a period of more than six months from the date they became payable;

(b) Disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of the Nature of Amount Financial Forum where Statute the dues (Rs.) year/s to dispute is

which the pending

amount

relates

Tamilnadu Interest 7,537,505 2000-01 Madras High

General on belated to 2005-06 Court

Sales Tax Act payments

of tax

Foreign Penalty 99,363,453 1995-96 Appellate

Exchange Tribunal

Management constituted

Act under Foreign

Exchange Management Act

Income Tax Penalty 10,566,447 2009-10 Commissioner Act of Income Tax,

Appeals

Amounts paid under protest and not charged to Statement of Proft and Loss have not been included above. [Refer Note C.32(B) to the financial statements]

10 The company does not have any accumulated losses as on 31st March 2014. The company has not incurred any cash losses during the financial year and in the immediately preceding financial year;

11 Based on the information and explanations given to us, the Company has not defaulted in repayment of any dues to financial institutions and banks;

12 Based on our examination of the records and as explained to us, the Company has not granted any loans and/ or advances on the basis of security by way of pledge of shares, debentures and other securities;

13 The Company is not a chit fund, nidhi, mutual benefit fund or a society;

14 During the year, the Company has not made any dealing and trading in shares, securities, debentures and other investments. The Company holds all shares, debentures and other investments held by the company in own name;

15 According to the information and explanations given to us, the Company has given corporate guarantee to bank for and on behalf of step-down subsidiary amounting to Rs. 587,047,000 the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company;

16 In our opinion and according to the information and explanations given to us, the term loans have been applied for the purpose for which they were obtained;

17 As explained to us and on an overall examination of the balance sheet of the Company, in our opinion there are no funds raised on short-term basis, which have been used for long term investments by the Company;

18 During the year the Company has not made any preferential allotment of shares to the parties or companies covered in the register maintained under section 301 of the Companies Act, 1956;

19 During the year the Company has not issued any debentures accordingly, the clause (xix) of the paragraph 4 of the Order is not applicable to the Company;

20 The Company has not raised any money by way of public issues during the year. Therefore, the provisions of clause (xx) of the paragraph 4 of the Order are not applicable to the Company;

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

For and on behalf of

CNK & Associates LLP,

Chartered Accountants

Firm Registration No.: 101961W

H. V. Kishnadwala Place: Mumbai Partner

Date : 12th May, 2014 Membership No.: 037391


Mar 31, 2013

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

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting 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 misstatements.

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

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements 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, 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.

Emphasis of Matter

We draw attention to Note E.5 to the financial statements regarding exposure of Rs. 411,879,337 in Optimistic Organic Sdn Bhd on account of transfer of advances and other amounts due to the company from erstwhile TCL Industries (Malaysia) Sdn Bhd. As detailed in the said note, the Company expects that the same would be recovered in the foreseeable future.

We further draw attention to Note E.7 to financial statements regarding provision made for commission payable to non- executive directors amounting to Rs. 5,302,414. The same is subject to approval by the members at next general meeting. Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 issued by the Central Government of India in terms of sub- section (4A) of section 227 of the Act, we give in the Annexure 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 March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure to the Independent Auditors'' Report

Referred in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date.

On the basis of such checks as considered appropriate and in terms of the information and explanations given to us, we state as under:

1 (a) The company is maintaining proper records showing full particulars including quantitative details and situation of the fixed assets;

1 (b) As explained to us, an independent chartered engineer, valuer and appraiser appointed by the company had carried physical verification of the fixed assets in December 2011. As informed to us, the company has also initiated a phased physical verification of fixed assets over a period of 3 years. Discrepancies noticed on such verification, which were not material, have been appropriately dealt with in the accounts;

1 (c) The fixed assets disposed off by the company were not substantial and therefore does not affect the going concern assumption;

2 (a) As explained to us, the inventories have been physically verified during the year by the management. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable;

2 (b) In our opinion and according to the information and explanations given to us, 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;

2 (c) In our opinion, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification of the same were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account;

3 (a) As per the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any company, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence, clause 3(b), 3(c) and 3(d) of the Order are not applicable for the year;

3 (e) As per the information and explanations given to us, the Company has taken unsecured loans from a company covered in the register maintained under section 301 of the Companies Act, 1956. The details of such unsecured loan taken is as under:

Name of Balance as Maximum Party on 31 March balance 2013 (Rs.) outstanding during the year (Rs.)

Ultramarine & Nil 13,642,774 Pigments Ltd

3 (f) In case of the aforesaid unsecured loan taken, the rate of interest and the other terms and conditions are not prima-facie prejudicial to the interests of the Company;

3 (g) In case of the aforesaid unsecured loan, the repayment of principal amount and interest is regular;

4 In our opinion and as explained to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls and there is no continuing failure for the same;

5 (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered;

5 (b) In our opinion and as explained to us, the terms and conditions of the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 are reasonable having regard to the prevailing market prices at the relevant time;

6 In our opinion and according to the explanations given to us, the Company has generally complied with the provisions of Section 58A and 58AA or any other relevant provision of the Companies Act, 1956 and rules made there under for the deposits accepted from the public;

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

8 We have broadly reviewed the books of account maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima-facie, the prescribed accounts and cost records have been made and maintained. We have not, however, made a detailed examination of the cost records with a view to determining whether they are accurate or complete;

9 (a) According to the information and explanations given to us and the records examined by us, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income- tax, sales-tax, wealth-tax, service tax, custom duty, excise- duty, cess and other statutory dues and there are no undisputed statutory dues outstanding as at 31st March, 2013, for a period of more than six months from the date they became payable;

9 (b) Disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of Nature of Amount Financial Forum where the the dues (Rs.) Year/s to dispute is Statute which the pending amount relates

Central Excise 99,945 2005-06 Assistant Excise Duty Commissioner Act of Central Excise

Income Penalty 18,169,912 1995-96 Income Tax Tax Act Appellate Tribunal

Foreign Penalty 99,363,453 1995-96 Appellate Exchange Tribunal Management constituted Act under Foreign Exchange Management Act

Tamlinadu Interest on 7,537,505 2000-01 to Madras General belated 2005-06 High Court Sales payments Tax Act of tax

Amounts paid under protest and not charged to Statement of Profit and Loss Account have not been included above. [Refer Note C.32(B) to the financial statements]

10 The company does not have any accumulated losses as on 31st March 2013. The company has not incurred any cash losses during the financial year and in the immediately preceding financial year;

11 Based on the information and explanations given to us, the Company has not defaulted in repayment of any dues to financial institutions and banks;

12 Based on our examination of the records and as explained to us, the Company has not granted any loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities;

13 The Company is not a chit fund, nidhi, mutual benefit fund or a society;

14 During the year, the Company has not made any dealing and trading in shares, securities, debentures and other investments. The Company holds all shares, debentures and other investments held by the company in own name;

15 According to the information and explanations given to us, the Company has not given any guarantees for loans taken by another company from banks where it has substantial interest;

16 In our opinion and according to the information and explanations given to us, the term loans have been applied for the purpose for which they were obtained;

17 As explained to us and on an overall examination of the balance sheet of the Company, in our opinion there are no funds raised on short-term basis, which have been used for long term investments by the Company;

18 During the year the Company has not made any preferential allotment of shares to the parties or companies covered in the register maintained under section 301 of the Companies Act, 1956;

19 During the year the Company has not issued any debentures accordingly, the clause (xix) of the paragraph 4 of the Order is not applicable to the Company;

20 The Company has not raised any money by way of public issues during the year. Therefore, the provisions of clause (xx) of the paragraph 4 of the Order are not applicable to the Company;

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

For and on behalf of

Contractor Nayak & Kishnadwala

Chartered Accountants

Firm Registration No. : 101961W

H. V. Kishnadwala

Partner

Membership No. : 37391

Place : Mumbai

Date : 29th May, 2013


Mar 31, 2010

1. We have audited the attached Balance Sheet of THIRUMALAI CHEMICALS LIMITED as at 31s1 March 2010, the related Profit and 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.

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

3. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, and on the basis of such checks as considered appropriate and according to the information and explanations given to us during the course of the audit, we enclose in the Annexure hereto a statement on the matters specified in Paragraphs 4 and 5 of the said Order.

4. Attention is drawn to the following:

a) As disclosed in Note 27 of Schedule 19, the Company has pursuant to the order of the Honble High Court of Bombay adjusted the value of investment in shares of TCL Industries (Malaysia) Sdn Bhd Rs. 182,769,550 against the balance in Securities Premium Account and other capital Reserves;

b) As disclosed in Note 15(b) of Schedule 19, part of the remuneration paid to the managerial personnel amounting to Rs. 5,376,000 is subject to the approval of the members in the forthcoming annual general meeting;

5. As mentioned in Note 27 of Schedule 19, Company has an exposure o/Rs. 378,865,033 in TCL Industries (Malaysia) Sdn Bhd (TCLMj on account of advances and suppliers credit. The Company expects that the same wouldbe recovered in future since the operations of TCLM are continuing and hence no provisioning is considered necessary at this stage. We are unable to comment on the same. Our audit report for the last year was also modified accordingly;

6. As mentioned in Note 23 of Schedule 19, the Company had recognised in the last year. Deferred Tax Asset (DTAj of Rs. 203,644.679 for the unabsorbed business losses. Out of the same, the company continues to recognise Rs. 53.401,261 being the unadjusted amount at the end of the year as DTA. Had the company followed provisions of AS-22 Accounting for Taxes on Income, by not recognizing DTA of Rs. 53,401,261 on account of unabsorbed losses, pro/it for the year would have been lower and balance of deferred tax liability higher by the said amount with corresponding effect on reserves. Our audit report for the last year was also modified accordingly;

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

a) Subject to our comments in paragraph 5 above, we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

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

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

d) In our opinion, subject to our comments in paragraph 5 and 6 above, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement comply with the mandatory Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956.

e) On the basis of written representations received from the directors of the Company as on 31=l March 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2010, from being appointed as a director in terms of Section 274(l)(g) of the Companies Act, 1956.

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Notes to Accounts in Schedule 19 and subject to our observations in paragraphs 5 and 6 above give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2010;

b. In the case of the Profit and Loss Account, of the Profit for the year ended on that date,

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

Statement referred to in paragraph 3 of the Auditors Report of even date to the Members of THIRUMALAI CHEMICALS LIMITED on the accounts for the year ended 31st March 2010

On the basis of such checks as considered appropriate and in terms of the information and explanations given to us, we state as under:

1. (a) The company is maintaining proper records showing full particulars including quantitative details and situation of the fixed assets;

1. (b) As explained to us, the management at reasonable intervals carries out the physical verification of the fixed assets. The discrepancies noticed on such verification, which were not material, have been appropriately dealt with in the accounts;

1. (c) The fixed assets disposed off by the company were not substantial and therefore does not affect the going concern assumption;

2. (a) As explained to us, the inventories have been physically verified during the year by the management. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable;

2. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of tie Company and the nature of its business;

2. (c) In our opinion, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification of the same were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account;

3. (a) As per the information and explanations given to us, the Company had, in an earlier year granted an unsecured loan to a company covered in the register maintained under section 301 of the Companies Act, 1956. The details of such unsecured loan outstanding is as under:

Name of Balance as Maximum Party on 31 March balance 2010 (Rs.) outstanding during the year (Rs.)

TCL Industries 44,890,000 50,720,000 (Malaysia) SDN BHD

3. (b) In case of the aforesaid unsecured loan, the rate of interest and the other terms and conditions are not prima-facie prejudicial to the interests of the Company;

3. (c) In case of the aforesaid unsecured loan, the repayment of principal amount and interest thereon is not regular, {also refer our comments in paragraph 5 in the audit report and Note 27 of Schedule 191:

3. (d) In case of the aforesaid unsecured loan, we are unable to comment whether the company is taking reasonable steps for the timely recovery of the principal and interest. lalso refer our comments in paragraph 5 in the audit report and Note 27 of Schedule 191:

3. (e) As per the information and explanations given to us, the Company has taken unsecured loans from a company covered in the register maintained under section 301 of the Companies Act, 1956. The details of such unsecured loan taken is as under:

Name of Balance as Maximum Party on 31 March balance 2010 (Rs.) outstanding during the year (Rs.)

Ultramarine & Nil 106,796,775 Pigments Ltd

3. (f) In case of the aforesaid unsecured loan taken, the rate of interest and the other terms and conditions are not prima-facie prejudicial to the interests of the Company;

3. (g) In case of the aforesaid unsecured loan, the repayment of principal amount and interest is regular;

4. In our opinion and as explained to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls and there is no continuing failure for the same;

5. (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered;

5. (b) In our opinion and as explained to us, the terms and conditions of the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 are reasonable having regard to the prevailing market prices at the relevant time;

6. In our opinion and as explained to us, the Company has complied with the provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and rules made there under for the deposits accepted from the public;

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

8. We have broadly reviewed the books of account maintained by the company in respect of manufacture of chemicals pursuant to the order made by the Central Government for the maintenance of cost records prescribed under section 209(l)(d) of the Companies Act, 1956 and are of the opinion that prima-facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete;

9. (a) According to the information and explanations given to us and the records examined by us, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise-duty, cess and other statutory dues and there are no undisputed statutory dues outstanding as at 31st March 2010, for a period of more than six months from the date they became payable;

9. (b) Disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of Nature of Amount Year/s Forum where the the dues (Rs.) to which dispute is Statute the amount relates

Central Excise 350,000 2002-03 Central ExciseAct Duty 2004-05 Excise and 2005-06 ServiceTax Appellate Tribunal

Central Excise 99,945 2005-06 Asst. ExciseAct Duty Commissioner of Central Excise

Income Fenalty 43,652.086 1996-97 Commissioner TaxAct of Income Tax (Appeals)

Income Income 30,413,847 2007-08 Commissioner Tax Act Tax of Income Tax (Appeals)

Foreign Penalty 99,363,453 1996-97 Supreme Exchange Court of Managanent India Act

Tamihiadu Interest 7,537.505 2000-01 Chennai General on belated to High Court Sales Tax payments 2005-06 Act of tax

Amounts paid under protest and not charged to Profit and Loss Account have not been included above. (Refer Notes 3, 4 and 5 of Schedule 19)

10. The company does not have any accumulated losses as on 31st March 2010. The company has not incurred any cash losses during the financial year. However, it incurred cash losses in the immediately preceding financial year;

11. Based on the information and explanations given to us, the Company has not defaulted in repayment of any dues to financial institutions and banks;

12. Based on our examination of the records and as explained to us, the Company has not granted any loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities;

13. The Company is not a chit fund, nidhi, mutual benefit fund or a society;

14. During the year, the Company has not made any dealing and trading in shares, securities, debentures and other investments. The Company holds all shares, debentures and other investments held by the company in own name;

15. According to the information and explanations given to us, the Company has given guarantee to a financial institution for loan taken by another company. In our opinion, the terms and conditions whereof are not prejudicial to the interest of the company;

16. According to the information and explanations given to us, the term loans raised during the year were used for the purpose for which they were raised;

17. As explained to us and on an overall examination of the balance sheet of the Company, in our opinion there are no funds raised on short-term basis, which have been used for long-term investment by the Company;

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

19. During the year covered by our audit report the Company has not issued any secured debentures;

20. The Company has not raised any money by public issues during the year covered by our report.

21. As per the information and explanations given to us, no •fraud on or by the Company has been noticed or reported during the year.

For and on behalf of

Contractor Nayak & Kishnadwala

Chartered Accountants

H. V. Kishnadwala

Partner,

Firm Registration Number: 101961W

Membership No 37391

Mumbai

21st May 2010

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