Auditor Report of U G Hotels & Resorts Ltd.

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of U G HOTELS AND RESORTS 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 our 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, we consider 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 said accounts due to Note 6(A) of regarding dispute & compromise with UMAK Investment Company Private Limited & Note 13 of regarding non provision of doubtful debts for Rs. 48,20 lacs, give the information required by the Companies Act, 1956, in the manner so required but don''t give a true and fair view in conformity with the accounting principles generally accepted in India, in view of the dispute and compromise with UMAK Investment Company Private Limited is still pending at various levels:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

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

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

Report on Other legal and Regulatory Requirements 1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of 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 subsection (3C) of section 211 of the Companies Act, 1956;

e) On the basis of written representations received from the directors, as at March 31, 2013 and taken on record by the Board of Directors, we report that none of the directors other than Harmit Ghai are disqualified as at March 31, 2013 from being appointed as a director in terms of Section 274 (1) (g) of the Act;

Annexure to the Auditors'' Report of even date to the members of U G HOTELS AND RESORTS LIMITED, on the financial statements for the year ended March 31, 2013 (Refer to in paragraph 5(1) of our report of even date)

Based on the Audit Procedures performed for the purpose of reporting a true and fair view on the financials statements of the company and taking into the consideration the information and explanation given to us and the books of accounts and other records examined by us in the normal course of audit, we report that: i) In respect of Fixed Assets of the Company and in our opinion:

a. The Company has not maintained proper Fixed Assets records.

b. The Company has a programme of physical verification of its fixed assets by which they are verified annually. In accordance with this programme, fixed assets were verified during the year and no discrepancies were noticed on such verification. In our opinion, the frequency of the physical verification is reasonable having regards to the size of the company and nature of fixed assets.

c. The Company has not disposed any fixed assets during the year. ii) In respect of Inventories of the Company and in our opinion:

a. Inventories have been physically verified by management during the year and the frequency of verification is reasonable.

b. The procedures for 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. No material discrepancies were noticed on physical verification of inventory.

iii) In respect of loans, secured or unsecured, granted to or taken from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, in our opinion: a. The Company has granted unsecured interest free/interest- bearing loans to its subsidiaries which are listed in the register maintained under Section 301 of the Companies Act, 1956. The terms and conditions of such loans are prima facie, not prejudicial to the interest of the Company.

b. The Company has taken loans from two parties covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding at any time during the year aggregated to Rs. 79, 61,928 and the balance outstanding at year end is Rs.79,61,928.

c. In our opinion rate of interest, where ever stipulated and other terms and conditions of such loans are prima facie not prejudicial to the interest of the Company.

d. The payments of principal amount and interest where ever stipulated in respect of such loans have been regular.

e In respect of loans and advances in the nature of loans given by the Company, the parties/employees have generally repaid the principal amount and interest as per terms, wherever stipulated,

iv) In our opinion, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fixed assets and the sale of goods & services. We have not observed any major weakness in the internal control system during the course of the audit.

v )(a) In our opinion and according to the information and explanations given to us, the Company has entered into contracts or arrangements referred to in section 301 of the Companies Act, 1956, the particulars of which are required to be entered in the register required to be maintained under that section.

(b) In the absence of competitive information provided to us, we are unable to comment regarding the reasonableness of prices of the transactions entered. In our opinion, the Company has not entered into any contracts or arrangements referred to in Section 301 of the Companies Act, 1956, the particulars of which are required to be entered in the register, maintained section 301.

vi) In our opinion, the Company has not accepted any deposits from the public within the meaning of section 58A and section 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

vi) In our opinion, the company has an internal audit system commensurate with the size and nature of its business. However, no Internal Audit Report was shown to us.

vF:if The maintenance of cost records prescribed under section 209(1)(d) of the Companies Act,1956, is not applicable to the company,

''X) In respect of disputed and undisputed Statutory Dues of the Company and according to information and explanations given to us and on the basis of our examination of the records of the Company

a. Amounts deducted / accrued in the books of accounts in respect of Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and any other material Statutory Dues have generally been regularly deposited during the year by the Company with the appropriate authorities, to the extent applicable. There were no dues on account of Cess under Section 441A of the Companies Act, 1956 since the aforesaid section has not yet been made effective by the Central Government. b. According to the information and explanations given to us, no undisputed amounts payablein respect aforesaid dues were in arrears, as at March 31, 2013 for a period of more than six months from the date they became payable, wherever applicable except Employer''s contribution to Provident Fund Employee contribution to Provident Fund, Administration charges on Provident Fund, Service Tax, Luxury Tax and VAT amounting to Rs.7.18 Lacs, Rs. 4.66 Lacs, Rs. 0.38 Lacs, Rs. 7.98 Lacs, Rs. 18.86 Lacs and 5.93 Lacs respectively.

x) The Company has accumulated losses at the end of the financial year more than the Net Worth of the company and it has incurred cash losses in the current year as well as immediately preceding financial year.

xi) Based on our audit procedures and in our opinion, the Company has not defaulted in repayment of dues to financial institutions or banks or debenture holders except for car loan from Central Bank of India, ICICI Bank Limited, Tata Capital Limited and Kotak Mahindra Limited, but during the financial year company has made settlement/ paid all these loans except loan from Central bank of India.

xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of paragraph 4 clause (xii) of the Order are not applicable.

xiii) The Company is not a Chit Fund or a Nidhi/Mutual Benefit fund/ society. Accordingly, the provisions of paragraph 4 clause (xiii) of the Order are not applicable.

xiv) In our opinion the company is not dealing or trading in shares, debentures, securities and other investments. Accordingly, the provisions of paragraph 4 clause (xiv) of the Order are not applicable.

xv) In our opinion, the terms and conditions of guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interests of the Company.

xvi) In our opinion and to the best of our knowledge and belief, proceeds of term loans taken were, prima facie, applied for the purpose it was obtained and no fresh term loan was obtained during the year.

xvii) In our opinion and on an overall examination of the balance sheet of the Company, no funds have been raised on short-term basis.

xviii) In our opinion, 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) In our opinion and the records examined by us, no debentures have been issued during the year.

xx) The Company has not raised any monies by way of public issue during the year. Accordingly, the provisions of paragraph 4 clause (xx) of the Order are not applicable.

xxi) In our opinion, no material fraud on or by the Company has been noticed or reported during the period covered by our audit.



FOR SHARMA GOEL & CO.

CHARTERED ACCOUNTANTS

FRN: 000643N



Amar Mittal

Place: New Delhi Partner

Date: 30.05.2013 M.No. 017755

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Mar 31, 2012

1. We have audited the accompanying financial statements of U.G. Hotels and Resorts Limited ("the Company") which comprise the Balance Sheet as at March 31, 2012 and the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date. 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 the Standards on Auditing generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor''s Report) Order, 2003, as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub- section (4A) of Section 227 of ''The Companies Act, 1956'' of India (the ''Act''), we enclose in the Annexure, a statement on the matters specified in paragraph 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 purpose of our audit;

ii) 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;

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 Act;

v ) On the basis of written representations received from the directors, as at March 31, 2012 and taken on record by the Board of Directors, we report that none of the directors other than Harmit Ghai are disqualified as at March 31, 2012 from being appointed as a director in terms of Section 274 (1) (g) of the Act;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts due to Note 6(A) of regarding dispute & compromise with UMAK Investment Company Private Limited & Note 13 of regarding non provision of doubtful debts for Rs. 47.74 lacs, give the information required by the Companies Act, 1956, in the manner so required but don''t give a true and fair view in conformity with the accounting principles generally accepted in India, in view of the dispute and compromise with UMAK Investment Company Private Limited is still pending at various levels.

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

(b) In the case of Statement of Profit and Loss, of the loss of the Company for the year ended on that date; and

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

Annexure to the Auditors'' Report of even date to the members of U.G. Hotels & Resorts Limited, on the financial statements for the year ended March 31, 2012 (Refer to in paragraph 3 of our report of even date)

Based on the Audit Procedures performed for the purpose of reporting a true and fair view on the financials statements of the company and taking into the consideration the information and explanation given to us and the books of accounts and other records examined by us in the normal course of audit, we report that: i) In respect of Fixed Assets of the Company and in our opinion:

a. The Company has not maintained proper Fixed Assets records.

b. The Company has a programme of physical verification of its fixed assets by which they are verified annually. In accordance with this programme, fixed assets were verified during the year and no discrepancies were noticed on such verification. In our opinion, the frequency of the physical verification is reasonable having regards to the size of the company and nature of fixed assets.

c. The Company has not disposed off substantial part of any fixed assets during the year. Therefore the going concern assumption is not affected.

ii) In respect of Inventories of the Company and in our opinion:

a. Inventories have been physically verified by management during the year and the frequency of verification is reasonable.

b. The procedures for 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. No material discrepancies were noticed on physical verification of inventory.

iii) In respect of loans, secured or unsecured, granted to or taken from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, in our opinion:

a. The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Act.

b. The Company has taken loans from two parties covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount outstanding at any time during the year aggregated to Rs. 66,68,743 and the balance outstanding at year end is Rs. 66,68743. ( Refer Note – 6 to Notes to Accounts)

c . In our opinion rate of interest, where ever stipulated and other terms and conditions of such loans are prima facie not prejudicial to the interest of the Company. d. The payments of principal amount and interest where ever stipulated in respect of such loans have been regular.

iv) In our opinion, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fixed assets and the sale of goods & services. We have not observed any major weakness in the internal control system during the course of the audit.

v ) (a) In our opinion and according to the information and explanations given to us, the Company has entered into contracts or arrangements referred to in section 301 of the Companies Act, 1956, the particulars of which are required to be entered in the register required to be maintained under that section. (b) In the absence of competitive information provided to us, we are unable to comment regarding the reasonableness of prices of the transactions entered. In our opinion, the Company has not entered into any contracts or arrangements referred to in Section 301 of the Companies Act, 1956, the particulars of which are required to be entered in the register, maintained section 301.

vi) In our opinion, the Company has not accepted any deposits from the public within the meaning of section 58A and section 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business. However, no Internal Audit Report was shown to us.

viii) The maintenance of cost records prescribed under section 209(1)(d) of the Companies Act,1956, is not applicable to the company.

ix) In respect of disputed and undisputed Statutory Dues of the Company and according to information and explanations given to us and on the basis of our examination of the records of the Company

a. Amounts deducted / accrued in the books of accounts in respect of Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and any other material Statutory Dues have generally been regularly deposited during the year by the Company with the appropriate authorities, to the extent applicable. There were no dues on account of Cess under Section 441A of the Companies Act, 1956 since the aforesaid section has not yet been made effective by the Central Government.

b. According to the information and explanations given to us, no undisputed amounts payable in respect aforesaid dues were in arrears, as at March 31, 2012 for a period of more than six months from the date they became payable, wherever applicable except Employer''s contribution to Provident Fund, Employee contribution to Provident Fund, Service Tax, Luxury Tax and VAT amounting to Rs.3.13 Lacs, Rs. 3.19 Lacs, Rs. 3.87 Lacs, Rs. 8.14 Lacs and 3.02 Lacs respectively.

x) The Company has accumulated losses at the end of the financial year more than the Net Worth of the company and it has incurred cash losses in the current year as well as immediately preceding financial year.

xi) Based on our audit procedures and in our opinion, the Company has not defaulted in repayment of dues to financial institutions or banks or debenture holders except for car loan from Central Bank of India, ICICI Bank Limited, Tata Capital Limited and Kotak Mahindra Limited.

xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of paragraph 4 clause (xii) of the Order are not applicable.

xiii) The Company is not a Chit Fund or a Nidhi/Mutual Benefit fund/ society. Accordingly, the provisions of paragraph 4 clause (xiii) of the Order are not applicable.

xiv) In our opinion the company is not dealing or trading in shares, debentures, securities and other investments. Accordingly, the provisions of paragraph 4 clause (xiv) of the Order are not applicable.

xv) In our opinion, the terms and conditions of guarantees given by the Company for loans taken by others from banks and financial institutions, are not prima facie prejudicial to the interests of the Company.

xvi) In our opinion and to the best of our knowledge and belief, proceeds of term loans taken were, prima facie, applied for the purpose it was obtained and no fresh term loan was obtained during the year.

xvii) In our opinion and on an overall examination of the balance sheet of the Company, no funds have been raised on short-term basis.

xviii) In our opinion, 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) In our opinion and the records examined by us, no debentures have been issued during the year.

xx) The Company has not raised any monies by way of public issue during the year. Accordingly, the provisions of paragraph 4 clause (xx) of the Order are not applicable.

xxi) In our opinion, no material fraud on or by the Company has been noticed or reported during the period covered by our audit.

For Sharma Goel & Co.

Chartered Accountants

FRN : 000643N

Amar Mittal

Place: New Delhi Partner

Date: 1st September, 2012 Membership No. 017755

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Mar 31, 2010

We have audited the attached Balance Sheet of U.G. Hotels & Resorts Limited as at 31st March, 2010 and the Profit & Loss Account and the Cash Flow Statement of the company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Auditing Standards gener- ally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes as- sessing 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.

1. As required by the Companies (Auditors Report) Order, 2003 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 a statement on the matters specified in paragraph 4 and 5 of the said Order.

2. Further to our comments in the Annexure referred to above and subject to:

a) We have obtained all 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 accounts as required by law have been kept by the company so far as appears from our examination of the books.

c) The Balance Sheet and Profit & Loss Account dealt with by the report are in agreement with the books of accounts and re- turns.

d) In our opinion the aforesaid Balance Sheet and Profit & Loss Account comply in all material respects with the applicable 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 31st March 2010 and taken on record by the Board of Directors, we report that none of directors is disquali- fied from being appointed as a director in terms of clause (g) of sub section (I) to section 274 of companies Act, 1956 except one of the director.

f) No comments are offered on clause (g) of the Section 227(3) of the Companies Act, 1956, since the Central Government has not yet published any notification in the Official Gazette for levy and collection of cess under section 441A of the Compa- nies Act, 1956;

g) In our opinion and to the best of pur information and according to the explanations given to us, the said accounts Subject to Note No. 7 of Notes to Accounts (Schedule 13), regard- ing dispute & compromise with UMAX Investment Com- pany Private Limited & Note No. 24 of Notes to Ac- counts (Schedule 13), regarding non provision of doubt- ful debts for Rs. 46.67 lacs, give the information required by the Companies Act, 1956, in the manner so required but dont give a true and fair view in conformity with the ac- counting principles generally accepted in India, in view of the dispute & compromise with UMAX Investment Com- pany Private Limited which is still pending at various levels.

i. In case of the Balance Sheet, of the state of affairs of the Company as at 31st March,2010 ; ii. In case of the Profit & Loss account, Loss of the company for the year ended on that date; and iii. In case of the Cash Flow Statement, the Cash Flows of the company for the year ended on that date.

ANNEXURE A REFERRED TO IN PARA 1 OF OUR REPORT OF EVEN DATE ON THE ACCOUNTS OF U.G. HOTELS & RESORTS LTD. FOR THE YEAR ENDED 31st MARCH, 2010

I) In respect of fixed assets of the company:-

(a) The Company has not shown fixed assets records showing full particulars, including quantitative details and situation of its fixed assets.

(b) No records evidencing physical verification of Fixed Assets was shown to us and hence we are unable to comment on this.

(c) No substantial part of Fixed Assets has been disposed off during the year, which has a bearing on the Going Concern Assumption.

II) In respect of inventories of the company

(a) The inventory were physically verified by the management during the year at reasonable interval.

(b) In our opinion, 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. The discrepancies noticed on physical verification of inventory as compared to book records which have been dealt with in the books of account were not material.

III) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph (iii)(b), (iii)(c) & (iii)(d) of the order are not applicable to the Company.

(b) The Company has in the earlier year shown unsecured loan from companies, firms or other parties covered in the register maintained under Section 301 of the Act. However, these are subject to Note No. 7 of Notes on Accounts and our qualification in main Audit Report. Further, the Company has taken unsecured loan from the parties covered in the register maintained under Section 301 of the Act. These loans are interest free. Apart from it, the terms and conditions of these loans taken by the Company, are not prima facie prejudicial to the interest of the company. In respect of the aforesaid loans, the company is generally regular in payment of the principal wherever stipulated.

IV) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

V) (a) In our opinion and according to the information and explanations given to us, Contracts or arrangements referred to in Section 301 have been entered with such parties. (b) In the absence of competitive information provided to us, we are unable to comment regarding the reasonableness of prices of the transactions entered.

VI) The Company has not accepted any deposits from the public within the meaning of Sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under.

VII) In our opinion, the Company has an internal audit system. However, no internal audit report was shown to us.

VIII) No cost records have been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956 to be maintained by the Company.

IX) (a) According to the information and explanations given to us and the records of the Company examined by us in our opinion, the company is generally regular in depositing the undisputed statutory dues including Provident fund, Investor education and protection fund, Employees state insurance, Income tax, Sales tax, Wealth tax, Service Tax, Customs Duty, Excise duty, Cess and other material statutory dues as applicable with the appropriate authorities in India except Provident Fund of Rs. 39,366/- for the month of March10 not been paid.

Name of the statute Nature of dues Amount (Rs. in lacs) Forum where dispute is pending

Himachal Pradesh Tax On Luxuries Tax Interest & Penalty 2.07 Excise & Taxation Officer (in hotels & lodging houses ) Act,1979

Income Tax Act, 1961 TDS & Interest 0.55 N.A.



Records for Luxury Tax were not available for our inspection.

X) The accumulated losses of the Company are more than One Hundred percent of its net worth. The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

XI) The Company has entered into a one time settlement with IFCI & TFCI in the earlier years. In terms of one time settlement, the Company has cleared the entire dues of IFCI & TFCI in the earlier years. Further, the Company has not defaulted in repayment of dues to Financial Institutions & Bank. Moreover, the Company does not have any outstanding Debenture.

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

XIII) The provisions of any special statute applicable to chit fund / nidhi /mutual benefit fund / societies are not applicable to the Company.

XIV) In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

XV) In our opinion, and 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 during the year.

XVI) In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained.

XVII) On the basis of an over all examination of Balance Sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long term investment.

XVIII) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

XIX) The Company has no debentures outstanding at the year-end.

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

XXI) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management except dispute & compromise with UMAX Investment Company Private Limited as mentioned in Note No. 7 of Notes on Accounts (Schedule 13).

For SHARMA GOEL & CO. CHARTERED ACCOUNTANTS FRNo. 000643N Place: New Delhi Date: 3rd September, 2010 AMAR MITTAL PARTNER M.No. 017755

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Mar 31, 2009

We have audited the attached Balance Sheet of U.G. Hotels & Resorts Limited as at 31 st March, 2009 and the Profit & Loss Account and the Cash Flow Statement of the company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003 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 a statement on the matters specified in paragraph 4 and 5 of the said Order.

2. Further to our comments in the Annexure referred to above and subject to:

a) We have obtained all 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 accounts as required by law have been kept by the company so far as appears from our examination of the books.

c) The Balance Sheet and Profit & Loss Account dealt with by the report are in agreement with the books of accounts and returns.

d) In our opinion the aforesaid Balance Sheet and Profit & Loss Account comply in all material respects with the applicable 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 31 st March 2009 and taken on record by the Board of Directors, we report the none of directors is disqualified from being appointed as a director in terms of clause (g) of sub section (I) to section 274 of companies Act, 1956.

f) No comments are offered on clause (g) of the Section 227(3) of the Companies Act, 1956, since the Central Government has not yet published any notification in the Official Gazette for levy and collection of cess under section 441A of the Companies Act, 1956;

g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts Subject to Note No. 7 of Notes to Accounts (Schedule 13), regarding dispute & compromise with Umak Investment Company Private Limited & Note No. 24 of Notes to Accounts (Schedule 13), regarding non provision of doubtful debts for Rs. 39.32 lacs, give the information required I the Companies Act, 1956, in the manner so required be dont give a true and fair view in conformity with the accounting principles generally accepted in India, in view the dispute & compromise with Umak Investment Company Private Limited.

i. In case of the Balance Sheet, of the state of affairs of the Company as at 31st March,2009 ;

ii. In case of the Profit & Loss account, Loss of the company for the year ended on that date; and

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

ANNEXURE A REFERRED TO IN PARA 1 OF OUR REPORT OF EVEN DATE ON THE ACCOUNTS OF U.G. HOTELS RESORTS LTD. FOR THE YEAR ENDED 31 ST MARCH, 2009

I) In respect of fixed assets of the company:-

(a) The Company has maintained proper records to show flow particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies have been noticed on such verification.

(c) No substantial part of Fixed Assets has been disposed during the year, which has a bearing on the Going Concerned Assumption.

II) In respect of inventories of the company

(b) The inventory were physically verified by the management during the year at reasonable interval.

(c) In our opinion, the procedures of physical verification < inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(d) The Company is maintaining proper records of inventor The discrepancies noticed on physical verification inventory as compared to book records which have be« dealt with in the books of account were not material.

III) (a) The Company has not granted any loans, secured unsecured to companies, firms or other parties covered the register maintained under Section 301 of the A Accordingly, paragraph (iii)(b), (iii)(c) & (iii)(d) of the one are not applicable to the Company. (b) The Company has in the earlier year shown unsecur loan from companies, firms or other parties cover in the register maintained under Section 301 of the Act. However, these are subject to Note No. 7 Notes on Accounts and our qualification in me Audit Report.

Further, the Company has taken unsecured loan from the parties covered in the register maintained under Section 301 of the Act. These loans are interest free. Apart from it, the terms and conditions of these-loans taken by the Company, are not prima facie prejudicial to the interest of the company. In respect of the aforesaid loans, the company is generally regular in payment of the principal wherever * stipulated.

V) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the

size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control ¦ system.

V) (a) In our opinion and according to the information and explanations given to us, Contracts or arrangements referred to in Section 301 have been entered with such parties, (b) In the absence of competitive information provided to us, we are unable to comment regarding the reasonableness of prices of the transactions entered.

VI) The Company has not accepted any deposits from the public within the meaning of Sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under.

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

VIII) No cost records have been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956 to be maintained by the Company.

IX) (a) According to the information and explanations given to us and the records of the Company examined by us in our opinion, the company is generally regular in depositing the undisputed statutory dues including Provident fund, Investor education and protection fund, Employees state insurance, Income tax, Sales tax, Wealth tax, Service Tax, Customs Duty, Excise duty, Cess and other material statutory dues as applicable with the appropriate authorities in India . (b) According to the information and explanations given to us, there is no undisputed amount payable in respect of Income tax, Sales Tax, Wealth Tax, Service tax, Custom Duty, Excise duty, Cess and luxury tax as at March 31, 2009 for a period more than six months from the date they became payable except as mentioned below.

Name of the statue Nature of dues Amount (Rs. in lacs) Forum where dispute is pending

Himachal Pradesh Tax On Luxuries Tax Interest & Penalty 4.67 Excise & Taxation Officer (in hotels & lodging houses ) Act, 1979.

X) The accumulated losses of the Company are more than One Hundred percent of its net worth. The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

XI) The Company has entered into a one time settlement with IFCI & TFCI in the earlier years. In terms of one time settlement, the Company has cleared the entire dues of IFCI & TFCI in the earlier years. Further, the Company has not defaulted in repayment of dues to Financial Institutions & Bank. Moreover, the Company does not have any outstanding Debenture.

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

XIII) The provisions of any special statute applicable to chit fund / nidhi /mutual benefit fund / societies are not applicable to the Company.

XIV) In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

XV) In our opinion, and 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 during the year.

XVI) In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained.

XVII) On the basis of an over all examination of Balance Sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long term investment.

XVIII) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

XIX) The Company has no debentures outstanding at the year-end,

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

XXI) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management except dispute & compromise with Umak Investment Company Private Limited as mentioned in Note No. 7 of Notes on Accounts (Schedule 13).

For SHARMA GOEL & CO.

CHARTERED ACCOUNTANTS

AMAR MITTAL

Place: New Delhi PARTNER

Date: 1st September, 2009 M. No. 017755