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Auditor Report of Vardhman Textiles Ltd.

Mar 31, 2016

1. We have audited the accompanying Standalone Financial Statements of Vardhman Textiles Limited (''the Company'') which comprise the Balance Sheet as at 31st March 2016, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

2. The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation and presentation of these 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 financial statements that give a true and fair view and are free from material mis-statement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these Standalone Financial Statements based on our audit.

4. 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.

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

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

7. 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

8. 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 31st March, 2016 and its profits and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

9. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of sub- section (11) of section 143 of the Act, we give in the Annexure- A, which forms part of this report, a statement on the matters specified in the paragraph 3 and 4 of the Order.

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

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

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

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

d. in our opinion, the aforesaid 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;

e. on the basis of the written representations received from the directors as on 31st March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2016 from being appointed as a director in terms of sub-section (2) of section 164 of the Act; and

f. 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"; and

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

(i) the Company has disclosed the impact of pending litigations on its financial position in its financial statements. Refer Note No. 31 to the financial statements;

(ii) the Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

(iii) There are no amounts required to be transferred to the Investor Education and Protection Fund by the Company.

ANNEXURE - A TO THE AUDITORS'' REPORT

The Annexure referred to in Independent Auditors'' Report to the members of the Company on the Standalone Financial Statements for the year ended 31st March 2016, we report that:

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

b) According to the information and explanations given to us, the Company has adopted a policy of physical verification of the fixed assets once in every three years. Pursuant to the said policy, the Company has physically verified the entire block of office equipment and furniture and fixtures during the year under audit. Discrepancies noticed on such physical verification were not material and have been properly dealt with in the books of account.

c) According to information and explanations given to us and on the basis of our examination of the records of the company, the title deeds of immovable properties are held in the name of the company, except the land at Baddi (Himachal Pradesh) for which title deeds are yet to be executed in favour of Company. Refer Note No. 13 to the financial statements.

(ii) According to the information and explanations given to us, the inventories have been physically verified by the management during the year. In our opinion the frequency of verification is reasonable.

According to the information and explanations given to us, discrepancies noticed on physical verification of inventory as compared to the book records were not material and have been dealt with in the books of account.

(iii) According to the information and explanations given to us, we report that the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnership or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Therefore the provisions of paragraph (iii) (a), (b) and (c) of the Order are not applicable to the Company.

(iv) According to the information and explanations given to us, the Company has complied with the requirements of the section 186 of the Companies Act, 2013 pursuant to loans granted and investments made. The company has not granted loans to directors or to the person in whom directors are interested. Therefore the provisions of the section 185 of the Companies Act, 2013 are not applicable to the company.

(v) According to the information and explanations given to us, the Company has not accepted deposits covered under the provisions of sections 73 to 76, other relevant provisions of the Companies Act, 2013 and the rules framed there under. According to the information and explanations given to us, no order under the aforesaid sections has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on the Company.

(vi) We have broadly reviewed the books of account maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of such records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis of the records of the Company examined by us, in our opinion, the Company has been regular in depositing undisputed statutory dues including provident fund, employees'' state insurance, income tax, sales tax, service tax, duty of custom, duty of excise, value added tax, cess and other statutory dues with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts in respect of statutory dues payable were outstanding as on the last day of the financial year concerned for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of duty of custom, which have not been deposited with the appropriate authorities on account of any dispute. However according to information and explanations given to us, the following dues of Income Tax, Value Added Tax, Service Tax and duty of Excise has not been deposited by the company on account of dispute:

S. Name of Statute Amount Financial Year to which Forum at which dispute is pending No. (in Lacs) it relates

1 Central Excise Act,1944 25.88 2005-06 Hon''ble Supreme Court, New Delhi

2 Central Excise Act,1944 1.68 2005-06 Commissioner Appeals, Chandigarh

3 Central Excise Act,1944 13.18 2006-07 CESTAT, Delhi

4 Central Excise Act,1944 1.02 2009-10 Commissioner Appeals, Bhopal

5 Central Excise Act,1944 18.67 2009-10 CESTAT, Delhi

6 Central Excise Act,1944 216.06 2009-10 CESTAT, Delhi

7 Central Excise Act,1944 34.59 2013-14 CESTAT, Chandigarh

8 Central Excise Act,1944 4.26 2008-09 Hon''ble Supreme Court, New Delhi

9 Central Excise Act,1944 4.88 2008-09 Commissioner Appeals, Chandigarh

10 Central Excise Act,1944 4.80 2006-07 CESTAT, Delhi

11 Central Excise Act,1944 64.72 Jan 2008 to March 2011 CESTAT, Delhi

12 Central Excise Act,1944 2.06 2003-04, 2004-05 Commissioner Appeals, Chandigarh

13 Central Excise Act,1944 0.17 2002-03 Assistant Commissioner , Central Excise, Ludhiana

14 Central Excise Act,1944 3.55 2005-06 CESTAT, Delhi

15 Central Excise Act,1944 0.52 2011-12 Commissioner Appeals, Bhopal

16 Central Excise Act,1944 449.64 2011-12 CESTAT, Delhi

17 Central Excise Act,1944 112.00 2011-12 CESTAT, Delhi 18 Central Sales Tax Act, 1956 1.80 2005-06 Deputy Commissioner of Sales Tax, Mumbai

19 Central Sales Tax Act, 1956 6.19 2009-10 Deputy Excise & Taxation Commissioner Appeals, Jalandhar

20 Commercial Tax Act, 1994 5.03 2001-02 Assistant Commissioner, Commercial Tax, Bhopal

21 Entry tax Act, 1976 0.52 2001-02 Assistant Commissioner, Commercial Tax, Bhopal

22 Entry tax Act, 1976 8.10 2003-04 Additional Commissioner, Commercial Tax, Bhopal

23 MP Vat Act,2002 30.87 2006-07 Appellate Board, Commercial Tax, Bhopal

24 MP Vat Act,2002 3.95 2010-11 Appellate Board, Commercial Tax, Bhopal

25 MP Vat Act,2002 2.60 2011-12 Appellate Board, Commercial Tax, Bhopal

26 MP Vat Act,2002 1.09 2012-13 Appellate Board, Commercial Tax, Bhopal

27 Punjab VAT Act, 2005 0.83 2002-03 Joint Director Enforcement, Patiala

28 The Finance Act 1994 5.02 2007-08 to 2009-10 Commissioner Appeals, Chandigarh.

29 The Finance Act 1994 11.22 2005-06 Commissioner Appeals, Chandigarh

30 Income tax Act,1961 8,626.27 2009-10 to 2011-12 Income tax Appellant Tribunal

31 Income tax Act,1961 2,823.80 2012-13 Commissioner of Income tax, Appeals

(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. The Company has not issued any debentures during the year or in the preceding year.

(ix) In our opinion and according to the information and explanations given to us, the term loans taken during the year by the Company have been applied for the purpose for which they were raised. The company has not raised money by way of initial public offer or further public offer (including debt instruments) during the year.

(x) According to the information and explanations given to us, no fraud by the company or on the company by its officers or employees has been noticed or reported during the course of our audit.

(xi) According to the information and explanations given to us and based on our examination of records of company, the company has paid / provided for the managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) According to the information and explanations given to us, the company is not a Nidhi Company. Therefore the provisions of paragraph 3(xii) of the Order are not applicable.

(xiii) According to the information and explanations given to us, and based on our examination of the records of the company, transactions with the related parties are in compliance with section 177 and 188 of the Act, where applicable and the details of the transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, the Company has not made Preferential Allotment or Private Placement of Shares or Fully or Partly Convertible Debentures during the year under audit. Thus the provisions of paragraph 3(xiii) of the Order are not applicable.

(xv) According to information and explanations given to us, and based on our examination of the records of the company, the company has not entered into non-cash transactions with Director or person connected with him. Accordingly, provisions of paragraph 3 (xv) of the Order are not applicable.

(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.

For S.C. Vasudeva & Co. Chartered Accountants

Firm Regn. No. 000235N

(Sanjiv Mohan)

Place: Ludhiana Partner

Dated: 9th May, 2016 M. No. 086066


Mar 31, 2015

We have audited the accompanying standalone financial statements of M/s. Vardhman Textiles Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the 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 judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these 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 thereunder.

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

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

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

a. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2015;

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, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11 )of section 143 of the Act, we give in the Annexure, which forms part of this report, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the 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, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. In our opinion, the aforesaid 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;

e. On the basis of written representations received from the directors as on 31st March, 2015 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164(2) of the Act;

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

(i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements.

(ii) The Company has made provision as required under the applicable law or accounting standards in respect of long term derivative contracts on mark to market basis. There are no other long term contacts for which there were any material foreseeable losses.

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

Annexure to the Independent Auditor's Report

(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of even date)

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

(b) According to the information and explanations given to us, the Company has adopted a policy of physical verification of the fixed assets once in every three years. Pursuant to the said policy, the Company has physically verified the entire block of Land, Building and Vehicles during the year under audit. Discrepancies noticed on such physical verification were not material and have been properly dealt with in the books of account.

(ii) (a) The physical verification has been carried out by the Management in respect of inventory at reasonable intervals during the year. In our opinion, the frequency of verification is reasonable.

(b) Based on information and explanations given to us and the records produced to us, in our view, procedures of physical verification of inventory followed by the management during the year 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. As per the information given to us, the discrepancies noticed on physical verification of Inventories as compared to book records were not material and have been properly dealt with in the books of account.

(iii) The Company has not granted any secured or unsecured loans to the parties covered in the register maintained under section 189 of the Companies Act.

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

(v) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year under the provisions of section 73 and 76 and any other relevant provisions of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014. According to the information and explanation given to us, no order under its aforesaid sections has been passed by the Company Law Board or the Reserve Bank of India or any Court or any other Tribunal on the Company.

(vi) We have broadly reviewed the cost records maintained by the Company pursuant to the sub-section (1) of section 148 of the Companies Act, specified by the Central Government and are of the opinion that, prima facie, such accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and records of the Company examined by us, the Company has been regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, wealth tax, service tax, duty of custom, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts in respect of statutory dues payable wereout standing as at the last day of the financial year concerned for a period of more than six months from the date they became payable.

(b) According to the records of the Company, the disputed statutory dues that have not been deposited on account of matters pending before the appellate authorities in respect of sales tax, duty of custom , service tax, duty of excise, value added tax and income tax are given below:

Nature of Dues/ Amount Financial Forum where dispute Name of (Rs.in year to is pending statute lac) which it relates

Central Excise 0.17 2002-03 Assistant Commissioner Act, 1944 Central Excise, Ludhiana

Central Excise 3.55 2005-06 CESTAT, Delhi Act, 1944

Central Excise 1.02 2009-10 Commissioner (Appeals), Act, 1944 Bhopal

Central Excise 18.67 2009-10 CESTAT, Delhi Act, 1944

Central Excise 216.06 2009-10 CESTAT, Delhi Act, 1944

Excise Act, 1.68 2005-06 Commissioner (Appeals) , 1944 Chandigarh

Central Excise 25.88 2005-06 Hon'ble Supreme Court, Act, 1944 New Delhi.

Central Excise 13.18 2006-07 CESTAT, Delhi Act, 1944

Central Excise 13.51 2007-08 Additional Commissioned Act, 1944 P & V), Chandigarh

Central Excise 4.26 2008-09 Hon'ble Supreme Court, Act, 1944 New Delhi.

Central Excise 4.88 2008-09 Commissioner ( Appeals ), Act, 1944 Jalandhar

Central Excise 112.00 2011-12 CESTAT, Delhi Act, 1944

Central Excise 0.52 2011-12 Commissioner (Appeals), Act, 1944 Bhopal

Central Excise 449.64 2011-12 CESTAT, Delhi Act, 1944

Central Excise 4.80 2006-07 CESTAT, Delhi Act, 1944

Central Excise 64.72 Jan 2008 CESTAT, Delhi Act, 1944 to March, 2011

Central Excise 34.59 2013-14 CESTAT, Delhi Act, 1944

Central Sales 6.19 2009-10 Deputy Excise & Taxation Tax Act,1956 Commissioner (Appeal), Jalandhar

Commercial Tax 0.52 2001-02 Assistant Commissioner Act, 1994 Commercial Tax, Bhopal

Entry tax Act, 1.81 2000-01 Assistant Commissioner 1976 Commercial Tax, Bhopal

Entry tax Act, 8.10 2003-04 Additional Commissioner 1976 Commercial Tax, Bhopal

Central Sales 1.80 2005-06 Deputy Commissioner of Tax Act,1956 Sales Tax, Mumbai

MP VAT Act, 30.87 2006-07 Appellate Board Commercial 2002 Tax, Bhopal

MP VAT Act, 5.26 2010-11 Appellate Board Commercial 2002 Tax, Bhopal

MP VAT Act, 6.68 2011-12 Additional Commissioner 2002 (Appeals) Commercial Tax, Bhopal

MP VAT Act, 3.70 2012-13 Additional Commissioner 2002 (Appeals) Commercial Tax, Bhopal

Punjab VAT Act, 0.83 2002-03 Joint Director Enforcement, 2005 Patiala

The Finance Act, 11.22 2005-06 Joint Secretary Revenue 1994 Department, Ministry of Finance, Delhi

Income Tax Act, 193.22 2009-10 Income Tax Appellant 1961 Tribunal

Income Tax Act, 10,065.51 2010-11 Commissioner of Income 1961 and Tax (Appeals) 2011-12 (c) According to the information and explanations given to us, the amount required to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 and rules made there under has been transferred to such fund within time.

(viii) The Company does not have accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institutions or banks. The Company has not issued any debentures during the year under audit.

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

(xi) In our opinion and according to the information and explanations given to us, the term loans taken during the year by the Company have been applied for the purpose for which they were raised.

(xii) We have been informed that some of the employees of the Company along with the outsiders had misappropriated raw material of the Company at its unit at Budhni, Madhya Pradesh involving an amount of approximately Rs.767.16 lac. The incident was reported to Police authorities at Budhni and accordingly FIR was registered by them. The Police have filed a charge sheet in the court against the concerned employees as well as other persons involved in the crime and court proceedings in the matter are in progress. The Company has also filed a fidelity insurance claim in this matter.

Further, on the basis of information and explanation given to us, we report that no other fraud on or by the Company has been noticed or reported during the course of our audit.

For S.C. Vasudeva & Co.

Chartered Accountants Firm Regn. No. 000235N

(SANJIV MOHAN) Place: Ludhiana Partner Dated: 8th May, 2015 M. No. 086066


Mar 31, 2014

1. We have audited the accompanying financial statements of Vardhman Textiles 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

2. The management is responsible for the preparation of these financial statements that give a true and fair view of the financia 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

3. Our responsibility is to express an opinion on these financia 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 financia 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, ncluding 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 contro relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity interna control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overal 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

4. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

b. in the case of 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

5. As required by the Companies (Auditor''s Report) Order, 2003 (as amended) (''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.

6. 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 Act;

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 Act.

Annexure to Independent Auditor''s Report a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

b) According to the information and explanations given to us, the Company has adopted a policy of physically verifying the fixed assets once in every three years. Pursuant to the said policy, the Company has physically verified the entire block of Plant and Machinery during the year. Discrepancies which were not material noticed on such physical verification have been properly dealt with in the books of account. Further, in our opinion, the frequency of physical verification of fixed assets is reasonable having regard to the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has not disposed off substantial part of its fixed assets during the year.

i. a) According to the information and explanations given to us, nventories have been physically verified by the management during the year. In our opinion the frequency of verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management as evidenced by the written procedures and instructions are reasonable and adequate in relation to the size of the Company and nature of its business.

c) On the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of Inventories as compared to book records were not material and have been dealt properly with in the books of account.

iii (a) The Company has not granted secured or unsecured loans to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of paragraph 4(ii)(b)(c) and 9(d) of the above said order are not applicable to the Company.

(b) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect of unsecured loan given by the Company, are not prima-facie prejudicial to the interest of the Company.

(c) In our opinion and according to the information and explanations given to us, the payment of principal amount and interest in respect of the aforesaid loan was regular.

(d) The Company has during the year taken unsecured loans from sixteen companies covered in the register maintained under section 301 of the Companies Act, 1956. The amount nvolved in the transaction is Rs.26,969.04 lac. The amount payable as at the close of the year is Rs.1,605.58 lac.

(e) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect

of unsecured loan taken by the Company, are not prima-facie prejudicial to the interest of the Company.

(f) In our opinion and according to the information and explanations given to us, the payment of principal amount and interest in respect of the aforesaid loan was regular.

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

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

(b) In our opinion and according to information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rupees five lac or more in respect of the party during the year, have been made at price which are reasonable having regard to the prevalent market prices at the relevant time.

vi. According to the information and explanations given to us, the Company has not accepted deposits from public during the year covered under the provisions of section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975.

vii. In our opinion and according to the information and explanations given to us, the Company has an internal audit system commensurate with its size and nature of its business.

viii. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of the records with a view to determine whether they are accurate or complete.

ix. a) According to the records of the Company, undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to the Company, if any, have been regularly deposited with appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2014, for a period of more than six months from the date they became payable.

b) According to the records of the Company, the details of disputed statutory dues aggregating to Rs.9,650.16 lac that have not been deposited on account of matters pending before the appellate authorities in respect of sales tax, custom duty, service tax, excise duty and income tax are given below:

Nature of Dues/Name of Statute Disputed Amount Financial yeartowhich (Rsinlac) amount relates

Sales tax/Central Sales Tax/ Entry Tax M. P. VAT Act, 2002 38.58 2006-07

The Maharashtra Sales Tax Act, 1 956 1.80 2005-06

Central Sales Tax Act, 1 956 6.19 2009-10

The Punjab VAT Act, 2005 0.83 2002-03

M.P. Commercial Tax Act, 1994 0.52 2001-02

Central Sales Tax Act, 1 956 11.16 2010-11

The Entry Tax Act, 1976 13.04 2003-04 & 2010-11

The Entry Tax Act, 1976 5.03 2000-01

Excise/Custom Duty

Central Excise Act, 1944 870.40 2003-04 to 2010-11

Customs Act, 1 962 7.15 2006-07

Central Excise Act, 1944 1.25 2006-07 to2010-11

Central Excise Act, 1944 112.62 2003-04 & 2005-06

Central Excise Act, 1944 0.17 2002-03

Central Excise Act, 1944 4.88 2013-14

Central Excise Act, 1944 3.55 2005-06

Central Excise Act, 1944 1.68 2005-06 & 2006-07

Service tax

Finance Act, 1994 13.67 2006-07

Finance Act, 1994 11.22 2008-09

Finance Act, 1994 113.20 2010-11

Income Tax

Income Tax Act, 1961 37.99 2001-02 & 2002-03

Income Tax Act, 1961 8395.23 2010-11

Name of the Statute Forum where Dispute is pending Sales tax/Central SalesTax/ Entry Tax M. P. VAT Act, 2002 Deputy Commissioner (Appeal), Commercial Tax, Bhopal

The Maharashtra Deputy Commissioner of Sales Tax, Mumbai Sales Tax Act,1956

Central Sales Tax Act 1956 Deputy Excise & Taxation Commissioner (Appeal), Jalandhar.

The Punjab VAT Act, 2005 Joint Director (Enforcement), Patiala

MP.Commercial TaxAct,1994 Add. Commissioner Commercial Tax, Bhopal

Central Sales Tax Act1956 Add. Commissioner Commercial Tax, Bhopal

The Entry Tax Act, 1976 Add. Commissioner Commercial Tax, Bhopal

The Entry Tax Act, 1976 Asstt. Commissioner Commercial Tax, Bhopal

Excise/Custom Duty

Central Excise Act, 1944 Custom, Excise & Service Tax Appellate Tribunal, New Delhi

Customs Act, 1 962 Custom, Excise & Service Tax Appellate Tribunal, New Delhi

Central Excise Act, 1944 Commissioner (Appeals), Bhopal

Central Excise Act, 1944 Hon''ble Supreme Court, New Delhi

Central Excise Act, 1944 Asstt. Commissioner Central Excise, Ludhiana

Central Excise Act, 1944 Commissioner (Appeals) Jalandhar

Central Excise Act, 1944 Additional. Commissioner Central Excise, Ludhiana

Central Excise Act, 1944 Commissioner(Appeals) Central Excise & Customs, Chandigarh Service tax

Finance Act, 1994 Commissioner (Appeals) Central Excise, Chandigarh Finance Act, 1994 Ministry of Finance, Department of Revenue, New Delhi Finance Act, 1994 Custom, Excise & Service Tax Appellate Tribunal, New Delhi

Income Tax

Income Tax Act, 1961 Income Tax Appellate Tribunal, Chandigarh Income Tax Act, 1961 CIT (Appeals) Ludhiana

According to the information and explanations given to us there are no disputed dues in respect of wealth tax and cess.

x. The Company does not have accumulated losses as at 31st March 2014. The latter part of the question relating to net worth is thus not applicable to the Company. Further, the Company has not ncurred cash losses during the financial year covered under audit and in the immediately preceding financial year.

xi. According to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks.

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. Therefore the provisions of the clause 4 (xii) of the above said order are not applicable to the Company.

xiii. The Company is not a chit fund or a nidhi mutual benefit fund/ society. Accordingly, the provisions of clause 4 (xiii) of the above said order are not applicable to the Company.

xiv. According to the information and explanations given to us, the Company has not dealt or traded in share, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the above said order are not applicable to the Company.

xv. The Company has not given guarantees for loans taken by others from banks. Therefore provisions of clause 4(xv) of above said order are not applicable to the Company.

xvi. In our opinion and according to the information and explanations given to us, the term loans taken during the year have been applied for the purpose for which they were obtained.

xvii. According to information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds raised on short-term basis have not been used for long term investment.

xviii. According to the information and explanations given to us, the Company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix. According to the information and explanations given to us, the Company has not issued debentures during the year. Accordingly the provisions of clause 4 (xix) of the above said order are not applicable to the Company.

xx. The Company has not raised any money by way of public issue during the year. Accordingly the provisions of clause 4 (xx) of the above said order are not applicable to the Company.

xxi. According to the information and explanations given to us by the management and based upon the audit procedures performed we report that no fraud on or by the Company has been noticed or reported during the year.

For S.C. Vasudeva & CO. Chartered Accountants Firm Reg. No. 000235N

Sanjiv Mohan Place: New Delhi Partner Dated: 23rd May, 2014 M. No. 86066


Mar 31, 2013

Report on the Financial Statements

1. We have audited the accompanying financial statements of Vardhman Textiles Limited, which comprise the Balance sheet as at 31st March, 2013, and the Statement of Profit and Loss and Cash flow statement for the year ended on that date, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

2. 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. 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

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

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

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

Opinion

4. In our opinion and to the best of our information and according to the explanations given to us, the financial statements read together with significant accounting policies and notes thereon 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, 2013;

b. In the case of 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

5. 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 a statement on the matters specified in paragraphs 4 and 5 of the Order.

6. As required by section 227(3) of the Companies Act, 1956, 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 31st March, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 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 to in paragraph 5)

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

b) According to the information and explanations given to us, the Company has adopted a policy of physically verifying the fixed assets once in every three years. Pursuant to the said policy, the Company has physically verified the entire block of office equipment and furniture and fixtures during the year. Discrepancies, which were not material, noticed on such physical verification have been properly dealt with in the books of account. Further, in our opinion, the frequency of physical verification of fixed assets is reasonable having regard to the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has not disposed off substantial part of its fixed assets during the year.

ii. a) According to the information and explanations given to us, inventories have been physically verified by the management during the year. In our opinion the frequency of verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management as evidenced by the written procedures and instructions are reasonable and adequate in relation to the size of the Company and nature of its business.

c) On the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of Inventories as compared to book records were not material and have been dealt properly within the books of account.

iii. a) The Company has not granted secured or unsecured loans to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore the provisions of paragraph 4 (iii) (b) (c) and (d) of the above said order are not applicable to the Company.

b) The Company has during the year taken unsecured loans from twelve companies covered in the register maintained under section 301 of the Companies Act, 1956. The amount involved in the transaction is Rs. 3,358.80 lac. The amount payable as at the close of the year is Rs. 147.80 lac.

c) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect of unsecured loans taken by the Company, are not prima-facie prejudicial to the interest of the Company.

d) In our opinion and according to the information and explanations given to us, the payment of principal amount and interest in respect of the aforesaid loans was regular.

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

v. a) In our opinion and according to information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register maintained under that section.

b) In our opinion and according to information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rupees five lac or more in respect of the party during the year, have been made at price which are reasonable having regard to the prevalent market prices at the relevant time.

vi. According to the information and explanations given to us, the Company has complied with the provisions of section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975 with regard to deposits accepted from the public. According to the information given to us, 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 and according to the information and explanations given to us, the Company has an internal audit system commensurate with its size and nature of its business.

viii. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of the records with a view to determine whether they are accurate or complete.

ix. a) According to the records of the Company, undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to the Company, if any, have been regularly deposited with appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2013, for a period of more than six months from the date they became payable.

b) According to the records of the Company, the details of disputed statutory dues aggregating to Rs. 451.29 Lac that have not been deposited on account of matters pending before the appellate authorities in respect of sales tax, custom duty, service tax, excise duty and income tax are given below:

Nature of Dues/ Disputed Period to Forum where Name of Statute Amount which amount Dispute is pending (Rs. in Lac) relates

Sales Tax/Central Sales Tax/Entry Tax

M. P. VAT Act, 2002 38.58 2007 Deputy Commissioner (Appeal), Commercial Tax, Bhopal

The Maharashtra Sales Tax 1.80 2006 Deputy Commissioner Act, 1956 of Sales Tax, Mumbai

M. P. VAT Act, 2002 0.04 2010 Add. Commissioner Commercial Tax, Bhopal

The Punjab VAT Act, 2005 0.83 2003 Joint Director (Enforcement), Patiala

M.P. Commercial Tax Act, 0.52 2002 Deputy Commissioner 1994 Commercial Tax, Bhopal

Central Sales Tax Act, 1956 27.44 2010 Add. Commissioner Commercial Tax, Bhopal

The Entry Tax Act, 1976 13.04 2004 & 2011 Add. Commissioner Commercial Tax, Bhopal

The Entry Tax Act, 1976 5.03 2001 Asstt. Commissioner Commercial Tax, Bhopal

Excise/Custom Duty

Central Excise Act, 1944 205.96 2006 to 2011 Custom, Excise & Service Tax Appellate Tribunal, New Delhi

Customs Act, 1962 7.15 2007 Custom, Excise & Service Tax Appellate Tribunal, New Delhi

Central Excise Act, 1944 1.02 2010 Commissioner (Appeals), Bhopal

Central Excise Act, 1944 108.36 2004 Hon''ble Supreme Court, New Delhi

Central Excise Act, 1944 0.17 2006 Asstt. Commissioner Central Excise,Ludhiana

Service tax

Service Tax Act, 1994 2.10 2010 & 2011 Commissioner (Appeals) Central Excise, Chandigarh

Service Tax Act, 1994 1.26 2008 & 2010 Custom, Excise & Service Tax Appellate Tribunal, New Delhi

Income Tax

Income Tax Act, 1961 37.99 2002 & 2003 Income Tax Appellate Tribunal, Chandigarh

According to the information and explanations given to us there are no disputed dues in respect of wealth tax and cess.

x. The Company does not have accumulated losses as at 31st March, 2013. The latter part of the question relating to net worth is thus not applicable to the Company. Further, the Company has not incurred cash losses during the financial year covered under audit and in the immediately preceding financial year.

xi. According to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks.

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. Therefore, the provisions of the clause 4 (xii) of the above said order are not applicable to the Company.

xiii. The Company is not a chit fund or a nidhi mutual benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of the above said order are not applicable to the Company.

xiv. According to the information and explanations given to us, the Company has not dealt or traded in share, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the above said order are not applicable to the Company.

xv. The Company has not given guarantees for loans taken by others from banks. Therefore, provisions of clause 4(xv) of above said order are not applicable to the Company.

xvi. In our opinion and according to the information and explanations given to us, the term loans taken during the year have been applied for the purpose for which they were obtained.

xvii. According to information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds raised on short-term basis have not been used for long term investment.

xviii. According to the information and explanations given to us, the Company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix. According to the information and explanations given to us, the Company has not issued debentures during the year. Accordingly, the provisions of clause 4 (xix) of the above said order are not applicable to the Company.

xx. The Company has not raised any money by way of public issue during the year. Accordingly, the provisions of clause 4 (xx) of the above said order are not applicable to the Company.

xxi. According to the information and explanations given to us by the management and based upon the audit procedures performed we report that no fraud on or by the Company has been noticed or reported during the year.

For S.C. VASUDEVA & CO.

CHARTERED ACCOUNTANTS

Firm Regn. No.: 000235N

(SANJIV MOHAN)

PLACE : NEW DELHI PARTNER

DATED :28th May, 2013 MEMBERSHIP NO. 86066


Mar 31, 2012

1. We have audited the attached Balance Sheet of Vardhman Textiles Limited as at 31st March, 2012, and also the statement of profit and loss and the cash flow statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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 misstatement. An audit includes examining, on 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 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

4. Further to our comments in the annexure referred to in paragraph 3 above, 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 dealt with by this report comply with the accounting standards referred to in section 211 (3C) of the Companies Act; 1956.

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

f) As indicated in note- 36 in Notes to accounts there is significant uncertainty associated with the derivative options referred to in the said note, resolution of which is dependent upon future events which are not under the direct control of the Company, on account of which the Company could not determine the possible loss, if any, on valuation of open derivative options. The ultimate outcome of these future events and their affect on the financial statements cannot be ascertained at this stage.

Subject to above, in our opinion and to the best of our information and according to the explanations given to us, they said accounts read together with the significant accounting policies and notes thereon, 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:

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

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

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

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in paragraph 3)

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

b) According to the information and explanations given to us, the Company has adopted a policy of physically verifying the fixed assets once in every three years. Pursuant to the said policy, the Company has physically verified the entire block of land, buildings and vehicles during the year. No discrepancies were noticed on such physical verification. Further, in our opinion, the frequency of physical verification of fixed assets is reasonable having regard to the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations given to us, the Company has not disposed off substantial part of its fixed assets during the year.

(ii) a) According to the information and explanations given to us, inventories have been physically verified by the management during the year. In our opinion the frequency of verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management as evidenced by the written procedures and instructions are reasonable and adequate in relation to the size of the Company and nature of its business.

c) On the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of Inventories as compared to book records were not material and have been dealt properly within the books of account.

(iii) a) The Company has not granted secured or unsecured loans to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore the provisions of paragraph 4 (iii) (b) (c) and (d) of the above said order are not applicable to the Company.

(b) The Company has during the year taken unsecured loans from twelve companies covered in the register maintained under section 301 of the Companies Act, 1956. The amount involved in the transactions is Rs. 4217.05 lacs. The amount payable as at the close of the year is Rs. 1947.30 lacs.

(c) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect of unsecured loan taken by the Company, are not prima-facie prejudicial to the interest of the Company.

(d) In our opinion and according to the information and explanations given to us, the payment of principal amount and interest in respect of the aforesaid loan was regular.

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

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

(b) In our opinion and according to information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rupees five lacs or more in respect of the party during the year, have been made at prices which are reasonable having regard to the prevalent market prices at the relevant time.

(vi) According to the information and explanations given to us the Company has complied with the provisions of section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975 with regard to deposits accepted from the public. According to the information given to us, 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 and according to the information and explanations given to us, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) a) According to the records of the Company, undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to the Company, if any, have been regularly deposited with appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2012, for a period of more than six months from the date they became payable.

b) According to the records of the Company, the details of disputed statutory dues aggregating to Rs. 3,46,88,884/- that have not been deposited on account of matters pending before the appellate authorities in respect of sales tax, custom duty, service tax and excise duty are given on the next page:

Nature of Dues/ Disputed Forum where Dispute is Name of Statute Amount (Rs.) pending

Sales Tax/Central Tax

M.P. Vat Act, 2002 5,145,532 Asstt. Commissioner Circle-2, Bhopal

The Maharashtra 179,691 Deputy Commissioner of Sales Tax Act, 1956 Sales Tax, Mumbai

M. P. VAT Act, 2002 1,447,063 Asstt. Commissioner Commercial Tax, Ratlam

The Punjab VAT 82,500 Joint Director (Enforcement), Act, 2005 Patiala

M.P. Commercial 52,137 Commercial Tax Appellate Tax Act, 1994 Board, Bhopal

Excise/Custom Duty

Central Excise 16,157,082 Custom, Excise & Service Tax Act, 1944 Appellate Tribunal, New Delhi

Central Excise 10,835,845 Hon'ble Supreme Court, New Act, 1944 Delhi

Central Excise 17,378 Asstt. Commissioner Central Act, 1944 Excise, Ludhiana Service tax

Service Tax 169,547 Commissioner (Appeals), Act, 1994 Central Excise, Chandigarh

Service Tax 604,109 Custom, Excise & Service Tax Act, 1994 Appellate Tribunal, New Delhi

According to the information and explanations given to us there are no disputed dues in respect of wealth tax and cess and in respect of income tax, disputed dues have been deposited with the income tax department.

(x) The Company does not have accumulated losses as at 31st March 2012. The latter part of the question relating to net worth is thus not applicable to the Company. Further, the Company has not incurred cash losses during the financial year covered under audit and in the immediately preceding financial year.

(xi) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks.

(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. Therefore the provisions of the clause 4 (xii) of the above said order are not applicable to the Company.

(xiii) The Company is not a chit fund or a nidhi mutual benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of the above said order are not applicable to the Company.

(xiv) According to the information and explanations given to us, the Company has not dealt or traded in share, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the above said order are not applicable to the Company.

(xv) The Company has not given guarantees for loans taken by others from banks. Therefore provisions of clause 4(xv) of above said order are not applicable to the Company.

(xvi) In our opinion and according to the information and explanations given to us, the term loans taken during the year have been applied for the purpose for which they were obtained.

(xvii) According to information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds raised on short-term basis have not been used for long term investment.

(xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company has not issued debentures during the year. Accordingly the provisions of clause 4 (xix) of the above said order are not applicable to the Company.

(xx) The Company has not raised any money by way of public issue during the year. Accordingly, the provisions of clause 4 (xx) of the above said order are not applicable to the Company.

(xxi) According to the information and explanations given to us by the management and based upon the audit procedures performed, we report that no fraud on or by the Company has been noticed or reported during the year.

For S.C. VASUDEVA & CO.

CHARTERED ACCOUNTANTS

Firm Regn. No.: 000235N

(SANJIV MOHAN)

PLACE : NEW DELHI PARTNER

DATED: 9th May, 2012 MEMBERSHIP NO. 86066

 
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