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Auditor Report of Welspun Enterprises Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of Welspun Projects Limited (" the Company "), which comprise the Balance Sheet as at March 31, 2014 , 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 principles generally accepted in India including Accounting Standards referred to in Section 211(3C) 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.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s 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 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 aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India :

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at M arch 31, 2014;

(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 (Auditors Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

1. As required by the Companies (Auditors Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of Section 227(4A) 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, 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 Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in section 211(3C) of the Act;

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT TO THE MEMBERS OF M/S. WELSPUN PROJECTS LIMITED, ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2014.

(Referred to in paragraph 1 under the heading of Report on other legal and regulatory requirements of our report of even date)

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

b) Major portion of fixed assets has been physically verified during the year by the management in accordance with a programme of verification, which, in our opinion provides for physical verification of all the fixed assets at reasonable interval having regards to size of the Company and nature of its business. According to the information and explanations given to us the discrepancies noticed on such verification were not material and have been properly dealt with in the books of accounts.

c) No disposal of a substantial part of fixed assets of the Company has taken place during the year.

2 a) As explained to us, the inventories were physically verified by the management at reasonable intervals during the year.

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 are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) As the Company has not maintained quantitative records of stock, It is not possible to find out discrepancies between the physical stock and book records.

3 a) The Company has granted unsecured loan to eight Companies covered in the register maintained u/s 301 of the Companies Act'' 1956. The maximum amount involved during the year was Rs. 42,68,23,012/- and the year end balance of loans granted to these Companies was Rs. 42,67,18,484/- including interest free loan of Rs.12,94,87,432/-

The Company ha s taken interest free unsecured loan from one Company covered in the register maintained u/s 301 of the Companies act 1956. The maximum amount involved during the year was Rs.8,05,80,570/- and year end balance of loan taken from such Company was Rs. Nil.

b) In our opinion, the rate of interest, where applicable and other terms and conditions on which loan have been taken from / granted to the Companies listed in the register maintained u/s 301 of the Companies act, 1956 are not prima- facie, prejudicial to the interest of the Company, except interest free Loan as stated in para 3 (a).

c) The Companies to whom advance in the nature of loan is granted there is no stipulation for repayment there of. As per the information and explanations given to us the said loan is repayable on demand. The Company is regular in repaying the principle amount wherever stipulated, 4 In our opinion and according to the information and explanations given to us, there are , adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventories and fixed assets and with regard to the receipts of Civil Contracts. During the course of our audit, we have not observed any major weakness in the internal controls.

5 a) To the best of our knowledge and belief, and according to information and explanations given to us, the transactions that needed to be entered in to the register in pursuance of Section 301 of the Companies Act, 1956, have been so entered.

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

6 In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public, Accordingly the provisions of clause (vi) of the Companies (Auditor s Report) order 2003 are not applicable to the Company.

7 The Company has appointed a partnership firm of Chartered Accountants, to carry out its internal audit function. In our opinion, the internal audit system commensurate with the size and nature of its business.

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

9 a) Ac cording to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2014 for a period of more than six months from the day they become payable except Sales Tax liability of Rs. 12,95,874/- and Service Tax of Rs.1,05,34,752/-

c) The disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under.

Sr. Nature of the Status Nature of Amount Period to No. the due which the amount relate

1. Building & Other Labour Cess Rs.1,06,52,334/- Various Construction Years Workers Welfare Cess

2. M.P minor Minerals Royalty. Rs. 3,00,000/- Various Rules 1996 years

3. Punjab Municipal House Tax Rs. 1,21,11,727/- Various corporation Ludhiana Years

4. Punjab Municipal House Tax Rs. 1,39,51,602/- Various corporation Jalandhar Years

5. Income Tax Act '' 1961 Income Tax Rs.45,48,16,121/- A.Y.2008 -09

6. Service Tax Act Service Tax Rs. 3,47,76,000/- Various Years

Sr. Nature of the Status Forum where No. dispute is Pending 1. Building & Other M.P High court Construction Jalabalpur Bench Workers Welfare Cess

2. M.P minor Minerals District Magitrate M.P Rules 1996

3. Punjab Municipal Supreme Court of corporation India

4. Punjab Municipal Supreme Court of corporation India

5. Income Tax Act '' 1961 Commissioner (Appeal)- Baroda)

6. Service Tax Act Commissioner (Appeal)- Baroda

10) The Company does not have accumulated losses at the end of the financial year. The Company has incurred cash losses during the financial year covered by the audit and the Company has not incurred cash losses during the immediately preceding financial year.

11) The Company has not defaulted in repayment of dues to any financial institution or Banks.

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

13) The provisions of any Special Statue applicable to Chit Funds, Nidhis or Mutual Benefit Funds /Societies are not applicable to the Company.

14) The Company is not dealing in or trading in shares, securities, debentures, or other investments and hence, requirements of paragraph 4(xiv) are not applicable to the Company.

15) In our opinion and according to information and explanations given to us the term and condition on which the Company has given guarantee for loan taken by others from Bank / Financial Institution are not prejudicial to the interest of the Company.

16) In our opinion, the term loans have been applied for the purpose for which they were raised.

17) Ac cording to the Cash Flow Statement and other records examined by us and on the basis of information and explanations given to us, on an overall basis, funds raised on Short Term basis have, prima facie, not being used during the year for Long Term investment and vice versa.

18) During the year, the Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained U/s 301 of the Act.

19) Since the Company does not have any debentures, the question of creation of securities for debentures does not arise.

20) The Company has not raised money by public issue during the year.

21) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

FOR CHANDRAKANT & SEVANTILAL & J.K. SHAH & CO. Firm Registration No. 101676W PLACE : VADODARA. Chartered Accountants DATE : 21-05-2014

(H.B. SHAH) PARTNER MEMBERSHIP NO. 016642


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Welspun Projects Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, 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 principles generally accepted in India including Accounting Standards referred to in Section 211(3C) 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.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

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

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

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

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

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 Section 227(4A) 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, 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 Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in section 211(3C) of the Act;

e. On the basis of the written representations received from the directors as on March 31, 2013, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of Section 274(1) (g) of the Act.

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT TO THE MEMBERS OF M/S. WELSPUN PROJECTS LIMITED, ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2013.

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

1) a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets on the basis of available information.

b) Major portion of fixed assets has been physically verified during the year by the management in accordance with a programme of verification, which, in our opinion provides for physical verification of all the fixed assets at reasonable interval having regards to size of the Company and nature of its business. According to the information and explanations given to us the discrepancies noticed on such verification were not material and have been properly dealt with in the books of accounts.

c) No disposal of a substantial part of fixed assets of the Company has taken place during the year.

2) a) As explained to us, the inventories were physically verified by the management at reasonable intervals during the year.

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 are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) As the Company has not maintained quantitative records of stock, It is not possible to find out discrepancies between the physical stock and book records.

3) a) The Company has granted unsecured loan to six Companies covered in the register maintained u/s 301 of the Companies Act'' 1956. The maximum amount involved during the year was Rs. 21,37,11,521/- and the year end balance of loans granted to these Companies was Rs.19,92,68,348/-including interest free loan of Rs.3,01,25,818/- The Company has taken interest free unsecured loan from one Company covered in the registered maintained u/s 301 of the Companies act'' 1956. The maximum amount involved during the year was Rs.7,75,66,967/- and year end balance of loan taken from such Company was Rs. 7,74,96,243/- b) In our opinion, the rate of interest, where applicable and other terms and conditions on which loan have been taken from / granted to the Companies listed in the register maintained us 301 of the Companies act, 1956 are not prima- facie, prejudicial to the interest of the Company. c) The Companies to whom advance in the nature of loan is granted there is no stipulation for repayment there of. As per the information and explanations given to us the said loan is repayable on demand. The Company is regular in repaying the principle amount wherever stipulated,

4) In our opinion and according to the information and explanations given to us, there are , adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventories and fixed assets and with regard to the receipts of Civil Contracts. During the course of our audit, we have not observed any major weakness in the internal controls.

5) a) To the best of our knowledge and belief, and according to information and explanations given to us, the transactions that needed to be entered in to the register in pursuance of Section 301 of the Companies Act, 1956, have been so entered. b) In our opinion and according to the information and explanations given to us, transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Rupees five lacs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time where such market prices are available.

6) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public, Accordingly the provisions of clause (vi) of the Companies (Auditor''s Report) order 2003 are not applicable to the Company.

7) The Company has appointed a partnership firm of Chartered Accountants, to carry out its internal audit function. In our opinion, the internal audit system commensurate with the size and nature of its business,

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

9) a) According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. b) According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2012 for a period of more than six months from the day they become payable except Sales Tax liability of Rs.12,95,874/- and Service Tax of Rs.1,05,34,752/-

10) The Company does not have accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year covered by the audit and in the immediately preceding financial year.

11) The Company has not defaulted in repayment of dues to any financial institution or Banks.

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

13) The provisions of any Special Statue applicable to Chit Funds, Nidhis or Mutual Benefit Funds/Societies are not applicable to the Company.

14) The Company is not dealing in or trading in shares, securities, debentures, or other investments and hence, requirement of paragraph 4(xiv) are not applicable to the Company.

15) In our opinion and according to information and explanations given to us the term and condition on which the Company has given guarantee for loan taken by others from Bank / Financial Institution are not prejudicial to the interest of the Company.

16) In our opinion, the term loans have been applied for the purpose for which they were raised.

17) According to the Cash Flow Statement and other records examined by us and on the basis of information and explanations given to us, on an overall basis, funds raised on Short Term basis have, prima facie, not being used during the year for Long Term investment and vise versa.

18) During the year, the Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained U/s 301 of the Act.

19) Since the Company does not have any debentures, the question of creation of securities for debentures does not arise.

20) The Company has not raised money by public issue during the year.

21) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

FOR CHANDRAKANT & SEVANTILAL & J.K. SHAH & CO.

Chartered Accountants

Firm Registration No. 101676W

PALCE: VADODARA

DATE: 18-05-2013 H.B. SHAH - PARTNER

Membership No. 016642


Mar 31, 2012

We have audited the attached Balance Sheet of M/s. Welspun Projects Limited as at 31st March, 2012 and also the annexed statement of Profit and Loss and the Cash Flow Statement of the Company 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.

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

1) As required by the Companies (Auditor's Report) order, 2003 issued by the Central Government of India in terms of Section 227 (4-A) of the Companies Act, 1956, and on the basis of information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

2) FURTHER ANDSUBJECTTO OUR COMMENTS INTHE ANNEXURE REFERREDTO IN PARAGRAPH 1 ABOVE.

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 the 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 of the Company.

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

e) In our opinion, subject to non compliance with the specified accounting standards relating to :-

Disclosure of Cash Subsidy amounting to Rs.82.87 Crores received from Madhya Pradesh Rajya Setu Nirman Nigam Limited against BOT Projects under the head 'Reserve & Surplus' instead of deducting the same from the Project Cost as required by the Accounting Standard-12 "Accounting for Government Grants" (See Note No. 37).

The Balance Sheet, the statement of Profit & Loss and the Cash Flow Statement dealt with by this report comply with the other Accounting Standards as referred to in the Section 211 (3C) of the Companies Act, 1956 and

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to:

Disclosure of Cash Subsidy amounting to Rs.82.87 Crores received from Madhya Pradesh Rajya Setu Nirman Nigam Limited, against BOT Projects under the head 'Reserve & Surplus' instead of deducting the same from the Project Cost (See Note No. 37). and read with the Significant Accounting Policies and notes appearing 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 the Balance Sheet of the state of affairs, of the Company as at 31st March, 2012 and;

ii) In the case of the statement of Profit and Loss of the Profit for the year ended on that date.

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

ANNEXURE TO THE AUDITORS' REPORT TO THE MEMBERS OF M/S. WELSPUN PROJECTS LIMITED, VADODARA ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2012 (REFERREDTO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE)

1. a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets on the basis of available information.

b) Major portion of fixed assets has been physically verified during the year by the management in accordance with a program me of verification, which, in our opinion provides for physical verification of all the fixed assets as reasonable interval having regards to size of the Company and nature of its business. According to the information and explanations given to us the discrepancies noticed on such verification were not material and have been properly dealt with in the books of accounts.

c) No disposal of a substantial part of fixed assets of the Company has taken place during the year.

2. a) As explained to us, the inventories were physically verified by the management at reasonable intervals during the year.

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 are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) As the Company has not maintained quantitative records of stock, It is not possible to find out discrepancies between the physical stock and book records.

3. a) The Company has granted unsecured loan to four Companies covered in the register maintained u/s 301 of the Companies Act1 1956. The maximum amount involved during the year was Rs. 10,95,09,827 and the year end balance of loans granted to these Companies was Rs. 7,25,97,421. Including interest free loan of Rs. 2,40,44,940/-

The Company has taken interest free unsecured loan from one Company covered in the registered maintained u/s 301 of the Companies act11956. The maximum amount involved during the year was Rs. 20,41,71,420 and year end balance of loan taken from such Company was Rs. 4,86,91,513.

b) In our opinion, the rate of interest, where applicable and other terms and conditions on which loan have been taken from / granted to the Companies listed in the register maintained us 301 of the Companies act, 1956 are not prima- facie, prejudicial to the interest of the Company.

c) The Companies to whom advance in the nature of loan is granted there is no stipulation for repayment there of. As per the information and explanations given to us the said loan is repayable on demand. The Company is regular in repaying the principle amount wherever stipulated.

4. In our opinion and according to the information and explanations given to us, there are, adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventories and fixed assets and with regard to the receipts of Civil Contracts. During the course of our audit, we have not observed any major weakness in the internal controls.

5. a) To the best of our knowledge and belief, and according to information and explanations given to us, the transactions that needed to be entered in to the register in pursuance of Section 301 of the Companies Act, 1956, have been so entered.

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

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public. Accordingly the provisions of clause (vi) of the Companies (Auditor's Report) order 2003 are not applicable to the Company.

7. The Company has appointed a partnership firm of Chartered Accountants, to carry out its internal audit function. In our opinion, the internal audit system is commensurate with the size and nature of its business.

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

9. a) According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2012 for a period of more than six months from the day they become payable except Sales Tax liability of Rs. 12,95,874/-and Service Tax of Rs. 1,24,16,979/-

c) According to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Custom Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute except the following disputed Demand.

Sr. Nature of the Nature of the Amount Period to which Forum where No. Status due the amount relate dispute is Pending

1. Punjab House Tax 96,89,382 2008-09 Supreme Municipal - to Court of Corporation Ludhiana 2011-12 India Act

2. Punjab House Tax 1,39,51,602 2008-09 Supreme Municipal - to Court of Corporation Jalandhar 2011-12 India Act

3. Building and Other Labour 1,06,52,334 Various Years M.P. High Construc tion Cess Court Workers Welfare Bench Cess Act, 1996. Jabalpur

4. M.P. Minor Royalty 30,25,880 Various Years District Minerals Magistrate Rules 1996 M.P.

10. The Company does not have accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year covered by the audit. The Company has incurred Cash losses in the immediately proceeding financial year.

11. The Company has not defaulted in repayment of dues to any financial institution or Banks.

12. The Company has not granted loans and advances on the basis of security byway of pledge of shares, debentures or other securities.

13. The provisions of any Special Statue applicable to Chit Funds, Nidhisor Mutual Benefit Funds/Societies are not applicable to the Company.

14. The Company is not dealing in or trading in shares, securities, debentures, or other investments and hence, requirement of paragraph 4(xiv) are not applicable to the Company.

15. In our opinion and according to information and explanations given to us the term and condition on which the Company has given guarantee for loan taken by others from Bank / Financial Institution are not prejudicial to the interest of the Company.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. According to the Cash Flow Statement and other records examined by us and on the basis of information and explanations given to us, on an overall basis, funds raised on Short Term basis have, prima facie, not being used during the year for Long Term investment and vice versa.

18. During the year, the Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained U/s 301 of the Act.

19. Since the Company does not have any debentures, the question of creation of securities for debentures does not arise.

20. The Company has not raised money by public issue during the year.

21. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

For Chandrakant & Sevantilal & J. K. Shah & Co.

Firm Registration No. 101676W

Chartered Accountants

Place: Vadodara

Date : 28/05/2012 (H. B. Shah)

Partner

Membership No.16642


Mar 31, 2010

We have audited the attached Balance Sheet of MSK PROJECTS (INDIA) LIMITED, as at 31 March, 2010 and also the annexed Profit and Loss Account and the Cash Flow statement of the Company for the year ended on that date. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

1. As required by the Companies (Auditors Report) order, 2003 as amended by Companies (Auditors Report) (Amendment) Order, 2004(togetherthe Order) issued bythe Central Government of India in terms of Section 227 (4-A) of the Companies Act, 1956, and on the basis of information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

2. Further and subject to our comments in the annexure referred to in paragraph 1 above.

a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary forthe 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 the books.

c) The Balance Sheet and Profit and Loss Account dealt with by this Report are in agreement with the books of account of the Company.

d) On the basis of written representations received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2010 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 ofthe Companies Act, 1956.

e) Inour opinion, subject to non compliance with the specified accounting standards relatingto-.-

Disclosure of Cash Subsidy amounting to Rs.82.87 Crores received from Madhya Pradesh Rajyasetu Nirman Nigam Limited against BOT Projects under the head Reserve & Surplusinstead of deducting the same from the Project Costas required bythe Accounting Standard-12 "Accounting forGovernmentGrants"(SeeNote No. 15).

The Balance Sheet, the Profit & Loss Account and the Cash flow statement dealt with by this report comply with the other Accounting Standard as referred to in the Section 211 (3C) of the Companies Act, 1956 and

In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to:

Disclosure of Cash Subsidy amounting to Rs.82.87 Crores received from Madhya Pradesh Rajyasetu Nirman Nigam Limited against BOTProjects under the head Reserve & Surplusinstead of deducting the samefrom the Project Cost (See Note No. 15).

and read with the other notes appearing 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 the Balance sheet of the state of affairs, of the Company as at 31st March, 2010 and;

ii) in the case of the Profit and Loss Account of the Profit for the year ended on that date.

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

ANNEXURE TO THE AUDITORS REPORT TO THE OF M/S. MSK PROJECTS (iNDIA) LIMITED, BARODA ON THE ACCOUNTS FOR THE YEAR ENDED 315T MARCH, 2010 (REFERRED TO IN PARAGRAPH 1 0F THE OUR REPORT OF EVEN DATE)

1 a) The Company has maintained proper records showing full particulars including quantitative details and situation of itrfixed assets.

h) Major portion of fixed assets has been physically verified during the year by the management in accordance with a programme of verification, which, in our opinion provides for physical verification of all the fixed assets as reasonable interval having regards to size of the Company and nature of its business. According to the information and explanation given to us the discrepancies noticed on such verification were not material and have been properly dealt with inthe books of accounts.

a.> No disposal of a substantial part of fixed assets of the Company has taken place during the year.

2 a > As explained to us, the inventories were physically verified bvthe management at reasonable intervals during the year.

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 are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) As the Company has not maintained quantitative records of stock, It is not possible to find out discrepancies between the physical stock and book records.

3. a) The Company has granted unsecured loan to five companies covered inthe register maintained u/s 301 ofthe Companies Act 1956. The maximum amount involved during the year was Rs. 1544.27 Lacs and the year end balance of loans granted to these Companies was Rs. 1091.48 Lacs.

b) In our opinion, the rate of interest, where applicable and other terms and conditions on which loan have been granted to the companies listed in the register maintained us 301 of the Companies act, 1956 are not prima- facie, prejudicial to the interest of the Company except interest free loan given to two Companies (outstanding balance as on 31/03/2010 is Rs. 45.25 Lacs).

c) The Companies to whom advance in the nature of loan is granted there is no stipulation for repayment there of. As perthe information and explanations given to us the said loan is repayable on demand.

d) According to the information and explanations given to us, the Company has not taken any loans secured or unsecured from Companies, firm or other parties covered in the register maintained under section 301 of the Companies Act 1956. Accordingly provision of clause 4(iii) (a) (b) (c) and (d) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

4. In our opinion and according to the information and explanations given to us, there are, adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventories and fixed assets and with regard to the receipts of Civil Contracts. During the course of our audit, we have not observed any majorweakness inthe internal controls.

5. a) To the best of our knowledge and belief, and according to information and explanation given to us, the transactions that needed to be entered in to the register in pursuance of Section 301 of the Companies Act, 1956, have been so entered.

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

6, In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public, Accordingly the provisions of clause (vi) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

7, The Company has appointed a person to carry out its internal audit function. In our opinion, the internal audit system is required to be strengthen in respect of its scope to cover all the area to commensurate with the size of the Companyand nature of its business.

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

3. a) According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities.

b> According to the information and explanation given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2010 for a period of more than six months from the day they become payable except Sales Tax liability of Rs. 12.96 Lacs, and Income Tax of Rs. 88.60 Lacs.

c) According to the information and explanation given to us, there are no dues of Sales Tax, IncomeTax, Custom Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute except the following disputed Income Tax Demand.

Sr. No. Nature of the Nature of Amount Period to which Status the due (Rs. In Lacs) the amount relate

1. Income Tax Act, Income Tax 27.43 A.Y.2007-08 1961

2. Income Tax Act, Block 12.93 A.Y. 1997 to 1961 Assessment 2003-04



Nature of the Forum where Status dispute is Pending

Income Tax Act, 1961 CIT (A) Baroda

Income Tax Act, 1961 Appellate Tribunal Ahmedabad

10. The Company has no accumulated losses and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

11. The Company has not defaulted in repayment of dues to any financial institution or Banks.

12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures or othersecurities.

13. The provisions of any Special Statue applicable to Chit Funds, Nidhis or Mutual Benefit Funds/Societies are not applicable to the Company.

14. The Company is not dealing in or trading in shares, securities, debentures, or other investments and hence, requirement of paragraph 4(xiv) are not applicable to the Company.

15} In our opinion and according to information and explanation given to us the term and condition on which the Company has given guarantee for loan taken by others from Bank / Financial Institution are not prejudicial to the interest of the company.

16) In our opinion,the term loans have been applied for the purpose for which they were raised.

17> According to the Cash Flow Statement and other records examined by us and on the basis of information and explanations given to us, on an overall basis, funds raised on Short Term basis have, prima facie, not being used during theyearfor LongTerm investment and vise versa.

18) During the year, the Company has not made any preferential allotment of shares to parties and Companies covered in the Register maintained U/s301 of the Act.

19) Since the Company does not have any debentures, the question of creation of securities for debentures does not arise.

20) The Company has not raised money by public issue during the year.

21) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on orbythe Company was noticed or reported during the year.

For Chandrakant & Sevantilal & J. K. Shah & Co.

Firm Registration No. 101676W Chartered Accountants

(H. B. Shah)

Partner Membership No.16642 Place: Vadodara Date: 31/05/2010

 
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