Auditor Report of Arihant Foundations & Housing Ltd.

Mar 31, 2016

TO THE MEMBERS OF

ARIHANT FOUNDATIONS & HOUSING LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying Standalone financial statements of ARIHANT FOUNDATIONS & HOUSING LIMITED, (“the company”), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss for the year and 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 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 the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding the assets of the Company and for preventing and detecting the 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 internal financial control, 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 there under.

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 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 true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the company has in place an adequate internal financial controls 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 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, of the state of affairs of the Company as at March 31, 2016, and its loss and its 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, a statement on the matters specified in the paragraph 3 & 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 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) Since the Company does not have branches, the report on the account of branch offices audited by other auditor under sub-section (8) of the act is not applicable;

d) 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. The Company has no branches;

e) 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;

f) On the basis of written representations received from the directors as on March 31, 2016, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016, from being appointed as a director in terms of Section 164(2) of the Act

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements as of March 31, 2016;

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

iii. The amount of Rs.64,470 has not been transferred to the Investor Education and Protection Fund by the Company.

ANNEXURE TO THE INDEPENDENT AUDITORS’ REPORT

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

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

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

2. a) As explained to us, the stock of construction materials has been physically verified at periodic intervals and no significant discrepancies have been noticed on such verification during the year.

b) In our opinion and according to the information and explanations given to us, the procedure of physical verification of stock of building material followed by the management is reasonable and adequate in relation to the size of the company and nature of its company.

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

3. a) The company has granted loan to seven companies covered in the register maintained under section 189 of the companies Act 2013, The maximum amount involved during the year was Rs.38,56,76,015/- and the year-end balance of loans granted to such parties was Rs.38,12,49,873/-

b) During the year, in respect of the aforesaid loans, in some of the loans there has been no recovery towards principal, in the absence of any terms; we are unable to comment on the regularity of recovery of principal amount.

c) Where the overdue amount exceeds rupees one lakh, in respect of some of the loans, in absence of any terms; we are unable to comment that, company has taken necessary steps to recover the amount and interest thereon.

4. In our opinion and according to information and explanations given to us, the company has an adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets and for the sales of goods and services. During the course of audit, we have neither come across nor never informed of any continuing failure to correct major weaknesses in internal control system.

5. In our opinion and according to information and explanations given to us, the company has not accepted deposits during the year. Therefore, the provisions of the clause 3(v) of the order are not applicable to the company.

6. The maintenance of cost records specified by the Central Government under sub-section (1) of section 148 of the Companies Act will not apply to the company. Hence maintenance of cost accounts and records is not required ;

7. (a) According to the information and explanations given to us and on the basis of examination of books of accounts, The Company is regular in depositing undisputed statutory dues including, Investor Education and protection fund, Income Tax, Wealth Tax, Service Tax, Cess, Sales tax, Value added tax, Excise duty and any other material statutory dues with the appropriate authorities except in case of following: -

Statement of Arrears of statutory dues outstanding for more than six months:-

Name of statue	Nature of the dues	Amount ( Rs.)	Period to which the amount relates	Due Date	Date of Payment
Income Tax Act	Tds Payable	Rs.5,900/-	2015-16	07-11-2015	10-05-2016
Service Tax	ServiceTax Payable	Rs.5,07,705/-	2015-16	06-08-2015	22-03-2016

(b) According to the information and explanation given to us there are dues in respect of income tax ,or sales tax ,or value added tax following taxes on account of dispute , which are as follows:-Statement of Disputed Dues :-

Name of the Statue	Nature of Dues	Amount (Rs.)	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Income Tax	Rs.76,38,692/-	AY 1999-2000 FY 1998-1999	CIT Appeals
Income Tax Act, 1961	Income Tax	Rs.71,83,310/-	AY 2011-201 FY 2010-2011	CIT Appeals
Income Tax Act, 1961	Income Tax	Rs.13,71,638/-	AY 2004-2005 FY 2003-2004	Income Tax Appellate Tribunal (ITAT)
Income Tax Act, 1961	Income Tax	Rs.53,23,956 /-	AY 2005-2006 FY 2004-2005	Income Tax Appellate Tribunal (ITAT)

Income Tax Act, 1961	Income Tax	Rs.15,19,250/-	AY 2013-2014 FY 2012-2013	CIT Appeals
Finance Act, (Service Tax) 1994	Service Tax	Rs.23,16,081/-	June 16, 2005 to March 2007	CESTAT, Chennai

(c) The company is not regular in transferring amounts to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 and rules made there under within time.

8. The company has been registered for a period not less than five years and has no accumulated losses at the end of the financial year and it has incurred cash losses in such financial year but not in the immediately preceding financial year;

9. In our opinion and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or Bank. Further, in our opinion and according to information and explanations given to us, the Company has not issued any debentures and hence there is no outstanding to debenture holders.

10. In our opinion and according to information and explanations given to us, the Company has given corporate guarantee of Rs.60 crores for loans taken by jointly controlled entity from non-banking finance company. The terms and conditions whereof are not prejudicial to the interest of the company.

11. According to the information and explanation given to us and on the basis of examination of books of accounts, the company has applied term loans for the purpose for which the loans were obtained;

12. 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 has been noticed or reported during the year.

For M/S. B.P.JAIN & CO

CHARTERED ACCOUNTANTS

Firm Registration Number: 050105S

Sd/-

DEVENDRA KUMAR BHANDARI

Place: New York PARTNER

Date: 26.05.2016 Membership Number: 208862

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Dec 31, 2014

Report on the Financial Statements

'' We have audited the accompanying financial statements of ARIHANT FOUNDATIONS & HOUSING LIMITED ("the f Company"), which comprise the Balance Sheet as at December 31,2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial , Statements

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

Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. 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 December 31,2014;

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

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

Report on other legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

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

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

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

d. in our opinion the Balance Sheet and the 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 (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs).

e. on the basis of written representations received from the directors as on December 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on December 31, 2014, from being appointed as a director in terms of clause (g) of sub- section (1) of section 274 of the Companies Act, 1956.

Annexure to the Auditors'' report

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

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

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

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

(ii) (a) As explained to us the stock of construction materials has been physically verified at periodic intervals and no significant discrepancies has been noticed on such verification during the year.

(b) The procedure of physical verification of stock of building material, followed by the management is reasonable and adequate in relation to the size of the company and nature of its company.

(c) The company does not maintain stock records of raw materials. We are of the opinion that the valuation of the stock of building material is as per normally accepted accounting principles. The company has not identified slow moving building materials separately.

(iii) (a) The company has granted loan to five companies covered in the register maintained under section 301 of the companies Act 1956, The maximum amount involved during the year was Rs.47,27,08,834/- and the year-end balance of loans granted to such parties

(b) In our opinion the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the company.

(c) The parties have repaid the principal amounts and have also been regular in the payment of interest to the company.

(d) Where the overdue amount exceeds rupees one lakh the company has taken necessary steps to recover the amount and interest thereon.

(e) The company had taken loan from three parties covered in the register maintained under section 301 of the companies Act, 1956. The maximum amount involved during the year was Rs.54,79,19,840/- and the year-end balance of loans taken from such parties was Rs.52,26,45,900/-.

(f) In our opinion the rate of interest and other terms and conditions of the loan taken by the company, secured and unsecured are not prima facie, prejudicial to the interest of the company.

(g) The repayment of principal and interest thereon to the concerned parties is also regular.

(iv) In our opinion and according to information and explanation given to us the company has an adequate internal control procedure commensurate with the size and nature of business for the purchase of stores and raw materials, plant & machinery, equipment and other assets for the sale of finished stocks. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the company.

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

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

(vi) In our opinion and according to the information and explanation given to us the company has not accepted deposits from the public during the year. Therefore, the provision of clause 4(vi) of the Order is not applicable to the Company.

(vii) In our opinion the company has an internal audit system commensurate with size and nature of its business.

(viii) We have broadly reviewed the cost records maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records by the Company under section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the cost records have been maintained by the company. We have however not made a detailed examination of the same as the same has been certified by a cost accountant.

(ix) According to the information and explanations given to us and on the basis of our examination of books of account, in our opinion

a) The Company is regular in depositing undisputed statutory dues including, Investor Education and protection fund, Income Tax, Wealth Tax, Service Tax, Cess, Sales tax, VAT, Excise duty and any other material statutory dues during the year with the appropriate authorities except in case of following:

Statement of Arrears of statutory dues outstanding for more than six months.

Name of Nature of Amount Period Due Date statue the dues ( Rs.) to which Date of the Payment amount relates

TN Vat Vat Rs.10,000/- 2013-14 20-07-2013 Not paid Act 2006 Payable

b) According to the information and explanation given to us there are dues in respect of following taxes on account of dispute , which are as follows:-

Statement of Disputed Dues

Name of Nature Amount Period to Forum where the Statue of Dues (Rs.) which the dispute is amount pending relates Income Tax Income Tax Rs.76,38,692/- A. Y 1999-2000 CIT Appeals Act, 1961 / F. Y 1998-1999

Income Tax Income Tax Rs.71,83,310/- A. Y 2011-2012 CIT Appeals Act, 1961 / F. Y 2010- 2011

Income Tax Income Tax Rs.13,71,956/- A. Y 2004-2005 Income Tax Act, 1961 / F. Y Appellate 2003 - 2004 Tribunal (TAT

Income Tax Income Tax Rs.53,23,638/- A. Y 2005-2006 Income Tax Act, 1961 / F. Y Appellate 2004 - 2005 Tribunal (TAT

Income Tax Income Tax Rs.5,58,07,850/- A. Y 2009-2010 Income Tax Act, 1961 / F. Y Appellate 2008 - 2009 Tribunal (TAT

Income Tax Income Tax Rs.1,19,53,006/- A. Y 2007-2008 Income Tax Act, 1961 / F. Y Appellate 2006 - 2007 Tribunal (TAT

Finance Service Rs.23,16,081/- June 16, 2005 CESTAT, Act, 1994 Tax to March 2007 Chennai (Service Tax)

(x) The company has no accumulated losses as at December 31, 2014 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or Bank. Further, in our opinion and according to information and explanations given to us, the Company did not have any amount outstanding to debenture holders.

(xii) According to the information and explanation given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The provision of any special statute applicable to a chit fund / mutual benefit fund / societies are not applicable to the company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not applicable.

(xv) In our opinion, and according to information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions.

(xvi) According to the information and explanations given to us and on the basis of examination of books of accounts, the company has applied term loans for the purpose for which the loans were obtained.

(xvii) According to the information and explanation given to us and on an overall examination of balance sheet of the company, we report that no funds raised for short term basis utilised for long term investment and vice versa.

(xviii) According to the information and explanations given to us the Company has not made any preferential allotment of shares to the parties and companies covered in the register maintained under section 301 of the Companies Act, 1956, accordingly clause 4(xviii) of the order is not applicable.

(xix) The company has not issued any debenture during the year hence question of having security or registering a charge with the Registrar of Companies does not arise during the year.

(xx) The company has not raised any money by way of public issue during the year, accordingly, clause 4(xx) of the Order is not applicable to the Company.

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

For B.P.JAIN & CO. CHARTERED ACCOUNTANTS Firm Reg No. 050105S Sd/- CA. DEVENDRA KUMAR BHANDARI Partner Membership No.: 208862

Place: Chennai Date: 27.02.2015

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Sep 30, 2013

Report on the Financial statements

We have audited the accompanying fnancial statements of ARIHANT FOUNDATIONS & HOUSING LIMITED ("the Company"), which comprise the Balance Sheet as at September 30, 2013, and the Statement of Proft and Loss and Cash Flow Statement for the year then ended, and a summary of signifcant accounting policies and other explanatory information.

management''s responsibility for the Financial statements

Management is responsible for the preparation of these fnancial statements that give a true and fair view of the fnancial position, fnancial performance and cash fows 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 fnancial 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 fnancial 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 fnancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fnancial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the fnancial 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 fnancial 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 fnancial statements.

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

Basis for Qualifed Opinion:

The management has not made provision for interest of Rs.88,69,620/-during the year as payable to HUDCO on account of belated payment of interest and incidental cost that is payable as per order of Debt Recovery Tribunal dated 26/08/2011 for the period(01/07/2004 to 26/07/2011),which constitute a departure from the accounting standards referred to in sub-section (3C) of section 211 of Companies Act 1956. The company''s records indicate that, had management provided above provisions in books, the Indirect Expenses would have gone up by Rs.88,69,620/-. Accordingly, net proft and shareholder''s fund would have been reduced by the said fgure.

Qualifed Opinion:

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of matters described in the Basis for Qualifed Opinion Paragraph the aforesaid fnancial 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 September 30, 2013;

b) in the case of the Proft and Loss Account, of the proft for the year ended on that date; and

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

report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specifed in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

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

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

c. the Balance Sheet, Statement of Proft and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d. except for the matters described in the Basis for Qualifed Opinion Paragraph, in our opinion the Balance Sheet and the Statement of Proft 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 September 30, 2013, and taken on record by the Board of Directors, none of the directors is disqualifed as on September 30, 2013, from being appointed as a director in terms of clause (g) of subsection (1) of section 274 of the Companies Act, 1956.

f. Since the Central Government has not issued any notifcation as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

AnneXure

re: m/s ArihAnt FoundAtions And housing Ltd

Annexure to the Auditors'' report

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

On the basis of such checks we considered appropriate and according to the information and explanations given to us during the course of audit, we state that:

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fxed assets. None of the assets have been revalued during the year.

(b) The fxed assets have been physically verifed by the management at reasonable interval and no material discrepancies are noticed on such verifcation.

(c) The company has not disposed off substantial part of fxed assets during year so as to affect its going concern status.

(ii) (a) The stock of construction materials has been physically verifed at periodic intervals and no signifcant discrepancies has been noticed on such verifcation during the year.

(b)The procedure of physical verifcation of stock of building material, followed by the management is reasonable and adequate in relation to the size of the company and nature of its company.

(c) The company does not maintain stock records of raw materials. We are of the opinion that the valuation of the stock of building is as per normally accepted accounting principles. The company has not identifed slow moving building materials separately.

(III) (a) The company has granted unsecured loans to companies, frms or other parties covered in the register maintained under section 301 of the companies Act 1956, and the details are as follows

- No of parties : (6)

- Maximum amount involved in the transaction : Rs. 18,75,45,887/-- Closing balance of the loan is Rs. 48,33,85,778/-

(b) In our opinion the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the company.

(c) The receipt of principal and interest thereon are regular.

(d) Where the overdue amount exceeds rupees one lakh the company has taken necessary steps to recover the amount and interest thereon.

(e) The company has taken loans, secured or unsecured from companies, frms or other parties listed in the register maintained under section 301 of the companies Act 1956 and the details are as follows

- No of parties : (2)

- Maximum amount involved in the transaction : Rs. 5,74,21,102/-- Closing balance of the loan is Rs. 16,11,05,132/-(f) In our opinion the rate of interest and other terms and conditions of the loan taken by the company, secured and unsecured are not prima facie, prejudicial to the interest of the company.

(g) The repayment of principal and interest thereon to the concerned parties is also regular.

v) In our opinion and according to information and explanation given to us the company has an adequate internal control procedure commensurate with the size and nature of business for the purchase of stores and raw materials, plant & machinery, equipment and other assets for the sale of fnished stocks. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the company.

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

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered in the register maintained under section 301 of the companies Act 1956 and exceeding the value of rupees fve lakhs in respect of any party during the year, have been made at a price which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanation given to us the company has not accepted deposits from the public during the year. Therefore, the provision of clause 4(vi) of the Order are not applicable to the Company.

(vii) In our opinion the company has an internal audit system commensurate with size and nature of its business.

(viii) We have broadly reviewed the cost records maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records by the Company under section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the cost records have been maintained by the company. We have however not made a detailed examination of the same as the same has been certifed by a cost accountant.

(ix) According to the information and explanations given to us and on the basis of our examination of books of account, in our opinion

a) The Company is regular in depositing undisputed statutory dues including, Investor Education and protection fund, Income Tax, Wealth Tax, Service Tax, Cess, Sales tax, VAT, Excise duty and any other material statutory dues during the year with the appropriate authorities except in case of following:

Statement of Arrears of statutory dues outstanding for more than six months.

Name of statue Nature of the Amount( Rs.) Period to which the dues amount relates

Income Tax Act, 1961 Income Tax Rs.2,02,950/- 2010-2011

Name Due Date Date of Payment

Income Tax Act 1961 04/05/2013 Not Paid

b) According to the information and explanation given to us there are dues in respect of following taxes on account of dispute , which are as follows:-

Statement of Disputed Dues

Name of the Nature of Dues Amount Statue (Rs.)

Income Tax Act, 1961 Income Tax Rs.76,38,692/-

Income Tax Act, 1961 Income Tax Rs.95,58,275/-

Income Tax Act, 1961 Income Tax Rs.5,57,61,612/-

Income Tax Act, 1961 Income Tax Rs. 1,19,53,006/-

Income Tax Act, 1961 Income Tax Rs.5,58,07,850/-

Finance Act, 1994 Service Tax Rs.23,16,081/- (Service Tax)

Name Period to Forum where which the dispute Amount relates

Income Tax Act, 1961 1999-2000 CIT Appeals

Income Tax Act, 1961 2005-2006 CIT Appeals

Income Tax Act, 1961 2007-2008 CIT Appeals

Income Tax Act, 1961 2007-2008 Income Tax Appellate Tribunal (ITAT)

Income Tax Act, 1961 2009-2010 Income Tax Appellate Tribunal (ITAT)

Income Tax Act, 1961 June 16, 2005 to CESTAT, March 2007 Chennai

(x) The company has no accumulated losses as at September 30, 2013 and it has not incurred cash losses in the fnancial year ended on that date or in the immediately preceding fnancial year.

(xi) According to the records of the company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any fnancial institution or Bank or debenture holders as at the balance sheet date. (Except in case of HUDCO, wherein the company is disputing the amount of interest payment / Principal payment and rate of interest due to non release of NOC in favor of prospective buyers vide court case No Q.A.No 78 of 2004. The company had fled contempt of court petition vide petition No 384/2004 against HUDCO for not obeying the directions of High Court. HUDCO had fled a suit in the Debt Recovery Tribunal). The company has paid a sum of the above dispute as to principal and interest thereon, a sum of Rs. 15,48,54,845/- was determined as principal by the Debt Recovery Tribunal. The company has paid the principal amount of Rs.15,48,54,845/- to HUDCO. The company has not accrued interest to the tune of Rs.9,93,77,130.40 as payable to HUDCO as per the order of the Debt Recovery Tribunal Dated 26/8/2011 for the period (01/07/2004 to 26/07/2011) and further consequent interest as per recovery offcer amounting to Rs.1,96,60,340.70/-for the period (27/07/2011 to 30/09/2013) has also not been provided for belated payment of (interest and incidental cost).

(xii) According to the information and explanation given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The provision of any special statute applicable to a chit fund / mutual beneft fund / societies are not applicable to the company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not applicable.

(xv) In our opinion, and according to information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or fnancial institutions.

(xvi) According to the information and explanations given to us and on the basis of examination of books of accounts, the company has applied term loans for the purpose for which the loans were obtained.

(xvii) According to the information and explanation given to us and on an overall examination of balance sheet of the company, we report that no funds raised for short term basis utilised for long term investment and vice versa.

(xviii) According to the information and explanations given to us the Company has not made any preferential allotment of shares to the parties and companies covered in the register maintained under section 301 of the Companies Act, 1956, accordingly clause 4(xviii) of the order is not applicable.

(xix) The company has not issued any debenture during the year hence question of having security or registering a charge with the Registrar of Companies does not arise during the year.

(xx) The company has not raised any money by way of public issue during the year, accordingly, clause 4(xx) of the Order is not applicable to the Company.

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

For B.P.JAIN & CO.

CHARTERED ACCOUNTANTS

Firm Reg No. 050105S

Sd/-

CA. DEVENDRA KUMAR BHANDARI

Partner

Membership No.: 208862

Place: Chennai Date: 29/11/2013

---

Sep 30, 2012

1. We have audited the attached balance sheet of M/s Arihant Foundations And Housing Limited ("the Company") as at 30th September 2012, and also the annexed profit and loss account 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. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order"), as amended by the Companies (Auditor''s Report) (Amendment) Order 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments above, we report that:

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

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

iii) The balance sheet and profit and loss account dealt with by this report are in agreement with the books of account;

iv) In our opinion, the balance sheet, and profit and loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956, except Accounting Standard (15) and in case of HUDCO the company has not accrued interest amounting to Rs. 11, 01, 67,851.50/- for the period from 1/07/2004 to 30/09/2012.

v) On the basis of written representations received from the directors, as on 30th September 2012, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th September 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;.

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view except as mentioned in note (iv) above are 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 30th September 2012 and

(b) In the case of the profit and loss account, of the profit of the Company for the year ended 30th September 2012.

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

ANNEXURE

Re: M/S ARIHANT FOUNDATIONS AND HOUSING LIMITED

Referred to in paragraph 3 of our report of even date,

On the basis of such checks we considered appropriate and according to the information and explanations given to us during the course of audit, we state that:

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. None of the assets have been revalued during the year.

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

(c) The company has not disposed off substantial part of fixed assets during year so as to affect its going concern status.

(ii) (a) The stock of construction materials has been physically verified at periodic intervals and no significant discrepancies has been noticed on such verification during the year.

(b)The procedure of physical verification of stock of building material, followed by the management is reasonable and adequate in relation to the size of the company and nature of its company.

(c) The company does not maintain stock records of raw materials. We are of the opinion that the valuation of the stock of building is as per normally accepted accounting principles. The company has not identified slow moving building materials separately.

(iii) (A) The company has granted during the year loans of unsecured in nature to companies, firms or other parties listed in the register maintained under section 301 of the companies Act 1956, and the details are as follows

No of parties : (9)

Maximum amount involved in the transaction :

Rs. 68,15,13,649/- Closing balance of the loan is Rs. 57,20,31,013/-

(b) The rate of interest and other terms and conditions of loans given by the company, secured and unsecured are not prima facie prejudicial to the interest of the company.

(c) The receipt of principal and interest thereon are regular.

d) Where the overdue amount exceeds rupees one lakh the company has taken necessary steps to recover the amount and interest thereon.

e) The company has taken loans, secured or unsecured from companies, firms or other parties listed in the register maintained under section 301 of the companies Act 1956 and the details are as follows

No of parties : (9)

Maximum amount involved in the transaction :

Rs. 21,69,58,069/- Closing balance of the loan is Rs. 19, 91,86,472/-

(f) The rate of interest and other terms and conditions of the loan taken by the company, secured and unsecured are not prima facie, prejudicial to the interest of the company.

(g) The repayment of principal and interest thereon to the concerned parties is also regular. During the year the company has repaid loans to the extent of Rs 24, 67, 91,669/-.

(iv) The company has an adequate internal control procedure commensurate with the size and nature of business for the purchase of stores and raw materials, plant & machinery, equipment and other assets for the sale of finished stocks.

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

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

(vi) The Company has accepted fixed deposits and in our opinion and according to the information and explanation given to us, the directives issued by the Reserve Bank of India and provisions of Section 58A,58AA and other relevant provisions of the Companies Act, 1956 and rules framed there under, where applicable, have been duly complied with except in case of unsecured loans others borrowed by the company which fall within the definition of deposits defined u/s 2(b) of companies act amounting to Rs 2,62,02,436. We are informed that no order has been passed by the company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal.

(vii) In our opinion the company has an internal audit system commensurate with size and nature of its business.

(viii)We have broadly reviewed the cost records maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records by the Company under section 209 (1) (d) of the Companies Act,1956 and are of the opinion that primafacie the cost records have been maintained by the company. We have however not made a detailed examination of the same as the same has been certified by a cost accountant.

(ix) According to the information and explanations given to us and on the basis of our examination of books of account, in our opinion

a) The Company is regular in depositing undisputed statutory dues including, Investor Education and protection fund, Income Tax, Wealth Tax, Service Tax, Cess, Sales tax, VAT, Excise duty and any other material statutory dues during the year with the appropriate authorities. Except the company did not remit the employees provident fund due in time.

b) According to the information and explanation given to us there are dues in respect of following taxes on account of dispute , which are as follows:-

INCOME TAX

Income Nature of Amount Pending tax A.Y. due before Which Authorit

1999-2000 Regular Rs.76,38,692 CIT Appeals

SERVICE TAX

Sl Pertaining Amount Pending No to Period Before Authorit

1 October 2004 (Madras High to March 2007 23,16,081/- Court)

The company has filed a writ against the above service tax levied by the department and the penalty levied by the service tax department to the tune of Rs.70 lakh vide court case no.6562 / 2011 before the honorable madras High Court and the high court has granted a stay until further orders.

(x) The company has no accumulated losses as at September 30, 2012 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

(xi) According to the records of the company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or Bank or debenture holders as at the balance sheet date. (Except in case of HUDCO, wherein the company is disputing the amount of interest payment / Principal payment and rate of interest due to non release of NOC in favor of prospective buyers vide court case No Q.A.No 78 of 2004. The company had filed contempt of court petition vide petition No 384/2004 against HUDCO for not obeying the directions of High Court. HUDCO had filed a suit in the Debt Recovery Tribunal). The company has paid a sum of the above dispute as to principal and interest thereon a sum of Rs 15,48,54,845/- was determined as principal by the Debt Recovery Tribunal. The company has paid the principal amount of Rs.15,48,54,845 to HUDCO (Rs.12,87,47,121/- AND 2,61,07,364/- as interest). The company has not accrued interest to the tune Rs 9,93,77,130.40/- as payable to HUDCO as per the order of the Debt Recovery Tribunal Dated 8/8/2011 for the period (01/07/2004 to 26/08/2011) and further consequent interest as per recovery officer amounting to Rs1,07,90,720.70 for the period (27/08/2011 to 30/09/2012) needs to be further accounted for belated payment of (interest and incidental cost).

(xii) According to the information and explanation given to us, the company has not granted loans and advances on the basis of security by way of pelage of shares, debentures and other securities.

(xiii) The provision of any special statute applicable to a chit fund / mutual benefit fund / societies are not applicable to the company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not applicable.

(xv) In our opinion, and according to information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions.

(xvi) According to the information and explanations given to us and on the basis of examination of books of accounts, the company has applied term loans for the purpose for which the loans were obtained.

(xvii) According to the information and explanation given to us and on an overall examination of balance sheet of the company, we report that no funds raised for short term basis utilised for long term investment and vice versa.

(xviii) According to the information and explanations given to us the Company has not made any preferential allotment of share to the parties and companies covered in the register maintained under section 301 of the companies Act 1956, accordingly clause 4(xviii) of the order is not applicable.

(xix) The company has not issued any debentures during the year hence question of having security or registering a charge with the Registrar of Companies does not arise during the year.

(xx) The company has not raised the public issue during the year; accordingly, clause 4(xx) of the Order is not applicable to the Company.

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

For B.P.JAIN & CO.

CHARTERED ACCOUNTANTS

FIRM REG NO-050105S

Sd/-

CA Devendra Kumar Bhandari

Partner

Membership No. 208862

Place : Chennai

Date : 29/11/2012

---

Sep 30, 2011

1. We have audited the attached balance sheet of M/s Arihant Foundations & Housing Limited ("the Company") as at 30th September 2011, and also the annexed profit and loss account 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. 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 signifcant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 ("the Order"), as amended by the Companies (Auditor's Report) (Amendment) Order 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specifed in paragraphs 4 and 5 of the said Order.

4. Further to our comments above, we report that:

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

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

iii) The balance sheet and profit and loss account dealt with by this report are in agreement with the books of account;

iv) In our opinion, the balance sheet, and profit and loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956, except in case of HUDCO the company has not accrued interest for the period amounting to Rs.1,39,36,936/- and total accumulated interest for the period (1/07/2004 19 to 30/09/2011) amounting to Rs. 10,10,71,424/-.

v) On the basis of written representations received from the directors, as on 30th September 2011, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th September 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;.

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of the balance sheet, of the state of affairs of the Company as at 30th September 2011 and

(b) In the case of the profit and loss account, of the profit of the Company for the year ended 30th September 2011.

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

ANNEXURE

Re: M/S ARIHANT FOUNDATIONS & HOUSING LIMITED Referred to in paragraph 3 of our report of even date, On the basis of such checks we considered appropriate and according to the information and explanations given to us during the course of audit, we state that:

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. None of the assets have been revalued during the year.

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

(c) The company has not disposed off substantial part of fxed assets during year so as to affect its going concern status.

(ii) (a) The stock of construction materials has been physically verified at periodic intervals and no significant discrepancies has been noticed on such verification during the year.

(b)The procedure of physical verification of stock of building material, followed by the management is reasonable and adequate in relation to the size of the company and nature of its company.

(c) The company does not maintain stock records of raw materials. We are of the opinion that the valuation of the stock of building is as per normally accepted accounting principles. The company has not identified slow moving building materials separately.

(iii) (A) The company has granted during the year loans of unsecured in nature to companies, firms or other parties listed in the register maintained under section 301 of the companies Act 1956, and the details are as follows

No of parties - 11, amount of loan granted during the year : Rs. 75.41Crores, maximum amount involved in the transaction : Rs.74.39Crores,Closing balance of the loan is : Rs. 72.11Crores.

(b) The rate of interest and other terms and conditions of loans given by the company, secured and unsecured are not prima facie prejudicial to the interest of the company.

(c) The receipt of principal and interest thereon are regular.

d) Where the overdue amount exceeds rupees one lakh the company has taken necessary steps to recover the amount and interest thereon.

e) The company has taken loans, secured or unsecured from companies, firms or other parties listed in the register maintained under section 301 of the companies Act 1956 and the details are as follows

No of parties -7, the amount of loan taken during the year is : Rs. 17.12Crores, maximum amount involved in the transaction : Rs. 22.43Crores, closing balance of the loan is : Rs. 17.89Crores.

(f) The rate of interest and other terms and conditions of the loan taken by the company, secured and unsecured are not prima facie, prejudicial to the interest of the company.

(g) The repayment of principal and interest thereon to the concerned parties is also regular. During the year the company has repaid loans to the extent of Rs 19,30,20,515/- (iv) The company has an adequate internal control procedure commensurate with the size and nature of business for the purchase of stores and raw materials, plant & machinery, equipment and other assets for the sale of finished stocks.

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

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered in the register maintained under section 301 of the companies Act 1956 and exceeding the value of rupees fve lakhs in respect of any party during the year, have been made at a price which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has accepted fixed deposits and in our opinion and according to the information and explanation given to us, the directives issued by the Reserve Bank of India and provisions of Section 58A,58AA and other relevant provisions of the Companies Act, 1956 and rules framed there under, where applicable, have been duly complied with. We are informed that 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. The company has fled annual return of deposits for the year 2011.

(vii) In our opinion the company has an internal audit system commensurate with size and nature of its business.

(viii) The Central Government has not prescribed the maintenance of cost records by the Company under section 209 (1) (d) of the Companies Act, 1956.

(ix) According to the information and explanations given to us and on the basis of our examination of books of account, in our opinion

a) The Company is regular in depositing undisputed statutory dues including, Investor Education and protection fund, Income Tax, Wealth Tax, Service Tax, Cess, Sales tax, VAT, Excise duty and any other material statutory dues during the year with the appropriate authorities. Except the company did not remit the employees provident fund to extent of Rs.12,30,745/-.

b) According to the information and explanation given to us there are dues in respect of following taxes on account of dispute , which are as follows:-

INCOME TAX

Income tax Nature Amount Pending before A.Y. of due Which Authority

2004-05 Regular 13,71,638 CIT Appeals

2005-06 Regular 53,23,956 CIT Appeals

2007-08 Regular 65,65,350 CIT Appeals

SERVICE TAx

Pertaining to Period Amount Pending Before Authority

October 2004 to

March 2007 2316081/- (Madras High Court)

The company has fled a writ against the above service tax levied by the department and the penalty levied by the service tax department to the tune of Rs.70 lakhs vide court case No.6652/2011 before the honorable madras High Court and the high court has granted a stay until further orders.

(x) The company has no accumulated losses as at September 30, 2011 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

(xi) According to the records of the company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or Bank or debenture holders as at the balance sheet date. (Except in case of HUDCO, wherein the company is disputing the amount of interest payment / Principal payment and rate of interest due to non release of NOC in favor of prospective buyers vide court case No Q.A.No 78 of 2004. The company had fled contempt of court petition vide petition No 384/2004 against HUDCO for not obeying the directions of High Court. HUDCO had fled a suit in the Debt Recovery Tribunal). The company has accrued a sum of Rs. 12,87,47,121/- as payable to HUDCO towards principal, since the above dispute as to principal and interest thereon a sum of Rs 15,48,54,845/- was determined as principal by the Debt Recovery Tribunal. The company has paid the principal amount of Rs.15,48,54,845 to HUDCO (Rs.12,87,47,121/- and 2,61,07,364/- as interest). The company has not accrued interest to the tune Rs 10,10,71,423.40 as payable to HUDCO as per the order of the Debt Recovery Tribunal Dated 8/8/2011 for the period (01/07/2004 to 30/09/2011).

(xii) According to the information and explanation given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The provision of any special statute applicable to a chit fund / mutual benefit fund / societies are not applicable to the company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not applicable.

(xv) In our opinion, and according to information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions. 2

(xvi) According to the information and explanations given to us and on the basis of examination of books of accounts, the company has applied term loans for the purpose for which the loans were obtained.

(xvii) According to the information and explanation given to us and on an overall examination of balance sheet of the company, we report that no funds raised for short term basis utilised for long term investment and vice versa.

(xviii) According to the information and explanations given to us the Company has allotted equity shares on preferential basis upon conversion of convertible equity warrants to the parties covered in the register maintained under section 301 of the Companies Act, 1956. The price at which shares have been issued is not prejudicial to the interest of the company.

(xix) The company has not issued any debentures during the year hence question of having security or registering a charge with the Registrar of Companies does not arise during the year.

(xx) The company has not raised the public issue during the year; accordingly, clause 4(xx) of the Order is not applicable to the Company.

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

For B.P.JAIN & CO.

CHARTERED ACCOUNTANTS

Sd/-

DEVENDRA KUMAR BHANDARI

Partner

Membership No.: 208862

Place: Chennai

Date: 29.11.2011

---

Sep 30, 2009

1. We have audited the attached balance sheet of M/S Arihant Foundations and Housing Limited, Chennai as at 30th September 2009, the Profit and Loss Account for the year ended on that date and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order 2004, issued by the Central Government of India under sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

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

ii) In our opinion, proper bookjs of account as required by law have been kept by the Company so far as appears from our examination of those books. The Company does not have any branches. Hence Branch audit and Branch audit report is not applicable;

iii) The balance sheet and profit and loss account and Cash Flow Statement dealt with by this report are in agreement with the books of account and the company has no branches;

iv) In our opinion, the balance sheet, and profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 to the extend applicable except AS-15 and AS-22.

v) On the basis of written representations received from the directors, as on 30th September 2009, and taken on record by the Board of Directors, Wherever applicable we report that none of the directors is disqualified as on 30th September 2009 from being appointed as a director of the company in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the note thereon and the Schedules attached thereto, 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.

1) in the case of Balance Sheet, of the state of affairs of the Company as at 30th September 2009 and

2) in the case of Profit and Loss account, of the profit of the company for the year ended on that date.

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

ANNEXURE TO THE AUDITORS REPORT

(Referred to Paragraph (3) of our report of even date)

On the basis of such checks we considered appropriate and according to the information and explanations given to us during the course of audit, we state that;

(1) (a)The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets. None of the assets have been revalued during the year.

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

(c) The company has not disposed of a substantial part of its fixed assets during the year so as to affect its going concern status.

(2) (a) The Stock of construction materials have been physically verified at periodic intervals and no significant discrepancies have been noticed on such verification during the year.

(b) The procedure of physical verification of stocks of building material, followed by the management is reasonable and adequate in relation to the size of the Company and nature of its business.

(c) The company does not maintain stock records of raw materials. We are of the opinion that the valuation of the stock of building is as per normally accepted accounting principles. The company has not identified slow moving building materials separately.

(3) (a) The Company has granted during the year loans, secured or unsecured to companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956, and the details are as follows.

(i) No. of Parties : (9)

(ii) Amount involved in the transaction: Rs.60.36 Crore

(b) The rate of interest and other terms and conditions of loans given by the company, secured and unsecured, are not prima facie prejudicial to the interest of the Company.

(c) The receipt of the principal amount and interest are also regular from parties.

(d) Where the overdue amount is more than Rs.1 lakh, reasonable steps have been taken by the company for recovery of principal and interest.

(e) The company has taken loans secured or unsecured from the Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 and the details are as follows. (i) No of Parties: (10)

(ii) Amount involved in the transaction: Rs.30.16 Crores

(f) The rate of interest and other terms and conditions of loan taken by the Company, secured and unsecured are not prima facie, prejudicial to the interest of the company.

(g) The payment of principal amount and the interest are also regular to the parties.

(4) The company has an adequate internal control procedure commensurate with the size and the nature of the business for the purchase of stores and raw materials,plant and machinery equipment and other assets and for the sale of finished stock.

(5) (a) In our opinion and according to the information and explanations given by the management, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the Register required to be maintained under that section.

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

(6) The Company has accepted fixed deposits and in our opinion and according to the information and explanations given to us, the directives issued by the Reserve Bank of India and the provisions of Section 58A, 58AA and other relevant provisions of the Companies Act, 1956 and the rules framed there under, where applicable, have been duly complied with. We are informed that 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. However the company is yet to file annual return of deposits for the year 2009.

(7) In our opinion, the company has an internal audit system commensurate with its size and nature of its business

(8) We are informed that the maintenance of Cost records has not been prescribed by the Central Government under section 209 (1) (d) of tlfie Companies Act, 1956.

(9) According to the information ^nd explanations given to us and records of the Company examined by us,in our opinion,

(a) The Company has bee|n regular in depositing undisputed statutory dues including Income Tax, Sales Tax,Service tax, Wealth Tax^ Investor Education and Protection Fund, Cess, VATJ, and any other material statutory dues with the appropriate authorities during the year. Except in case of tpe following:

(i) The company has stopped collecting service tax from the receipt of Circular from 29/01/09.

(ii) According to the information and explanations given to us there are dues in respebt of Income tax, which is as under.

Income Nature of Amount Pending before tax A.Y. Due which authority 2004-05 Regular 13,71,638 CIT Appeals Regular 1,96,01,764 Appellate Tribunal 2005-06 Regular 53,23,956 CIT Appeals Regular 1,13,75,018 Appellate Tribunal 2006-07 Regular 9,20,226 CITAppeals

(10) The Company has no accumulated losses as at September 30,2009 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

(11) According to the records of the Company examined by us and the information and explanation given to us, The company has not defau ted in repayment of dues to any financial Institution or EJank or debenture holders as at the balance sheet date. (Except in case of HUDCO, where in the company is disputing the amount of interest payment / principal payment and rate of interest due to non release of NOC in favour of the prospective buyers vide Court case No. Q.A.No.78 of 2004. The Company has filed contempt of Court petition vide Petition 384/2004 agains;t HUDCO for not following the order of High Court. HUDCO has filed a suit in the Debt Recovery Tribunal).

(12) According to the information and explanations given to us, The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(13) The provisions of any special Statute applicable to a chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

(14) According to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments.

(15) In our opinion and according to the information and explanations given to us, the company has not given/ extended corporate guarantee during the financial year.

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

(17) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short term basis have not been used for long term investments and vice versa.

(18) The Company has made allotment of convertible share warrants on preferential basis to the person forming part of Promoter Group and Body Corporate covered in the register maintained under section 301 of the Companies Act 1956, during the year.

(19) The company has not issued any secured debentures during the year accordingly, paragraph 4(xix) of the order is not applicable.

(20) The company has not raised any money by public issue during the year.

(21) No fraud on or by the company, have been noticed or reported during the year.

For B.P.JAIN & CO. CHARTERED ACCOUNTANTS

Sd/- DEVENDRA KUMAR BHANDARI Partner Membership No.208862

Place: Chennai Date : 28/12/2009