Auditor Report of McNally Bharat Engineering Company Ltd.

Mar 31, 2018

REPORT ON THE STANDALONE IND AS FINANCIAL STATEMENTS

We have audited the accompanying standalone Ind AS financial statements of McNally Bharat Engineering Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information (herein after referred to as "standalone Ind AS financial statements").

MANAGEMENT''S RESPONSIBILITY FOR THE STANDALONE IND AS FINANCIAL STATEMENTS

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS 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 Ind AS financial statements based on our audit.

In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements 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 standalone Ind AS financial statements are free from material misstatement.

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

We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone Ind AS financial statements.

BASIS FOR QUALIFIED OPINION

We draw attention to:

(i) Note 32(A) on the standalone Ind AS financial statements regarding payment of excess managerial remuneration for which the Company is yet to seek approval from the Central Government to regularize the same in terms of section 197(3) read with Schedule V to the Act amounting to Rs. 40.82 lacs paid/payable to erstwhile one whole time director for the financial year ended March 31, 2018.

(ii) Note 32(B) on the standalone Ind AS financial statements regarding payment of excess managerial remuneration for which approval in terms of section 197(3) read with Schedule V to the Act is pending from the Central Government amounting to Rs.220.03 lacs paid/ payable to the managing director for the financial year ended March 31, 2018 and Rs.121.87 lacs paid/payable to two erstwhile whole time directors for the financial year ended March 31, 2017.

This matter was also qualified by the predecessor auditor in the report for the financial year ended March 31, 2017 as reported Rs.76.80 lacs.

Pending Central Government approval, we are unable to comment on the consequential effect of the above matters on the standalone Ind AS financial statements.

QUALIFIED OPINION

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid standalone Ind AS 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 Ind AS and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its loss, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by Section 143(3) of the Act, based on our audit we report that:

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

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

c) the Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

d) in our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act.

e) on the basis of the written representations received from the directors of the Company as on March 31, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 from being appointed as a director in terms of Section 164(2) of the Act.

f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses a qualified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting for the reasons stated therein.

g) with respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, 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 standalone Ind AS financial statements.

ii. the Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

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

2. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

Annexure "A" to the Independent Auditors’ Report

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

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of McNally Bharat Engineering Company Limited ("the Company") as of March 31, 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

MANAGEMENT''S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

AUDITOR''S RESPONSIBILITY

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Company''s internal financial controls system over financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

BASIS FOR QUALIFIED OPINION

According to the information and explanations given to us and based on our audit, material weakness has been identified in the Company''s internal financial controls over financial reporting as at March 31, 2018 relating to compliance with laws and regulations did not operate effectively which resulted in payment of excess managerial remuneration without complying the requirements of Section 197(3) read with Schedule V to the Act.

A ''material weakness'' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company''s annual or interim financial statements will not be prevented or detected on a timely basis.

QUALIFIED OPINION

In our opinion, to the best of our information and according to the explanations given to us, except for the possible effects of the material weakness described in Basis for Qualified Opinion paragraph above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the material weakness identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone Ind AS financial statements of the Company for the year ended March 31, 2018, and the material weakness does affect our opinion on the said standalone Ind AS financial statements of the Company.

Annexure "B" to the Independent Auditors’ Report

(Referred to in paragraph 2 under ''Report on Other Legal and Regulatory Requirements'' section 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 Company has a program of physical verification of Property, Plant and Equipment to cover all the items in a phased manner over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) The Company does not own any immovable property as disclosed in Note 3 on Property, plant & equipment to the financial statements. Therefore, the provisions of Clause 3(i)(c) of the said Order is not applicable to the Company.

(ii) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) The Company has granted unsecured loans to companies covered in the register maintained under Section 189 of the Act. The Company has not granted any secured/unsecured loans to firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Act.

(a) In respect of the aforesaid loans, the terms and conditions under which such loans are granted are not prejudicial to the Company''s interest.

(b) In respect of the aforesaid loans, no schedules of repayment of principal have been stipulated by the Company. Therefore, in absence of stipulation of repayment terms we do not make any comment on the regularity of repayment of principal and payment of interest.

(c) In respect of the aforesaid loans, in absence of schedules of repayment, we are unable to comment on the overdue ageing of the repayments.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to the information and explanations given to us, the Company has not accepted any deposit from the public within the meaning of Sections 73, 74, 75 and 76 of the Act and the Rules framed thereunder to the extent notified.

(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Act. We have broadly reviewed the same as maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended prescribed by the Central Government under sub-section (1) of Section 148 of the Act and are of the opinion that, primafacie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect of statutory dues:

(a) The dues of Employees'' State Insurance, Cess and Value Added Tax have not been regularly deposited during the year with the appropriate authorities .The Company has generally been regular in depositing other undisputed statutory dues, including Provident Fund, Service tax, Custom Duty, Excise Duty, Sales Tax and other material statutory dues applicable to it to the appropriate authorities.

(b) There were arrears in undisputed amounts payable in respect of Employees'' State Insurance, Cess and Value Added Tax as at March 31, 2018 for a period of more than six months from the date they became payable are as follows:

Name of Statute	Nature of Dues	Amount (Rs.)	Period to which the amount Relates	Due Date	Date of subsequent Payment
Employee''s State Insurance Scheme, 1948	ESI	1,476	Apr 16	21-May-16	23-May-18
		880	May 16	21-Jun-16	23-May-18
		1,593	Jun 16	21-Jul-16	23-May-18
		1,261	Jul 16	21-Aug-16	23-May-18
		386	Aug 16	21-Sep-16	23-May-18
		471	Sep 16	21-Oct-16	23-May-18
		166	Oct 16	15-Nov-16	23-May-18
		166	Nov 16	15-Dec-16	23-May-18
		620	Jan 17	15-Feb-17	23-May-18
The Uttar Pradesh Value Added Tax Act, 2008	UP WCT	117,755	Oct 15	21-Nov-15	28-May-18
		45,518	Jun 17	21-Jul-17	30-Apr-18
Tamil Nadu Value Added Tax Act, 2006	TM WCT	202,850	Jun 17	21-Jul-17	28-May-18
The Chhattsgarh Value Added Sales Tax Act, 2003	CH WCT	316,880	Jun 17	21-Jul-17	2-May-18
Madhya Pradesh VAT Act, 2002	MP WCT	45,872	May 17	21-Jun-17	2-May-18
		184,571	Jun 17	21-Jul-17	2-May-18
Jharkhand Value Added Tax Act, 2005	JH WCT	1,300,362	Jun 17	21-Jul-17	28-May-18
GST (Compensation to States) Act, 2017	GST Compensation Cess	115,975	Sep 17	20-Oct-17	21-May-18

c) Details of dues of Sales Tax, Service Tax, Excise Duty and Value Added Tax which have not been deposited as on March 31, 2018 on account of disputes are given below:

Statute	Forum where dispute is pending	Period to which the amount relates to	Amount involved (Rs. in lacs)
Sales Tax/Value Added Tax Acts	Assistant Commissioner/ Additional Commissioner/ Deputy Commissioner/ Commissioner/ Joint Commissioner (Appeal)	2003-04 to 2013-14	3,974.24
	Appellate and Revisional Board	2005-06 to 2014-15	3,363.30
	Sales Tax Appellate Tribunal	1994-95	4.16
The Central Excise Act, 1944	Commissioner of Central Excise	1989-1993	129.51
The Finance Act, 1994	Assistant Commissioner/ Additional Commissioner of Service Tax	2003-04 to 2005-06	2,786.98

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions, banks. The Company has not taken any loan from the Government and not issued any debentures during the year.

(ix) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments).

Further, the term loans have been applied by the Company during the year for the purposes for which they were raised.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid/provided managerial remuneration during the year in excess of the limits and approvals prescribed under section 197 read with Schedule V to the Act to the following managerial personnel:

Managerial Position	Excess amount of remuneration paid/ provided (Rs. in lacs)	Financial year ending	Treatment of the excess remuneration in the respective year financial statements	Steps taken by the Company for securing refund
Managing Director	220.03	2017-18	Recognised as expense in the Statement of Profit & Loss.	Application filed with Central Government for approval of excess remuneration paid/ payable.
Whole Time Director	40.82	2017-18	Recognised as expense in the Statement of Profit & Loss.	The Company is yet to seek approval from the Central Government for excess remuneration paid/ payable.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the CARO 2016 Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Act, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the Standalone Ind AS financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, the Company has made preferential allotment of equity shares, share warrants and compulsorily convertible preference shares during the year under review.

In respect of the above issue, we further report that:

a) the requirement of Section 42 of the Act, as applicable, have been complied with; and

b) the amounts raised have been applied by the Company during the year for the purposes for which the funds were raised.

(xv) In our opinion and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with its directors or persons connected with him, during the year and hence provisions of section 192 of the Act are not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, clause (xvi) of the CARO 2016 Order is not applicable.

For DELOITTE HASKINS & SELLS LLP For V. SINGHI & ASSOCIATES

Chartered Accountants Chartered Accountants

Firm Registration Number: Firm Registration Number:

117366W/W-100018 311017E

A. Bhattacharya V. K. Singhi

Place: Kolkata

Partner Partner

Date: May 29,

2018 Membership Number: 054110 Membership Number:

050051

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Mar 31, 2016

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of McNally Bharat Engineering Company Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Financial Statements

2. The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone financial statements to give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness ofthe 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.

Auditors’ Responsibility

3. Our responsibility is to express an opinion on these standalone financial statements based on our audit.

4. We have taken into account the provisions of the Act and the Rules made there under including the accounting standards and matters which are required to be included in the audit report.

5. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards and pronouncements 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.

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

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

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, and its loss and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

9. As required by ‘the Companies (Auditor’s Report) Order, 2016'', issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act (hereinafter referred to as the “Order”), 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 give in the Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

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

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

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

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure A

(g) With respect to the other matters to be included in the Auditors’ Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our knowledge and belief and according to the information and explanations given to us:

i. The Company has disclosed the impact, if any, of pending litigations as at March 31, 2016, on its financial position in its standalone financial statements - Refer Note 31;

ii. The Company has made provision as at March 31, 2016, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts Refer Note 42 (iii). The Company did not have long term derivative contracts as at March 31, 2016;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2016.

Referred to in paragraph 9 of the Independent Auditors’ Report of even date to the members of McNally Bharat Engineering Company Limited on the standalone financial statements as of and for the year ended March 31, 2016.

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

(c) The Company does not own any immovable properties as disclosed in Note 13 on fixed assets to the financial statements. Therefore, the provisions of Clause 3(i)(c) of the said Order are not applicable to the Company.

ii. The physical verification of inventory have been conducted at reasonable intervals by the Management during the year. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been appropriately dealt with in the books of accounts.

iii. The Company has granted unsecured loans, to a company covered in the register maintained under Section 189 of the Act. The Company has not granted any secured / unsecured loans to firms /LLPs/ other parties covered in the register maintained under Section 189 of the Act.

(a) In respect of the aforesaid loans, the terms and conditions under which such loans were granted are not prejudicial to the Company’s interest.

(b) In respect of the aforesaid loans, no schedule for repayment of principal has been stipulated by the Company. Therefore, in absence of stipulation of repayment terms we do not make any comment on the regularity of repayment of principal and payment of interest.

(c) In respect of the aforesaid loans, there is no amount which is overdue for more than ninety days.

iv. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Companies Act, 2013 in respect of the loans and investments made, and guarantees and security provided by it.

v. The Company has not accepted any deposits from the public within the meaning of Sections 73, 74, 75 and 76 of the Act and the Rules framed there under to the extent notified.

vi. Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148(1) of the Act in respect of its products. We have broadly reviewed the same, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

vii. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax and value added tax have not been regularly deposited with the appropriate authorities and there have been serious delays in a large number of cases and is regular in depositing undisputed statutory dues including duty of customs, duty of excise and cess as applicable with appropriate authorities. The extent of the arrears of statutory dues outstanding as at March 31, 2016, for a period of more than six months from the date they became payable are as follows:

Name of the statute	Nature of dues	Amount (Rs.)	Period to which the amount relates	Due Date	Date of Payment
Income Tax Act, 1961	TDS u/s 194C	66,87,853	July ‘15	7-Aug-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194C	58,19,024	Aug ‘15	7-Sep-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194H	3,94,307	July ‘15	7-Aug-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194H	2,34,152	Aug ‘15	7-Sep-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194A	4,40,747	July ‘15	7-Aug-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194A	8,81,795	Aug ‘15	7-Sep-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194I	16,27,922	July ‘15	7-Aug-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194I	22,08,998	Aug ‘15	7-Sep-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194J	34,33,175	June ‘15	7-Jul-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194J	12,68,690	July ‘15	7-Aug-15	Not yet paid
Income Tax Act, 1961	TDS u/s 194J	7,43,960	Aug ‘15	7-Sep-15	Not yet paid
Income Tax Act, 1961	TDS u/s 195	19,32,756	June ‘15	7-Jul-15	Not yet paid
Income Tax Act, 1961	TCS	49,857	April ‘15	7-May-15	Not yet paid
Income Tax Act, 1961	TCS	81,703	May ‘15	7-Jun-15	Not yet paid
Income Tax Act, 1961	TCS	4,752	June ‘15	7-Jul-15	Not yet paid
Income Tax Act, 1961	TCS	7,886	July ‘15	7-Aug-15	Not yet paid
Income Tax Act, 1961	TCS	26,502	August ‘15	7-Sep-15	Not yet paid
UP VAT Act	UP VAT	3,730	June ‘15	21-Jul-15	Not yet paid
MPVAT Act	MPWCT	1,05,720	July-15	20-Aug-15	Not yet paid
MPVAT Act	MPWCT	1,63,300	August-15	20-Sep-15	Not yet paid
Rajasthan Vat Act	Rajasthan WCT	300	May-15	20-Jun-15	Not yet paid
Rajasthan Vat Act	Rajasthan WCT	96,121	July-15	20-Aug-15	Not yet paid
Rajasthan Vat Act	Rajasthan WCT	9,962	August-15	20-Sep-15	Not yet paid
Tamil NaduVatAct	TN WCT	11,120	August-15	20-Sep-15	Not yet paid
Telangana VAT Act	Telangana WCT	30,59,298	April ‘15	20-May-15	Not yet paid
Telangana VAT Act	Telangana WCT	10,05,087	May-15	20-Jun-15	Not yet paid
Telangana VAT Act	Telangana WCT	82,91,860	June-15	20-Jul-15	Not yet paid
Employees Provident Fund and Miscellaneous Provisions Act, 1952	Provident Fund	53,42,211	April ‘15	20-May-15	Not yet paid
Employees Provident Fund and Miscellaneous Provisions Act, 1952	Provident Fund	56,78,566	May ‘15	20-Jun-15	Not yet paid
Employees Provident Fund and Miscellaneous Provisions Act, 1952	Provident Fund	55,40,057	June ‘15	20-Jul-15	Not yet paid

Name of the statute	Nature of dues	Amount (Rs.)	Period to which the amount relates	Due Date	Date of Payment
Employees Provident Fund and Miscellaneous Provisions Act, 1952	Provident Fund	54,24,930	July ‘15	20-Aug-15	Not yet paid
Employees Provident Fund and Miscellaneous Provisions Act, 1952	Provident Fund	53,43,385	August ‘15	20-Sep-15	Not yet paid

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of duty of customs which have not been deposited on account of any dispute. The particulars of dues of income tax, sales tax, service tax, duty of excise, value added tax as at March 31,2016 which have not been deposited on account of a dispute, are as follows:

Name of the statute	Nature of dues	Amount (Rs. In lacs)	Period to which the amount relates	Forum where the dispute is pending
Central Excise Act, 1944	Excise Duty and penal interest thereon	129.51	1989-93	Commissioner of Central Excise, Pondicherry
Finance Act, 1994	Service Tax	16.81	2005-06	Addl. Commissioner of Service Tax
APGST Act, 1957	Sales Tax	4.16	1994-95	Sales Tax Appellate Tribunal - Hyderabad
UP Trade Tax Act, 1948		1.30	2003-04	Deputy commissioner (Appeals) Robertsgunj
WBST Act, 1994		3.90	2003-04	Deputy commissioner, Commercial Taxes, Kolkata
Rajasthan Sales Tax Act, 1994		1.33	2005-06	Deputy commissioner (Appeals), Udaipur
Central Sales Tax Act, 1956		470.27	2006-07	West Bengal Appellate and Revisional Board
Central Sales Tax Act, 1956		26.00	2007-08	West Bengal Appellate and Revisional Board
Central Sales Tax Act, 1956		29.46	2008-09	West Bengal Appellate and Revisional Board
Central Sales Tax Act, 1956		217.09	2011-12	Addl. Commissioner of CT (Appeals)
Central Sales Tax Act, 1956		106.77	2012-13	Addl. Commissioner West Bengal
Central Sales Tax Act, 1956		258.24	2012-13	Addl. Commissioner of CT (Appeals)
West Bengal Value Added Tax Act, 2003	VAT	72.27	2005-2006	West Bengal Appellate and Revisional Board
West Bengal Value Added Tax Act, 2003		182.59	2006-2007	West Bengal Appellate and Revisional Board
West Bengal Value Added Tax Act, 2003		65.67	2007-08	West Bengal Appellate and Revisional Board
West Bengal Value Added Tax Act, 2003		79.84	2008-09	West Bengal Appellate and Revisional Board
West Bengal Value Added Tax Act, 2003		20.26	2009-10	West Bengal Appellate and Revisional Board
APVAT Act		12.62	2010-11	Asst. Commissioner Commercial Tax, Andhra Pradesh
Bihar VAT Act		47.12	2010-11	JCCT appeals (Patna)
APVAT Act		0.94	2011-12	Asst. Commissioner Commercial Tax, Andhra Pradesh
Bihar VAT Act		29.34	2011-12	JCCT appeals (Patna)
West Bengal Value Added Tax Act, 2003		763.40	2012-13	Addl. Commissioner Appeals, West Bengal
Income Tax Act, 1961	Income Tax	3778.89	2012-13	Commissioner of Income Tax (Appeals)

viii. According to the records of the Company examined by us and the information and explanations given to us, except for loans or borrowings from ICICI Bank for the period from March 26, 2016 to March 31, 2016, aggregating Rs. 3,12,50,000, as described below, the Company has not defaulted in repayment of loans or borrowings to any financial institution or bank or Government or dues to debenture holders as at the balance sheet date.

	Nature of dues	Period of default	Amount of default (Rs.)
ICICI Bank	Installment of Long Term Loan	6 days	3,12,50,000

ix. In our opinion, and according to the information and explanations given to us, the moneys raised by way of term loans have been applied for the purposes for which they were obtained. The Company has not raised any moneys by way of initial public offer, further public offer (including debt instruments).

x. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees, noticed or reported during the year, nor have we been informed of any such case by the Management.

xi. The Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

xii. As the Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it, the provisions of Clause 3(xii) of the Order are not applicable to the Company.

xiii. The Company has entered into transactions with related parties in compliance with the provisions of Sections 177 and 188 of the Act. The details of such related party transactions have been disclosed in the financial statements as required under Accounting Standard (AS) 18, Related Party Disclosures specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

xiv. The Company has made a preferential allotment during the year under review, in compliance with the requirements of Section 42 of the Act except non deposit of money received in a separate bank account as required by Section 42(6) of the Act.

Particulars [Nature of securities viz. Equity share / Preference shares / Convertible Debenture]	Amount involved	Nature of non compliance
Issue of Equity shares	90,00,00,000	Money received was not deposited in a separate bank account.
Conversion of warrants	3,75,00,000	Money received was not deposited in a separate bank account

Further, the amounts raised have been used for the purpose for which funds were raised.

xv. The Company has not entered into any non cash transactions with its directors or persons connected with him. Accordingly, the provisions of Clause 3(xv) of the Order are not applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, the provisions of Clause 3(xvi) of the Order are not applicable to the Company.

For Lovelock & Lewes

Firm Registration No. 301056E

Chartered Accountants

Prabal Kr. Sarkar

Partner

Kolkata, May 30, 2016 Membership No: 52340

---

Mar 31, 2015

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

Management's Responsibility for the Standalone Financial Statements

2. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements to give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these standalone financial statements based on our audit.

4. We have taken into account the provisions of the Act and the Rules made thereunder including the accounting standards and matters which are required to be included in the audit report.

5. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards and pronouncements 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.

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

7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

8. We draw your attention to Note 44 (III) to the financial statements regarding remuneration aggregating Rs 560 Lakhs paid/payable to two whole-time directors and an erstwhile Chairman of the Company in excess of the limits prescribed under Section 197 of the Act read with Schedule V to the Act for which requisite approval from shareholders by way of special resolution is pending; and in case of the aforesaid Chairman, the Company is yet to obtain approval from the Central Government. The consequential impact of this matter on financial statements is presently not ascertainable.

Qualified Opinion

9. 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 except for the indeterminate effects of the matter referred to in Basis for Qualified Opinion paragraph above, 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, 2015, and its profit/loss and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

10. As required by 'the Companies (Auditor's Report) Order, 2015, issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act (hereinafter referred to as the "Order"), 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 give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

11. 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, except for the effects of the matter referred to in the Basis for Qualified Opinion paragraph above, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

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

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

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

(f) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

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

i. The Company has disclosed the impact, if any, of pending litigations as at March 31, 2015 on its financial position in its standalone financial statements - Refer Note 32;

ii. The Company has made provision as at March 31, 2015, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts - Refer Note 43(iii). The Company did not have any loss on long term derivative contract as at March 31, 2015.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31,2015.

Annexure to Independent Auditors' Report

Referred to in paragraph 10 of the Independent Auditors' Report of even date to the members of McNally Bharat Engineering Company Limited on the standalone financial statements as of and for the year ended March 31, 2015

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

ii. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. The Company has granted unsecured loans, to a company covered in the register maintained under Section 189 of the Act. The Company has not granted any secured/ unsecured loans to firms or other parties covered in the register maintained under Section 189 of the Act.

(a) In respect of the aforesaid loans, the parties are repaying the principal amounts, as stipulated, and are also regular in payment of interest as applicable.

(b) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

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

v. The Company has not accepted any deposits from the public within the meaning of Sections 73, 74, 75 and 76 of the Act and the rules framed there under to the extent notified.

vi. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been specified under sub- section (i) of Section 148 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained.

We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

vii. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, undisputed statutory dues including Service Tax, Sales Tax, Value Added Tax, Provident Fund, Tax deducted at source, Works Contract Tax, Employees' State Insurance and Tax collected at source have not been regularly deposited with the appropriate authorities and there have been serious delays in a large number of cases and is regular in depositing undisputed statutory dues including Wealth Tax, Duty of Customs, Duty of Excise and cess, as applicable with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, wealth tax, service tax, duty of customs and duty of excise duty as at March 31, 2015 which have not been deposited on account of a dispute, are as follows:

Name of the statute Nature of dues Amount Period to

(Rs. lakhs) which the amount relates

Central Excise Act, 1944 Excise Duty and 129.51 1989-93

penal interest thereon

Finance Act, 1994 Service Tax 16.81 2005-06

4.24 2006-08

APGST Act, 1957 Sales Tax 4.16 1994-95

Rajasthan Sales 1.33 2005-06 Tax Act, 1994

UP Trade Tax Act, 1948 1.30 2003-04

Central Sales Tax Act, 1956 470.27 2006-07

Central Sales Tax Act, 1956 26.00 2007-08

Central Sales Tax Act, 1956 29.46 2008-09

Central Sales Tax Act, 1956 258.24 2013-14

Central Sales Tax Act, 1956 217.09 2011-12

WBST Act, 1994 3.90 2003-04

West Bengal Value Added VAT 72.27 2005-2006 Tax Act, 2003

West Bengal Value Added 182.58 2006-2007 Tax Act, 2003

West Bengal Value Added 65.67 2007-08 Tax Act, 2003

West Bengal Value Added 79.84 2008-09 Tax Act, 2003

West Bengal Value Added 20.26 2009-10 Tax Act, 2003

APVATAct 12.62 2010-11

APVATAct 0.94 2011-12

MP VAT Act 548.57 2011-12

Bihar VAT Act 47.12 2010-11

Bihar VAT Act 29.34 2011-12

Income-tax Act, 1961 Income tax 1,339.55 2010-11

Name of statute Forum where the dispute is pending

Central Excise Act,1944 Commissioner of Central Excise, Pondicherry

Finance Act,1994 Addl Commissioner of Service Tax CESTAT, Kolkata

APGS Act,1957 Sales Tax Appellate Tribunal - Hyderabad Rajastan Sales Tax Act,1994 Deputy commissioner (Appeals), Udaipur

UP Trade Tax Act,1948 Deputy commissioner (Appeals) Robertsgunj

Central Sales Tax Act,1956 West Bengal Appellate and Revisional Board

Central Sales Tax Act,1956 West Bengal Appellate and Revisional Board

Central Sales Tax Act,1956 West Bengal Appellate and Revisional Board

Central Sales Tax Act,1956 Addl Commissioner of CT (Appeals)

Central Sales Tax Act,1956 Addl Commissioner of CT (Appeals)

WBST Act,1994 Depty. Commissioner, Commercial Taxes, Kolkata

West Bengal Value Added Tax,2003 West Bengal Appellate and Revisional Board

West Bengal Value Added tax,2003 West Bengal Appellate and Revisional Board

West Bengal Added Tax,2003 West Bengal Appellate and Revisional Board

west Bengal Value Added tax,2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax,2003 West Bengal Appellate and Revisional Board

APVAT Act Asst. Commissioner Commercial Tax, Andhra Pradesh

APVAT Act Asst. Commissioner Commercial Tax, Andhra Pradesh

MP VAT Act Add! Commissioner of CT (Appeals)

Bihar Vat Act JCCT appeals (Patna)

Bihar Vat Act JCCT appeals (Patna)

Income Tax Act,1961 Commissioner of Income Tax (Appeals)

c) The amount required to be transferred to Investor Education and Protection Fund has been transferred within the stipulated time in accordance with the provisions of the Companies Act, 1956 and the rules made thereunder.

viii. The Company has no accumulated losses as at the end of the financial year and it has incurred cash losses in the financial year ended on that date and has not incurred cash losses in the immediately preceding financial year.

ix. According to the records of the Company examined by us and the information and explanations given to us, except for dues to ICICI Bank for the period of i day aggregating Rs. 2,71,50,000, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

x. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

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

xii. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

For Lovelock & Lewes

Firm Registration No. 301056E

Chartered Accountants

Prabal Kr. Sarkar

Partner

Kolkata, May 30, 2015 Membership No: 52340

---

Mar 31, 2014

1. We have audited the accompanying financial statements of McNally Bharat Engineering Company Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

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

Auditors- Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing and other applicable authoritative pronouncements 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.

4. An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'' 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 auditors consider internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

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

6. Opinion

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

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014:

(b) in the case of 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. Emphasis of Matter

7. We draw your attention to Note 44 (III) to the financial statements regarding remuneration paid to two whole-time directors and Chairman of the Company, in excess of the limits prescribed under Section 198 of the Act, for which approval from Central Government is awaited. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

8. As required by ''the Companies (Auditor''s Report) Order, 2003'', as amended by ''the Companies (Auditor''s Report) (Amendment) Order, 2004'', issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act (hereinafter referred to as the "Order"), 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 give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards notified under the Companies Act, 1956, read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013;

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

Annexure to Independent Auditors'' Report

Referred to in paragraph 8 of the Independent Auditors'' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements as of and for the year ended March 31, 2014.

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

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

ii. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. (a) The Company has granted unsecured loans, to a company covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregated to Rs.61 lacs and Rs.61 lacs, respectively. The Company has not granted any secured/ unsecured loans to firms or other parties covered in the register maintained under Section 301 of the Act.

(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) In respect of the aforesaid loans, the parties are repaying the principal amounts, as stipulated, and are also regular in payment of interest as applicable.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lacs.

(e) The Company has taken unsecured loans, from one company covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregated to Rs. 4000 lacs and Rs. Nil, respectively. The Company has not taken any secured/ unsecured loans from firms or other parties covered in the register maintained under Section 301 of the Act.

(f) 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.

(g) In respect of the aforesaid loans, the Company is regular in repaying the principal amounts, as stipulated, and is also regular in payment of interest, as applicable.

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

v. According to the information and explanations given to us, there have been no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act.

vi. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

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

viii. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

ix. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues in respect of service tax, sales tax, value added tax, provident fund, tax deducted at source, works contract tax, employees'' state insurance and tax collected at source though there has been a slight delay in a few cases, and is regular in depositing undisputed statutory dues, including investor education and protection fund, income tax, wealth tax, customs duty, and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income-tax, sales-tax, wealth-tax, service-tax, customs duty, and excise duty which have not been deposited on account of any dispute. The particulars of dues of income tax, sales tax, service tax, and excise duty as at March 31, 2014 which have not been deposited on account of a dispute, are as follows:

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

Central Excise Excise Duty and 129.51 1989-93 Act, 1944 penal interest thereon

Finance Act 1994 Service Tax 16.81 2005-06

5.64 2003-04

4.24 2006-08

APGST Act, 1957 Sales Tax 4.16 1994-95

Rajasthan Sales 1.33 2005-06 Tax Act, 1994

UP Trade 1.30 2003-04 Tax Act, 1948

Central Sales 470.27 2006-07 Tax Act, 1956

Central Sales 26.00 2007-08 Tax Act, 1956

Central Sales 29.46 2008-09 Tax Act, 1956

WBST Act, 1994 3.90 2003-04

West Bengal Value VAT 72.27 2005-06 Added Tax Act, 2003

West Bengal Value 182.59 2006-07 Added Tax Act, 2003

West Bengal Value 65.67 2007-08 Added Tax Act, 2003

West Bengal Value 79.84 2008-09 Added Tax Act, 2003

West Bengal Value A 20.26 2009-10 dded Tax Act, 2003

Income-tax Act, 1961 Income tax 1,339.55 2010-11



Name of the statue Forum where the dispute is pending

Central Excise Act, 1944 Commissioner (Appeals)

Finance Act''1994 Commissioner (Appeals)

Customs, Excise & Service Tax Appellate Tribunal

Customs, Excise & Service Tax Appellate Tribunal

APGST Act, 1957 Appellate Tribunal

Rajasthan Sales Tax Act, 1994 Commissioner (Appeals)

UP Trade Tax Act, 1948 Commissioner (Appeals)

Central Sales Tax Act, 1956 Appellate and Revisional Board

Central Sales Tax Act, 1956 Appellate and Revisional Board

Central Sales Tax Act, 1956 Appellate and Revisional Board

WBST Act, 1994 Commissioner (Appeals)

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value A dded Tax Act, 2003 West Bengal Appellate and Revisional Board

Income-tax Act, 1961 Commissioner (Appeals)

x. The Company has no accumulated losses as at the end of the financial yearand it has not incurred any 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.

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

xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order 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, the provisions of Clause 4(xiv) of the Order are not applicable to the Company.

xv. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

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

xvii. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the no funds raised on short-term basis have been used for long-term investment.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company.

xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company.

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

For Lovelock & Lewes

Firm Registration No. 301056E

Chartered Accountants

Prabal Kr. Sarkar

Partner Kolkata, May 30, 2014 Membership No: 52340

---

Mar 31, 2013

Report on the Financial Statements

1. We have audited the accompanying financial statements of McNally Bharat Engineering Company Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of ''the Companies Act, 1956'' of India (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

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

4. An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'' 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 auditors consider internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

6. In our opinion, and to the best of our information and according to the explanations given to us, the accompanying 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

7. As required by ''the Companies (Auditor''s Report) Order, 2003'', as amended by ''the Companies (Auditor''s Report) (Amendment) Order, 2004'', issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act (hereinafter referred to as the "Order"), 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 give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8. 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;

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

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act;

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

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT

Referred to in paragraph 7 of the Independent Auditors'' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements as of and for the year ended March 31, 2013.

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

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

ii. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. (a) The Company has granted unsecured loans, to two companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregated to Rs. 61,00,000. The Company has not granted any secured/ unsecured loans to firms or other parties covered in the register maintained under Section 301 of the Act.

(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.

T(c) In respect of the aforesaid loans, the parties are repaying the principal amounts, as stipulated, and are also regular in payment of interest as applicable.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

(e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii) (f) and (g) of the said Order are not applicable to the Company.

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

v. According to the information and explanations given to us, there have been no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act.

vi. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

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

viii. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

ix. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues in respect of service tax, income tax, sales tax and excise duty, though there has been a slight delay in a few cases, and is regular in depositing undisputed statutory dues, including provident fund, investor education and protection fund, employees'' state insurance, wealth tax, customs duty and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income-tax, wealth-tax and customs duty, which have not been deposited on account of any dispute. The particulars of dues of sales tax, service tax and excise duty as at March 31, 2013 which have not been deposited on account of a dispute, are mentioned in attached Appendix A.

x. The Company has no accumulated losses as at the end of the financial year and it has not incurred any 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. The Company has not issued any debentures as at the balance sheet date.

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

xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order 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, the provisions of Clause 4(xiv) of the Order are not applicable to the Company.

xv. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

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

xvii. 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 been used for long-term investment.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company.

xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company.

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.



For Lovelock & Lewes

Firm Registration No. 301056E

Chartered Accountants

Prabal Kr. Sarkar

Partner

Kolkata, May 29, 2013 Membership No: 52340

---

Mar 31, 2012

1. We have audited the attached Balance Sheet of McNally Bharat Engineering Company Limited (the "Company") as at 31st March 2012, and the related Statement of Profit and Loss and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the 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, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 (together the "Order"), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of 'The Companies Act, 1956' of India (the 'Act') 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 give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, as on 31st March 2012 and taken on record by the Board of Directors, 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 Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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 asat31st March 2012;

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

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

Annexure to Auditors' Report

Referred to in paragraph 3 of the Auditors' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements as of and for the year ended 31st March 2012

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

(b) The fixed assets are physically verified bythe Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified bythe Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

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

2. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has granted unsecured loans, to two companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregate to Rs. 14,81,40,945. The company has not granted any loans to firms or other parties covered in the register maintained under Section 301 of the Act.

(b) In our opinion, the terms and conditions of such loans are not prima facie prejudicial to the interest of the Company. The loans are interest free.

(c) In respect of the aforesaid loans, the parties are repaying the principal amounts, as per terms.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

(e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly the paragraphs (f) and (g) of the Order are not applicable.

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

5. According to the information and explanations given to us, there have been no contracts or arrangements referred to in Section 301 of the Act during the year to be entered in the register required to be maintained under that Section. Accordingly, the question of commenting on transactions made in pursuance of such contracts or arrangements does not arise.

6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

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

8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, except for dues in respect of service tax, income tax, employees' state insurance, professional tax and sales tax, the Company is regular in depositing undisputed statutory dues, including provident fund, investor education and protection fund, wealth tax, customs duty, excise duty and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, value added tax, wealth tax, service tax, customs duty and excise duty as at 31st March 2012 which have not been deposited on account of a dispute, are mentioned in attached AppendixA.

10. The Company has no accumulated losses.

11. 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 as at the balance sheet date. There is no debenture.

12. The Company has not granted any 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 chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company.

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

15. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, the term loans have been applied, on an overall basis, forthe purposes forwhich theywere obtained.

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion, and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment.

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

19. The Company has not issued any debentures during the year; and does not have any debentures outstanding as at the year end.

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

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

Appendix - A

Referred to in paragraph 9(b) of the Annexure to Auditors' Report

Name of The Statute Nature of dues Amount (Rs.)

Central Excise Act,1944 Excise duty and penal 12,951,359 interest thereon Finance Act,1994 Service Tax 109,647,427

Finance Act,1994 Service Tax 2,838,829

Finance Act,1994 Service Tax 180,682,597

Finance Act,1994 Service Tax 423,800

Finance Act,1994 Service Tax 3,980,137

Finance Act,1994 Service Tax 2,820,444

West Bengal Value Added Tax Act, 2003 VAT 13,008,951

West Bengal Value Added Tax Act, 2003 VAT 74,525,243

Bihar Finance Act,1981 VAT 5,387,227 Adopted by Govt of Jharkhand

APGST Act, 1957 Sales Tax 41 6,084

OST Act,1947 Sales Tax 166,333

WBST Act,1994 Sales Tax 390,375

Rajasthan Sales Tax Act,1994 Sales Tax 132,840

UP Trade Tax Act,1948 Sales Tax 130,111

Central Sales Tax Act,1956 Central Sales Tax 250,901

Name of the Statute Period to Forum in which the dispute is pending which the amount relates

Central Excise Act,1944 1989-1993 Commisioner of Central Excise, Pondicherry

Finance Act,1994 2006-2010 Commissioner of Service Tax, Kolkata

Finance Act,1994 2002-2009 Commissioner (Appeals), Central Excise, Allahabad

Finance Act,1994 2003-2005 CESTAT, Kolkata

Finance Act,1994 2006-2008 Commisioner (Appeals), Central Excise, Kolkata

Finance Act,1994 2004-2007 The Additional/Joint Commissioner, Service Tax, Kolkata

Finance Act,1994 2004-2007 Addl. Commissioner, Service Tax

West Bengal Value Added Tax Act, 2003 2004-2006 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 2006-2007 Senior Joint Commissioner Corporate Division, Kolkata

Bihar Finance Act,1981 2003-2004 DCCT Chirkunda Adopted by Govt of Jharkhand

APGST Act, 1957 1994-1998 Sales Tax Appellate Tribunal - Hyderabad

OST Act,1947 2003-2004 Asst. Commissioner, Comercial Taxes, Cuttack

WBST Act,1994 2003-2004 Deputy Commisioner, Commercial Taxes, Kolkata

Rajasthan Sales Tax Act,1994 2005-2006 Deputy Commisioner (Appeals), Udaipur

UP Trade Tax Act,1948 2003-2004 Deputy Commisioner (Appeals)

Central Sales Tax Act,1956 2005-2006 Senior Joint Commisioner,Sales Tax



For Lovelock & Lewes

Firm Registration Number: 301056E

Chartered Accountants

Prabal Kr. Sarkar

Kolkata Partner

1st June, 2012 Membership Number 52340

---

Mar 31, 2011

I. We have audited the attached Balance Sheet of McNally Bharat Engineering Company Limited (the "Company") as at 31st March 20ii, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the 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, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 (togetherthe "Order"), issued by the Central Government of India in terms of sub-section (4A) ofSection 227 of 'The Companies Act, 1956' of India (the 'Act') 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 give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) ofSection 211 of the Act;

(e) On the basis of written representations received from the directors, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2011 from being appointed as a director in terms of clause (g) of sub- section (1) of Section 274 of the Act;

(f) In ouropinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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 2011;

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

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

ANNEXURE TO AUDITORS'REPORT

Referred to in paragraph 3 of the Auditors' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements for the year ended 31st March 2011

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

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

2. (a) The inventory has been physically verified by the Management during the year. In ouropinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. The Company has not granted / taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained underSection 301 of the Act. Accordingly the paragraphs 4("i)(b),(c), (d),(f),and (g) of the Order are not applicable.

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

5. According to the information and explanations given to us, there have been no contracts or arrangements referred to in Section 301 of the Act during the year to be entered in the register required to be maintained under that Section. Accordingly, the question of commenting on transactions made in pursuance of such contracts or arrangements does not arise.

6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

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

8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the Company.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in ouropinion, except dues in respect of service tax, income tax, employee's state insurance and sales tax where there have been significant delays, the Company is generally regular in depositing undisputed statutory dues including investor education and protection fund, wealth tax, customs duty, excise duty and other material statutory dues as applicable, with the appropriate authorities. The extent of the arrears of statutory dues outstanding as at 31st March 2011, for a period of more than six months from the date they became payable are as follows:

Name of the Nature of Amount Period to Due date Date of Statute Dues Rs. which the Payment amount relates

Assam Value Value Added Tax Rs 20937 june'2010 21st July, 2010 8th April, 2011 Added Tax Act

BiharValue Value Added Tax Rs. 324835 August'2010 15th September, 2010 5th April, 2011 Added Tax Act

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income-tax, sales-tax, value added tax, wealth-tax, service-tax, customs duty, excise duty and cess as at 31st March 2011 which have not been deposited on account of a dispute, are mentioned in Annexure attached.

10. The Company has no accumulated losses as at 31st March 2011 and it has not incurred any 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 defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

12. The Company has not granted any 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 chit fund / nidhi / mutual benefit fund/ societies are not applicable to the Company.

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

15. In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

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

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short term basis which have been used for long term investment.

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

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

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

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.











ANNEXURE-A

[Referred to in paragraph 9 (b) of the Auditor's Report on matters specified in paragraphs 4 and 5 of Companies (Auditor's Report) Order, 2003]

NAME OF THE NATUREOFDUES AMOUNT (Rs.) PERIOD TO WHICH FORUM IN WHICH STATUTE THE AMOUNT THE DISPUTE IS PENDING RELATES

Central Excise Act, 1944 Excise duty and penal 12,951,359.00 1989-1993 Commisioner of Central Excise, interest thereon Pondicherry

Finance Act,1994 Service Tax 109.647.427.00 2006-2010 Commissioner of Service Tax, Kolkata

Finance Act, 1994 Service Tax 2,838,829.00 2002-2009 Commissioner (Appeals), Central Excise, Allahabad

Finance Act, 1994 Service Tax 180,682,597.00 2003-2005 CESTAT, Kolkata

Finance Act, 1994 Service Tax 423,800.00 2006-2008 Commisioner (Appeals), Central Excise, Kolkata

Finance Act, 1994 Service Tax 3,980,137.00 2004-2007 The Additional/ joint Commissioner, Service Tax, Kolkata

Finance Act, 1994 Service Tax 2,820,444.00 2004-2007 Addl. Commissioner, Service Tax

West Bengal Value Added VAT 13,008,951.00 2004-2006 West Bengal Appellate and Tax Act, 2003 Revisional Board

West Bengal Value Added VAT 74,525,243.00 2006-2007 Senior joint Commissioner Tax Act, 2003 Corporate Division, Kolkata

Bihar Finance Act, 1981 VAT 5,376,372.00 2003-2004 DCCT Chirkunda Adopted by Govt of jharkhand

APGST Act'1957 SalesTax 3,070,036.00 1994-1998 Sales Tax Appellate Tribunal- Hyderabad

OST Act, 1947 Sales Tax 166,333.00 2003-2004 Asst. Commissioner, Comercial Taxes, Cuttack

WBST Act,1994 Sales Tax 390,375.00 2003-2004 Deputy Commisioner, Commercial Taxes, Kolkata

Rajasthan Sales Tax Act,1994 SalesTax 132,840.00 2005-2006 Deputy commisioner (Appeals), Udaipur

UP Trade Tax ACt, 1948 SalesTax 130,111.00 2003-2004 Deputy commisioner (Appeals)

Central Sales Tax Act, 1956 Central Sales Tax 250,901.00 2005-2006 Senior joint Commisioner, Sales Tax



For Lovelock & Lewes

Firm Registration Number: 301056E

Chartered Accountants

Partha Mitra

Partner

Kolkata, 27th June, 2011 Membership Number 50553

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of McNally Bharat Engineering Company Limited (the "Company") as at 31 st March 2010, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. 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 the 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 (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 (together the "Order"), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of The Companies Act, 1956 of India (the Act) 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 give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

(d) In our opinion, the Balance Sheet, 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 Act;

(e) On the basis of written representations received from the directors, and taken on record by the Board of Directors, 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 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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;

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

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



ANNEXURE TO AUDITORS REPORT

Referred to in paragraph 3 of the Auditors Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements for the year ended 31st March 2010

1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of

fixed assets.

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

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

2. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has granted unsecured loans, to one company covered in the register maintained under Section 301

of the Act. The maximum amount involved during the year and the year-end balance of such loan aggregate to Rs. 550,00,000/-, and Rs. Nil, respectively.

(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) In respect of the aforesaid loans, the parties are repaying the principal amounts as stipulated and are also regular in payment of interest, where applicable.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

(e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly the paragraphs 4 (iii) (f),and (g) of the Order are not applicable.

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

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements

referred to in Section 301 of the Act 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 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 not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

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

8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the Company.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our

opinion, except dues in respect of service tax, income tax, employees state insurance and sales tax where there have been significant delays, the Company is generally regular in depositing undisputed statutory dues including investor education and protection fund, wealth tax, customs duty, excise duty and other material statutory dues as applicable, with the appropriate authorities. The extent of the arrears of statutory dues outstanding as at 31 st March 2010, for a period of more than six months from the date they became payable are as follows:

Name of the Nature of Amount Period to Due date Date of Statute Dues Rs. which the Payment amount relates

Finance Act Service Rs. April- On the 5th 7th May Tax 798516 August of 2010 2009 the next month

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income-tax, sales-tax, wealth-tax, service-tax, customs duty, excise duty and cess as at 31 st March 2010 which have not been deposited on account of a dispute, are mentioned in Annexure attached.

10. The Company has no accumulated losses as at 31st March 2010 and it has not incurred any 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 defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

12. The Company has not granted any 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 chit fund / nidhi / mutual benefit fund/ societies are not applicable to the Company.

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

15. In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

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. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, short-term funds to the extent of Rs 1373048 (in 000) has been used for long-term purposes.

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

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

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

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

ANNEXURE - A

[Referred to in paragraph 9 (b) of the Auditors Report on matters specified in paragraphs 4 and 5 of Companies (Auditors Report) Order, 2003]

NAME OF THE NATURE OF DUES AMOUNT (Rs.) PERIOD TO WHICH STATUTE THE AMOUNT RELATES

CENTRAL EXCISE Excise duty and Penal 12,951,359 1989-90 to ACT, 1944 Interest thereon 1992-93

SUB-TOTAL 12,951,359

APGST ACT, 1957 Sales Tax 3,070,036 1994-95 to 1997-98

OST ACT, 1947 Sales Tax 166,333 2003-04

WBST ACT, 1994 Sales Tax 390,375 2003-04

CENTRAL SALES TAX ACT, Sales Tax 250,901 2005-06 1956

RAJASTHAN Sales Tax 132,840 2005-06

SALES TAX ACT, 1994

UP TRADE TAX ACT, 1948 Sales Tax 1 30,111 2003-04

SUB-TOTAL 4,140,596

West Bengal Value VAT/CST 13,008,951 2004-05 to 2005-06 Added Act, 203

-DO- VAT/CST 74,525,243 2006-07

Bihar Finance Act, 1981 VAT/CST 5,376,372 2003-04 Adopted by Govt. of harkhand

SUB-TOTAL 92,910,566

Finance Act,1994 Service Tax 104,806,129 Oct 2006 to Mar 2009

-DO- Service Tax 2,838,829 Apr 2003 to Jan 2009

-DO- Service Tax 180,682,597 2003-04 & 2004-05

-DO- Service Tax 423,800 2006-07 & 2007-08

SUB-TOTAL 288,751,355

NAME OF THE FORUM IN WHICH STATUTE THE DISPUTE IS PENDING

CENTRAL EXCISE Commissioner of Central ACT, 1944 Excise, Pondicherry



APGST ACT, 1957 Sales Tax Appellate Tribunal, Hyderabad

OST ACT, 1947 Assistant Commissioner, Commercial Taxes, Cuttack

WBST ACT, 1994 Senior joint Commissioner, Commercial Taxes, Kolkata

CENTRAL SALES TAX ACT, Senior joint Commissioner, 1956 Commercial Taxes, Kolkata

RAJASTHAN Deputy Commissioner, Appeals SALES TAX ACT, 1994

UP TRADE TAX ACT, 1948 Deputy Commissioner, Appeals

West Bengal Value Added Act, 203 West Bengal Appellate and Revisional Board



-DO- Senior joint Commissioner Corporate Division, Kolkata

Bihar Finance DCCT Chirkunda Act, 1981 Adopted by Govt. of harkhand

Finance Act,1994 Commissioner of Service Tax, Kolkata



-DO- joint Commissioner, Central Excise, Allahabad



-DO- CESTAT, Kolkata

-DO- Commissioner Appeals Kolkata

For Lovelock & Lewes

Chartered Accountants

Firm Registration Number: 301056E

Partha Mitra

Partner

Kolkata, 1 3th August 2010 Membership Number 50553