Auditor Report of Asian Electronics Ltd.

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying fnancial statements of ASIAN ELECTRONICS LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2013, the Statement of Proft and Loss and the Cash Flow Statement for the year then ended, and a summary of the signifcant accounting policies and other explanatory information, in which are incorporated the unaudited Returns for the year ended on that date of PAL Technology Division, LMD Division and SMR Division.

Management''s Responsibility for the Financial Statements

The Management is responsible for the preparation of these fnancial statements that give a true and fair view of the fnancial position, fnancial performance and cash fows of the Company in accordance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 ("the Act") and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the fnancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

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

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

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

Basis for Qualifed Opinion

Attention is invited to the following:

i. Note No. 30 regarding transfer of related loans and debentures of ESCO and Project Division aggregating to Rs. 14,279.61 Lacs to two wholly owned subsidiaries. The Lenders have refused to give their approval and have informed the company not to proceed with hiving off of the Assets and not to transfer the Loans / Debentures to the two subsidiaries. Although the Loans / Debentures aggregating to Rs. 14,279.61 Lacs granted by Banks/Financial Institutions to the Company are not refected in the Books of Account, the Company continues to be liable to the lenders for the Loans / Debentures transferred to the subsidiary companies. Also, the Company has not provided interest on the above Loans / Debentures for the year under review. On the basis of information available to us, we are unable to form an opinion in this matter and unable to opine on the fall in the value of Investments in the subsidiary companies amounting to Rs 6303.49 Lacs shown under Investment Supense in Note No. 10.

ii. Note Nos. 31 to 33 regarding Stock Options granted to Directors and Employees. Since the Company has not ascertained the fair value of the Options granted, impact of the same on the Proforma Loss, Proforma basic earnings per share and Proforma diluted earnings per share is not ascertainable. Also the Company has not complied with the Securities and Exchange Board Of India (Employee Stock Option Scheme And Employee Stock Purchase Scheme) Guidelines, 1999.

iii. Note No. 35, wherein as explained, LIC NOMURA Mutual Fund and SBI Factors Limited had fled petitions in The Bombay High Court for winding up of the company for nonpayment of their dues. In case of the dues to SBI Factors Limited, the dues were supposed to be paid in the fnancial year 2012-13, where there is a delay and the company is likely to pay in the coming months. The other lenders are being addressed under One Time Settlement. Upon settlement of the matters amicably with the lenders including LIC Nomura Mutual Fund, the consent terms will be fled. Also Bank of India has served upon the Company a Notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 for repayment of dues. The said notice has been set aside by DRT and is now being challenged in appeal by the Bank. Other Banks have also asked the Company for repayment of their dues and also issued SARFAESI notices.

iv. Note No. 37, wherein consequent to review made by the management the following are the observations:

a. Diminution in the value of Investments in certain companies of Rs. 4,507.47 Lacs not refected in theFinancial Statements which is not in accordance with Accounting Standard - 13 Accounting for Investments" referred to in Section 211(3C) of the Act .

b. Loans aggregating to Rs 22,399.68 Lacs have been recalled by the banks, due to default in repayment of the principal and interest amounts. Interest aggregating to Rs. 2,835.95 Lacs approx, has not been provided on these loans for the year ended 31.03.2013 and consequently loss for the year has been understated to the same extent. Also no interest has been provided on account of delays in payment of various statutory dues like Tax Deducted at Source, Service Tax, ESIC, Customs Duty, Sales Tax, Provident Fund etc. amount whereof is not ascertainable. Of the above, balances aggregating to Rs. 7,657.83 Lacs have not been confrmed / reconciled. The Company has approached the Banks for One Time Settlement of the Dues. Consequently the aggregate liability due to these Banks is not ascertainable.

c. Trade Receivables considered good includes Rs. 9,979.50 Lacs of old Outstanding''s which may be doubful of recovery.

d. Old Debit Balances of Rs. 5,901.13 Lacs included in Loans and Advances and old unreconciled debits in certain Bank Accounts which may not be recoverable / realizable.

e. Interest amounting to Rs. 63.55 Lacs approx, has not been provided on Public Deposits for the year including on Deposits which have matured and are claimed but have not been paid as on 31 st March 2013 amounting to Rs. 258.62 Lacs and consequently loss for the year has been understated to the same extent Consequently, although the above related items of assets have been shown as Considered Good, no provision has been made for the same.

v. Managerial remuneration of Rs 17.99 Lacs paid during the year to the Executive Director is subject to the approval of the Central Government

vi. Note No. 40 wherein Management has stated that Impairment of the Company''s assets and impact thereof on the loss for the year has not been ascertained. Also certain Fixed Assets are no longer under the control of the Company for the reasons stated in Note No. 35. Hence we are unable to ascertain as to whether there is any impairment in line with Accounting Standard - 28 "Impairment of Assets" referred to in Section 211(3C) of the Act

In view of the above, we are unable to express an opinion on the recoverability / realizability of the above mentioned items, the impact of the same on the Loss for the year as well as the future viability of the Company as a ‘going concern''.

Qualifed Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualifed Opinion paragraph, the aforesaid fnancial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter:

We draw attention to Note Numbers 38 and 41 regarding Unsecured Interest Free Loans received from certain parties aggregating to Rs. 131.50 Lacs and Balances of Trade Receivables, Loans and Advances and Trade Payables which are subject to confrmations and reconciliations, the effects of which are at present unascertainable.

Attention is also drawn to Note No. 39 regarding non availability of Sales Invoices along with relevant corresponding documents for a part of the year as the same are in the custody of the Government Authorities.

Our opinion is not qualifed in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

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

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

(b) Except for the effects of the matter described in the Basis for Qualifed Opinion paragraph, 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 and proper returns adequate for the purposes of our audit have been received from the branches not visited by us, except for the fnancial statements of PAL Technology Division, LMD Division and SMR Division which have not been audited by branch auditors. Therefore, we are unable to express an opinion on the same.

(c) The Balance Sheet, the Statement of Proft and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the branches not visited by us.

(d) Except for the effects of the matter described in the Basis for Qualifed Opinion paragraph, in our opinion, the Balance Sheet, the Statement of Proft and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

(e) As the Company has failed to repay its Public Deposits and interest thereon on the due dates, and such failure has continued for a period of over one year, all the directors are disqualifed as on March 31, 2013 from being appointed as directors in any other public company, under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. Refer Note No. 37(ii)(a).

For SORAB S. ENGINEER & CO.

Chartered Accountants

Firm Registration No. 110417W

CA N.D. Anklesaria

(Partner)

(Membership No. 10250)

Place : Mumbai.

Date : 30th May, 2013

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Mar 31, 2011

We have audited the attached Balance Sheet of Asian Electronics Limited ('the Company') as at March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

2. Further to our comments in the Annexure referred to in Paragraph 1 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 and proper returns adequate for the purposes of our audit have been received from the branches / divisions not visited by us, except for the financial statements of PA L Technology Division which have not been audited by branch auditors.

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 Companies Act, 1956, except AS – 2 "Valuation of Inventories" and AS – 13 "Accounting for Investments"

e. On the basis of the written representations received from the Directors, as on March 31, 2011, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2011 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f . Attention is invited to the following:

i. Note No. 2 of Schedule 21(III) regarding transfer of related loans and debentures of ESCO and Project Division aggregating to Rs. 13,871.24 Lacs to two wholly owned subsidiaries. The Lenders have refused to give their approval and have informed the company not to proceed with hiving off of the Assets and not to transfer the Loans / Debentures to the two subsidiaries. Although the Loans / Debentures aggregating to Rs.13,871.24 Lacs granted by Banks/ Financial Institutions to the Company are not reflected in the Books of Account, the Company continues to be liable to the lenders for the Loans / Debentures transferred to the subsidiary companies. Also, the Company has not provided interest on the above Loans / Debentures for the year under review. On the basis of information available to us, we are unable to form an opinion in this matter and unable to opine on the fall in the value of Investments in the subsidiary companies amounting to Rs. 6303.49 Lacs shown under Investment Suspense in Schedule 6.

ii. Note Nos. 4 to 7 of Schedule 21(III) regarding Stock Options granted to Directors and Employees. Since the Company has not ascertained the fair value of the Options granted, impact of the same on the Proforma Loss, Proforma basic earnings per share and Proforma diluted earnings per share is not ascertainable.

iii. Note No.9 of Schedule 21(III),wherein as explained, LIC Mutual Fund has filed a petition in The Bombay High Court for winding up of the company for non-payment of its dues. The matter is sub judice and outcome of the same cannot be currently ascertained. Also Bank of India has served upon the Company a Notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 for repayment of dues and other Banks have also asked the Company for repayment of their dues.

iv. Note No. 11 of Schedule 21(III), wherein consequent to review made by the management the following are the observations:

1. Diminution in the value of Investments in certain companies of Rs. 4367.97 Lacs not reflected in the Financial Statements (AS-13)

2. Old/Unusable Stocks mainly for discontinued product lines amounting to Rs. 3000 Lacs included in Inventories which may no longer be realizable (AS-2)

3. Sundry Debtors considered good includes Rs. 4,216.23 Lacs of old Outstanding's which may not be recoverable.

4. Old Debit Balances of Rs. 2926.51 Lacs included in Loans and Advances and Rs.192.67 Lacs on account of Unreconciled Bank Balances which may not be recoverable / realizable. Consequently, although the above have been shown as Considered Good, no provision has been made for the same. In view of the above, we are unable to express an opinion on the recoverability / realisablility of the above mentioned items, the impact of the same on the Loss for the year as well as the future viability of the Company as a 'going concern'.

g. Subject to our remarks mentioned in Paragraph (f) above and our comments in the Annexure referred to in Paragraph 1, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2011 ;

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

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

ANNEXURE TO THE AUDITORS' REPORT Referred to in paragraph 1 of our Report of even date.

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

b. All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

c. According to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year.

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

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management 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 records of inventory, material discrepancies were noticed between book records and physical verification of inventories. However, the same have been dealt with in the books of account.

iii. a. to g. As no entries have been made in the Register required to be maintained under Section 301 of the Companies Act, 1956, we are unable to opine whether the Company has granted or taken any Loans, secured or unsecured to / from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

iv. On the basis of the audit procedures and our examination of the books of Account, we are of the opinion that internal control system is not adequate and requires strengthening in order to make it commensurate with the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and services. During the course of our audit we have observed failures to correct major weaknesses in the internal controls in certain areas. Attention is invited to the matters stated in Note 12 of Schedule 21 (III).

v. No entries have been made in the Register of Contracts / Arrangements as required under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (v) (b) of the Order are not applicable to the Company.

vi. In our opinion and according to the information and explanations given to us, the Company has not complied with certain provisions of Section 58A, 58AA and other relevant provisions of Companies Act 1956 and the rules framed there under. Deposits matured and claimed, but unpaid as on 31.3.2011 are Rs 127.89 Lacs. No interest has been provided on the same after the date of maturity. No intimation to Tribunal regarding default in repayment of deposits has been made. Public deposits amounting to Rs. 20.66 Lacs are matured but not claimed.

vii. In our opinion and according to the information and explanations given to us, the Company's internal audit system is not adequate and requires strengthening to be commensurate with the size and nature of its business.

viii. We are informed that the maintenance of cost records has not been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956, for any of the Company's products.

ix. a. According to the information and explanations given to us and on the basis of our examination of the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Sales Tax, Income Tax, Custom Duty, Excise Duty, Wealth Tax, Service Tax and other statutory dues have not been regularly deposited with the appropriate authorities.

There are no dues on account of Cess under Section 441A of the Companies Act, 1956 since the aforesaid section has not yet been made effective by the Central Government of India.

According to the information and explanations given to us, the undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Sales Tax, Income Tax, Custom Duty, Excise Duty, Wealth Tax, Service Tax and other statutory dues which were in arrears as at 31st March, 2011 for a period of more than six months from the date they became payable are as under:

Statutory Dues Rs.in Lacs

Provident Fund 10.14

ESIC 0.36

Custom Duty 10.32

Profession Tax 1.16

Service Tax 0.96

TDS 2.06

b. According to the information and explanations given to us and on the basis of our examination of the records of the Company, details of dues of income tax which have not been deposited on account of any dispute are given below:

Name of Nature of Amount Period to Forum where the statute Dues (Rs. In lacs ) which amount dispute is pending relates

Income Tax Income 10.81 Assessment Honorable High Act,1961 Tax Year 1994-95 Court of Mumbai

Income Tax 38.01 Assessment Honorable High Year 1995-96 Court of Mumbai

Income Tax 69.85 Assessment Honorable High Year 1996-97 Court of Mumbai

Income Tax 114.20 Assessment Honorable High Year 1997-98 Court of Mumbai

Income Tax 1282.38 Assessment Commissioner of Year 2007-2008 Income Tax (Appeals)

Income Tax 1,458.32 Assessment Commissioner of Year 2008-2009 Income Tax (Appeals)

x. The Company does not have accumulated losses of more than fifty per cent of its net worth at the end of the financial year. The Company has incurred cash losses during the financial year covered by our audit but has not incurred cash losses in the immediately preceding financial year.

ii. As per the information and explanations given by the management, the Company has defaulted in repayment of its dues to various banks and Financial Institutions amounting to Rs. 5580.51 Lacs during the period covered by our audit.

iii. In our opinion and according to the information and explanations given by the management, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, Debentures or any other securities.

iv. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

v. In our opinion, the Company is not dealing in or trading in shares, securities, Debentures and any other investments. Therefore, the provisions of clause 4 (xiv) of the Order are not applicable to the Company.

vi. In our opinion and according to the information and explanations given by the management, the Company has given a corporate guarantee for a loan taken by a third party from a bank. The terms and conditions of the said guarantee are prima facie, not prejudicial to the interest of the Company.

vii. On the basis of the records examined by us, and relying on the information compiled by the Company for co-relating the funds raised to the end use of term loans, we state that the Company has, prima facie, applied the term loans for the purpose for which they were obtained.

viii. According to the information and explanations given to us and on an overall examination of the financial statements and after placing reliance on the reasonable assumptions made by the Company for classification of Short-term and Long-term usage of the funds, we are of the opinion that, prima facie, no funds raised on short-term basis have been utilized for long-term investment.

ix. According to the information and explanations given to us, during the period covered by our audit report, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 except for allotment of 33,20,549 Equity shares to the Chairman of the Company, under Chairman's Stock Option Scheme, 2009.

x. According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any secured debentures.

xi. According to the information and explanations given to us, the Company has not made any public issues during the year.

xii. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.

For SORAB S. ENGINEER & CO.

Chartered Accountants

Firm Registration No.: 110417W

CA N. D. ANKLESARIA

Partner

Membership No. 10250

Place: Mumbai

Date: 7th June, 2011.

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Mar 31, 2010

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

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

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

2. Further to our comments in the Annexure referred to in Paragraph 1 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 Companies Act, 1956.

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

f Attention is invited to the following:

i. Note No. 2 of Schedule 23(III) regarding transfer of related loans and debentures of ESCO and Project Division aggregating to Rs. 12,349.21 Lacs to two wholly owned subsidiaries (proposed) without obtaining the approval of the lenders. On the basis of information available to us, we are unable to form an opinion in this matter.

ii. Note Nos. 4 to 7 of Schedule 23(III) regarding Stock Options granted to Directors and Employees. Since the Company has not ascertained the fair value of the Options granted, impact of the same on the Proforma Net Profit, Proforma basic earnings per share and Proforma diluted earnings per share is not ascertainable.

g In addition to our remarks mentioned in Paragraph (f) above and our comments in the Annexure referred to in Paragraph 1, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010 ;

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

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

ANNEXURE TO THE AUDITORS REPORT Referred to in paragraph 1 of our Report of even date.

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

b. All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

c. According to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year.

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

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management 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 records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii. a. As informed, the Company has not granted any loans, secured or unsecured, to Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the clauses 4(iii)(b) to (d) of the Order are not applicable to the Company.

e. As informed, 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 Companies Act, 1956. Accordingly, the clauses 4(iii)(f) & (g) of the 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 purchases of inventory and fixed assets and for the sale of goods and services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in the internal controls. However, attention is invited to the matters stated in Note 10 of Schedule 23 (III).

v. In our opinion and according to the information and explanations provided by the management, there are no parties which are covered under the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(v) (a) and (b) of the Order are not applicable to the Company.

vi. In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public.

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

viii. We are informed that the maintenance of cost records has not been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956, for any of the Companys products.

ix. a. According to the information and explanations given to us and on the basis of our examination of the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Sales Tax, Income Tax, Custom Duty, Excise Duty, Wealth Tax, Service Tax and other statutory dues have generally been regularly deposited with the appropriate authorities though there have been slight delays in a few cases.

There are no dues on account of Cess under Section 441A of the Companies Act, 1956 since the aforesaid section has not yet been made effective by the Central Government of India.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Sales Tax, Income Tax, Custom Duty, Excise Duty, Wealth Tax, Service Tax and other statutory dues were in arrears as at 31st March, 2010 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us and on the basis of our examination of the records of the Company, details of dues of income tax and sales tax which have not been deposited on account of any dispute are given below:



Name of Nature Amount Period to

the statute of Dues (Rs. In which amount

lacs ) relates

Income Tax Income Tax 10.81 Assessment

Act,1961 Year 1994-95

Income Tax 38.01 Assessment

Year 1995-96

Income Tax 69.85 Assessment

Year 1996-97

Income Tax 114.20 Assessment Year 1997-98

Income Tax 1282.38 Assessment

Year 2007-2008



Name of

the statute Forum where

dispute is

pending

Income Tax

Act,1961 Honorable

High Court of

Mumbai

Honorable

High Court of

Mumbai

Honorable

High Court of

Mumbai

Honorable

High Court of

Mumbai

Commissioner

of Income

Tax (Appeals)



Name of Nature Amount Period to

the statute of Dues (Rs. In which amount

lacs ) relates

Tamil Nadu Sales Tax, 52.05 Assessment

Sales Tax Penalty and Year 2001-02

Act and Interest

Central

Sales Tax

Act

Tamil Nadu Sales Tax, 24.25 Assessment

Sales Tax Penalty and Year 2002-03

Act and Interest

Central

Sales Tax

Act

Tamil Nadu

Sales Tax, 0.75 Assessment

Sales Tax Penalty and Year 2005-06

Act and Interest

Central

Sales Tax

Act



Name of

the statute Forum where

dispute is pending





Tamil Nadu Honorable High Court of Madras

Sales Tax Act and

Central Sales Tax Act



Tamil Nadu Sales Tax Appellate Commissioner

Act and Central Sales Commercial Tax Tamil Nadu

Tax Act

Tamil Nadu Sales Tax Act Appellate Commissioner Commercial

Tax Tamil Nadu

and Central Sales Tax Act



According to the information and explanations given to us, there are no dues of wealth-tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute.

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

xi. As per the information and explanations given by the management, the Company has defaulted in repayment of its dues to various banks amounting to Rs. 1,333.23 Lacs during the period covered by our audit.

xii. In our opinion and according to the information and explanations given by the management, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, Debentures or any other securities.

xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, 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 any other investments. Therefore, 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 by the management, the Company has given a corporate guarantee for a loan taken by a third party from a bank. The terms and conditions of the said guarantee are, prima facie, not prejudicial to the interest of the Company.

xvi. On the basis of the records examined by us, and relying on the information compiled by the Company for co-relating the funds raised to the end use of term loans, we state that the Company has, prima facie, applied the term loans for the purpose for which they were obtained.

xvii. According to the information and explanations given to us and on an overall examination of the financial statements and after placing reliance on the reasonable assumptions made by the Company for classification of Short-term and Long-term usage of the funds, we are of the opinion that, prima facie, no funds raised on short-term basis have been utilized for long-term investment.

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

xix. According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any secured debentures.

xx. According to the information and explanations given to us, the Company has not made any public issues during the year.

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



For SORAB S. ENGINEER & CO.

Chartered Accountants

Firm Registration No.: 110417W



CA N.D. ANKLESARIA

Partner

Membership No. 10250

Place : Mumbai.

Date : 31st May, 2010