Auditor Report of Surya Pharmaceuticals Ltd.

Mar 31, 2013

We have audited the accompanying financial statements of M/s. Surya Pharmaceutical Limited, 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.

Management''s Responsibility for the Financial Statement:

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 ("the Act"). This responsibility includes the design, implementation and maintenanc e of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility:

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

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

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

Opinion:

1. The provision for employee benefit has been provided on accrual basis and no actuarial valuation certificate has been obtained as required by AS15.

2. Managerial Remuneration paid to Directors in FY 2011-12 has exceeded the limit as prescribed in the Companies Act, 1956. The Company sought approval from Central Government for condo nation of excess remuneration. The same is still pending.

3. Attention is invited to restructuring of facilities carried out by lenders to the Company in January, 2013, followed by recall of loan notice issued by some of the lenders. At this stage, it is not possible to evaluate the effect of the outcome of aforesaid notice of recall.

4. The Board of Directors of the Company since June 15, 2013 comprises of 2 persons, which is less than the minimum number of Directors statutorily required in case of a public Company, and is a contravention of section 252 of the Act. The Whole time Secretary mandatorily required to hold office under section 383A of the Act is not in office since from May 28, 2013, which is a contravention of the said section. As on date, there is no person in employment of the Company except its Managing Director and Executive Director.

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India subject to our comments in paragraph 1, 2, 3 and 4 above:-

Further to our comments in the annexure referred to in paragraph 4 below, we report that:-

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 Profit and Loss Account, 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.

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

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

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

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

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

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 Companies Act, 1956.

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

ANNEXURE ''A'' REFERRED TO IN PARAGRAPH 5 OF OUR REPORT OF THE AUDITORS TO THE MEMBERS OF SURYA PHARMACEUTICAL LIMITED ON THE ACCOUNTS FOR THE YEAR ENDING 31st MARCH, 2013

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

(b) The Company was having regular program of physical verification of its fixed assets by which all fixes assets are verified every year. In our opinion, the periodicity of physical verification is reasonable to the size of the company and nature of its assets.

(c) No fixed assets has been disposed off during the year, and therefore, do not affect the going concern assumption.

2 (a) Physical verification of stock of finished goods, work in process, stores, spares and raw materials was conducted by the management during the year. Since plants of the Company were not working on regular basis, hence we cannot comment on the usability and reliability of the inventory lying with the Company. Attention is drawn to note no 15 appearing in notes to account.

(b) Procedures for 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) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records were not material.

3 In respect of unsecured loans granted by the company to companies covered in the register under section 301 of the Companies Act, 1956 and according to information and explanation given to us:-

(a) The Company has granted unsecured loans to subsidiary of the Company and also a party listed in the register maintained under Section 301 of the Companies Act, 1956 and the amount outstanding as on 31.03.2013 was Rs. 15.67 crores (Rs. NIL). The maximum balance outstanding during the year was Rs.15.67 crores.

(b) According to the information and explanation given to us, we are of the opinion that the rate of interest and terms and conditions of loan given by the Company to subsidiary Company in which the Directors of the Company are interested are prima facie prejudicial to the interest of the Company on account of the fact that the Company has granted interest free loans, whereas the Company is paying interest to banks and institutions.

(c) The Loan is repayable by the subsidiary Company on being demanded by the Company.

(d) The Company has not been able to recover the amount from the subsidiary Company and has taken no steps for the same.

(e) The Company has not taken any unsecured loans from companies/firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

4 In our opinion and according to the information and explanations given to us, the plants of the company are closed since last one year and we cannot comment on the adequacy of internal control procedures of the company and the nature of its business with regard to the purchase of stores, raw materials including the Plant & Machinery, Vehicles, Equipment and other assets and for the sale of these goods.

5 In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to information and explanation given to us:

a) The particulars of contracts or arrangements referred to in section 301 that were needed to be entered in the register maintained under said section have been so entered.

b) Where each of such transaction is in excess of Rs. 5 lakhs in respect of any party, the transaction have been made at price prima facie reasonable having regard to the prevailing market prices at relevant time.

6. In our opinion, and according to the information and explanations given to us, the company has not accepted fresh deposits from public during the year and the Company is generally in compliance with the provisions of Section 58A of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7 The company does not have an internal audit system operational during the year. The audit committee was also not functional during the year.

8. We have reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records. The cost audit report for last year has not been submitted with the concerned authorities.

9 (a) The Company is not regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sale Tax, Wealth Tax Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues applicable to it and there are no arrears as at the yearend for a Period of more than six months from the date they became payable.

(b) According to the records of the Company, the following dues of Income Tax, Sale Tax, Wealth Tax Service Tax, Custom Duty, Excise Duty, Cess etc. have not been deposited on account of some dispute.

Detail of dues of Sales Tax, Service Tax, Income Tax, Custom duty and Excise etc., which have not been deposited as at March 31.03.2013 on account of disputes are given below:-

Name of the Nature of Amount Penalty Period to Forum where Statute Dues (Rs. In Imposed which the dispute is pending Lacs) amount relates

FT(Deve- lopment & 6.14 2005-2006 The Jt. DGFT, Chandigarh Regulation) Act, 408.05 2006-2007 The Jt. DGFT, Chandigarh

Rules & orders_ 59.57 2007-2008 The Jt. DGFT, Chandigarh Section 13 of the 26.64 577.00 2004-2005 Appeal Filed with DGFT, New Delhi

FTDR Act 1992 383.92 5262.00 2005-2006 Appeal Filed with DGFT, New Delhi

Demand 98.58 2001-2002 The Jt. DGFT, Chandigarh

Under Section 11(2) 18.75 2002-2003 The Jt. DGFT, Chandigarh for taking action 148.24 2004-2005 The Jt. DGFT, Chandigarh under Section 11(2) 40.45 2005-2006 The Jt. DGFT, Chandigarh & (7) of the FTDR 173.11 2006-2007 The Jt. DGFT, Chandigarh Act, 1992 237.49 2007-2008 The Jt. DGFT, Chandigarh

118.17 2008-2009 The Jt. DGFT, Chandigarh

Total 1719.11 5839.00

2.16 1998-1999 CESTAT

17.96 1999-2000 CESTAT

36.90 2002-2003 CESTAT

0.86 2003-2004 CESTAT

Demand 6.34 2008-2009 CESTAT

349.91 2009-2010 Commissioner Appeals and Cestat

27.21 2010-2011 Assistant Commissioner

272.24 2011-2012 Assistant Commissioner

483.41 2012-2013 Assistant Commissioner

Total 1196.99

1.83 2007-2008 Assistant Commissioner

22.25 2008-2009 CESTAT

Service tax Demand 133.68 2010-2011 Commissioner appeals

17.90 2011-2012 Assistant Commissioner

221.18 2012-2013 Assistant Commissioner

Total 396.84

The Central Sales 1015.25 2012-2013 DETC,Appeals

Demand tax

Custom Demand 384.80 2008-2009 Custom

Total 4712.99 5839.00

10. The Company has accumulated Losses. The Company has incurred cash losses of Rs. 378.32 crores during the financial year covered by our audit previous year Rs. 358.76 crores. The 100% net worth of the Company has been eroded.

11. The Company has defaulted in repayment of dues amounting to Rs. 1755.91 crore principal and Rs. 201.88 crores interest to banks and financial institutions.

12. In our opinion and according to the information and explanations given to us, the Company has not granted loans & advances on the basis of security by way of pledge of shares, debentures & other securities.

13. In our opinion and according to the information and explanations given to us the provisions of chit fund are not applicable to the company.

14. In our opinion and according to the information and explanations given to us, the Company is not dealing in shares securities and debentures. Therefore the provision of clause 4(xiv) of CARO are not applicable to the Company.

15. In our opinion and according to the information and explanations given to us, having regard to the fact that the subsidiaries are wholly owned the term and conditions of the guarantee given by the Company for loan taken by the subsidiaries from banks are not prima facie prejudicial to the interest of the Company

16. In our opinion and according to the information and explanations given to us, the company has not raised any term loans during the year.

17. In our opinion and 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 have been raised during the year.

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

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

20. The company has not raised any money by public issue 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 explanation given to us, we have neither come across any instance of fraud on or by the Company noticed or reported during the year.

FOR AAD & ASSOCIATES

CHARTERED ACCOUNTANTS

Sd/-

SHAMSHER SINGH

(PROPRIETOR)

Place: Chandigarh M.NO. 083898

Date: 20.07.2013 FRN-020624N

---

Mar 31, 2012

We have audited the attached Balance sheet of SURYA PHARMACEUTICAL LIMITED as at 31st March, 2012 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 ouraudit.

1. 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 also 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

2. As required by the Companies (Auditors' Report) Order, 2003 issued by the Company Law Board in terms of Section 227 (4A) of the CompaniesAct, 1956 we enclose in theAnnexureAstatement on the matters specified in paragraph 4 & 5 of said order:

3. As stated in note 28.10 of the financial statement, the managerial remuneration to directors exceeded the limits specified in the relevant provisions of the Companies Act,1956, by Rs. 270.62 lacs. As informed to us, the company taken necessary steps to seek approval from central Government and expects such approval. Pending such approval the impact thereof on the financial statement has not been determined.

4. Further to our comments in the annexure referred to in paragraph (2) above, we report that:-

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

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

c) The Balance sheet and Profit and LossAccount dealt with by this report are in agreement with the books of accounts;

d) In our opinion, the Balance Sheet and the Profit and Loss account comply with the accounting standards referred to in sub section (3C) of section 211 of the CompaniesAct, 1956, subject to Notes on Accounts forming part of Balance Sheet.

e) As per information and explanations given to us, none of the directors of the company is disqualified from being appointed as a director in terms of clause (g) of subsection (1) of section 274 of the CompaniesAct, 1956.

f) Subject to our comments in paragraph (3) above and para 3(b) of annexure A, the effect of which has not been ascertained, in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the CompaniesAct, 1956, in the mannerso required and give a true and fair view.

(i) In the case of the Balance Sheet of the State of affairs of the company as at 31st March, 2012 and

(ii) In the case of the Profit and Loss account, of Loss of the company for the year ended on that date.

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

ANNEXURE 'A' REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF THE AUDITORS TO THE MEMBERS OF SURYA PHARMACEUTICAL LIMITED ON THEACCOUNTS FORTHEYEAR ENDING 31st MARCH, 2012

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

(b) The company has a regular program of physical verification of its fixed assets by which all fixed assets are verified every year. In our opinion, the periodicity of physical verification is reasonable to the size of the company and nature of its assets. No material discrepancies were noted on such verification.

(c) The fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2 (a) Physical verification of stock of finished goods, stores, spares and raw materials was conducted by the management during the year and in our opinion, the frequency of such verification was reasonable.

(b) Procedures for 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) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records were not material. The expired stock of Rs. 15.72 crore detected during physical verification has been written off by the company.

3 In respect of unsecured loans granted by the company to companies covered in the register under section 301 of the CompaniesAct, 1956 and according to information and explanation given to us-

(a) The company has granted unsecured loans to six Companies/ Firms/ Trusts and other Parties Listed in the register maintained under Section 301 of the CompaniesAct, 1956 and the amount outstanding as on 31.03.2012 was Rs. 84.92 crore (Rs. 5.10 crore). The maximum balance outstanding during the year was Rs.109.56 crore.

( b) According to the information and explanation given to us , we are of the opinion that the rate of interest and terms and conditions of loan given by the company to companies/firms/ trusts in which directors of the company, are interested are prima facie prejudicial to the interest of the company on account of following.

(c) The company has granted the interest free loans, where the company is paying interest to banks and institutions

(d) The company has agreement for recovery with a stipulation of four years.

(e) The company has taken unsecured loans from companies/firms or other parties listed in the register maintained under section 301 of the CompaniesAct, 1956.Theoutstandingamountason31-03-2012isRs.2.93crore.

(f) The loans are interest free and not prejudicial to the interest of the company.

(g) The company has agreementfor repayment with a stipulation of three years.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to the purchase of stores, raw materials including the Plant & Machinery, Vehicles, Equipment and other assets and for the sale of these goods. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct the major weaknesses in internal control system. We have not observed any major weakness in the internal control system during the course of our audit.

5 In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the CompaniesAct, 1956, to the best of our knowledge and belief and according to information and explanation given to us:

a) The particulars of contracts or arrangements referred to in section 301 that were needed to be entered in the register maintained under said section have been so entered.

b) Where each of such transaction is in excess of Rs. 5 lakhs in respect of any party, the transaction have been made at price prima facie reasonable having regard to the prevailing market prices at relevant time.

6. In our opinion, and according to the information and explanations given to us, the company has accepted deposits from public during the year and has complied with the provisions of Section 58A of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7 The company has an internal audit system, which in our opinion is, commensurate with the size of the company and nature of its business.

8 We have broadly reviewed the books of account maintained by the company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9 (a) The company has generally been regular in depositing undisputed dues, including Provident Fund ,Investor Education and Protection Fund, Employees' State Insurance ,Income Tax, Sale Tax, Wealth Tax Service Tax ,Custom Duty ,Excise Duty, cess and other material statutory dues applicable to it with the appropriate authorities.

(b) No undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sale Tax, Custom Duty, Excise Duty, cess were in arrears as at March 31.03.2012 fora Period of more than six months from the date they became payable.

(c) Detail of dues of Sales Tax, Service Tax and Income Tax which have not been deposited as at March 31.03.2012 on account of disputes are given below :-

Name of Statute Nature of Dues Amount Period to which Forum In the amount relates where dispute Lacs(*) is pending

The Central Excise Act, 1944. 2 16 1998 CESTAT

The Central Excise Demand 17.96 1999 CESTAT

Act, 1944 3.69 2002

0.86 2003

94.12 2005

6.34 2008

371.53 2009

34.42 2010

1508.42 2011

2039.51

Service Tax Demand 2.89 2007 Department

13.25 2008

2.00 2009

138.34 2010

45.29 2011

201.77

Custom Act Demand 313.27 2008 Department

Total 2556.71

Net of pre-deposit amount

10. The Company does not have accumulated Losses. The Company has incurred cash losses of Rs. 358.60 crore during the financial year covered by our audit previous year Nil.

11. The Company has defaulted in repayment of dues amounting to Rs. 22.20 crore principal and Rs. 39.78 crore interest to banks and financial institutions. The company has approached the Corporate Debt Restructuring cell for restructuring of loans and working capital limits, where its application has been accepted and is in process of approval.

12. In our opinion and according to the information and explanations given to us, the Company has not granted loans & advances on the basis of security byway of pledge of shares, debentures & other securities.

13. In our opinion and according to the information and explanations given to us the provisions of chit fund are not applicable to the company.

14. In our opinion and according to the information and explanations given to us, the Company is not dealing in shares securities and debentures. Therefore the provision of clause 4(xiv) of CARO are not applicable to the Company.

15. In our opinion and according to the information and explanations given to us, having regard to the fact that the subsidiary is wholly owned the term and conditions of the guarantee given by the Company for loan taken by the subsidiary from a bank are not prima facie prejudicial to the interest of the Company

16. In our opinion and according to the information and explanations given to us, the term loan have been applied for the purpose forwhich they were raised.

17. In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that funds raised on short term basis have not been used during the year for long term investment.

18. According to the information and explanations given to us during the period covered by our audit, the Company has converted 10,00,000 convertible warrants out of 47,00,000 convertible share warrants issued earlier into 1,00,00,000 equity shares to the parties and companies covered in the register maintained under Section 301 of the CompaniesAct-1956.

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

20. 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 explanation given to us, we have neither come across any instance of fraud on or by the Company noticed or reported during the year.

FOR AAD & ASSOCIATES

CHARTERED ACCOUNTANTS

Sd/-

SHAMSHER SINGH

(PROPRIETOR)

PLACE: CHANDIGARH M.NO. 083898

DATE: July 7, 2012

FRN-020624N

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Mar 31, 2011

We have audited the attached Balance sheet of SURYA PHARMACEUTICAL LIMITED as at 31st March, 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.

1. We conducted our audit in accordance with auditing standards generally accepted in India. The standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. An audit also 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

2. As required by the Companies (Auditors' Report) Order, 2003 issued by the Company Law Board in terms of Section 227 (4A) of the Companies Act, 1956 we enclose in the Annexure A statement on the matters specified in paragraph 4 & 5 of said order:

3. 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 purpose of our audit;

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

c) The Balance sheet and Profit and Loss Account dealt with by this report are in agreement with the books of accounts;

d) In our opinion, the balance sheet and the profit and loss account comply with the accounting standards referred to in sub section (3C) of section 211 of the companies Act, 1956, subject to Notes on Accounts forming part of Balance Sheet.

e) As per information and explanations given to us, none of the directors of the company is disqualified from being appointed as a director in terms of clause (g) of subsection (1) of section 274 of the Companies Act, 1956.

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view.

i) In the case of the Balance Sheet of the State of affairs of the company as at 31st March, 2011 and

ii) In the case of the Profit and Loss account, of Profit of the company for the year ending on that date.

iii) In case of cash flow statement, of the cash flows for the year ending on that date.

Annexure to the Auditors' Report

Annexure 'A' referred to in paragraph 1 of our Report of the Auditors to the members of SURYA PHARMACEUTICAL LIMITED on the accounts for the year ending 31st March, 2011

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

b) The company has a regular program of physical verification of its fixed assets by which all fixes assets are verified every year. In our opinion, the periodicity of physical verification is reasonable to the size of the company and nature of its assets. No material discrepancies were noted on such verification.

c) The fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

2 a) Physical verification of stock of finished goods, stores, spares and raw materials was conducted by the management during the year and in our opinion, the frequency of such verification was reasonable.

b) Procedures for 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) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records were not material.

3 a) The company has granted unsecured loans to Companies/ Firms and other Parties Listed in the register maintained under Section 301 of the Companies Act, 1956 and the amount outstanding as on 31.03.2011 was Rs.510.35 Lacs (Rs.114.35 Lacs).

b) & (c)" These points are not applicable to the company.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to the purchase of stores, raw materials including the Plant & Machinery, Vehicles, Equipment and other assets and for the sale of these goods. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct the major weaknesses in internal control system. We have not observed any major weakness in the internal control system during the course of our audit.

5. According to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1956.

6. In our opinion, and according to the information and explanations given to us, the company has complied with the provisions of Section 58A of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7 The company has an internal audit system, which in our opinion is, commensurate with the size of the company and nature of its business.

8 We have broadly reviewed the books of account maintained by the company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9 a) The company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sale Tax, Wealth Tax Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues applicable to it with the appropriate authorities.

b) No undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sale Tax, Custom Duty, Excise Duty, cess were in arrears as at March 31.03.2011 for a Period of more than six months from the date they became payable.

c) Detail of dues of Sales Tax, Service Tax and Income Tax which have not been deposited as at March 31.03.2011 on account of disputes are given below:

Name of Statute Nature of Dues Amount Rs. in Lacs (*) Period to which the amount relates Forum where dispute is pending

The Income 89.72 AY 2006-07 ITAT

Tax Act, 1961 89.72

The Central Excise Demand 2.16 1998 CESTAT

Act, 1944 17.97 1999

3.69 2002

0.86 2003

94.12 2005

6.34 2008

371.53 2009

237.85 2010

Total 734.52

Service Tax Demand 2.89 2007 Department

13.25 2008

19.84 2009

137.96 2010

Total 173.94

Custom Act Demand 313.27 2008 Department

Total 1,311.45

- Net of pre-deposit amount

10.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.

11.In our opinion and according to the information and explanations given to us, the Company did not have any amount outstanding to a financial institution or bank. Therefore the provision of clause (xi) of paragraph 4 of CARO is not applicable.

12.In our opinion and according to the information and explanations given to us, the Company has not granted loans & advances on the basis of security by way of pledge of shares, debentures & other securities.

13.In our opinion and according to the information and explanations given to us the provisions of chit fund not applicable to the company

14.In our opinion and according to the information and explanations given to us, the Company is not dealing in shares securities and debentures.Therefore.the provision of clause 4(xiv) of CARO are not applicable to the Company.

15.In our opinion and according to the information and explanations given to us, having regard to the fact that the subsidiary is wholly owned the term and conditions of the guarantee given by the Company for loan taken by the subsidiary from a bank are not prima facie prejudicial to the interest of the Company

16.In our opinion and according to the information and explanations given to us, the term loan have been applied for the purpose for which they were raised.

17.In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that funds raised on short term basis have not been used during the year for long term investment.

18.According to the information and explanations given to us during the period covered by our audit, the Company has made preferential allotment of 47,00,000 convertible share warrants out of which 9,50,000 warrants has been converted into 95,00,000 equity shares to the parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

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

20.The Company has raised Rs.111.85 crores from issue of GDR's & the company has issued and allotted 47,00,000 convertible Share Warrants during the year. The management has disclosed the end use of monies received through GDR's & Convertible Share Warrants during the year in notes to accounts (Refer Note-E) which has been verified by us.

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 explanation given to us, we have neither come across any instance of fraud on or by the Company noticed or reported during the year.

For AAD & Associates

Chartered Accountants

Sd/-

Place: Chandigarh Shamsher Singh

Date: 13th August, 2011 (Partner)

M.NO. 083898

FRN-020624N

---

Mar 31, 2010

We have audited the attached Balance Sheet of SURYA PHARMACEUTICAL LIMITED as at 31st March, 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 audi!.

1. 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 also 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.

2. As required by the Companies (Auditors Report! Order, 2003 issued by the Company Law Board in terms of Section 227 (4A) of the Companies Act, 1956 we enclose in the Annexure A statement on the matters specified in paragraph4 & 5 of said order.

3. Further to our comments in the annexure referred to in pa ragra ph (1 ) above, we re port that:-

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

b) In our opinion, proper books of account as required

by Law have been kept by the Company so far as appears from our examination of the books;

c) The Balance sheet and Profit and Loss Account dealt with by this report are in agreement with the books of accounts.

d) In our opinion, the Balance Sheet and the Profit and Loss account comply with the accounting standards referred to in sub section (3C) of section 211 of the Companies Act, 1956, subject to Notes on Accounts forming part of Balance Sheet.

e) As per information and explanation given to us, none of the directors of the company is disqualified from being appointed as a director in terms of clause (g) of subsection (1) of section 274 of the Companies Act, 1956.

f In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view.

(i) In the case of the Balance Sheer of the State of affairs of the company as at 31st March, 2010 and

(ii) In the case of the Profit and Loss account, of Profit of the company for the year ended on that date.

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

Annexure A referred to in paragraph 2 of our report of the auditors to the members of M/s. Surya Pharmaceutical Limited on the accounts for the year ending 31st March, 2010

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

(b) As explained to us, the fixed assets have been physically verified by the Management at the reasonable intervals during the period under review and no material discrepancies were noticed in the said verification.

(c) The substantial part of fixed assets have not been disposed off during the year.

2.(a) Physical verification of stocks of finished goods, stores, spares and raw materials was conducted by the management during the year and in our opinion, the frequency of verification was reasonable.

(b) Procedures for physical verification of stocks followed by the company are adequate in relation to the siZB of the company and the nature of its business,

(e) The company is maintaining proper records of inventory and no material discrepancies have been noticed on physical verification of stocks as compared to the book records.

3,(a) The company has granted two loans, secured or unsecured to Companies/ Firms and other Parties Listed in the register maintained under Section 301 of the Companies Act, 1956 and the amount outstanding as on 31.03.2010 was Rs, 114.35 Lacs Rs. 977.76 Lacs}.

(b) to (c) These points are not applicable to the company.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to the purchase of stores, raw materials including the Plant & Machinery, Vehicles, Equipment and other assets and for the sale of these goods.

5.(a) According to the information and explanation given to us, no transaction of purchase of goods and materials and sale of goods, materials and services in pursuance of contracts of agreements entered in the register maintained U/s 301 of the Companies Act, 1956 and aggregating during the year to Rs, 5,00,000/- or more in respect of each party are entered by the company. Hence this clause is not applicable.

(b) This point is not applicable to the company.

6. In our opinion, and according to the information and explanation given to us, the company has complied with the provisions of Section 58A of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public

7. The company has an internal audit system, which in our opinion is, commensurate with the size of the company and nature of its business.

8. The company is maintaining proper cost records as prescribed under section 20901(d) of the Companies Act, 1956.

9.(a) The company is regular in Depositing Employees State Insurance dues and dues under the Provident Fund & Miscellaneous Provision Act, 1952.

(b) According to the information and explanation given to us, there are no undisputed amounts payable in respect of Wealth Tax, sales Tax, Customs duty and Excise Duty, which are outstanding on the 31st March, 2010 for a period of more than six months from the date they became payable.

(c) Arcordirg to the in forrmation and explanations given to us and recods of the the company examined by us theparticijIai of Excise Duty and Income Tax as on 31.3.2010 which have not been deposited on account of disputes pending are; follows:-





Name of Statute Nature of Dues Amount Period to which the Forum where

Rs. in Lacs() amount relates dispute is pending

The Income Tax Act, 1961 89.72 AY2006-07 ITAT

649.47 AY2O07-O8 CIT(A)

739.19

The Central Excise Act, 1944 Demand 2-16 1998 CE5TAT

17.96 1999

3.69 2002

0.86 2003

94.12 2005

2.18 2007

6.34 2008

900.65 2009

563-52 2010

1591.48

Service Tax Demand 2.89 2007 Department

4.14 2008

17.85 2009

24.88

Sale Tax Demand 45.36 96-97 Department

Act 7.66 97.98

1.22 00-01

.01 03-04

101,54 06-07

155.81

Custom Act Demand 313.27 2008 Department

Grand Total 2824.63





"Net of pre-deposit Amount

10. There are no accumulated losses of the Company at the end of the financial year,

11. In our opinion and according to the information and explanations given to us. the company has not defaulted in repayment of dues to any financial institution, bank or debenture holders.

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

13. The company is not a chit fund or a nidhi or a mutual benefit fund/society. Therefore the provisions of clause 4{xiii) of the Companies (Auditors Report) Order 2003 are not applicable to the company.

14. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause 4(xiv) of the companies (Auditors Report) Order 2003 are not applicable to the company.

15. The company has not given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company.

16. According to the information & explanations given |o us and the records examined by us on an overall basis, the term loan was applied by the company for the purpose for which it was obtained.

17. According to the information provided to us the funds raised on short-term basis have not been used for long- term investment and vice versa,

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

19. According to the information and explanation given to us, the company has not issued any debentures during the year regarding creation of security.

20. The management has disclosed the end use of money raised through public issue in its prospectus and the same has been utilized accordingly.

21. No fraud on or by the company has been noticed or reported during the year.

For AAD & Associates

Chartered Accountants

sd/-

PLACE : CHANDIGARH SHAM5HER SINGH

DATE : 14.08.2010 (PaMner)