Auditor Report of Volant Textile Mills Ltd.

Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying financial statements of Volant Textile Mills Limited which comprise the Balance Sheet as at 31st March, 2013 the Statement Profit & Loss and Cash Flow Statement for the year ended on that date and a summary of significant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

These financial statements are the responsibility of the Company''s management that give a true and fair view of the financial position, financial performance and cash flow of the Company in accordance with the accounting principles generally accepted in India including Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956. 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 error or fraud.

3. 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 Standards on Auditing issued by the Institute of Chartered Accountants of India. Those standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.

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

4. Opinion

We would like to draw the attention to the following:

a. Accounting Standard 2: The inventory valuation of Rs 26,922,151 is accepted by us on the basis of certificate of the management, in the absence of working papers relating to its physical verification and valuation and also absence of Internal Auditors confirmation relating to its quantity and value,

b. Accounting Standard 21: The Company has not consolidated the accounts of its subsidiary Force Protective Solutions Private Limited as on 31.03.2013

c. Acconting Standard 26: The other non-current assets include Miscellaneous Expenditure amounting to Rs 17,42,470/- which we believe is of no tangible value as on the date of Balance Sheet,

d. Trade Receivables of Rs 112,999,716 include Receivables which according to us are doubtful of recovery amounting to Rs 20,620,215 & for which no provison has been made in the financial statements

e. As per Note No 1, Para B (2) (i), (ii), (iii) relating to amounts payable to various Government authorities including Central Excise Duty of Rs 156.40 lakhs demanded which according to the company is not payable and various other dues disputed by the company & the liability of which according to the management is unascertainable is not provided for in the accounts

f. As per Note No 1, Para B (4) regarding non confirmation of balance of unsecured loans, trade receivables, trade payables, other current & non current liabilities and loans and advances, they are subject to confirmation & reconciliation, if any.

In our opinion, subject to above points mentioned in opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the 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 Balance Sheet, of the state of affairs of the Company as at 31st March, 2013;

(b) In the case of the Statement of Profit & Loss, 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.

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditors Report) Order, 2003, 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) As required by Section 227(3) of the Companies Act, 1956, we report that:

a) Subject to above,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 the law have been kept by the Company so far as appears from our examination of these books.

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

d) Subject to the above notes in the Par of Opinion, the Balance Sheet, the Statement of Profit & Loss and the 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 written representations received from the Directors as on 31st March 2013 and taken on record by Board of Directors, we report that none of the Directors is disqualified as on 31st March 2013 from being appointed as a Director in terms of clause (g) of sub- section (i) of Section 274 of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS'' REPORT

(Referred to in paragraph 4 of our report of even date)

1. a) The company has not maintained the statements showing full particulars including quantitative details and situation of most of its fixed assets.

b) As explained to us, the fixed assets of the Company are physically verified by the management during the year, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no discrepancies have been noticed on such verification.

c) No substantial part of the fixed assets have been disposed of during the year.

2. a) As explained to us, the inventory has been physically verified by the management during the year. In our opinion the frequency of such 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) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory. The discrepancy noticed on verification, between the physical stocks and the book records were not material.

3. In respect of unsecured loans taken by the Company from companies, firms, or other parties covered by the register maintained under section 301 of the Companies act, 1956, and according to the information and explanations given to us:

a) The Company has taken interest free unsecured loans from promoters. As at the year end, the outstanding balance of such loans aggregated to Rs. 1321.70 lacs. The maximum amount outstanding during the year, aggregated to Rs.1450.10 lacs.

b) The Company has given interest free unsecured loans to one company. As at the year end, the outstanding balance of such loans aggregated to Rs. NIL lacs. The maximum amount outstanding during the year, aggregated to Rs.113.80 lacs.

c) The interest free loans taken in our opinion, prime facie, are not prejudicial to the interest of the company, however interest free loan given is not prejudicial to the interests of the company.

d) No stipulation has been made with regard to repayment of loans taken and payment of interest on such loans taken, hence we cannot comment on the clause.

4. In our opinion, and according to the information and explanations given to us, internal control procedures requires to be further strengthened 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.

5. According to the information and explanations given to us, we are of the opinion that company has not maintained the Register u/s 301 of the Companies Act, 1956 .

6. Accordingly to the information and explanations given to us, the Company has not accepted deposits from the public within the meaning of Section 58A and 58AA of the Companies Act, 1956 and the rules framed there under.

7. The Company has an internal auditor, however the scope needs to widened and it requires to be strengthened to be commensurate with its size and nature of business.

8. As per the information & explanation given to us, Cost records prescribed by the Central Government under Section 209(1)(d) of the Companies Act,1956 have not been maintained by the company.

9. According to the information and explanations given to us and according to the books nd records of the Company as produced and examined by us, in our opinion, the undisputed statutory dues, including provident fund, income tax, and professional tax have been deposited generally by the company during the year with appropriate authorities. There are no arrears of statutory dues as mentioned above as at 31st March, 2013 for a period more than six months.

Note 1: The amount disputed is depreciation of Rs. 45.61 Lacs which was attributed to increase in value of assets on account of foreign exchange fluctuation.

10. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth as at 31st March 2013. The Company has not incurred cash losses during the financial year and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of Secured Loan for vehicles obtained from Banks.

12. According to the information and explanations given to us, and based on the documents and records produced to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The company is not a chit fund/nidhi/mutual benefit fund/society. Therefore, the provision of clause 4 (xiii) of the order 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 or trading in shares, securities, debentures and other investments. Accordingly the provision of clause 4 (xiv) of the order are not applicable to the Company.

15. In our opinion and according to the information and explanations given to us, the Company has given guarantee for entering into a marketing tie-up whereby the company will get exclusive marketing rights for sale of the products in India.

16. In our opinion and according to the information and explanations given to us, the Company has taken Term Loan from Banks & they have been applied for the purpose for which they were obtained.

17. According to the information and explanations given to us and on overall examination of the Balance Sheet and Cash Flow Statement of the Company, we report that no funds raised on short term basis have been used for long term investments.

18. In our opinion and according to the information and explanations given to us, 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, during the year.

19. The Company has not issued any debentures during the year.

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

21. To the best of our knowledge and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported by the Management during the year.

For SHAH PATANI & ASSOCIATES

(Chartered Accountants)

(Registration No: 121252W)

DHARMEN B. SHAH

Partner

Membership No.: 036324

Place: Mumbai

Date: 14th August 2013.

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Mar 31, 2010

1. We have audited the attached Balance Sheet of Volant Textile Mills Limited as at March 31, 2010, the relative Profit and Loss Account for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date, which we have signed under reference to this report. These financial statements are the responsibility of the Management of the Company. Our responsibility is to express an opinion on these financial ¦statements based on our audit.

2. We have 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 the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. The accounts are prepared on the principle application to a going concern despite heavy losses which have totally eroded the net worth of the Company. The Company has been declared Sick by BIFR having case No. 322/02 in the hearing held on 1.3.2006. In the year 2006-2007 the company had arrived at a negotiated settlement with SASF and has subsequently repaid them in April, 2009. The OA (Bank of Baroda) has prepared a report for rehabilitation & restructuring including expansion, and had submitted the same to BIFR, to achieve a viable and profitable business model. BIFR in its hearing held on 13.04.2010 has asked the company to submit a revised DRS based on the Balance Sheet dated 31.03.2010.

4. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India }n terms of Section 227 (4A) of the Companies Act, 1956 and on the basis of such checks of the books and record of the Company as we considered appropriate and according to the information and explanations given to us during the course of audit, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable.

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

a) Subject to remarks in Para 5.1, and 5.2 below, 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 appear from our examination of those books.

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

d) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report have been prepared in compliance with the applicable accounting standards referred to in Section 211 (3C) of the Act;

e) On the basis of written representations received from the Directors and taken on record by the Board of Directors of the Company, none of the Directors are disqualified 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 Act.

f) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Profit and. Loss Account and the Cash Flow statement together with the Notes thereon and annexed thereto given in the prescribed manner, subject to Note 21 on Schedule T regarding non-availability of information as to the status of registration of suppliers as small scale industrial undertakings and in view of our remarks in paragraphs 5.1 to 5.2 below and related notes referred to therein with consequential effects on the Companys profit for the year and the relevant items on the Balance Sheet, we are unable to comment whether the accounts give a true and fair view at this stage, in conformity with the accounting principle generally accepted in India;

- In the case of Balance Sheet, of the state of affairs of the Company as at March 31,2010

- In the case of Profit and Loss Account, of the profit for the year ended on that date; and

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

5.1 Note B (1) (ui&iii) on schedule T relating to amount payable to various Government authorities and the amount payable for pending assessment if any being unascertainable.

5.2 Note B (3) on schedule T regarding non-confirmation of balance of Secured and Unsecured Loans, Sundry debtors, Sundry creditors, Current Liabilities and Loans and advances.

ANNEXURE TO THE AUDITORS REPORT (Referred to in paragraph 4 of our report of even date)

1. a) The company has maintained the statements showing full particulars including quantitative details and situation of most of its fixed assets.

b) As explained to us, the fixed assets of the Company are physically verified by the management during the year, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no discrepancies have been noticed on such verification

c) No substantial part of the fixed assets have been disposed of during the year.

2. a) As explained to us, the inventory has been physically verified by the management during the year. In our opinion the frequency of such 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) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory. The discrepancy noticed on verification, between the physical stocks and the book records were not material.

3. In respect of unsecured loans taken by the Company from companies, firms, or other parties covered by the register maintained under section 301 of the Companies act, 1956, and according to the information and explanations given to us:

a) The Company has taken interest free unsecured loans from promoters. As at the year end, the outstanding balance of such loans aggregated to Rs. 1661.04 lacs. The maximum amount outstanding during the year, aggregated to Rs. 1847.93 lacs. b)The Company has given interest free unsecured loans to one company. As at the year end, the outstanding balance of such loans aggregated to Rs. 30.91 lacs. The maximum amount outstanding during the year, aggregated to Rs. 30.91 lacs.

c) The interest free loans in our opinion, prime facie, are not prejudicial to the interest of the company.

d) No stipulation has been made with regard to repayment of loans taken and payment of interest on such loans taken, hence we cannot comment on the clause.

4. In our opinion, and according to the information and explanations given to us, there are internal control procedures 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. During the course of our audit, we have not observed any continuing failure to correct major weakness in its internal control.

5. According to the information and explanations given to us, we are of the opinion that no transactions need to be entered in to the register maintained under section 301 of the Companies Act, 1956 except stated in clause 3 above.

6. Accordingly to the information and explanations given to us, the Company has not accepted deposits from the public within the meaning of Section 58A and 5SAA of the Companies Act. 1956 and the rules framed there under.

7. The Company has an internal audit system, however it requires to be strengthened to commensurate with its size and nature of business.

8. In our opinion and according to the information and explanations given to us, the Central Government of India, has not prescribed the maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956.

9. a) According to the information and explanations given to us and according to the books and records of the Company as produced and examined by us, in our opinion, the undisputed statutory dues, including provident fund, income tax, and professional tax have been deposited generally by the company during the year with appropriate authorities. There are no arrears of statutory dues as mentioned above as at 31st March, 2010 for a period more than six months.

b) As at 31st March 2010, according to the records of the company and the information and explanations given to us, the following are the particulars of disputed dues on account of statutory dues that have not been deposited:

Sr. Authority Amount Period to Dispute Pending at Deposits

Disputed which the made (Rs. In lacs) amount relates (Rs. In lacs)

1 Excise Duty 151.52 2000-2001 Appellate Tribunal 15.00

2 Excise Duty 4.88 2005-2006 Jt. Commissioner, Pune 1.00

3 Provident Fund 9.98 2001-2002 High Court 2.00

10) In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth as at 31st March 2010. The Company has not incurred cash losses during the financial year and in the immediately preceeding financial year.

11) In our opinion and according to the information and explanations given to us, the Company have not defaulted in the repayment of dues to a financial institution.

12) According to the information and explanations given to us, and based on the documents and records produced to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13) The company is not a chit fund/nidhi/mutual benefit fund/society. Therefore, the provision of clause 4 (xiii) of the order 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 or trading in shares, securities, debentures and other investments. Accordingly the provision of clause 4 (xiv) of the order are not applicable to the Company.

15) In our opinion and according to the information and explanations given to us, the Company has given guarantee for entering into a marketing tie-up whereby the company will get exclusive marketing rights for sale of the products in India.

16) In our opinion and according to the information and explanations given to us, the Company has not taken any term loans during the current year.

17) According to the information and explanations given to us and on overall examination of the Balance Sheet and Cash flow Statement of the Company, we report that no funds raised on short term basis have been used for long term investments.

18} In our opinion and according to the information and explanations given to us, 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, during the year.

19) The Company has not issued any debentures during the year.

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

21) To the best of our knowledge and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported by the Management during the year.

For YADAV, PUJARA & SHAH

(Chartered Accountants)

SANTOSH A. SHAH

Partner

Membership No. 46548

Firm No 121711W

Place: Mumbai

Date: August31 st, 2010.