Auditor Report of CIFCO Finance Ltd.

Mar 31, 2014

1. We have audited the accompanying financial statements of CIFCO FINANCE LIMITED which comprises of Balance Sheet as at 31st March, 2014 and the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 ("the Act") read with General Circularl 5/2013 dated 13lh September 2013 issued by the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditors'' Responsibility

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. Basis for Qualified opinion

1. Preparation of accounts of the Company on the basis of the assumption of going concern without making any adjustment for recoverability/classification of assets and its amounts and classification of liabilities and its amounts, inspite of the following indicators:

i The application of the Company to carry on business of a Non-Banking Financial Institution has been rejected by the Reserve Bank of India (Department of A/on Banking Supervision) by its order of November 25,1998; nevertheless, as the Company has been legally adviced, it carries on activities of a non-banking financial company for the benefit of deposit holders; (Refer Note 15(2) to the Accounts)

2. Attention is invited to Note 15(5) to the Accounts relating to the Order of Special Court and payment of only Rs. 3,14,87,341/- against deposit and interest amounting to Rs. 15,55,03,932/- in the aggregate;

3. a. Attention is invited to Note 15 (6) (a) to the

Accounts relating to delay in repayment of outstanding principals of Public Deposits matured and interest thereon, for which the Company is to follow a Schedule of Repayment as per the directions issued by the Company Law Board. According to the said directions, the Company was expected to pay upto March 31, 2014 an aggregate sum ofRs. 7,49,81,015/- to its deposit holders. Nevertheless, the Company has not been able to adhere to the said Schedule of Repayment. During the year, it has paid only Rs. 30,000/- and the balance of Rs. 7,49,51,015/- remains unpaid. The aggregate principal amount of Public Deposits matured and not paid as on March 31, 2014 is Rs. 5,38,64,656/-.

b. Attention is also invited to Note 15(6)(b) to the

Accounts relating to delay in payment of 19% Non convertible Debenture -1997 series (NCDs), which have already become due for redemption; for the said Debentures, the Company is to follow a Schedule of Repayment on the same lines with the Order of CLB for Public Deposits.

Accordingly, the Company was expected to pay upto March 31, 2014 an aggregate sum of 92,92,835/-. Nevertheless, the Company has not been able to adhere to the said Schedule of Repayment. During the year company paid Rs. 47,645/-. The aggregate overdue NCDs as on March 31, 2014 was Rs. 92,45,790/-.

4 Our remarks in Para 1, 2 & 3 above - whether considering the said circumstances, the Company would be able to continue as a going concern and consequential effects and adjustments, if any, on the Accounts; and

5. Non redemption of 10% cumulative preference shares oft 1,20,00,000/- due for redemption on 31" March, 2003 (refer note 9 to the Accounts)

Qualified 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 Qualified Opinion paragraph the accompanying financial statements give the information required by the Act in the manner so required and give true and fair view in conformity with the accounting principles generally accepted in India. i. In case of the Balance Sheet, of the state of the Company''s affairs as at March 31, 2014; and ii. In case of the Profit and Loss Account, of the Loss for the period ended March 31, 2014 and iii. in case of the Cash Flow Statement of the cash flows for the year ended March 31, 2014.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors'' Report) Order, 2003, (the Order) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 (hereinafter to referred to as ''the Act'') we give in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

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

(i.) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; (ii.) In our opinion, proper 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 branches not visited by us; (iii.) The Balance Sheet, Statement of Profit and Loss Account and Cash Flow statement dealt with by this report are in agreement with the books of account; (iv.) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the Accounting Standards notified under the Companies, 1956 read with General Circular 15/2013 dated 13th September, 2013 issued by the Ministry of Company Affairs, in respect of Section 133 of the Companies Act, 2013. (v.) In our opinion and as per the information and according to explanation given to us, all of the Directors are prima facie, disqualified as on March 31, 2014 from being appointed as Directors in terms of clause (g) of sub- section (1) of Section 274 of the Companies Act, 1956; (vi.) We report that the Company has not filed returns of minimum liquid investments since the quarter ending on June 30, 1998 and half yearly returns on Prudential Norms since September 30,1997; the aggregate amount of total deposits and Non Convertible Debentures, including interest to the extent provided thereon, as at the last day of the financial year is Rs. 7,49,51,015/- and Rs. 92,45,190/- respectively

ANNEXURE TO THE AUDITOR''S REPORT

(Referred to in paragraph 1 under the heading of "Report on Other Legal and Regulator Requirements" of our Report of even date ) (i) (a) The Company has not updated its records showing full particulars including quantitative details and situation of its fixed assets.

(b) The Fixed Assets have not been verified by the management during the year.

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

(ii) The provision of clause 4(ii) of the Companies (Auditors'' Report) Order, 2003 are not applicable to the Company.

(iii) a) According to information and explanations given to us, 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, sub-clause (b), (c) and (d) are not applicable.

(iii) b) According to information and explanations given to us, the Company has not taken any loans from Companies, firms and other parties listed in register maintained under section 301 of the Companies Act, 1956. The other provision of clause 4 (iii) are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal controls commensurate with the size of the Company and the nature of its business with regard to sale of shares, securities and debentures. During the course of audit no major weakness has been noticed in these internal controls.

(v) (a) In our opinion and according to the information and explanation given to us, the transactions that need to be entered into the register in pursuant of section 301 of the Act have been so entered.

(b) In our opinion and according to the information and explanation given to us, there are no transactions exceeding the value of Rupees Five Lakhs in respect of any party during the year.

(vi) The provisions of section 58A except Section 58A(2)(b) of the Companies Act, 1956 are not applicable to the Company. As regards provisions of Section 58AA of the Act refer note 6(a) to the Accounts under Schedule 15 regarding approval of Schedule of Repayment of Public Deposits by the Company Law Board. However, the Company has not been able to adhere to the said Schedule of Repayment. Further in our opinion and according to the information and explanation given to us, the Company has not complied with the Directives issued by the Reserve Bank of India in terms of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 and more particularly, the following :

a) Not obtaining credit rating

b) Not regularizing public deposits held in excess of permissible limits

c) Non-payment of interest till date of repayment in respect of deposits matured but repaid later:

d) Non- submission of various returns to the Reserve Bank of India:

e) Not maintaining of minimum percentage of liquid assets. (vii) We are informed that in view of reduction in volume of business activities and existing internal controls, the Company did not have an internal audit system.

(viii) The provisions of clause 4 (viii) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

(ix) a) The Company is generally regular in depositing the undisputed statutory dues in respect of Provident Fund, Investor Education and Protection Fund, Employee''s State Insurance, Sales-tax, Wealth tax, Custom Duty, Excise Duty, cess and other material statutory dues, except for non payment of Income tax amounting to Rs. 279.03 lacs (Previous year Rs. 279.03 lacs).

(ix) b) According to the information and explanation given to us, no undisputed amount payable in respect of sales tax, wealth tax, service tax, customs duty and excise duty were in arrears as at 31st March, 2014 for a period of more than six months from the date become payable except for non payment of Income tax amounting to Rs. 279.03 Lacs (Previous year Rs. 279.03 lacs).

(ix) c) According to the information and explanations given to us, there were dues in respect of income tax which have not been deposited on account of any dispute.

Name of Amount Rs. in Forum where statutory dues crores dispute is pending

Income tax 3.00 ITAT

(x) The Company has accumulated losses exceeding 50% of its net-worth at the end of the financial year. It has incurred cash losses in the current financial year and also in the immediately preceding financial year.

(xi) According to information and explanation given to us, there are following defaults by the Company in respect of principal and interest to banks & debenture holders.

Lender Amount due Period of Default including interest

Debentures 92.45 lacs 13 1/2 years*

Refer note 6(b) to the Accounts under Note 15

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

(xiii) The Company is not a chit fund or nidhi/mutual benefit fund/ society, therefore the provisions of clause 4 (xiii) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

(xiv)ln our opinion and according to the information and explanations given to us, the Company has maintained proper records of transactions and contracts as to dealing or trading in shares, securities, debentures and other investments and timely entries have been made therein, and have been held in the name of the company except of the exception, if any granted under Section 49 of the Companies Act, 1956.

(xv) According to information and explanations given to us, the Company had given guarantees for loan taken by another Company from a bank in earlier years. We are informed that the loans taken by the company are in process of being settled and as such terms and conditions are not prejudicial to the interest of the company.

(xvi) According to information and explanation given to us, no fresh term loans have been raised during the year.

(xvii)According to information and explanation given to us, and on overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long term investment. No long term funds have been used to finance short term assets, except working capital.

(xviii)The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Act.

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

(xx) The Company has not raised any money through a public issue during the year.

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

For M.D. PANDYA & ASSOCIATES Chartered Accountants Reg. No. 107325W

A.D. Pandya Partner Mem. No. 33930

MUMBAI Dated ; 30th May 2014

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Mar 31, 2013

1. We have audited the accompanying financial statements of CIFCO FINANCE LIMITED which comprises of Balance Sheet as at 31st March, 2013 and the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the 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 maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditors'' Responsibility

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

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

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

In our opinion and to the best of our information and according to the explanations given to us, the financial statements subject to :-

1. Preparation of accounts of the Company on the basis of the assumption of going concern without making any adjustment for recoverability/classification of assets and its amounts and classification of liabilities and its amounts, inspite of the following indicators:

i The application of the Company to carry on business of a Non-Banking Financial Company has been rejected by the Reserve Bank of India (Department of Non Banking Supervision) by its order of November 25,1998; nevertheless, as the Company has been legally adviced, it carries on activities of a non-banking financial company for the benefit of deposit holders; (Refer Note 4 to the Accounts);

ii The Company has let out its premises at Navsari to an associate company for pursuing its operations (Refer para 2 of Note 4 to the Accounts);

iii Though at the year end, the Net Worth of the Company was negative and would have been further negative by a substantial amount, had the effects been given for

a. Provisioning of Non-Performing Assets as required by Non -Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 issued by the Reserve Bank of India ( "Prudential Norms Directions"), considering the fact that the deposits were already accepted prior to November 25,1998 (the date of rejection of its application) and were yet to be fully repaid.

b. Providing for depreciation on plant and machinery given on lease by following the Guidance Note on Accounting for Leases issued by the Institute of Chartered Accountants of India; [Refer Note 6.b. to the Accounts] in our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of such books.

2. Attention is invited to Note 7 to the Accounts relating to the Order of Special Court and payment of only Rs. 3,14,87,341/- against deposit and interest amounting to Rs. 14,97,43,932/- in the aggregate;

3. a. Attention is invited to Note 8a. to the Accounts relating to delay in repayment of outstanding principals of Public Deposits matured and interest thereon, for which the Company is to follow a Schedule of Repayment as per the directions issued by the Company Law Board. According to the said directions, the Company was expected to pay upto March 31, 2013 an aggregate sum of Rs. 7,50,62,015/- to its deposit holders. Nevertheless, the Company has not been able to adhere to the said Schedule of Repayment. During the year, it has paid only Rs. 81,000/- and the balance of Rs. 7,49,81,015/- remains unpaid. The aggregate principal amount of Public Deposits, matured and not paid as on March 31, 2013 is Rs. 5,38,94,656/-. b. Attention is also invited to Note 6.b. to the Accounts relating to delay in payment of 19% Non convertible Debenture -1997 series (NCDs), which have already become due for redemption; for the said Debentures, the Company is to follow a Schedule of Repayment on the same lines with the Order of CLB for Public Deposits. Accordingly, the Company was expected to pay upto March 31, 2013 an aggregate sum of Rs. 92,98,835/-. Nevertheless, the Company has not been able to adhere to the said Schedule of Repayment. During the year the Company paid

Rs. Nil. The aggregate overdue NCDs as on March 31, 2013 was Rs. 61,01,046/-.

4. Our remarks in Para 1 above - whether considering the said circumstances, the Company would be able to continue as a going concern and consequential effects and adjustments, if any, on the Accounts; and Subject to -

a. Not giving effect to Assets Classification and Provisioning of Non-Performing Assets pursuant to Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 considering the fact that the Deposits were already accepted prior to the date of rejection of its application, for registration to carry on business as an NBFC by the Reserve Bank of India and the same are yet to be fully repaid; the Company has obtained legal advice that Provisioning Norms are not applicable to the Company;

b. Note 6(b) to the Accounts relating to providing of depreciation on plant and machinery given on lease, without following the Guidance Note on Accounting for Leases issued by the Institute of Chartered Accountants of India and pending working out consequential effects on account thereto on Loss for the year and the balance carried to the Net Block of Fixed Assets;

c. Loan given to, guarantee given and investments made in earlier years in shares of other companies in excess of the limits specified under Section 372A of the Companies Act, 1956. [Refer Note 7 to the Accounts]; and

5. Non redemption of 10% cumulative preference shares of Rs. 1,20,00,000 due for redemption on 31st March, 2003 (Refer Note 10 to the Acccounts) 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 other Notes thereon and Significant Accounting Policies stated in Schedule 16, give the information required by the Companies Act, 1956 in the manner so required and give true and fair view in conformity with the accounting principles generally accepted in India.

i. In case of the Balance Sheet, of the state of the Company''s affairs as at March 31, 2013; and

ii. In case of the Profit and Loss Account, of the Loss for the period ended March 31, 2013 and

iii. in case of the cash flow statement of the cash flows for the year ended March 31, 2013.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors'' Report) Order, 2003, (the Order) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 (hereinafter referred to as ''the Act'') we give in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

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

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

(ii.) In our opinion, proper 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 branches not visited by us;

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

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

(v.) In our opinion and as per the information and according to explanation given to us, all of the Directors are prima facie, disqualified as on March 31, 2013 from being appointed as Directors in terms of clause (g) of sub- section (1) of Section 274 of the Companies Act, 1956;

(vi.) We report that the Company has not filed returns of minimum liquid investments since the quarter ending on June 30, 1998 and half yearly returns on Prudential Norms since September 30,1997; the aggregate amount of total deposits and Non Convertible Debentures, including interest to the extent provided thereon, as at the last day of the financial year is Rs. 5,38,94,656/- and X 61,01,046/- respectively

i.a The company has not updated its records showing full particulars including quantitative details and situation of its fixed assets.

i.b The Fixed Assets have not been physically verified by the management during the year.

i.c The Company has not disposed off substantial part of fixed assets during the year.

ii. The provision of clause 4(ii) of the Companies (Auditors'' Report) Order, 2003 are not applicable to the Company.

iii.a. The Company has not granted any loans to companies, firms and other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

iii.b. There are no overdue amount more than Rs. one lakh in respect of the aforesaid loan.

iii.c. The Company has not taken loans from companies, firms and other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

iv. In our opinion and according to the information and explanations given to us, it appears that there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the sale of other assets and also for sale of shares and securities.

v.a. In our opinion and according to the information and explanation given to us, the transactions that need to be entered into the register in pursuance of Section 301 of the Act have been so entered.

v.b. In our opinion and according to the information and explanation given to us, there are no transactions exceeding the value of Rupees Five Lakhs in respect of any party during the year.

vi. The provisions of Section 58A except Section 58A(2)(b) of the Companies Act, 1956 are not applicable to the Company. As regards provisions of Section 58AA of the Act Refer Note 7(a) to the Accounts under Schedule 16 regarding approval of Schedule of Repayment of Public Deposits by the Company Law Board. However, the Company has not been able to adhere to the said Schedule of Repayment. Further, in our opinion and according to the information and explanations given to us, the Company has not complied with the Directives issued by the Reserve Bank of India in terms of Non- Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 and more particularly, the following :

a) not obtaining credit rating;

b) not regularising public deposits held in excess of permissible limits;

c) non-payment of interest till the date of repayment in respect of deposits matured but repaid later;

d) non-submission of various returns to the Reserve Bank of India;

e) not maintaining of minimum percentage of liquid assets.

vii. We are informed that in view of reduction in volume of business activities and existing internal controls, the Company did not have internal audit system.

viii. The provisions of clause 4 (viii) of the Companies (Auditors Report) Order 2003 are not applicable to the Company.

ix.a The Company is regular in depositing with appropriate authorities undisputed statutory dues of provident fund, ESIC, sales tax, service tax and other material statutory dues.

ix.b According to the information and explanations given to us, no undisputed amounts payable in respect of income tax , wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2013 for a period of more than six months from the date they became payable.

ix.c According to information and explanation given to us, there are dues in respect of income-tax, which have not been deposited on account of any dispute.



Name of Amount Forum where statutory dues Rs.(crores) dispute is pending

Income tax 3.00 ITAT

x. The accumulated losses of the Company exceed 50% of the net worth as at the end of financial year. The Company has not incurred cash loss in the current year and also in the preceeding financial year.

xi. Based on our audit and basis of information and explanations given to us, there are following defaults by the Company in respect of principal and interest to banks & debentureholders.

Lender Amount due Period of including Interest Default

Debentureholders 92.92 lakhs 12 1/2 years*

* Refer Note 8(b) of Schedule 15.

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

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

xiv. According to information and explanation given to us, the Company is not dealing or trading in shares, securities, debentures and other investments, therefore the provisions of clause 4 (xiv) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

xv. According to information and explanation given to us, the Company had given guarantee for loans taken by a Company from bank. We are informed that the loans taken by the company are in process of being settled and as such terms and conditions are not prejudicial to the interest of the company.

xvi. According to information and explanation given to us, no fresh term loans were/have been applied for the purpose for which they were raised.

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

xviii. The Company has not made preferential allotment of shares to parties and companies covered in register under Section 301 of the Act.

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

xx. The Company has not raised any money through a public issue during the year.

xxi. According to the information and explanation given to us, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.



For M.D. PANDYA & ASSOCIATES

Chartered Accountants

Reg. No. 107325W



A.D. Pandya

Mumbai Partner

Dated : 31st May, 2013 Mem. No. 33930

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Mar 31, 2010

1. We have audited the attached Balance Sheet of CIFCO FINANCE LIMITED as at March 31,2010 and the Profit and Loss Account of the Company for the year ended on that date. These financial Statements are in responsibility of the Companys management Our responsibility is to express our opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement As audit includes, examining on a test basis, evidence supporting the amount 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 presentation of the linancial statements. We believe that our audit provides a reasonable basis of our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, (the Order) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act. 1956 (hereinafter to referred to as the Act*) we enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order. Further to our comments in the Annexure referred to in (3) above, we report that:

1. 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.

2. Subject to -

Preparation of accounts of the Company on the basis of the assumption of going concern without making any adjustment for recoverablllty/ciasslficatlon of assets and its amounts and classification of liabilities and its amounts, inspite of the following indicators:

I The application of the Company to carry on business of a Non-Banking Financial Institution has been rejected by the Reserve Bank of India (Department of Non Banking Supervision) by Its order of November 25, 1998; nevertheless, as the Company has been legally adviced, it carries on activities of a non-banking financial company for the benefit of deposit holders; (Refer Notel to the Accounts);

II The Company has entered into an arrangement with an associate Company for its presently operating FIMS Division (Refer para 2 of Note 1 to the Accounts);

ill Though at the year end, the Net Worth of the Company was negative and would have been further negative by a substantial amount, had the effects been given for

a. Provisioning of Non-Performing Assets as required by Non -Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 Issued by the Reserve Bank of India ("Prudential Norms Directions"), considering the fact that the deposits were already accepted prior to November 25,1998 (the date of rejection of its application) and were yet to be fully repaid [Refer Note 5 to the Accounts];

b. Providing for depreciation on plant and machinery given on lease by following the Guidance Note on Accounting for Leases Issued by the institute of Chartered Accountants of India; [Refer Note 3,b. to the Accounts] In our opinion , proper books of account as required by law have been kept by the Company so for as appears from our examination of such books.

3. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account

4. In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report, comply with Accounting Standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956, to the extent applicable.

5. In our opinion and as per the Information and according to explanantion given to us, all of the Directors are prima facie, disqualified as on March 31, 2010, from being appointed as Directors in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act 1956.

6. I. Attention Is invited to Note 4 to the Accounts relating

to the Order of Special Court and payment of only Rs.3,14,87,341/- against deposit and interest amounting to Rs. 13,24,63,932/- In the aggregate;

ii. a. Attention is Invited to Note 6.a. to the Accounts relating to delay in repayment of outstanding principals of Public Deposits matured and interest thereon, for which the Company is to follow a Schedule of Repayment as per the directions issued by the Company Law Board. According to the said directions, the Company was expected to pay upto March 31,2010 an aggregate sum of Rs.736,65,121/- to Its deposit holders. Nevertheless, the Company has not been able to adhere to the said Schedule of Repayment. During the year, it has paid only Rs.2,29,752/- and the balance of Rs. 7,54,35,3691- remains unpaid. The aggregate principals amount of Public Deposits matured and not paid as on March 31,2010 Is Rs. 5,42,86,656/-.

b. Attention is also invited to Note 6.b. to the Accounts relating to delay In payment of 19% Non convertible Debenture - 1997 series (NCDs), which have already become due for redemption; for the said Debentures, the Company Is to follow a Schedule of Repayment on the same lines with the Order of CLB for Public Deposits. Accordingly, the Company was expected to pay upto March 31,2010 an aggregate sum of Rs.1,14,82,835/-. Nevertheless, the Company has not been able to adhere to the said Schedule of Repayment The aggregate overdue NCDs as on March 31, 2010 was Rs.68,02,114/-.

7. i. Subject to - Our remarks in Para 2 above - whether considering the said circumstances, the Company would be able to continue as a going concern and consequential effects and adjustments. If any, on the Accounts; and

ii. Subject to -

a. Not giving effect to Assets Classification and Provisioning of Non-Performing Assets pursuant to Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 considering the fact that the Deposits were already accepted prior to the date of rejection of its application, for registration to carry on business as a NBFC by the Reserve Bank Of India and the same are yet to be fully repaid; the Company has obtained legal advice that Provisioning Norms are not applicable to the Company. (Refer Note 5 to Accounts) ; Had the Company followed provisioning norms as per the said Directions, though there being no Impact on the Loss for the year, the debit balance of the Profit and Loss Account carried to the Balance Sheet, due to non- provision would have been higher by Rs.66,02,093/- and Sundry Debtors on Account of Lease and hire Purchase and other Debtors as Indicated under the head Current Assets would have been stated lower by Rs.66,02,093/-;

b. Note 3.b. to the Accounts relating to providing of depreciation on plant and machinery given on lease, without following the Guidance Note on Accounting for Leases issued by the Institute of Chartered Accountants of India and pending working out consequential effects on account thereto on Loss for the year and the balance carried to the Net Block of Fixed Assets;

c. Loan given to, guarantee given and Investments made In earlier years in shares of other companies in excess of the limits specified under Section 372A of the Companies Act, 1956.[Refer Note 7 to the Accounts]; and

ill. Subject to -

Without considering the items mentioned In Para 7.ii b, above, the effect of which could not be determined, had the observations made by us in Para 7.ii.a above have been considered, the loss for the year would have been Rs. 66,17,559/- (as against the reported loss figure of Rs. 15,466/-) and considering the effect of those observations in earlier years to the extent of Rs. 66,02,093/-, the carried forward cumulative Debit Balance In the Profit and Loss Account would have been Rs. 22,66,00,894/- (as against the reported figure of Rs. 21,99,98,801/-) and Total Current Assets would have been Rs. 5,02,71,317/- (as against reported figure of Rs. 5,68,73.410/-).

iv. Non redemption of 10% cumulative preference shares of Rs. 1,20,00,000 due for redemption on 31st March, 2003 (refer note 8 to the Acccounts) 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 other Notes thereon and Significant Accounting Policies stated in Schedule 16, give the information required by the Companies Act 1956 in the manner so required and give true and fair view in conformity with the accounting principles generally accepted In India.

i. In case of the Balance Sheet, of the state of the Companys affairs as at March 31,2010; and

ii. In case of the Profit and Loss Account, of the Loss for the period ended March 31,2010.

and

iii. in case of the cash flow statement of the cash flows for the year ended March 31,2010.

8. We report that the Company has not filed returns of minimum liquid investments since the quarter ending on June 30,1998 and half yearly returns on Prudential Norms since September 30,1997; the aggregate amount of total deposits and Non Convertible Debentures, including interest to the extent provided thereon, as at the last day of the financial year is Rs. 5,42,86,656/- and Rs. 68,02,114/- respectively.

REFERRED TO IN PARAGRAPH 3 OF OUR AUDITOR REPORT OF EVEN DATE

i a The company has not updated its records showing full particulars including quantitative details and situation of its fixed assets.

i b The Fixed Assets have not been physically verified by the management during the year.

i c The Company has not disposed off substantial part of fixed assets during the year.

ii. The provision of clause 4(H) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

iii.a. The Company has not granted any loans to companies, firms and other parties listed in the register maintained under Section 301 of the Companies Act 1956.

iii.b. There are no overdue amount more than one lakh in respect of the aforesaid loan.

iii.c. The Company has not taken loans from companies, firms and other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

iv. In our opinion and according to the information and explanations given to us, it appears that there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the sale of other assets and also for sale of shares and securities.

v.a. In our opinion and according to the information and explanation given to us, the transactions that need to be entered into the register in pursuant of section 301 of the Act have been so entered.

v.b. In our opinion and according to the information and explanation given to us, there are no transactions exceeding the value of Rupees Five Lakhs in respect of any party during the year.

vi. The provisions of Section 58A except Section 58A(2)(b) of the Companies Act, 1956 are not applicable to the Company. As regards provisions of Section 58AA of the Act Refer Note 7(a) to the Accounts under Schedule 16 regarding approval of Schedule of Repayment of Public Deposits by the Company Law Board. However, the Company has not been able to adhere to the said Schedule of Repayment. Further, in our opinion and according to the information and explanations given to us, the Company has not complied with the Directives issued by the Reserve Bank of India in terms of Non- Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 and more particularly, the following:

a) not obtaining credit rating;

b) not regularising public deposits held in excess of permissible limits;

c) non-payment of interest tilt the date of repayment in respect of deposits matured but repaid later;

d) non-submission of various returns to the Reserve Bank of India;

e) not maintaining of minimum percentage of liquid assets.

vii. We are informed that in view of reduction in volume of business activities and existing intemat controls, the Company did not have internal audit system.

viii. The provisions of clause 4 (vill) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

ix a The Company is regular in depositing with appropriate authorities undisputed statutory dues of provident fund, ESIC, sales tax, service tax and other material statutory dues.

ix b According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2010 for a period of more than six months from the date they became payable.

ix c According to information and explanation given to us, there are dues in respect of income-tax, which have not been deposited on account of any dispute.

Name of Amount Forum where

statutory dues Rs.(crores) dispute is

pending

Income tax 2.69 CIT (A)

x. The accumulated losses of the Company exceed 50% of the net worth as at the end of financial year. The Company has not incurred cash loss in the current year and also in the preceeding financial year.

xi. Based on our audit and basis of information and explanations given to us, there are following defaults by the Company in respect of principal and interest to banks & debentureholders.

Lender Amount due Period of

including Interest Default

Debentureholders 1.06crores 91/2 years

* Refer Note 8 of schedule 14.

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

xiii. The Company is not a chit fund or nidhi / mutual benefit fund / society, therefore the provisions of clause 4 (xiii) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

xiv. According to information and explanation given to us, the Company is not dealing or trading in shares, securities, debentures and other investments, therefore the provisions of clause 4 (xiv) of the Companies (Auditors Report) order 2003 are not applicable to the Company.

xv. According to information and explanation given to us. the Company had given guarantee for loans taken by a Company from bank. We are informed that the loans taken by the company are in process of been settled and as such terms and conditions are not prejudicial to the interest of the company.

xvi. According to information and explanation given to us, no fresh term loans were have been applied for the purpose for which they were raised.

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

xviii. The Company has not made preferential allotment of shared to parties and companies covered in register under Section 301 if the Act.

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

xx. The Company has not raised any money through a public issue during the year.

xxi. According to the information and explanation given to us, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For M.D. PANDYA & ASSOCIATES Chartered Accountants

Reg. No. 10732SW

A.D. Pandya

Mumbai Partner

Dated: 6th September, 2010 Mem. No. 33930