Auditor Report of Western India Cottons Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of THE WESTERN INDIA COTTONS LIMITED, PAPPINISSERI ("the Company"), which comprise the Balance Sheet as at 31st March, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

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.

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.

Basis for Qualified Opinion

1. The impairment loss, if any, in respect of assets has not been assessed and adjusted in the accounts as required in the Accounting Standard, ''AS 28-Impairment of Assets''.

2. Confirmation in respect of balances outstanding under trade receivables, advances and liabilities has not been obtained.

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 matters stated in the Basis for Qualified Opinion paragraph, 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:

(a) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2014;

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors'' Report) Order, 2003 ("the Order") 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.

2. As required by section 227(3) of the Companies Act, 1956, we report that:

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

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

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

d. Except for the effects of the matters stated in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement 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 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2014, 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 44IA 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.

Referred to in our report of 19 August, 2014

(i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. But, the records have not been updated.

(b) The fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.

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

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

(b) The procedures laid down by the management for physical verification of inventory 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 physical verification of stocks as compared to book records were not material and have been properly dealt with in the books of account.

(iii) (a) The company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) The company has taken unsecured loan from a director. The maximum amount of the loan during the year was Rs.24 lakh and the year-end balance was Rs. 19 lakh. The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(c) No interest is charged on the loan taken from the director. In our opinion, the other terms and conditions on which the loan has been taken from the director are not, prima facie, prejudicial to the interest of the company.

(d) The principal amount of the loan taken from the director was partly repaid by the company during the year.

(iv) 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 purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

(v) (a) According to the information and explanations given to us, there were no contracts or arrangements referred to in section 301 of the Companies Act, 1956 to be entered in the register required to be maintained under that section.

(b) The company did not have any transaction exceeding the value of five lakh rupees with any party in pursuance of contracts or arrangements to be entered in the register maintained under section 301 of the Companies Act, 1956.

(vi) The company has not accepted deposits from the public.

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

(viii) The Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 are not applicable to the company. The company was not, therefore, required to maintain cost records.

(ix) (a) The company was regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, income tax, sales tax, service tax and other statutory dues during the year. There was delay in remittance of employees'' state insurance dues. According to the information and explanations given to us, no undisputed amounts payable in respect of statutory dues were in arrears, as at 31 March, 2014 for a period of more than six months from the date they became payable other than employees'' state insurance amounting to Rs.97,335/-.

(b) According to the information and explanation given to us, the following disputed amount of incometax was not deposited with the appropriate authority as at 31 March, 2014:

Nature of statute : Incometax

Nature of dues : Incometax and interest

Amount : Rs. 1,23,48,110/-

Period for which the amount relates : 2010-''11 (Assessment year 2011-''12)

Forum where dispute is pending : Commissioner of Incometax (Appeals), Kozhikode

There are no dues of salestax, wealthtax, service tax, customs duty and excise duty which have not been deposited on account of dispute.

(x) The accumulated losses of the company are more than fifty percent of its net worth as at 31 March, 2014. The company has not incurred cash losses in the financial year and in the immediately preceding financial year.

(xi) The company has not defaulted in repayment of dues to any financial institution or bank. The company has not issued debentures.

(xii) The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

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

(xv) According to the information and explanations given to us the company has not given guarantees for loans taken by others from banks or financial institutions.

(xvi) According to the information and explanations given to us, the company has not raised any term loan during the year.

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

(xviii) According to the information and explanations given to us, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the period covered by our audit report.

(xx) The company has not raised any money by public issues during the period covered by our audit report.

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

For T.K. Menon & Co., Chartered Accountants. Firm Regn. No: 002067S

P.Balagopal Partner Membership No.022290

---

Mar 31, 2012

We have audited the attached Balance Sheet of THE WESTERN INDIA COTTONS LIMITED, PAPPINISSERI, as at 31st March, 2012 and the Profit and Loss Account and the Cash Flow Statement of the company for the year ended that date annexed thereto. The preparation and presentation of these financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We have conducted our audit in accordance with the auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatements. An audit includes examining, on test basis, evidences supporting the amounts and disclosures in the financial statements. An audit also includes assessment of the accounting principles used and the significant estimates made by the management, as well as evaluation of the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and 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) 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.

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

(4) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the accounting standards referred to in section 211(3C) of the Companies Act, 1956, except 'AS 28, Impairment of Assets', in that impairment loss, if any, in respect of assets has not been assessed and adjusted in the accounts.

(5) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors of the company are disqualified as on 31st March 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 on the said date.

(6) The cess payable under section 441A of the Companies Act, 1956, has not been specified by the Central Government and hence, it is neither paid nor provided for in the accounts.

(7) Confirmation in respect of balances outstanding under trade receivables, advances and liabilities has not been obtained.

Subject to the above comment, in our opinion, and to the best of our information and according to the explanations given to us, the said accounts, read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: -

(a) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2012;

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

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

(8) As required by the Companies (Auditors' Report) Order, 2003 issued by the Government of India under section 227(4A) of the Companies Act, 1956, we enclose in the attached Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Annexure to Auditors' Report Referred to in paragraph 8 of our report of 22 August, 2012

(i) (a) The company has maintained proper records showing full particulars

including quantitative details and situation of fixed assets. But, the records have not been updated.

(b) The fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.

(c) The company has disposed of a substantial part of the fixed assets during the year. In our opinion, the sale has not affected the company's ability to continue as a going concern.

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

(b) The procedures laid down by the management for physical verification of inventory 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 physical verification of stocks as compared to book records were not material and have been properly dealt with in the books of account.

(iii) (a) The company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) The company has taken unsecured loan from a director. The maximum amount of the loan during the year and the year-end balance were Rs.49 lakh each. The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(c) No interest is charged on the loans taken from the director. In our opinion, the other terms and conditions on which the loans have been taken from the director are not, prima facie, prejudicial to the interest of the company.

(d) The principal amount of the loan taken from the director was not repaid by the company during the year.

(iv) 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 purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

(v) (a) According to the information and explanations given to us, there were no contracts or arrangements referred to in section 301 of the Companies Act, 1956 to be entered in the register required to be maintained under that section.

(b) The company did not have any transaction exceeding the value of five lakh rupees with any party in pursuance of contracts or arrangements to be entered in the register maintained under section 301 of the Companies Act, 1956.

(vi) The company has not accepted deposits from the public.

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

(viii) The Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 are not applicable to the company. The company was not, therefore, required to maintain cost records.

(ix) (a) The company was regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, income tax, sales tax and excise duty during the year. The company did not have any employees' state insurance scheme in operation during the year. According to the information and explanations given to us, no undisputed amounts payable in respect of statutory dues were in arrears, as at 31 March, 2012 for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us, there are no dues of salestax, wealthtax, service tax, customs duty and excise duty which have not been deposited on account of dispute.

(x) The accumulated losses of the company are more than fifty percent of its net worth as at 31 March, 2012. The company has not incurred cash losses in the financial year and in the immediately preceding financial year.

(xi) The company has not defaulted in repayment of dues to any financial institution or bank. The company has not issued debentures.

(xii) The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

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

(xv) According to the information and explanations given to us the company has not given guarantees for loans taken by others from banks or financial institutions.

(xvi) According to the information and explanations given to us, the company has not raised any term loan during the year.

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

(xviii) According to the information and explanations given to us, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the period covered by our audit report.

(xx) The company has not raised any money by public issues during the period covered by our audit report.

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

For T.K. Menon & Co.,

Chartered Accountants

Firm Regn. no:002067S

P.Balagopal

Partner

Membership No.022290

---

Mar 31, 2010

We have audited the attached Balance Sheet of THE WESTERN INDIA COTTONS LIMITED, PAPPINISSERI, as at 31st March, 2010 and the Profit and Loss Account and the Cash Flow Statement of the company for the year ended that date annexed thereto. The preparation and presentation of these financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We have conducted our audit in accordance with the auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatements. An audit includes examining, on test basis, evidences supporting the amounts and disclosures in the financial statements. An audit also includes assessment of the accounting principles used and the significant estimates made by the management, as well as evaluation of the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and 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) 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.

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

(4) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the accounting standards referred to in section 211(3C) of the Companies Act, 1956, except ‘AS 28, Impairment of Assets, in that impairment loss, if any, in respect of assets has not been assessed and adjusted in the accounts.

(5) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors of the company are disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 on the said date.

(6) The cess payable under section 441A of the Companies Act, 1956, has not been specified by the Central Government and hence, it is neither paid nor provided for in the accounts.

(7) (a) Confirmation in respect of balances outstanding under trade debtors, advances and liabilities has not been obtained.

(b) The charge created in favour of The Federal Bank Ltd. by hypothecation of motor car has not been registered as required by section 125 of the Companies Act, 1956.

Subject to the above comments, in our opinion, and to the best of our information and according to the explanations given to us, the said accounts, read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: -

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

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

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

(8) As required by the Companies (Auditors’ Report) Order, 2003 issued by the Government of India under section 227(4A) of the Companies Act, 1956, we enclose in the attached Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

ANNEXURE TO AUDITORS REPORT Referred to in paragraph 8 of our report of 9 August, 2010

(i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. But, the records have not been updated.

(b) The fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.

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

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

(b) The procedures laid down by the management for physical verification of inventories 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 physical verification of stocks as compared to book records were not material and have been properly dealt with in the books of account.

(iii) (a) The company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) The company has taken unsecured loans from two directors. The maximum amount of the loans during the year was Rs.68 lakh and the year-end balance was Rs.68 lakh. The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(c) No interest is charged on the loans taken from the directors. In our opinion, the other terms and conditions on which the loans have been taken from the directors are not, prima facie, prejudicial to the interest of the company.

(d) The principal amounts of the loans from directors were not repaid by the company during the year.

(iv) 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 purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

(v) (a) According to the information and explanations given to us, there were no contracts or arrangements referred to in section 301 of the Companies Act, 1956 to be entered in the register required to be maintained under that section.

(b) The company did not have any transaction exceeding the value of five lakh rupees with any party in pursuance of contracts or arrangements to be entered in the register maintained under section 301 of the Companies Act, 1956.

(vi) The company has not accepted deposits from the public.

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

(viii) The company did not carry out any manufacturing operations during the year and hence, was not required to maintain cost records pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956.

(ix) (a) The company was regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, income tax, sales tax and excise duty during the year. The company did not have any employees’ state insurance scheme in operation during the year. The employer’s contribution to employees’ state insurance for the months of October and November 2003 amounting to Rs.18,169/- are in arrears as at 31 March 2010 for a period of more than six months from the date it became payable. According to the information and explanations given to us, no undisputed amounts payable in respect of other statutory dues were in arrears, as at 31 March, 2010 for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us, there are dues of sales tax and central excise duty which have not been deposited on account of dispute as under:



Name of statute Period to which the Amount Forum where dispute amount relates is pending

The Kerala General 1998-99, 1999-00 Rs.48,94,497/- The Assistant

Salestax Act & 2000-01 Commissioner,

KVAT,

Special

Circle, Kannur



(x) The accumulated losses of the company are more than fifty percent of its net worth as at 31 March, 2010. The company has not incurred cash losses in the financial year and in the immediately preceding financial year.

(xi) In our opinion, and according to the information and explanations given to us, the company has defaulted repayment of dues in respect of secured loan from Indian Bank amounting to Rs.2,04,80,181/- since May, 2005. The loan was closed during the year under a one-time settlement agreement with the bank.

(xii) The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

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

(xv) According to the information and explanations given to us the company has not given guarantees for loans taken by others from banks or financial institutions.

(xvi) According to the information and explanations given to us, the company has not raised any term loan during the year.

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

(xviii) According to the information and explanations given to us, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued any debentures.

(xx) The company has not raised any money by public issues during the period covered by our audit report.

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



For T.K. Menon & Co.,

Chartered Accountants.

Firm Regn. no:002067S

P.Balagopal

Partner

Membership No.022290