1.  We have audited the attached Balance Sheet of Bhagawati Gas
 Limited, as at March 31, 2011, the Profit and Loss Account and also the
 Cash Flow Statement for the year ended on that date annexed thereto.
 These financial statements are the responsibility of the Company’s
 management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance 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.  As required by the Companies (Auditor’s Report) Order, 2003 issued
 by the Central Government of India in terms of sub-section (4A) of
 Section 227 of the Companies Act, 1956, we enclose in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order.
 
 4.  Attention is drawn to Note 4 of Schedule 17 regarding income in
 respect of minimum off take charges and other claims recognised during
 the year ended March 31, 2011. The effects of the above on the accounts
 are indeterminate. We are unable to express an opinion as to when and
 to what extent said amount would be realised.
 
 5.  Attention is drawn to Note 5 of Schedule 17 regarding non-provision
 for doubtful advances and security deposits aggregating to Rs
 24,211,431. The effects of the above on the accounts are indeterminate.
 We are unable to express an opinion as to when and to what extent said
 amount would be recovered.
 
 6.  Further to our comments in the Annexure referred to above, we
 report that:
 
 a.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 b.  In our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books.
 
 c.  The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account.
 
 d.  In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report comply with the Accounting
 Standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956;
 
 e.  On the basis of written representations received from the
 directors, as on March 31, 2011 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2011 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956;
 
 g. In our opinion and to the best of our information and according to
 the explanations given to us, subject to what is stated in para 4
 above, the ultimate effect which on the loss for the year is
 undeterminate. The said accounts 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:
 
 i.  in the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31,2011,
 
 ii.  in the case of the Profit and Loss Account, of the loss for the
 year ended on that date; and
 
 iii.  in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE
 
 i. a. The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 b.  A major portion of the fixed assets has been physically verified by
 the management during the year pursuant to a programme for physical
 verification of fixed assets, which in our opinion, is reasonable
 having regard to the size of the company and the nature of its assets.
 
 c.  During the year, the company has disposed off a substantial part of
 the plant and machinery. According to the information and explanation
 given to us, we are of the opinion that the sale of the said plant and
 machinery has not affected the going concern status of the company.
 
 ii. a. The inventory has been physically verified during the year by
 the management. In our opinion, the frequency of verification is
 reasonable.
 
 b.  The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the company and the nature of its business.
 
 c.  The company is maintaining proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 the book records have been properly dealt with in the books of account.
 
 iii. a. The company has granted interest free inter corporate loan to a
 company. The maximum amount involved during the year was Rs. 79,051,622
 and yearend balance was Rs. 44,022,524.
 
 b.  As stated in note 6 of Schedule 17, regarding proposal of
 conversion of interest free loan given, into equity shares of the
 borrower company, we are unable to express an opinion whether the terms
 and conditions of the interest free loan are, prima facie, prejudicial
 to the interest of the company.
 
 c.  According to the information and explanations given to us, the
 principal and interest accrued is repayable on demand.  Accordingly, we
 are unable to comment as to whether the party has been regular in
 payment of interest to the company.
 
 d.  According to the information and explanations given to us, the
 company has not taken any loans, secured or unsecured, from companies
 firms or other parties covered in the register maintained under Section
 301 of the Companies Act, 1956.  Accordingly, the provisions of the
 clause 4 (iii)(d), (iii)(e) (iii) (f) and (iii)(g) of the Companies
 (Auditors’ Report) Order, 2003 are not applicable to the company.
 
 iv. In our opinion and according to the information and explanations
 given to us, there exists an adequate internal control system
 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 neither observed nor have been informed of any
 continuing failure to correct major weaknesses in internal control
 system of the company.
 
 v. a. In our opinion, and according to the information and explanations
 given to us, the particulars of contracts or arrangements referred to
 in Section 301 of the Act have been entered in the register required to
 be maintained under that section.
 
 b. In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 and exceeding the value of Rs 500,000 in
 respect of any party during the year have been made at prices which are
 reasonable with regard to the prevailing market prices at the relevant
 time.
 
 vi. In our opinion and according to the information and explanations
 given to us, the company has not accepted any deposits under the
 provisions of Sections 58A, 58AA and other relevant provisions of the
 Companies Act, 1956 and the rules framed there under.
 
 vii.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 viii. We have broadly reviewed the books of account maintained by the
 company pursuant to the rules made by the Central Government for the
 maintenance of cost records under clause (d) of sub-section (1) of
 Section 209 of the Companies Act, 1956 and are of the opinion that
 prima facie, the prescribed accounts and records have been made and
 maintained. However, we are neither required to nor have we carried out
 any detailed examination of such accounts and records.
 
 ix. a. According to the information and explanations given to us, the
 company is generally regular in depositing with the appropriate
 authorities undisputed statutory dues including provident fund,
 investor education and protection fund, employees’ state insurance,
 income-tax, sales-tax, wealth tax, service tax, custom duty, excise
 duty, cess and any other statutory dues applicable to it except for
 income tax and provident fund where there have been delay in some
 cases.
 
 b. According to the information and explanations given to us, no
 undisputed amounts payable in respect of income-tax, sales-  tax,
 wealth tax, service tax, custom duty and excise duty were in arrear as
 at March 31, 2011 for a period of more than six months from the date
 they became payable.
 
 c.  According to information and explanations given to us, there are no
 dues of income-tax, sales tax, wealth tax, service tax, customs duty,
 excise duty or cess or any other statutory dues which have not been
 deposited on account of any dispute.
 
 x. In our opinion, the accumulated losses of the Company at the end of
 the financial year are not more than fifty percent of its net worth.
 The company has incurred cash losses in the financial year covered by
 our audit. However, it has not incurred cash losses in the immediately
 preceding financial year.
 
 xi. In our opinion and according to the records of the company examined
 by us and the information and explanations given to us, the company has
 not defaulted in repayment of dues to any financial institution or bank
 except the following dues:
 
                           IDBI Bank Term Loan
 
                                                       Period of default
 Amount Due  Due Date      Amount of
                            default    Date of payment        (in days)
 
 9,97.486    01-04-2010    997,486       21-04-2010              20
 
 15,03,000   30-06-2010    500,486       28-06-2010               1
 
 22,24,000   01-10-2010  2,124,486       11-10-2010              10
 
 22,24,000   01-11-2010  2,124,486       01-12-2010              30
 
 22,24,000   01-12-2010  2,124,486       02-12-2010               1
 
                            99,514       02-12-2010               1
 
                           500,000       13-4-2011              102
 22,24,000   01-01-2011
 
                           700,000       21-04-2011             110
 
                           924,486       03-05-2011             122
 
 22,24,000   01-02-2011     99,514       03-05-2011              91
 
                         2,124,486       09-08-2011             189
 
 22,24,514   01-03-2011  2,224,514       09-08-2011             161
 
 86,689      01-03-2011     86,685       09-08-2011             161
 
 xii. In our opinion and according to the information and explanations
 given to us, 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. According to the information and explanations given to us, the
 company is not dealing or trading in shares, securities, debentures and
 other investments. Accordingly, the provisions of clause 4 (xiv) of the
 Companies (Auditors’ Report) Order, 2003 are not applicable to the
 company.
 
 xv. According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.
 
 xvi. In our opinion, and according to the information and explanations
 given to us, term loans have been applied for the purposes for which
 they were raised.
 
 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 a short-term basis have been used for long-term
 investment.
 
 xviii. The company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Act during the year. Accordingly, the provisions of clause 4
 (xviii) of the Companies (Auditors’ Report) Order, 2003 are not
 applicable to the company.
 
 xix.  The company has not issued any debentures during the year.
 
 xx. The company has not raised any money by public issues during the
 year. Accordingly, the provisions of clause 4 (xx) of the Companies
 (Auditors’ Report) Order, 2003 are not applicable to the company.
 
 xxi. To the best of our knowledge and belief and 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 CHATURVEDI & PARTNERS
 
                                            Chartered Accountants
                                    Firm Registration No. 307068E
 
 New Delhi                                         R N CHATURVEDI
 
 August 11, 2011                                          Partner
 
                                            Membership No. 092087