Celebrity Fashions

We have audited the attached Balance Sheet of M/S CELEBRITY FASHIONS
 LIMITED as at 31s1 March 2009, 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 Companys
 Management. Our responsibility is to express an opinion on these
 Financial Statements based on our audit.
 
 1.  We conducted our audit in accordance with Auditing Standards
 generally accepted in India. 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 Management, as well as evaluating the overall financial statement
 preparation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 2.  As required by the Companies (Auditors Report) Order, 2003 as
 amended, issued by the Central Government of India in terms of Section
 227(4A) of the Companies Act, 1956, and on the basis of such checks of
 the books and records of the Company as we considered appropriate and
 according to the information and explanations given to us, we give in
 the Annexure, a statement on the matters specified in paragraphs 4 & 5
 of the said Order.
 
 3.  Further to our comments in the annexure referred to in paragraph 1
 above we report that.
 
 a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the 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 & 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 in sub section (3C) of Section 211 of the Companies
 Act, 1956.
 
 e) In view of the large losses incurred by the Company during the year
 under review, we have evaluated the appropriateness of the going
 concern assumption in accordance with SA - 57. In our opinion and on
 the basis of the information and explanations given to us, we report
 that we have obtained sufficient audit evidence to establish
 continuance of the Company as a going concern. The mitigating factors
 have been outlined in Note No. 12 of the Notes on Accounts, dealing
 with operational and financial restructuring.
 
 f) On the basis of written representations received from the Directors
 as on 31st March, 2009 and taken on record by the Board of Directors,
 none of the directors is prima facie disqualified as on 31st March 2009
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act, 1956; and
 
 g) In our opinion and to the best of our information and according to
 the explanations given to us, the said 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:
 
 i) in the case of the Balance Sheet of the state of affairs of the
 Company as at 31st March 2009;
 
 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 TO THE AUDITORS REPORT
 
 (Referred to in paragraph 2 of the Auditors Report of even date to the
 members of Celebrity Fashions Limited on the accounts for the year
 ended March 31st, 2009)
 
 (i).  In respect of its Fixed Assets:
 
 a) The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 b) As explained to us, the fixed assets of the Company have been
 physically verified by the Management during the year in a phased
 periodical manner, which in our opinion is reasonable, having regard to
 the size of the Company and nature of its assets. In accordance with
 the phased programme of verification, certain fixed assets were
 verified during the year and no material discrepancies were noticed on
 such verification.
 
 c) During the year, the Company has disposed of a major part of its
 Fixed Assets. Based on the information and explanations given by the
 Management and on the basis of audit procedures performed by us, we are
 of the opinion that the sale of the said fixed assets has not affected
 the going concern assumption (refer Note No. 9 of the Notes on
 Accounts).
 
 (ii).  In respect of its Inventories
 
 a) As explained to us the inventories of the Company have been
 physically verified by the Management during the year. In respect of
 inventories lying with third parties, these have substantially been
 confirmed by them. In our opinion the frequency of verification is
 reasonable.
 
 b) In our opinion and according to the information and explanations
 given to us, 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 has maintained proper record of inventories. There was
 no material discrepancies noticed on physical verification of
 inventories as compared to the book records.
 
 (iii).  a) The Company has not granted any loans, secured or unsecured,
 to companies, firms or other parties listed in the Register maintained
 under Section 301 of the Act.
 
 b) The Company has not taken any loans, secured or unsecured, from
 companies, firms or other parties listed in the Register maintained
 under Section 301 of the Act.
 
 (iv). In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to the purchase of inventory and fixed assets and for the sale of
 goods. Further on the basis of our examination of the books and
 information and as per the explanations given to us, we have neither
 come across nor have we been informed of any instance of continuing
 failure to correct major weaknesses in the aforesaid internal control.
 
 (v). Based on the audit procedures applied by us and according to the
 information and explanations given to us, we are of the opinion that
 there were no contracts or arrangements the particulars of which need
 to be entered in the register maintained under Section 301 of the
 Companies Act 1956. Hence the requirement of reporting regarding
 transactions of purchase and sale of goods, materials and services made
 in pursuance of such contracts aggregating during the year to Rs.
 500,000/- or more in respect of each party does not arise.
 
 (vi). The Company has not accepted any deposits from the public.
 Accordingly paragraph 4(vi) of the Order is not applicable.
 
 (vii). The Company has an internal audit system, which in our opinion
 is commensurate with the size and nature of its business.
 
 (viii). According to the information and explanations given to us, the
 Central Government has not prescribed for the maintenance of cost
 records under Section 209(1 )(d) of the Companies Act, 1956.
 Accordingly paragraph 4(viii) of the Order is not applicable.
 
 (ix).  a. According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion the Company
 is generally regular in depositing with the appropriate authorities
 undisputed statutory dues including Provident Fund, Employees State
 Insurance, Income Tax, Customs Duty, Cess and other material statutory
 dues as applicable.  respect of the aforesaid dues were in arrears as
 at 31st March 2009 for a period of more than six months from the date
 they became payable.
 
 b. According to the information and explanations given to us the
 particulars of the outstanding dues that have not been deposited on
 account of disputed matters pending before the appropriate authorities
 are as under:
 
 Name of                    Nature of            Period to
 the                        Dues                 which the
 Statute                                       amount relate
 
 Income                    Income              AY 2003-04
 Tax Act,                  Tax
 1961                      Demand
 Income                    Income              AY 2004-05
 Tax Act,                  Tax
 1961                      Demand
 Income                    Income              AY 2005-06
 Tax Act,                  Tax
 1961                      Demand
 Income                    Income              AY 2006 -07
 Tax Act,                  Tax
 1961                      Demand
 
 Forum where               Amount
 dispute is               (Rs. In Lacs)
 pending
 Pending for               5.26
 re-assessment
 before the
 Assessing
 Officer
 Commissioner             64.84
 of Income Tax
 Appeals)
 Commissioner              2.07
 of Income
 ax (Appeals)
 Commissioner             76.84
 of Income Tax
 Appeals)
 
 (x). The accumulated losses of the Company are in excess of 50% of the
 net worth of the Company as per the Balance Sheet as at the end of the
 financial year covered by our audit. The company has incurred a cash
 loss in the current financial year, and also in the immediately
 preceding financial year.
 
 (xi). The Company has defaulted in repayment of Rs.7.48 crores in
 respect of loans availed from Banks (other than State Bank of India)
 for a period exceeding 6 months as at the date of the balance sheet.
 The Company has as per the information and explanations given to us,
 obtained a restructuring package from State Bank of India rescheduling
 its principal and interest commitments. We are further informed that
 the financial restructuring proposal submitted to banks, other than
 State Bank of India, were under progress as at the date of the balance
 sheet. (Refer Note No. 12 of the Notes on Accounts).
 
 (xii). The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities. Accordingly paragraph 4(xii) of the Order is not
 applicable.  fund or a riidhi / mutual benefit fund/society.
 Accordingly paragraph 4(xiii) of the Order is not applicable.
 
 (xiv). The Company has maintained proper records of the transactions
 and contracts in respect of dealing in other investments and timely
 entries have been made therein.  All investments have been held by the
 Company in its own name.
 
 (xv). According to the information and explanations given to us the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.  Accordingly paragraph 4(xv) of the
 Order is not applicable.
 
 (xvi). According to the information and explanations given to us, the
 term loans have been applied for the purposes for which they were
 obtained.
 
 (xvii). According to the information and explanations given to us and
 an overall examination of the Balance Sheet of the Company, we are of
 the opinion that the funds raised on short term basis have not 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 Companies Act, 1956.
 
 (xix). The company did not have any outstanding debentures during the
 year.
 
 (xx). The company has not raised any money by public issue during the
 year. Accordingly paragraph 4(xx) of the Order is not applicable.
 
 (xxi) During the course of our examination of the books and records of
 the Company carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, no material fraud on or by the Company has
 been noticed or reported during the course of our audit.
 
 
 for ANIL NAIR & ASSOCIATES                  for CNGSN & ASSOCIATES
 Chartered Accountants                       Chartered Accountants
 
 G ANIL                                        C.N. GANGADARAN
 Partner                                       Partner
 Membership No 22450                           Membership No 11205
 
 Place: Chennai
 Date: April 29th, 2009