Century Textiles and Industries

We have audited the attached Balance Sheet of CENTURY TEXTILES AND
 INDUSTRIES LIMITED, as at 31st March, 2009, the annexed Profit and Loss
 Account and the Cash Flow Statement for the year ended on that date.
 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 the 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 from any 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 presentation of the
 financial statements. We believe that our audit provides a reasonable
 basis for our opinion.
 
 2.  As required by the Companies (Auditors Report) Order, 2003 and the
 Companies (Auditors Report) (Amendment) Order, 2004 issued by the
 Central Government in terms of Section 227(4A) of the Companies Act,
 1956, we annex hereto a statement on the matters specified in
 paragraphs 4 and 5 of the said Order.
 
 3.  Further to our comments in the annexure referred to above, 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 purposes
 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 the
 books of the Company;
 
 (iii) The Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account of the Company;
 
 (iv) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in sub-section (3C) of Section 211 of
 the Companies Act, 1956;
 
 (v) Based on the representations made by the Directors and taken on
 record by the Board of Directors of the Company and the information and
 explanations given to us, none of the Directors is, as at 31st March,
 2009, prima-facie disqualified from being appointed as a director in
 terms of clause (g) of sub-section (1) of Section 274 of the Companies
 Act, 1956;
 
 (vi) Without qualifying our opinion, we draw attention to Note No.\ 12
 in Schedule 17 to the Accounts, relating to revision in accounting
 policy;
 
 (vii) In our opinion and to the best of our information and according
 to the explanations given to us, the said financial statements, read
 together with the notes thereon, give the information required by the
 Companies Act, 1956, in the manner so required and present 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, 2009;
 
 (b) in the case of the Profit and Loss Account, 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.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR AUDITORS REPORT OF EVEN
 DATE ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2009 OF
 CENTURY TEXTILES AND INDUSTRIES LIMITED
 
 On the basis of such checks as we considered appropriate and in terms
 of the information and explanations given to us, we state that:-
 
 i. (a) The Company has generally maintained proper records showing
 particulars, including quantitative details and situation of its fixed
 assets;
 
 (b) As explained to us, fixed assets, according to the practice of the
 Company, are physically verified by the management at reasonable
 intervals, in a phased verification-programme, which, in our opinion,
 is reasonable, looking to the size of the Company and the nature of its
 business. According to the information and explanations given to us,
 discrepancies noticed on physical verification have been adjusted in
 the books of account;
 
 (c) The disposal of fixed assets by the Company during the year, and
 also the cessation of its Textile operations at Worli, Mumbai, have not
 affected its going concern;
 
 ii. (a) As explained to us, inventories have been physically verified
 during the year by the management, except for inventories lying with
 outside parties, which have, however, been confirmed by them. The
 intervals at which the inventories have been verified are, in our
 opinion, reasonable in relation to the size of the Company and the
 nature of its business;
 
 (b) The procedures explained to us, which are followed by the
 management for physical verification of inventories, are, in our
 opinion, reasonable and adequate in relation to the size of the Company
 and the nature of its business;
 
 (c) On the basis of our examination of the inventory records of the
 Company, we are of the opinion that, the Company is maintaining proper
 records of its inventory. Discrepancies noticed on physical
 verification as compared to book records, which were not material, have
 been properly dealt with in the books of account;
 
 iii. According to the information and explanations given to us, the
 Company has not granted/ taken any loan, secured or unsecured, to/ from
 companies, firms or other parties covered 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, there are generally adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of inventory, fixed assets and with
 regard to sale of goods and services. During the course of our audit,
 we have not come across any major weaknesses in the internal control
 system;
 
 v. (a) On the basis of the audit procedures performed by us, and
 according to the information, explanations and representations given to
 us, we are of the opinion that, the transactions in which directors
 were interested, and which were required to be entered in the register
 maintained under Section 301 of the Companies Act, 1956, have been so
 entered;
 
 (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 exceeding the value of Rupees five lac in
 respect of any party during the year have been made at prices which are
 reasonable having regard to market prices prevailing at that time;
 
 vi. In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of Section
 58A of the Companies Act, and its Rules, and also the directives of
 Reserve Bank of India.  Since the Company has not defaulted in
 repayment of deposits, compliance of Section 58AA or obtaining any
 order from the Company Law Board or National Company Law Tribunal or
 Reserve Bank of India or any Court or any other Tribunal, does not
 arise;
 
 vii. On the basis of the internal audit reports broadly reviewed by us,
 we are of the opinion that, the coverage of internal audit functions
 carried out by firms of Chartered Accountants appointed by the
 management, is commensurate with the size of the Company and the 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 Section 209(l)(d) of the Companies
 Act, 1956 in respect of the Companys products to which the said rules
 are made applicable, and are of the opinion that, prima-facie, the
 prescribed accounts and records have been made and maintained. We have,
 however, not made a detailed examination of the records with a view to
 determine whether they are accurate;
 
 ix. (a) According to the records of the Company, it has been generally
 regular in depositing 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 other statutory dues with the appropriate
 authorities;
 
 (b) On the basis of our examination of the documents and records, the
 disputed statutory dues, which have not been deposited with the
 appropriate authorities, are as under:
 
 Nature of the Dues                               Rs. in Crore
 
 Income Tax                                             0.27
 Customs Duty                                           0.58
                                                        0.24
                                                        0.73
 
 Excise Duty                                            5.96
                                                        0.08
                                                        3.05
                                                       15.01
 Sales Tax, Entry Tax, etc.                            23.15
                                                        1.45
                                                       19.40
 Service Tax                                            1.18
                                                        0.70
 Cess on Water, Royalty, Energy, etc.                   0.98
                                                       22.68
                                                        7.99
 
 Forum where dispute is pending
 
 Tribunal
 High Court
 Tribunal (CESTAT)
 Departmental Authorities
 Supreme Court
 High Court
 Tribunal
 Departmental Authorities
 Supreme Court
 High Court
 Departmental Authorities
 Tribunal
 Departmental Authorities
 Supreme Court
 High Court
 Departmental Authorities
 
 
 There were no disputed amounts due towards Wealth tax;
 
 x. The Company, neither has accumulated losses at the end of the
 financial year nor has incurred cash losses, both, in the financial
 year under report and in the immediately preceding financial year;
 
 xi. On the basis of the records examined by us and the information and
 explanations given to us, the Company has not defaulted in repayment of
 dues to financial institutions, banks or debenture holders;
 
 xii. As explained to us, the Company has not granted any loans or
 advances on the basis of security by way of pledge of shares,
 debentures or any other securities;
 
 xiii. In respect of shares, securities, debentures or other investments
 dealt in or traded by the Company, proper records are maintained in
 respect of transactions and contracts, and timely entries have been
 made therein. All the investments are held by the Company in its own
 name;
 
 xiv. According to the information and explanations given to us, and the
 representations made by the management, the Company has not given any
 guarantee for loans taken by others from any bank or financial
 institution;
 
 xv. On the basis of the records examined by us, and relying on the
 information compiled by the Company for co- relating the funds raised
 to the end use of term loans, we have to state that, the Company has,
 prima-facie, applied the term loans for the purposes for which they
 were obtained;
 
 xvi. According to the information and explanations given to us and on
 an overall examination of the financial statements of the Company and
 after placing reliance on the reasonable assumptions made by the
 Company for classification of usage of funds, we are of the opinion
 that, prima-facie, as at the close of the year, short term funds have
 not been utilised for long term investment;
 
 xvii. The Company has, during the year, not made any preferential
 allotment of shares to parties and companies covered in the register
 maintained under Section 301 of the Companies Act, 1956;
 
 xviii. On the basis of the records and documents examined by us, the
 Company has, during the year, issued short term privately placed
 secured debentures from time to time, aggregating Rs.4,198 Crore
 (maximum balance outstanding during the year Rs.320 Crore), which have
 been repaid prior to creation of any security in favour of the
 debentureholders;
 
 xix. The Company has not raised any money by way of public issue,
 during the year;
 
 xx. According to the information and explanations given to us, and to
 the best of our knowledge and belief, no significant fraud on or by the
 Company, has been noticed or reported by the Company during the year.
 
 Looking to the nature of activities being carried on, at present, by
 the Company and also considering the nature of the matters referred to
 in the various clauses of the Companies (Auditors Report) Order, 2003,
 and the Companies (Auditors Report) (Amendment) Order, 2004, clauses
 (iii)(b), (iii)(c), (iii)(d), (iii)(e), (iii)(f), (iii)(g) and (xiii)
 of paragraph 4 of the aforesaid Order, are, in our opinion, not
 applicable to the Company.
 
                                              For and on behalf of
 
                                                      DALAL & SHAH
                                             Chartered Accountants
 
                                                      Ashish Dalal
 
 Mumbai: 4th May, 2009                                     Partner
                                              Membership No: 33596