1 We have audited the attached balance sheet of M/s. Chadha Papers
 Limited, Chadha Estate, Nainital Road, Nagaria Khurd, Teh. Bilaspur,
 Distt. Rampur (UP.) as at 31st March, 2005, and also the profit and
 loss account and the cash flow statement for the year ended on that
 date annexed thereio. These financial statements are the responsibility
 of the companys management. Our responsibility is to express the
 opinion on these financial statements based on our audjt.
 
 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. 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
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3- As required by the Companies (Auditors 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- 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
 those books;
 
 (iii) The balance sheet, profit and loss account and cash flow
 statement dealt with by this report are in agreement with the books of
 account (and with the audited returns from the branches);
 
 (iv) 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, to the extent applicable;
 
 (v) On the basis of written representations received from directors, as
 on 31st March, 2005 and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as on 31st March,
 2005 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act, 1956,
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, 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;
 
 a) In the case of the balance sheet, as of the state of affairs of the
 company as at 31st March, 2005.
 
 b) In the case of 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 forming part of Auditors report
 
 (i) (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of its fixed
 assets.
 
 (b) The Fixed Assets have been physically verified by the management at
 reasonable intervals and no material discrepancy has been noticed on
 such verification.
 
 (c) In our opinion and according to the information and explanation
 given to us substantial parts of fixed assets have not been disposed
 off during the year.
 
 (ii) (a) The inventory has been physically verified during the year by
 the management. In our opinion the frequency of verification is
 reasonable.
 
 (b) In our opinion, the procedures of physical verification of
 inventory followed by the management are 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, in our
 opinion, the company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification as compared to the book
 records were not material.
 
 (iii) (a) The company has taken unsecured loan from companies covered
 in the register maintained under section 301 of the Act. The number of
 parties and amount involved in the transactions is given in note no.26
 of schedule W
 
 (b) Unsecured loans taken by the company from the parties referred
 above carry zero rate of interest. In our opinion and according to the
 information and explanation given to us terms and conditions of
 unsecured loans taken by the company are prima facie not prejudicial to
 the interest of the company.
 
 (c) Loans taken by the company do not carry any interest and are
 repayable on demand.
 
 (d) The company has granted unsecured loan to companies covered in the
 register maintained under section 301 of the Act. The number of parties
 and amount involved in the transactions is given in no.26 of schedule
 W
 
 (e) Unsecured loans granted by the company to the parties referred
 above carry zero rate of interest. In our opinion and according to the
 information and explanation given to us terms and conditions of
 unsecured loans granted by the company are prima facie not prejudicial
 to the interest of the company.
 
 (f) Loans granted by the company do not carry any interest and are
 repayable on demand.
 
 (g) Since the loans does not carry interest and are repayable on
 demand, the question of amount being overdue does not arise.
 
 (iv) In our opinion and according to the information and explanation
 given to us there is a need for improvement for adequate internal
 control procedure commensurate with the size of the company and nature
 of its business, for purchase of inventories and fixed assets and for
 sale of goods & services. The similar situation prevailed in previous
 year.
 
 (v) (a) In our opinion and according to the information and explanation
 given to us particulars of contracts or arrangements referred to in
 section 301 have been so entered.
 
 (b) In our opinion and according to the information and explanation
 given to us, the transactions made in pursuance of contracts or
 arrangements entered into the register in pursuance of section 301 of
 the act have been made at prices which are reasonable having regard to
 the prevailing market prices at the relevant time;
 
 (vi) The Company has not accepted any deposits from the Public with in
 the meaning of sections 58-A or 58AA or any other relevant provisions
 of the Companies Act, 1956, and the rules framed there under.
 
 (vii) In our opinion, the Companys present internal audit system is to
 be enlarged its sphere of activities to be commensurate with its size
 and nature of its business.
 
 (viii) The Central Government has Prescribed maintenance of cost
 records under section 209(l)(d) of The Companies Act1956 in respect of
 Paper Industry. We are informed that the Company is taking necessary
 steps to maintain cost records .However the company is regular in
 getting its cost records audited by Cost Accountant.
 
 (ix) (a) According to the information and explanations given to us and
 records of the company examined by us, in our opinion the company is
 regular in depositing undisputed statutory dues including Provident
 Fund, Income-tax, Sales-tax, Wealth Tax, Service tax, Custom Duty,
 Excise Duty, Cess and any other statutory dues with the appropriate
 authorities except as stated in note no.25 of schedule W
 
 (b) According to the information and explanations given to us and
 records of the company examined by us, the particulars of dues of sales
 tax/excise duty / service tax which have not been deposited on account
 of any dispute have been stated in note no.24 of schedule W
 
 (x) The company has no accumulated losses as at March 31 st 2005 and it
 has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 (xi) According to the records of the company examined by us and the
 information and explanation given to us the company has not defaulted
 in the payment of dues to any bank as at the Balance sheet date. The
 company has not taken loan or credit facility from any financial
 institution.
 
 (xii) The company has not granted loan 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 provision of clause 4(XIII) of the said
 order is not applicable to the company.
 
 (xiv) In our opinion, the company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 (xv) In our opinion and according to the information and explanations
 given to us, the terms and conditions of the guarantees given by the
 company, for the loans taken by others from banks are prima facie not
 prejudicial to the interest of the company;
 
 (xvi) On the basis of information & explanations given to us, the term
 loans had been applied for the purposes for which they were obtained.
 
 (xvii) On the basis of an overall examination of the Balance Sheet of
 the company, in our opinion and according to the information and
 explanations given to us there are no funds raised on a short term
 basis which have been used in 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.
 
 (xix) The company has not raised any money from the issue of
 debentures, (xx) The company has not raised any money by Public issue
 during the year.
 
 (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
 explanation given to us, we have neither come across any instance of
 fraud on or by the company, noticed or reported during the year nor
 have we been informed of any such case by the management.
 
                                     FOR SHIV OM & CO.,
                                  (CHARTERED ACCOUNTANTS),
 
                                     (SHIV OM AGARWAL)
                                       PARTNER (FCA)
 PLACE: MORADABAD
 DATED: 03/09/2005