ANNUAL REPORT 2005-2006
 
 AUDITORS' REPORT
 
 To The Members of
 FCL TECHNOLOGIES & PRODUCTS LIMITED
 NEW DELHI.
 
 01.  We  have  audited the attached Balance Sheet  of  FCL  Technologies  & 
 Products Limited as at 31st March, 2006 and also the Profit & Loss  Account 
 and  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.
 
 02. 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.
 
 03.  s required by the Companies (Auditor's Report) Order, 2003, issued  by 
 the Central Government of India in terms of subsection (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.
 
 04.  Further to our comments in the Annexure referred to in paragraph  (03) 
 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)  n 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)  he Balance Sheet, Profit and Loss Account and Cash  Flow  Statement, 
 dealt with by this report are in agreement with the books of account;
 
 (iv)  n  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;
 
 v) On the basis of written representations received from the directors,  as 
 on  31st  March, 2006, and taken on record by the Board  of  Directors,  we 
 report  that none of the directors is disqualified as on  31st-March,  2006 
 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  read  with   Significant 
 Accounting Policies and 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, 2006;
 
 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.
 
                                                     For VIJAY SEHGAL & CO.,
 	                                              Chartered Accountants
 
                                                                 S.V. Sehgal
                                                                     Partner
                                                         Membership No.80329
 
 Place : NOIDA	
 Dated : 26th July, 2006	
 
 ANNEXURE  TO  THE AUDITORS' REPORT OF FCL TECHNOLOGIES &  PRODUCTS  LIMITED 
 FOR THE YEAR ENDED 31ST MARCH 2006.
 
 [Referred to in paragraph (03) of our Report of even date]
 
 01. In respect of fixed assets of the Company:-
 
 (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) Substantial part of fixed assets have not been disposed off during  the 
 year.
 
 02. In respect of inventories of the Company:
 
 (a) Inventories were physically verified during the year by the  Management 
 at reasonable intervals.
 
 (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)   The  company  is  maintaining  proper  records  of   inventory.   The 
 discrepancies noticed on physical verification of inventory as compared  to 
 book records were not significant and were properly dealt with in the books 
 of account.
 
 03.  During  the year, the company has neither granted nor 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. 
 Therefore,  the  provisions of clause 4 (iii) of the  Companies  (Auditor's 
 Report) Order, 2003 are not applicable to the Company.
 
 04. In our opinion and according to the information and explanations  given 
 to  us,  there is adequate internal control system, commensurate  with  the 
 size  of  the company and the nature of its business, for the  purchase  of 
 inventory  and fixed assets and for the sale of goods and services.  During 
 the course of the audit, no major weakness has been noticed in the internal 
 control system.
 
 05.  (a)  According to the information and explanations given  to  us,  the 
 particulars of contracts and arrangements referred to in Section 301 of the 
 Companies  Act,  1956,  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. Five Lacs in respect of a party, during 
 the  year, have been made at prices which are reasonable having  regard  to 
 prevailing market prices at the relevant time.
 
 06. According to the information and explanations given to us, the  Company 
 has  not accepted deposits from the public during the year.  Therefore  the 
 provision  of Clause 4(vi) of the Companies (Auditor's Report) Order,  2003 
 is not applicable to the Company.
 
 07. The internal audit of the company has been conducted by an  independent 
 firm  of  Chartered  Accountants and in our opinion,  the  company  has  an 
 internal  audit  system,  commensurate  with the size  and  nature  of  its 
 business.
 
 08. The Company has made and maintained Cost Records & Accounts, concerning 
 polyester  chips activity carried on by the Company, in respect  of  which, 
 the Central Government has prescribed the maintenance of cost records under 
 Section 209(1)(d) of the Companies Act, 1956.
 
 09.  (a)  According  to  the  records of the  Company,  it  is  regular  in 
 depositing with 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 other applicable statutory dues.
 
 (b) According to the information and explanations given to us, there is  no 
 undisputed amounts payable in respect of 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 
 applicable  statutory dues as at the year end; for a period more  than  six 
 months from the date they became payable.
 
 (c) According to the information and explanations given to us, there are no 
 dues of service tax, custom duty, wealth tax and cess, which have not  been 
 deposited  on  account  of  any dispute.  However,  following  amounts  are 
 involved  (gross  of amount deposited under protest, if  any)  with  under-
 mentioned forums, in respect of the disputed statutory dues:
 
 (i)  Aggregate  Sales  Tax of Rs.236.07 Lacs and  pending  before  (a)  Jt. 
 Commissioner  Sales  Tax (Appeals) (Rs.1.26 Lacs), (b) Sales  Tax  Tribunal 
 (Rs.1.07 Lacs) and (c) various High Courts (Rs.233.74 Lacs);
 
 (ii)  Aggregate  Excise  duty of Rs.1148.41 Lacs  and  pending  before  (a) 
 Customs,  Excise  &  Service Tax Appellate Tribunal  (Rs.30.80  Lacs),  (b) 
 Commissioner  (Appeals) (Rs.74.81 Lacs), (c) Addl.  Commissioner  (Appeals) 
 (Rs.26.39  Lacs), (d) Dy. Commissioner (Appeals) (Rs.3.59 Lacs) & (e)  M.P. 
 High Court (Rs.1012.82); and
 
 (iii) Income Tax of Rs.2.74 Lacs and pending before ITAT, New Delhi.
 
 10. The Company has neither accumulated Loss as at the year end nor it  has 
 incurred  cash  losses  in  the financial year  under  report  and  in  the 
 immediately preceding financial year.
 
 11.  The  company  has  not defaulted in repayment  of  dues  to  Financial 
 Institution or banks or debenture-holders, during the year.
 
 12. The company has not granted Loans & Advances, on the basis of  security 
 by way of pledge of Shares, Debentures & other Securities.
 
 13. The company is not a chit fund, nidhi or 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.
 
 14.  The Company has not dealt or traded in shares, securities,  debentures 
 and  other investments during the year. However, it has  maintained  proper 
 records in respect of shares held as long-term investments and are held  in 
 the name of the Company.
 
 15. According to the information and explanations given to us, the  company 
 has not given any guarantee during the year, for loans taken by others from 
 banks or financial institutions.
 
 16.  The Company has neither raised any term loan during the year  nor  any 
 unutilized  amount  was left on this account, as at the  beginning  of  the 
 year. Therefore the provisions of clause 4(xvi) of the Companies (Auditor's 
 Report) Order, 2003 are not applicable to the Company.
 
 17.  According  to the information and explanations given to us and  on  an 
 overall examination of the Balance Sheet of the Company, we report that the 
 funds  raised  on  short-term  basis  have  not  been  used  for  long-term 
 investment.
 
 18.  The Company has not made any preferential allotment of shares  to  any 
 person during the year.
 
 19. Neither any debentures were issued during the year, nor any creation of 
 security  or charge is pending in respect of debentures raised  in  earlier 
 years.
 
 20. The Company has not raised any money by public issue during the year.
 
 21.  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 was 
 noticed or reported during the year.
 
                                                     For VIJAY SEHGAL & CO.,
 	                                              Chartered Accountants
 
                                                                 S.V. Sehgal
                                                                     Partner
                                                         Membership No.80329
 
 Place : NOIDA	
 Dated : 26th July, 2006