1.  We have audited the attached Balance Sheet of Gangadharam
 Appliances Limited, as at March 31 st, 2010 and the related Profit and
 Loss Account for the fifteen months period 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.
 
 2.  We conducted our audit in accordance with generally accepted
 auditing standards 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, evidences 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
 ouropinion.
 
 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 (the Act) 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 a statement on the matters specified in
 paragraphs 4 and 5 of the said Order.
 
 4.  Further to ourcomments in the Annexure referred to in paragraph 3
 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
 ouraudit;
 
 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 and Profit and Loss Account dealt with by this
 report are in agreement with the books of account;
 
 d.  In our opinion, the Balance Sheet and Profit and Loss Account dealt
 with by this report comply with the accounting standards referred to in
 sub-section (3C) of Section 211 of the Act, to the extent applicable.
 
 e.  As perthe information furnished to us, noDirector of the Company is
 disqualified as on 31st March 2010 from being appointed as a Director
 under clause (g) of sub-section (1) of Section 274 of the Act.
 
 f. i) Despite huge losses resulting in total erosion of the net worth
 of the Company, the accounts for the period have been prepared on the
 assumption of the Going Concern basis and reference in this
 connection is made in Note 3 of Schedule 13 to the Notes on Accounts.
 
 ii) No provision has been made for the interest payable amounting to
 Rs.39.00 lakhs to M/s.Gandhimathi Appliances Ltd. As a result, the loss
 for the period has been understated by Rs.39.00 lakhs and the debit
 balance in the Profit and Loss Account and the liabilities are
 correspondingly understated to that extent (Refer to Note 6 of Schedule
 15).
 
 g. Subject to the foregoing, 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 and attached
 thereto give in the prescribed manner the information required by the
 Act 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 2010; and
 
 ii) in the case of Profit and Loss Account, of the Profit of the
 Company for the fifteen months period ended on 31 st March 2010.
 
 ANNEXURE A TO THE AUDITORS REPORT (Referred to in Paragraph 3 of our 
 Report of even date)
 
 1.(a) The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 (b) These fixed assets have been physically verified by the management
 in a phased manner, which in ouropinion, is reasonable having regard to
 the size of the Company and the nature of its assets. No material
 discrepancies between the book records and the physical inventory have
 been noticed on such verification.
 
 (c) In our opinion and according to the information and explanations
 given to us, no fixed asset has been disposed off by the Company during
 the period.
 
 2. (a) The inventory has been physically verified by the management
 during the period. Inour pinion, 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 examination of inventory records, in our opinion,
 the Company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to the book records which have been properly dealt with in the books of
 account were not material in relation to the operations of the Company.
 
 3.  (a) The Company has not granted any secured or unsecured loans to
 Companies, Firms or other parties covered in the register maintained
 under section 301 of the Act.
 
 (b) The Company has taken interest free unsecured loans from its
 Associate Company and a Firm covered in the register maintained under
 Section 301 of the Act. The maximum amount involved during the period
 was Rs.503.08 lakhs and the balance of such loans taken at the end of
 the period was Rs.503.08 lakhs.
 
 (c) In our opinion, the terms and conditions of such loans are not
 prima facie prejudiciarto the interest of the Company.
 
 (d) The Company has no commitment as such for repayment of such loans
 in view of specific arrangement entered into by the Company with those
 parties.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control system commensurate
 with the size of the Company and the nature of its business, with
 regard to the purchase of inventories, fixed assets and for the sale of
 goods and services. During the course of our audit, we have not
 observed any continuing failure to correct major weaknesses in internal
 Control system.
 
 5.  (a) In our opinion and according to the information and
 explanations given to us, the transactions that need to be entered into
 the register in pursuance of Section 301 of the Act, have been so
 entered.
 
 (b) The transactions made in pursuance of such contracts or
 arrangements have been made at prices which are reasonable having
 regard to prevailing market prices at the relevant time or the prices
 at which the transactions for similar goods/services have been made
 with other parties.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of Section 58A and 58AAof the Act and the rules framed
 thereunder.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  In our opinion and to the best of our knowledge and according to
 the information and explanations given to us, the Central Government,
 has not prescribed the maintenance of cost records under clause (d) of
 sub-section (1) of Section 209 of the Act, for any of the products
 manufactured by the Company during the period under audit.
 
 9.(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 the undisputed statutory dues including
 provident fund, employees state insurance, income-tax, sales-tax and
 other material statutory dues as applicable with the appropriate
 authorities. Arrears of sales tax not deposited as at 31st March 2010
 for a period of more than six months are covered by the Modified
 Rehabilitation Scheme sanctioned by Honble BIFR, payment of which will
 be effected in a phased manneras perprovisions ofthe saidScheme, is
 given in
 
 AnnexureB.
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, the particulars of dues of
 excise duty as at March 31, 2010 which have not been deposited on
 account of dispute, are referred to in AnnexureC
 
 10.  The Company has accumulated losses as at March 31st, 2010,
 amounting to Rs.27.66 Crores and has not incurred cash losses during
 this accounting period and has incurred cash losses in the immediately
 preceding accounting year.
 
 11.  As the Company has no dues to financial institution, bank or
 debenture holders, question of commenting on the repayment of dues does
 not arise.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of any special statute applicable to chit fund /
 nidhi / mutual benefit fund / societies are not applicable to the
 Company.
 
 14.  In our opinion, the company is not a dealer or trader in
 securities, debentures and other investments.
 
 15.  In our opinion, and 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.
 
 16.  The Company has not availed any term loans during the period.
 
 17.  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 for long-term investment or vice versa.
 
 18.  The Company has not made any preferential allotment of shares
 during the period.
 
 19.  The Company has not issued any debentures during the period.
 
 20.  The company has not raised any money byway of public issues during
 the period.
 
 21.  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.
 
 15. The Company is a Sick Industrial Company within the meaning of
 clause (o) of sub-section (1) of Section 3 of the Sick Industrial
 Companies (Special Provisions) Act, 1985, and on the basis of
 examination of records and according to the information and
 explanations given to us, the Modified Draft Rehabilitation cum Merger
 Scheme of the Company with its Associate, Gandhimathi Appliances
 Limited is under consideration of Honble Board for Industrial and
 Financial Reconstruction (BIFR). BIFR, vide its order dated 15.07.2009
 has granted in-principle approval for the said merger.
 
 Referred to in paragraph 9 (a) of Annexure A - Statement on the
 matters specified in the Companies (Auditors Report) Order, 2003 of
 Gangadharam Appliances Limited for the fifteen months period ended on
 31st March 2010
 
 
 
                                              Amount      Period to 
                                                          which the
 Name of the 
 Statute          Nature of Dues           (Rs ln Lakhs)  amount 
                                                          relates
 
 Central Sales 
 Tax Act          Monthly Dues                7.33*       1997-2006
 
 Local Sales 
 Tax Act          Monthly Dues             195.10*       1997-2006
 
 
 
 * Amount due to the Sales Tax authorities relating to earlier years
 becomes payable over a period of four years from the financial year
 2008-09 as per the Modified Rehabilitation Scheme approved by BIFR.
 
 ANNEXURE C TO AUDITORS REPORT
 
 Referred to in paragraph 9 (b) of Annexure A - Statement on the
 matters specified in the Companies (Auditors Report) Order, 2003 of
 Gangadharam Appliances Limited for the fifteen months period ended on
 31 st March 201 
 
                                    Amount     Period to 
                                               which the     Forum wh
                                                             ere the
 Name of the 
 Statute        Nature of 
                Dues               (Rs ln 
                                    Lakhs)     amount rel
                                               ates          dispute
                                                             is pend
                                                             ing
 
 Central Ex
 cise Act, 
 1944           Excise Duty         17.96      1995-1996     CESTAT, 
                                                             Chennai
 
 Central Ex
 cise Act, 
 1944           Excise Duty          4.08      2003-2004     CESTAT, 
                                                             Chennai
 
                TOTAL               22.04
 
 
 
 
 
                                           For RUDHRAKUMAR ASSOCIATES 
                                                Chartered Accountants 
                                            (Registration No.: 070335)
 
 Chennai-600018                                     R. RUDHRAKUMAR
 
 Dated : 04.08.2010                                   Proprietor