Himachal Futuristic Communication

1.  We have audited the attached Balance Sheet of Himachal Futuristic
 Communications Limited (the Company) as at 31 st March, 2009, the
 Profit & 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.
 
 2.  We have 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 Section 227(4A) of the
 Companies Act, 1956 and on the basis of such checks as considered
 appropriate and according to the information and explanations given to
 us during the course of the audit, we enclose in the Annexure hereto a
 statement on die matters specified in paragraphs 4 and 5 of the said
 Order to the extent applicable.
 
 4.  a) As stated in Note 8 of Schedule 19, the Company has accounted
 for the impact of modified CDR package after svmplying with most of the
 terms and conditions stipulated therein, however compliance of some of
 them are still in process. The company is also not regular in payment
 of its dues including interest thereon to the lenders and may be liable
 to consequential withdrawal of any of the reliefs granted earlier.
 
 b) As stated in Note 9 of Schedule 19, the Company has, in terms of the
 CDR package, provided for interest on ballooning basis at the rate
 specified for the year which is higher then the rate on YTM basis i.e.
 @ 8.5% per annum, resulting in the loss for the year is higher by Rs.
 88,862,684/-. Had the interest has been provided on YTM basis, the
 cumulative effect upto 31 March 2009 on the provision for interest and
 accumulated losses would have been higher by Rs. 218,951,740/-.
 
 c) As stated in Note 17 of Schedule 19, with regard to the sundry
 debtors outstanding for a long period, we are unable to comment on the
 extent of realisability and consequently on the adequacy of provision
 for doubtful debts made by the Company. Impact thereof on the loss for
 the year, if any, is unascertainable.
 
 d) As stated in Note 22 of Schedule 19, regarding balances of some of
 the sundry debtors, creditors, lenders and loans and advances are
 subject to confirmations, reconciliation and adjustments, if any.
 
 e) As stated in Note 4 of Schedule 19, the Company has paid ,
 remuneration to managerial personnel during the year for which approval
 of central government is yet to be obtained.
 
 f) As stated in Note 20 of Schedule 19, the Company is in process of
 determining the impairment loss, if any, on its assets as per
 Accounting Standard - 28 Impairment of Assets issued by The Institute
 of Chartered Accountants of India and will give effect thereto upon
 such determination.  As such we are unable to express any opinion as to
 the effect thereof on the value of Assets and loss for the year.  The
 effect of items mentioned at paragraph 4(a), (c), (d), (e) and (f)
 above is unascertainable and hence the consequential cumulative effect
 thereof on loss for the year, assets, liabilities and reserves is
 unascertainable. If the observation at paragraph 4(b) above had been
 considered, the loss for the year would have been lower by Rs.
 88,862,684/- and accumulated debit balance in profit and loss account
 and the liabilities arid provisions would have been higher by Rs.
 218,951,740/-.  5. Further to our comments in the Annexure referred to
 above paragraph, 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 and 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 to in sub section (3C) of Section 211 of the
 Companies Act, 1956 except AS 28 - Impairment of Assets (Refer para
 4(f) above)
 
 e) On the basis of written representations received from the directors,
 as on 31 March, 2009 and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as on above date from
 being appointed as a director in terms of clause (g) of sub-section (J)
 of Section 274 of the Companies Act, 1956;
 
 f) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts subject to para 4 above
 and read together with the other notes and the significant accounting
 policies 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:
 
 (i) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31th 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
 
 Annexure referred to in paragraph 3 of the Auditors Report of even.
 date to the Members of HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED on
 the accounts for the year ended 31 March, 2009;
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situations of Fixed
 Assets.
 
 (b) As per the information and explanations given to Us, there is a
 phased programme of physical verification of fixed assets adopted by
 the Company and no material discrepancies were noticed on such
 verification. In our opinion, the frequency of verification is
 reasonable, having regard to the size of the Company and nature of its
 business.
 
 (c) During the year, the Company has not disposed off any substantial
 part of the fixed assets.
 
 (ii) (a) As per the information furnished, the Inventories have been
 physically verified by the management at reasonable intervals during
 the year. In our opinion, having regard to the nature and location of
 stocks, the frequency of physical verification is reasonable.
 
 (b) In our opinion, and according to the information and explanations
 given to us, 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 xords of Inventory.  In our
 opinion, the discrepancies i ficed on physical verification of stocks
 were not materi I in relation to the operation of the Company and the
 same have been properly dealt with in the books of account.
 
 (iii) (a) As per the information furnished, the Company has not granted
 any loans, secured or unsecured to and from companies, firms and other
 parties covered in the register maintained under Section 301 of the
 Companies Act, 1956. Accordingly, paragraphs 4(iii) (a), (b), (c) and
 (d) of the Order are not applicable.
 
 (b) As per the information furnished, the Company has not taken any
 loans, secured or unsecured from companies, films or other parties
 covered in the register maintained under Section 301 of the Companies
 Act, 1956.  Accordingly, Clause 4 (iii) (e), (f) and (g) of the said
 Order is not applicable.
 
 (iv) In our opinion and according to 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
 purchase of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, no major weakness has been
 noticed in the internal controls.
 
 (v) Based on the audit procedure applied by us and according to the
 information and explanations provided by the management, during the
 year, there has been no contract or arrangement that needed to be
 entered into theTegister maintained under section 301 of the Companies
 Act, 1956. Accordingly, Clause 4 (v)(b) of the said Order is not
 applicable.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of the provisions of Section 58A, 58AA or any other
 relevant provisions of the Companies Act, 1956.
 
 (vii) The Company is having internal audit system which needs to be
 strengthened further to make it commensurate with the size of the
 Company and nature of its business.
 
 (viii) The Central Government has prescribed maintenance of the Cost
 records under section 209( I )(d) of the Companies Act, 1956 in respect
 of one of the product of the Company. We have broadly reviewed the
 accounts and records of the Company in this connection and are of the
 opinion that prima facie, the prescribed accounts and records have been
 made and maintained. We have not, however, made a detailed examination
 of the records.
 
 (ix) (a) According to the information and explanations given to us
 and-records examined by us, the Company has not been regular in
 depositing undisputed statutory dues with the appropriate authorities
 in respect of provident fund, employees state insurance, income tax
 deduced at source, income tax, wealth tax, excise duty, service tax,
 sales tax/works contract tax and Fringe Benefit Tax. As at the year end
 undisputed arrears of statutory dues outstanding for a period of more
 than six months from the date they became payable, are as follows:-
 
 Sr.  Particulars                         Outstanding for more 
 No.                                         than 6 months
 
 1.    Income Tax deducted at source           67,643,463
       Fringe Benefit Tax                       7,317,901      
 
 (b) According to the records of the Company, the dues of Sales tax and
 additional custom duty, which have not been deposited on account of
 disputes and the forum where the dispute is pending, are as under:
 
 Name of         Nature of   Amount in     Period to    Forum 
  the Statute    the dues     Rs.          which the    where
                                           amount       dispute
                                           relates      is pending
 
 1.  Sales      Sales Tax   18,742,719    1997-1998     Honble High
     Tax Act                             &1998-1999     Court of
                                                        Punjab &
                                                        Haryana.
 
 2.  Custom    Additional     10,883,115  2002-2003     CESTAT,
     TarifAct  Custom Duty                &2003-2004    New Delhi
                                                        and Honble
                                                        Supreme
                                                        Court of
                                                        India
 
      Total                  129,625,8341                     
 
 (x) The accumulated losses of the Company are more than fifty percent
 of its net worth at the end of the financial year. The Company has
 incurred cash loss during the year. In the immediately preceding
 financial year also, the Company had incurred cash loss.
 
 (xi) According to the information and explanations given to us and
 records examined by us, the Company has defaulted in repayment of dues
 to financial institution or banks in respect of the following.-
 
 Name of    Nature of    Period of       Maximum      Over due
 Lender     the Dues     Default/ delay  overdue      amount as on
                                         during the   31.03.2009
                                                      year (Rs.)
 
 ARCIL(ICICI) Principal   April, 2007 to   70,630,000    70,630,000
                          March, 2009
 
 ARClLflCICI) Interest    April, 2005 to  215.653.020   215,653,020
                          March, 2009
 
 OBC(eGTBL)   Principal   April, 2007 to  331,931,499   331.931,499
                          March, 2009
 
 OBC(eGTBL)   Interest    February.2004   103,107,318    78,970,059
                          to March.2009
 
 J&KBANK      Principal   April, 2007 to    7,545,546     7,545,546
                          March, 2009.
 
 J&KBANK      Interest    April, 2007 to   17,766,006    17,766,006
                          March, 2009
 
 IDBI         Principal   April, 2007 to   54,554,636    54.554,636
                          March, 2009
 
 IDBI         Interest    April, 2007 to  135,917,259   135,917,259
                          March, 2009       
 
 Bank of      Principal   April, 2007 to  112.407,632   112,407,632
 Baroda                   March, 2009
 
 Bank of      Interest    April, 2007 to   18,491,473    18,491,473
 Baroda                   March, 2009
 
 HDFCBank     Principal   July, 2008 to   249,527,463   249,527,463
 Ltd (eCBOP)              March, 2009  
 
 HDFC Bank    Interest    July, 2008 to    20,087,494    20,087,494
 Ltd (eCBOP)              March, 2009.
 
 Union Bank   Principal   January, 2009   133,990,177   133,990,177
 of India                 to March, 2009
 
 Union Bank   Interest    January, 2009     5,115,505     5,115,505
 of India                 to March, 2009
 
 State Bank   Principal   October 2008    444,372,339   444,372,339
 of India                 to March, 2009
 
 State Bank   Interest    October, 2008 to 33,808,639    33,808,639
 of India,                March, 2009
 
 (xii) Based on our examination of the records and information and
 explanations given to us, the Company has not granted any loans and
 advances on the basis of security by way of pledge of shares,
 debentures and other securities.
 
 (xiii) As per the information and explanations given to us the
 provisions of any Special Statute applicable to Chit Fund do not apply
 to the Company. The Company is also not a nidhi/ mutual benefit
 fund/society.
 
 (xiv) The Company has maintained proper records of transactions and
 contracts in respect of trading in shares, securities, debentures and
 other investments and timely entries have been made therein. All
 shares, debentures and other investments have been held by the Company
 in its own name.
 
 (xv) Based on our examination of the records and information and
 explanations given to us, the Company has given corporate/counter
 guarantees for loans taken by group companies, from banks and financial
 institutions. As one of the businesses of the Company is to promote the
 companies and also the long term involvement with those companies, the
 guarantees have not been considered prima facie, prejudicial to the
 interest of the Company.
 
 (xvi) Based on our examinations of the records and information and
 explanations given to us during the year no term loan with repayment
 period beyond 36 months has been obtained.
 
 However, during the year the Company has raised inter corporate loans
 which on an overall basis, have been applied for the purposes for which
 they were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company as at the
 end of the year, funds raised on short term basis have, prima facie,
 not been used for long term investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year to parties and cornpanies covered in the register
 maintained under section 301 of the Act.
 
 (xix) The Company has not issued any secured debentures during the
 year. The Company has created securities/charges in respect of
 15,704,000 Zero Coupon Premium Bonds (ZCPBs) of Rs. 100 each issued
 under the CDR package approved on 6th April 2004. However, no
 securities/charges is created in respect of 10,937,000 ZCPBs of Rs. 100
 each issued under the said CDR package, as the status-quo on the
 existing security is maintained by each lender for its exposure.
 
 (xx) The Company has not raised any money by public issue during the
 year ended March 31, 2009.
 
 (xxi) 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
 has been noticed or reported during the course of our audit.
 
                                  For KHANDELWAL JAIN & CO.,
                                      Chartered Accountants,
                                           (Akash Shinghal)
                                                    Partner
 Place: New Delhi                     Membership No: 103490
 Dated:30th June, 2009