Hindustan Motors

1.  We have audited the attached Balance Sheet of HINDUSTAN MOTORS
 LIMITED (‘the Company’) as at March 31, 2009 and also the Profit and
 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.
 
 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 (Auditor’s Report) Order, 2003 (as
 amended) 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 such
 books and proper returns adequate for the purposes of our audit have
 been received from the Company’s overseas branch not visited by us;
 
 iii. The Balance Sheet, Profit & Loss Account and Cash Flow Statement
 referred to in this report are in agreement with the books of account
 as submitted to us;
 
 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.
 
 v. On the basis of the written representations received from the
 directors, as on March 31, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
 
 5.  In our opinion and to the best of our information and according to
 the explanations given to us, the said statements of accounts, read
 together with the Notes appearing on Schedule 22, 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 March 31, 2009;
 
 b) in the case of the Profit and Loss Account, of the loss of the
 Company for the year ended on that date; and
 
 c) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure to the Auditors Report
 
 (Referred to in our Report of even date to the members of Hindustan
 Motors Limited as at and for the Year ended March 31, 2009)
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the
 management during the year but there is a regular programme of such
 verification in a phased manner to cover all the items over a period of
 three years which, in our opinion, is reasonable having regard to the
 size of the Company and the nature of its assets. In respect of fixed
 assets lying with third parties, the management has a process of
 obtaining confirmations. As informed, no material discrepancies were
 noticed on such verification during the year.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (b) 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. In respect of the material
 lying with third parties, the management has a process of
 reconciliation & confirmations from the third parties during the year.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification.
 
 (iii) As informed, the Company has not granted any loans, secured or
 unsecured to companies, firms or other parties covered in the register
 maintained under Section 301 of the Companies Act, 1956. Therefore, the
 provisions of clauses 4 (iii) (a) to (d) of the Companies (Auditor’s
 Report) Order, 2003 (as amended) are not applicable.
 
 As informed, the Company has not taken any loans, secured or unsecured
 from companies, firms or other parties covered in the register
 maintained under Section 301 of the Companies Act, 1956. Therefore, the
 provisions of clauses 4 (iii) (e) to (g) of the Order are not
 applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us, and having regard to the explanation that some of the
 items purchased are of a special nature and alternate sources do not
 exist for obtaining quotations thereof, there is an 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 our audit, no
 major weakness has been noticed in the internal control system in
 respect of these areas.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Act that need to be
 entered into the register maintained under Section 301 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding value of Rupees five lakhs entered into during
 the financial year, are at prices which are reasonable having regard to
 the prevailing market prices at the relevant time.
 
 (vi) As informed, the Company has not accepted any deposits from the
 public.
 
 (vii) The Company has an internal audit system which, in our opinion,
 is commensurate with the size and 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(1)(d) of the Companies
 Act, 1956, and are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained.
 
 (ix) (a) The Company has been 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, customs duty, excise
 duty, cess and other material statutory dues with the appropriate
 authorities applicable to it though there had been slight delays in few
 cases.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees’ state insurance, income-tax,
 wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
 other statutory dues were outstanding, at the Balance Sheet date, for a
 period of more than six months from the date they became payable.
 
 (c) According to the records of the Company, the dues outstanding of
 income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
 duty and cess on account of any dispute, are as follows:
 
 Name of the          Nature of Dues                  Amount
 Statute                                        (Rs. in lacs)
 
 The Central     Disputes on account of              1477.00
 Excise Act,    Classification, CENVAT Credit,
 1944            Assessable value, Differential
                 Excise Duty, etc.
 
 The Central     Disallowance of Waiver on           5820.59
 Sales Act,      turnover availed on car sales
 1956            due to non-achievement of
                 Bench- Mark, Stock Transfer,
                 Non-submission of C Forms, etc.
 
 Tamil Nadu      Disallowance of Waiver on           1322.84
 Sales Tax       turnover availed on car sales
 Act, 1959       due to non-achievement of
                 Bench- Mark, Additional
                 Sales Tax, etc.
 
 West Bengal     Non-Receipt of Sales Tax               5.05
 Sales Tax       Form, Interest, Penalty,
 Act, 1994       Post Return Adjustment etc.
 
 The Customs     Disputes on account of:               31.67
 Act, 1956       Classification, Duty on
                inclusion of technical know-how
                 fees on imported goods, import
                 of Engines, Short Levy, etc.
 
 Period to         Forum where dispute is pending
 which the
 amount
 relates
 
 1984-2006         Assistant/Deputy/Additional
                   Commissioner, Commissioner,
                   Commissioner (Appeals) and
                   Appellate Tribunal
 
 1989-2004         Deputy/Additional Commissioner,
                   Appellate Deputy Commissioner,
                   Tribunal Benches and Supreme
                   Court
 
 1993-2003         Tribunal Bench and
                   Supreme Court
 
 2003-2005         West Bengal Commercial Taxes
                   Appellate & Revision Board,
                   Additional Commissioner
 
 1990-2006         Assistant/ Deputy Commissioner,
                   Commissioner Appeals &
                   Appellate Tribunal
 
 (x) The Companys accumulated losses at the end of the financial year
 are less than fifty per cent of its net worth. The Company has incurred
 cash loss in the current financial year. However it had not incurred
 cash loss in the immediately preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, the Company has defaulted in
 repayment of dues to financial institutions and banks during the year,
 the details whereof are as follows:- Period of Default Amount (Rs in
 lacs) Less than 30 days 1411.05 30 to 90 days 1790.21
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended)
 are not applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.
 
 (xvi) Based on the information and explanations furnished to us by the
 management, term loans were applied for the purpose for which the loans
 were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet and cash flow of the
 Company, we report that short term fund worth Rs. 5045.80 lacs has been
 used for financing the losses of the Company amounting to Rs 5045.80
 lacs.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 Section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
                                              S. R. Batliboi & Company
                                                 Chartered Accountants
 Place : New Delhi                                     Per Raj Agrawal
 May 13, 2009                                                  Partner
 Membership No. 82028