1 We have audited the attached Balance Sheet of Hotel Leelaventure
 Limited as at 31st March 2011, and also the Profit and Loss Account and
 the Cash Flow statement for the year ended as on that date, both
 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 misstatements. 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 the 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 by the Companies (Auditor’s Report) (Amendment) Order, 2004
 (the ‘order’) issued by the Central Government in terms of Section
 227(4A) of the Companies Act, 1956 we give in the annexure, a statement
 on the matters specified in paragraphs 4 and 5 of the said order to the
 extent applicable.
 
 4 Further to our comments in the Annexure referred to 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
 our audit.
 
 b In our opinion, proper books of account as required by law have been
 kept by the Company so far as it appears from our examination of those
 books;
 
 c The Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report comply with the
 accounting standards, to the extent applicable, referred to in
 subsection (3C) of Section 211 of the Companies Act, 1956;
 
 e On the basis of written representations received from the directors,
 taken on record by the Board of Directors, we report that none of the
 directors is disqualified as at 31st March 2011 from being appointed as
 a director in terms of clause (g) of sub-section (1) of Section 274 of
 the Companies Act, 1956; and
 
 f In our opinion, and to the best of our information and according to
 the explanations given to us, the said Accounts read with other notes,
 give the information required by the Companies Act, 1956 in the manner
 so required, subject to our inability to express an opinion on the
 impact of disputed interest income recognised as referred to in note 8
 of schedule K to the accounts, and give a true and fair view
 
 i.  in the case of Balance Sheet, of the state of affairs of the
 Company as at 31st March 2011.
 
 ii in the case of Profit and Loss Account, of the profit of the Company
 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 [referred to in paragraph (3) of our
 report of even date]
 
 (i) a. The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets on the basis of available information.
 
 b.  As explained to us, all the fixed assets were physically verified
 during the year by the Management in a phased periodical manner, which
 in our opinion is reasonable, having regard to the size of the Company
 and nature of its assets. According to the information and explanations
 given to us, no material discrepancies were noticed on such
 verification.
 
 c.  The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (ii) a.  As explained to us, inventories were physically verified
 during the year by the Management at reasonable intervals.
 
 b.  In our opinion and according to the information and explanation
 given to us, the procedures of physical verification of inventories
 followed by the Management were reasonable and adequate in relation to
 the size of the Company and nature of the business.
 
 c.  In our opinion and according to the information and explanation
 given to us, the Company has maintained proper records of inventories
 and no material discrepancies were noticed on physical verification.
 
 (iii) According to the information and explanations given to us, the
 Company has not granted / taken secured or unsecured loans to / from
 companies, firms or other parties covered in the Register maintained
 under Section 301 of the Companies Act, 1956
 
 (iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the Company and nature of its business
 with regard to purchase of inventories and sale of goods and services.
 In our opinion internal control systems for purchase of fixed assets
 needs to be strengthened. During the course of our audit, except for
 weakness in internal control system for purchase of fixed assets, we
 have not observed any continuing failure to correct major weaknesses in
 internal controls.
 
 (v) To the best of our knowledge and belief and according to the
 information and explanations given to us, transactions to be entered in
 the register maintained under Section 301 of the Companies Act, 1956
 have been entered in the register. Transactions made in pursuance of
 such contracts or arrangements have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time.
 
 vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted deposits in terms of the
 provisions of Sections 58A and 58AA or any other relevant provisions of
 the Companies Act, 1956.
 
 (vii) In our opinion, the Company has an adequate internal audit system
 commensurate with the size and nature of its business.
 
 (viii) The central Government has not prescribed maintenance of cost
 records under section 209 (1) (d) of the Companies Act, 1956 in respect
 of any of the activities of the Company.
 
 (ix) (a) According to the information and explanations given to us, the
 Company has generally been regular in depositing 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 any other material statutory
 dues with the appropriate authorities during the year under review.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of the aforesaid dues were
 outstanding as on 31st March, 2011 for a period of more than six months
 from the date they became payable.
 
 (c) According to the information and explanations given to us, details
 of disputed Sales Tax, Income Tax, Custom Duty, Wealth Tax, Service
 Tax, Excise Duty and Cess which have not been deposited with
 appropriate authorities as on 31st March, 2011 on account of dispute
 are given below:
 
 Name of the 
 Statute        Nature of Dues    Amount  Period to which the amount
                                  (Rs in
                                   Lakhs) relates
 
 Karnataka VAT 
 Act 2003       VAT with interest 
                and                72.62  2005-06, 2006-07,2007-08 and 
                penalty                   2008-09
 
 Income Tax 
 Act 1961       Income Tax         30.14  Assessment Year 2008-09
 
 Wealth Tax 
 Act,1957       Wealth Tax         81.72  Assessment Year 2004-05
 
 Kerala 
 Agriculture 
 Income         Agriculture 
                Income Tax         17.30  Financial Year 2003 to 2009 
 Tax Act 
 
 Kerala VAT     VAT                 6.07  Financial Year 2005-06 
 
 Customs Act    Customs Duty 
                and Penalty        50.00  2000-01
 
 Customs Act    Customs Duty 
                and Penalty        35.00  1990-1991
 
 
 
 Name of the Statute        Forum where dispute is pending
 
 Karnataka VAT Act 2003     High Court of Karnataka
 
 Income Tax Act 1961        Commissioner of Income Tax (Appeals)
                            Mumbai
 
 Wealth Tax Act,1957        Commissioner of Income Tax (Appeals)
                            Mumbai
 
 Kerala Agriculture Income  Tribunal, Commercial Taxes, Trivandrum
 Tax Act
 
 Kerala VAT                 Deputy Commissioner of Appeals
                            (VAT),Trivandrum
 
 Customs Act                Commissioner of Customs ,Mumbai
 
 Customs Act                Commissioner of Customs ,Mumbai
 
 x.  The Company does not have accumulated losses. The Company has not
 incurred cash losses during the financial year covered by our audit and
 in the immediately preceding financial year.
 
 xi.  In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in the repayment of dues to
 the financial institutions, banks, or debenture holders
 
 xii.  In our opinion and according to the information and explanations
 given to us, no loans and advances have been granted by the Company on
 the basis of securities by way of pledge of shares, debentures and
 other securities.
 
 xiii.  The Company is not a chit fund / nidhi / mutual benefit fund /
 society. Accordingly, clause 4 (xiii) of the Companies (Auditor’s
 Report) Order, 2003 is not applicable to the Company during the year
 under audit.
 
 xiv In our opinion and according to the information and explanations
 given to us, the Company is not dealing in or trading in shares,
 securities, debentures and other investments. Therefore the provisions
 of clause (4)(iv) of The Companies (Auditors Report) Order 2003 are not
 applicable to the Company.
 
 xv The Company has not given any guarantee for loans taken by others
 from financial institutions or banks.
 
 xvi.  To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, term loans
 availed by the Company were, prima facie, applied by the Company during
 the year for the purposes 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 of the Company, funds
 raised on short term basis have, prima facie, not been used during the
 year for long term investment.
 
 xviii During the year, the Company has made preferential allotment of
 shares to a Company covered in the Register maintained under Section
 301 of the Act. In our opinion the price at which the said allotment
 was made is prima facie not prejudicial to the interest of the Company.
 
 xix The Company has created securities/charges in respect of secured
 debentures issued.
 
 xx.  The Company has not raised any monies by way of public issue
 during the year.
 
 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
 was noticed or reported during the year.
 
 
 For PICARDO & CO. 
 Chartered Accountants
 
 K.V. Gopalakrishnayya
 Partner
 Membership No.21748
 Firm Registration No: 107917W
 Mumbai, 23rd May 2011