We have audited the attached Balance Sheet of M/S INDO VANILLON
 CHEMICALS LTD. as at March 31, 2005 and also the Profit and Loss
 Account for of the Company for the year ended on that date annexed
 thereto and the Cash Flow Statement for the year ended on that date.
 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.
 
 1) 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 disclosure 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 statements.
 We believe that our audit provides a reasonable basis for our opinion.
 
 2) As required by the Companies (Auditors Report) (Amendment ) Order,
 2004 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 hereto a statement on the matters specified in paragraphs 4
 and 5 of the said Order.
 
 3) Further to our comments in the Annexure referred to in paragraph 2
 above, we report that:
 
 a) We hive obtained all the information and explanations which to the
 best of our knowledge and belief were necessary for the purpose 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 Shed, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement w ith the books of account;
 
 d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 Cash Flow Statement dealt with by this report comply with the mandatory
 Accounting Standards referred to in Sub-section (3C) of Section 211 of
 the Companies Act, 1956;
 
 e) On the basis of written representations received from the directors,
 (except Kamini Khanna, S. K.Jain and V.K. Chadha ) as on 31.03.2005 and
 taken on record by the Board of Directors, we report that none of
 directors is disqualified as on 31.03.2005 from being appointed as
 directors in terms of clause (g) of Sub-section (1) 274 of the
 Companies Act, 1956;.
 
 f) The companys operation have remained suspended since January 2001.
 The company has suffered continued losses and erosion of equity the
 accounts are continued to be prepared on going concern basis in the
 absence of adequate data for compilation on and alternative basis.
 Consequently, no adjustment are made in the accounts relating to
 recoverability of recorded assets amount and in respect of recorded
 liabilities and contingent liabilities. In our opinion and to the our
 information and according to explanations given to us. the said
 accounts which has been prepared on the principal of going concern,
 subject to the above and note no. 2 c of Schedule 17 regarding
 non-provision against work-in-progress, note no. 12 of Schedule 17
 regarding non-provision of depreciation on assets amounting to Rs.24.45
 Lacs and note no. 21 & 22 regarding confirmation of debit and credit
 balances along with the provision of interest on estimated basis read
 together with other notes on accounts and Accounting Policies given in
 Schedule II give the information required by the Companies Act, 1956,
 in the manner so required and present a true and fair view in
 conformity with the accounting principles generally accepted in India :
 
 i. In so far as it relates to Balance Sheet, of the State of Affairs of
 Company as at March 31, 2005.
 
 ii. In so far as it relates to Profit and Loss Account, of the Loss of
 the Company for the year ended on that date; and
 
 iii. In so far as it relates to the Cash Flow statement, of the cash
 flow of the Company for the year ended on that date.
 
                                                     For J P S & COMPANY
                                                   CHARTERED ACCOUNTANTS
 PLACE : NEW DELHI                                             J C VERMA
 DATED : 01.09.2005                                              PARTNER
                                                              M.No.83210
 
 ANNEXURE TO THE REPORT OF THE AUDITORS TO THE MEMBERS OF M/S INDO
 VANILLON CHEMICALS LTD. ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH.
 2005. (REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE)
 
 1. (a.) The company is not in possession of complete records/register
 showing full particulars including quantitative details and situation
 of fixed assets.
 
 (b.) The fixed assets have not been physically verified by the
 management during the year. Discrepancies, if any, arc not known.
 
 (c.) No such substantial pan of fixed asset have been disposed off
 during the year to affect the going concern principle.
 
 2. (a) The inventor) has not been verified by the management during
 the year.
 
 (b.) In the absence of physical verification, comments on procedure for
 physical verification of inventories are not offered.
 
 (c.) The unit is closed and management did not conduct physical
 verification of inventory.
 
 3. According to the information and explanations given to us, the
 company has not granted any loans, secured or unsecured, to companies,
 firms or other parties as listed in the register maintained under
 Section 301 or to the Companies under the same management as defined
 under sub-section (1-B) of Section 370 of the Companies Act,
 1956.Accordingly paragraph of clauses 4(iii)(b).(c) & (d) of the Order
 are not applicable to the company.
 
 4. In our opinion and on the basis of the information and explanations
 given to us, there are adequate and reasonable systems and procedures
 for physical verifications of stocks but they have not been followed by
 the management during the period, due to, suspension of manufacturing
 activities since January 2001.
 
 5. In our opinion and according to the information and explanation
 given to us, the company has not entered into any transactions for the
 purchase or sale of goods, materials or services in pursuance of
 contracts or arrangements entered in the register maintained u/s 301 of
 the Companies Act, 1956 as there is no manufacturing activity.
 
 6. According to the information and explanation given to us, the
 company has not taken any deposits from the public during the year.
 
 7. Since companys operations arc suspended since January 2001 the
 management does not feel the requirement of internal audit.
 
 8. The Central Government has not prescribed maintenance of cost
 records u/s 209 (1) (d) of the Companies Act 1956.
 
 9. (a) The company is regular in depositing appropriate authorities -
 undisputed statutory dues including Provident Fund, Investor Education
 and Protection Fund, Employees State Insurance, Income Tax, sales Tax,
 Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory
 dues applicable to it.
 
 (10) According to the information and explanation given to us, the dues
 of Sales Tax, Income Tax, Excise Duty, Custom Duty, Wealth Tax and Cess
 which have not been deposited on account of any dispute are as under :-
 
 Nature of Dues Amount in     Period to which     Forum where
                      Rs.     amount due          dispute is
                                                  pending
 
 Excise Duty    88,31,026     Raid for            CEGAT
 Demand                       23.09.1998  
 
 10. In our opinion, accumulated losses of the company are more than 50
 percent of its net worth. The company has incurred cash losses during
 the financial year covered by our audit and immediately proceeding
 financial year.
 
 11. In our opinion and according to the information and explanation
 given to us the company has defaulted in the repayment of dues to
 financial institution, banks or debenture holder and has filed a
 reference before the BIFR. The accumulated default including interest
 are as under: -
 
 DBI            746,04 Lacs
 
 HFC            487,90 Lacs
 
 OBC C/C        424,36 Lacs
 
 12. The company has not granted Loans and Advances on the basis of
 security by way of pledge of shares, debentures and other security.
 
 13. In our opinion the company is not a Chit find Or aNidhi/Mutual
 benefit fond/Society.
 
 14. In our opinion the company is not dealing in or trading in shares,
 securities, debentures and other investments.
 
 15. According to information and explanation given to us, the company
 has not given any guarantee for loans taken by others from banks and
 financial institutions.
 
 16. According to the information and explanation given to us, the
 company had not raised any term loan during the year under audit.
 
 17. According to information and explanation given to us and on an
 overall examination of balance sheet of the company, we report that no
 funds, raised on short term basis, have been used for long term
 investments. No long term fund have been used to finance short term
 assets except permanent working capital.
 
 18. According to the information and explanation given to us, the
 company has not maJe any preferential allotment of shares to parties
 and companies covered in register maintained under section 301 of the
 Companies Act, 1956.
 
 19. According to the information and explanation given to us, no
 debenture have been issued during the year under audit
 
 20. According to the information and explanation given en to us, no
 money has been raised by way of public issue during the year under
 audit. Therefore, the precisions of paragraph 4(xix)of the said order
 is not applicable to the company.
 
 21. According to the information and explanation given to us, no fraud
 on or by company has been noticed or reported during the year under
 audit.
 
                                                     For J P S & COMPANY
                                                   CHARTERED ACCOUNTANTS
 PLACE : NEW DELHI                                             J C VERMA
 DATED : 01.09.2005                                              PARTNER
                                                              M.No.83210