We have audited the attached Balance Sheet of INDU NISSAN OXO CHEMICAL
 INDUSTRIES LIMITED, as at 31st March, 2011 and also the Profit and Loss
 Account 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.
 
 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.
 
 1.  As required by Companies (Auditors'' Report) Order,
 
 2003 issued by Central Govt, 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 & 5 of the said
 order.
 
 2.  Further to our comments in the Annexure referred to in paragraph 1
 above, we report that:
 
 a) We have obtained all the information and explanations, except
 confirmations from lenders and creditors, more particularly the secured
 lenders / creditors, 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
 beert 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 of
 the Company;
 
 d) in our opinion, the Balance Sheet, Profit and Loss account, and the
 and Cash Flow Statement dealt with by this report, except compliance
 with AS-15 on Employee Benefits (refer clause (j) of this report),
 comply with the Accounting Standards referred to in sub-section (3C) of
 section 211 of the Companies Act, 1956.
 
 e) the Company has defaulted in redemption of Debentures, which fell
 due on the 1CP of July, 1998 aggregating to f 552.02 lacs and the
 amount of interest including penal interest calculated at simple
 interests accrued as of 31st March, 2011 is Rs1334.01 lacs, thereby, the
 directors of the Company are disqualified from being appointed as
 director under clause (g) of sub section 1 of section 274 of the
 Companies Act, 1956;
 
 f) Attention is invited to Note No. 7 of Notes to Accounts regarding
 confirmation of account of various parties, the balances have been
 taken as per books of account. We in the absence of confirmations are
 unable to ascertain the nature of adjustments that may be required in
 respect of various accounts and the resultant effects thereof on the
 accounts.
 
 g) Attention is invited to Note no. 3 (c) of Notes to Accounts. The
 Custom department had imposed penalty of f 1000 Lacs on the Company,
 which was disputed by the Company. On appeal before CESTAT, the said
 penalty is reduced to Rs700 Lacs vide order dated March 31, 2011. The
 Company has informed us that, it is proceeding in appeal against this
 order in appeal, and hence no provision for this liability is made in
 the accounts, contending this being contingent liability. We are unable
 to express our opinion on this item.
 
 h) Attention is invited to Note no. 3 (e) of Notes to Accounts. Amount
 receivable from RSEB (Rajasthan State Electricity Board) in respect of
 Assets given on Lease is shown at Rs412.19 Lacs against security deposit
 received from RSEB of f 653.09 Lacs. 
 
 We have been informed that Company has filed a suit against RSEB before
 Rajasthan High Court for the recovery of f 964.92 lacs inclusive of
 interest @ 20% after making adjustment of DPA (Deferred Payment
 Agreement) decision of which remains pending. We are unable to express
 our opinion on this item.
 
 i) Attention is invited to Note no. 3 (a) of Notes to Accounts. In
 respect of Inter Corporate Deposits received from Himalaya Machinery
 Limited, the Company had, based on legal opinion, written back interest
 amounting to f 23.43 lacs during the financial year ended 31st March
 2002 due to which debit balance in profit and loss a/c is lower by
 Rs23.43 lacs. Further the Company has not provided any interest for the
 period 1.10.2000 to 31.03.2011 the interest of which works out to f
 120.94 Lacs calculated at simple interests @ 27%. Including current
 year''s interest of Rs. 11.61 Lacs.
 
 j) Provision for Gratuity payable to employees has been made only upto
 31st March, 2006 based on management estimates. Provision for gratuity
 and retirement benefits for the current year has not been made. In the
 absence of any actuarial valuation we are unable to quantify the impact
 of the same on the Profit and Loss Account. This practice of the
 Company is not in conformity with the AS- 15.
 
 k) Attention is invited to Note no. 3 (b) of Notes to Accounts. Based
 on management''s perception, the Company has written back Interest
 accrued on Working Capital Loans amounting to f 493 Lacs during the
 year under consideration. We are informed that, the management is in
 negotiation with the bankers as regards repayment of the working
 capital loans at a reduced principal amount and no interest. However,
 no finality has been reached as to non payment of interest. In our
 opinion, profit for the current year is overstated by Rs 493 Lacs. This
 apart, no provision is made for interest payable for the current year
 that the Company used to provide every year amounting to Rs 52.98 Lacs;
 
 I) in absence of confirmations from creditors, especially secured
 creditors, we are unable to opine on the outstanding balances shown in
 accounts including interest provided and payable thereon;
 
 m) the closing stock of f12.88 Lacs and cash in hand of f 31.33 Lacs
 are accepted as certified by the management;
 
 n) write off of non existing fixed assets and current assets during the
 year under consideration are accepted as certified by the management;
 
 o) the combined effect of the above qualifications over financial
 results is not determinable in view of absence of relevant components
 and information.
 
 3. Subject to above, in our opinion and to the best of our information,
 and according to the explanations given to us, said Accounts read with
 notes thereon, give the information required by the Companies Act,
 1956, in the manner so required 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.  and 
 
 ii) in the case of Profit & Loss Account of the Profit 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 AUDITOR''S REPORT FOR THE YEAR ENDED 31st MARCH, 2011 OF
 INDU NISSAN OXO CHEMICAL INDUSTRIES LIMITED.
 
 (i.) (a) The Company has maintained records showing particulars
 including quantitative details and the general location of its Fixed
 Assets other than those given on lease only up to the year 1999.
 
 (b) As plant of the Company is not in operation, the Company has not
 carried out physical verification of the assets at periodic intervals.
 In respect of assets given on lease, no confirmation from the lessee
 has been produced before us, stating that the assets leased under the
 agreements are existing, but owing to dispute with the lessee, the same
 cannot be confirmed. The Company has written off some non existing
 assets during the year based on perception of the management.
 
 (c) No substantial part of fixed assets have been disposed off during
 the year, which can affect the going concern
 
 (ii) (a) We have been informed by the management that, Stock of goods
 have been physically verified by the management at reasonable intervals
 during the year; though no records of physical verification or
 valuation on the date of balance sheet were produced before us. The
 stock of stores, packing material, and semi finished goods is valued
 based on Chartered Engineers'' Certificate dated 13/10/2010.
 
 (b) In view of this, we are unable to comment on the procedure of
 physical verification of stocks followed by the management.
 
 (c) In view of this, we are unable to comment on the maintenance of
 proper stock records by the management.
 
 (iii) (a) 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 Act.
 
 (b) Since no loans are granted, the sub-clause dealing with rate of
 interest and other terms and conditions of loans given by the Company
 are not applicable.
 
 (c) Since no loans are granted, the sub-clause dealing with receipt of
 the principal amount and interest on regular basis is not applicable.
 
 (d) Since no loans are granted, the sub-clause dealing with overdue
 amount more than rupees one lakh is not applicable.
 
 (e) The Company has taken interest free unsecured loans from Two
 parties covered in the register maintained under section 301 of the
 Act. The amount involved in the transactions at the year end was Rs.
 80.28 Lac and on maximum basis Rs. 86.56 Lac.
 
 (f) Other terms and conditions of unsecured loans taken by the Company,
 are prima facie not prejudicial to the interest of the Company.
 
 (g) We are informed that, these are demand loans, and there is no
 stipulation put in view of the financial conditions of the Company.
 
 (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 the nature of business
 with regard to the purchases of inventory and fixed assets and sale of
 goods.
 
 (v) (a) Based on the audit procedures applied by us and according to
 the information and explanation provided by the management, we are of
 the opinion that the transaction that need to be entered into the
 register maintained under Section 301 have been properly entered in the
 said register;
 
 (b) In our opinion, and according to the information and explanation
 provided by the management, no transactions were entered as specified
 under section 301 of the Companies Act 1956, and accordingly no entries
 were required to be made in the register maintained under section 301
 of The companies Act, 1956 and exceeding during the year by Rs.
 500,000/- or more.
 
 (vi) The Company has not accepted any deposits from public within the
 meaning of the provisions of section 58A and section 58AA or any other
 provisions of the Companies Act, 1956 and the rules made there under.
 We have been informed by the management that there has been no order
 passed by the Company law Board or National Company Law Tribunal or
 Reserve Bank of India or any Court or any other Tribunal on the Company
 with respect to compliance of the provisions of section 58A or 58AA or
 any other provisions of the Companies Act 1956.
 
 (vii)The Company does not have any formal Internal Audit System
 commensurating with its size and nature of business.
 
 (viii)We have been informed by the management that, the Central
 Government has not prescribed the method of maintenance of cost records
 u/s. 209 (1) (d) of the Companies Act, 1956 to the industry to which
 the Company pertains.
 
 (ix) (a) The Company has defaulted in payment of undisputed statutory
 dues as given below. The extent of arrears of Statutory Dues
 outstanding (after adjusting pre- paid taxes) for than six months as on
 the year end is as follows:
 
 Nature of                                 Amount (Rs) 
 Statutory Dues                             (in lacs)
 
 Investor Protection Fund                      16.61
 
 Income Tax                                   216.51
 
 Fringe Benefit Tax                             0.27
 
 Sales Tax                                    105.05
 
 Profession Tax                                 1.53
 
 Bajwa Gram Panchayat                           6.82
 
 Tax Deducted at Source                         3.81
 
 The Company has requested the Income-tax Department to adjust refunds
 of subsequent years against outstanding dues of earlier years for
 which, we are informed, no communiqué is received from the Income-tax
 Department.
 
 No provision is made for rates and taxes payable to Bajwa Gram
 Panchayat for the year under consideration. The amount payable is not
 quantified by the Company.
 
 In the case of Income tax deducted at source, the Company has deducted
 tax on payment basis whereas provisions of chapter VXII-B of the
 Income-tax Act 1961 require deduction of tax on payment or credit in
 the books of account whichever is earlier. Details of payments wherein
 tax should have been deducted on credit basis is not available. Hence
 we are unable to state the exact amount of the defaulted tax deducted
 at source liability. The above mentioned amount is tax deducted at
 source on payments made but not deposited with the Central government.
 
 (b) The following are details of disputed Income tax, sales tax that
 has not been paid to the concerned authorities.
 
            Name of       Forum         Period to         Unpaid 
            the           where         which             Amount
            Statutory     dispute is    the amount        (Rs in 
            Dues          pending       relates            Lacs)
 
 
 1      Central Excise    Comm.          1993-96           35.74
                         (Appeals)
 
 2      Sales Tax         Sales Tax      1991-92            7.34
                          Tribunal
 
 3      Income tax        ITAT-          1996-97
                          Ahmedabad                        16.61
 
 4      Income tax        ITAT-          1999-00            0.63
                          Ahmedabad
 
 5      Income tax        ITAT-          2000-01            0.55
                          Ahmedabad
 
 6      Custom Duty       CESTAT-        1995-96          700.00
                          West Zone
 
 (x) (a) The Company as at the end of period under audit has accumulated
 losses exceeding fifty percent of its net worth.
 
 (b) The Company has not incurred any cash losses during the financial
 year covered by. our audit or in the immediately preceding financial
 year. For arriving at profit for this purpose, write back of
 liabilities has been considered as part of cash profits.
 
 (xi) (a) The Company has defaulted in redemption of debentures, which
 fell due on the 10,h July 1998 aggregating to Rs 552.07 lacs and the
 amount of interest accrued as of date is Rs 1334.56 lacs calculated 6n
 simple rests inclusive of penal interest as agreed upon in terms and
 conditions of issue of the debenture.
 
 (b) In respect of term loans from financial institution, the Company
 has defaulted in repayment of their dues. Following table brings out
 the amount of default and the period from which default is made.
 
       Term
 Sr   Loans from      Principal  Interest   Total   Default commencing on
 No   Finanacial