Jai Balaji Industries

1.  We have audited the attached Balance Sheet of Jai Balaji Industries
 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 the 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 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) (the order) 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
 paragrahs 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
 those books;
 
 iii) The balance sheet, profit and loss account and cash flow statement
 dealt with by this report are in agreement with the books of account;
 
 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.
 
 vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts 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 Balance Sheet, of the state of affairs of the Company
 as at March 31, 2009;
 
 b) in the case of Profit and Loss Account, of the profit 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 JAI BALAJI
 INDUSTRIES LTD AS AT AND FOR THE YEAR ENDED 31ST MARCH, 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
 verification in a phased manner to cover all the items of fixed assets
 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.
 As informed, no material discrepancies were noticed on such
 verification of fixed assets 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.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification carried
 out at the end of the year.
 
 iii)(a) The Company has granted loan to a Company covered in the
 register maintained under Section 301 of the Companies Act, 1956. The
 maximum amount involved during the year was Rs. 11,000 lacs and the
 year-end balance of such loan was Rs. 8,500 lacs.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loan are not prima facie prejudicial to the interest of the
 Company.
 
 (c) The above loan is re-payable on demand. As informed, the Company
 has not demanded repayment of any such loan during the year and thus,
 there has been no default on the part of the party to whom the money
 has been lent. The payment of interest has been regular.
 
 (d) In view of the loan being repayable on demand, there is no overdue
 amount above of loan granted to the Company listed in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 (e) 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.
 Accordingly, clauses (f) and (g) of Para (iii) of the Order are not
 applicable to the Company.
 
 (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 alternative sources do not
 exist for obtaining quotations thereof, it appears that 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 Companies Act 1956, 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 the value of Rupees five lakhs, entered into
 during the financial year, have been made 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, the scope and coverage
 of which, in our opinion requires to be enlarged to be 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 is generally 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 applicable to it though
 there have been delays in a 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, customs duty, excise duty, cess and other
 undisputed statutory dues were outstanding, at the year end for a
 period of more than six months from the date they became payable,
 except as under:
 
 Name of the statute  Nature of  Amount  Period to  Due      Date of
                      the dues  (Rs. in  which the  Date     Payment
                                 lacs)   amount re
                                         lates
 
 The West Bengal Value  Value    268.47  31st July   June,08   --
 
 c) According to the records of the Company, there are no dues
 outstanding relating to income-tax, wealth-tax, customs duty and cess
 on account of any dispute except for excise duty, service tax and sales
 tax, as follows :
 
 Name of the statute   Nature      Amount   Period to        Forum where
                       of dues     (Rs.in   which the        dispute is
                                            amount relates   pending
 
 Central Excise 
 Act, 1944         CENVAT Credit   518.26   2006-07 and   Central Excise
                   Disallowed                                Service Tax
                                            2007-08
                                                      Appellate Tribunal
 
 Central Excise 
 Act, 1944         CENVAT Credit    57.11   2005-06 and     Commissioner
                   Disallowed                                (Appeals)
                                            2007-08
 
 Central Excise 
 Act, 1944        Exemption for     38.75   2006-07         Commissioner
                  Service Tax on                            (Appeals)
                  Good Transport
                  Agency disallowed
 
 The West Bengal 
 Value            Tax Liability 10,086.32   2003-04,    Assistant/Deputy
 Added Tax Act,   on account of                          Commissioner of
 2003             Enhanced Turnover         2004-05 and Commercial Taxes
                  input credit 
                  disallowed                2005-06
 
                                            2003-04, 
 The Central 
 Sales Tax Act,   Tax Liability on 641.60               Assistant/Deputy
 1956             account of                2004-05  and Commissioner of
                  Enhanced Turnover,        2005-06
                  input credit 
                  Commercial Taxes
                  disallowed
 
 x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 xi) Based on our audit procedures and as per the information and
 explantions given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to any financial
 institution, bank or debenture holders.
 
 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 Order are not applicable.
 
 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 given guarantee for loans taken by its wholly owned
 Subsidiary from a bank, the terms and conditions whereof in our opinion
 are not prima-facie prejudicial to the interest of the Company.
 
 xvi) Based on the information and explanations given 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 of the Company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 xviii) The Company has not made any preferential allotment of shares
 during the year to parties and companies covered in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 xix)The Company has Zero Coupon Compulsorily Convertible Debentures
 (unsecured) outstanding during the year, on which no security or charge
 is required to be created.
 
 xx) The Company has not raised any money through 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.
 
                                         For S. R. Batliboi & Co. 
                                           Chartered Accountants
 
                                                 per R K Agrawal
                                                         Partner 
 Place : Kolkata
 Date : 30th June 2009                     Membership No : 16667