We have audited the attached Balance Sheet of LABH CONSTRUCTION AND
 INDUSTRIES LIMITED, Ahmadabad as at 31st March, 2011 and the Profit and
 Loss Account attached thereto, for the year ended on that date. These
 financial statements, is the responsibility of the Company. Our
 responsibility is to express an opinion on these financial statements
 based on our audit.
 
 We have 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 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. Audit also includes evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 A.  As required by the Companies Auditors Report Order, 2003 issued by
 the Company Law Board, Government of India, in term of sub-section (4A)
 of section 227 of the Companies Act, 1956, and on the basis of such
 checks of the books and records maintained by the Company as we
 considered appropriate as well as information and explanation provided
 to us during the course of our audit, we enclose in the Annexure
 hereto, a statement on the matters specified in the said order.
 
 We also report that:
 
 B.  We have obtained the information and explanation, which to the best
 of our knowledge and belief were necessary for the purpose of our
 audit.
 
 C.  In our opinion, proper books of accounts as required by law have
 been kept by the company so far as it appears from our examination of
 those books except the Statutory registers required to be maintained as
 per the relevant provisions of the Companies Act 1956 and certain items
 of income and expenditure not accounted on accrual basis as required by
 section 209 of the Companies Act 1956.
 
 D.  The Balance Sheet, Profit and Loss Account and Cash Flow statement
 referred to in this report are in agreement with the books of account.
 
 E.  In our opinion the Balance Sheet, Profit and Loss Account and Cash
 Flow statement read along with significant accounting policies and
 notes to accounts, as mentioned in Part A and Part B of Schedule 19,
 dealt by this report have been prepared in compliance of the Accounting
 Standards as referred to in sub-section 3(c) of Section 211 of
 Companies Act, 1956, except the following which are disclosed in the
 relevant clause of that schedule,
 
 i.  Non-compliance to requirements of AS 6 for accounting of
 depreciation in respect of:
 
 - Depreciation of Rs. 1.00 lacks on revalued amount of Office Building
 charged to revenue, due to which, loss for the year and accumulated
 loss overstated by that amount (refer note V.3 of Part B of Schedule 19
 to be read together with and forming part of the Balance Sheet and
 Profit and Loss Account),
 
 - Depreciation of Rs.1.35 lacs on one Office Building and furniture
 therein, not provided in the accounts, due to which, loss for the year
 is understated and fixed assets are overstated by that amount (refer
 note V.2 of Part B of Schedule 19 to be read together with and forming 
 part of the Balance Sheet and Profit and Loss Account),
 
 ii.  Non- provision for depletion in value of Investments of Rs 168.40
 lacs,, in the companies whose net worth has eroded, in terms of
 requirement of AS 13. In view of this balance of accumulated losses is
 understated and investments are overstated by that amount (refer note
 VI.2 of Part B of Schedule 19 to be read together with and forming part
 of the Balance Sheet and Profit and Loss Account).
 
 iii. No provision being made for Retirement benefits payable to
 employees including Gratuity and leave encashment in terms of
 requirement of AS 15 resulting into understatement of loss for the year
 and understatement of current liabilities to that extent. In view of
 non-availability of the relevant information, quantification of impact
 thereof could not be ascertained. (Refer note XII of Part A of Schedule
 19 to be read together with and forming part of the Balance Sheet and
 Profit and Loss Account).
 
 iv.  The company has neither identified nor provided for loss on
 impairment of assets as per the requirement of AS 28, resulting into
 overstatement of fixed assets and understatement of balance of
 accumulated losses.  However due to non availability of required
 information, impact of same could not be quantified. (Refer note IV of
 Part A of Schedule 19 to be read together with and forming part of the
 Balance Sheet and Profit and Loss Account).
 
 F.  The directors of the Company are disqualified in terms of Clause
 (g) of Sub-section (i) of Section 274 of the Companies Act 1956;
 
 G.  We further invite specific attention to the following notes
 contained in Part B of Schedule 19 to be read together with and forming 
 part of the Balance Sheet and Profit and Loss Account:
 
 i.  Note I, regarding non provision of certain liabilities in the
 accounts, due to which loss for the year and current liabilities are
 understated to that extent. However in the absence of relevant details,
 impact of the same could not be quantified.
 
 ii.  Note IX.2 & IX.3, regarding non provision of interest out of
 amount paid to Gujarat State Finance Corporation in excess of the
 outstanding balance, due to which balance of accumulated losses is
 understated and loans and advances are overstated by that amount.
 However in the absence of relevant details, impact of the same could
 not be quantified.
 
 iii. Note III.3, regarding balances of secured loans being subject to
 confirmation. In view of non availability of information in that
 respect, the consequential impact thereof, on the state of affairs of
 the company remains to be ascertained,
 
 iv.  Note IV, regarding the balances of unsecured loans reflected under
 current liabilities being subject to confirmation and reconciliation.
 In view of the non-availability of the relevant information,
 consequential impact thereof, on the state of affairs of the company
 remains to be ascertained,
 
 v.  Note VIII.1 & 2, regarding non-provision for doubtful debts out of
 debtors, especially those in respect of the projects already completed
 and/or abandoned. However in view of non-availability of complete
 information in that respect, we are neither able to express our opinion
 on reliability thereof nor able to quantify its impact on the affairs
 of the company,
 
 vi.  Note IX, regarding non provision of doubtful advances out of
 advances. However in view of non-availability of complete information
 in that respect, we are neither able to express our opinion on
 reliability thereof nor able to quantify its impact on the affairs of
 the company,
 
 vii. Note X regarding various deposits being subject to confirmation
 and reconciliation. However in view of non- availability of complete
 information in that respect, we are neither able to express our opinion
 on reliability thereof nor able to quantify its impact on the affairs
 of the company.
 
 viii.  Note XI.2, regarding non-provision of Rs.6.50 lacs out of Cash
 balance looted in the year 1995-96 and not recovered so far, due to
 which balance of accumulates losses is understated while current assets
 are overstated by that amount,
 
 ix.  Note No XII, regarding various liabilities being subject to
 confirmation and reconciliation. However in view of non-availability of
 complete information in respect of the liabilities as well as the same
 being subject to confirmation, we are not able to quantify its overall
 impact on the affairs of the company,
 
 We further draw specific attention to the following:
 
 a) Proceedings under Securitization and Reconstruction of Financial
 Assets and Enforcement of Security Interest Act 2002 being initiated
 against the company by its secured creditors, the liability under which
 may exceed the amount provided by the company .
 
 b) Various Recovery and other suits filed by secured and unsecured
 creditors, pending against the company in various courts, the liability
 under which may exceed the amount provided by the company on that
 account.
 
 c) Violation of provisions of section 58-A of Companies Act, 1956, in
 respect of Public Deposits accepted by the Company,
 
 d) Violation of provision of section 205A(5) of Companies Act, 1956,
 regarding non-maintenance of balance of unpaid dividend in separate
 Bank account and further by non-transfer of such amount to the account
 of Central Government, as stipulated,
 
 e) Violation of section 205 of Companies Act, 1956 regarding
 cancellation of dividend declared for 1997-98,
 
 f) Violation of section 73(3) of Companies Act, 1956 regarding
 non-maintenance of balance of unpaid refund in respect of share
 application money in separate bank account and further non-transfer of
 the same to Investor Education and Protection Fund,
 
 g) Violation of Section 115-O of Income Tax Act, 1961, regarding
 non-payment of Corporate Dividend Tax of Rs.6.61 lacs in the earlier
 year which has since been written back, Subject to the above,
 
 in our opinion and to the best of our information and according to the
 explanation given to us, the said Balance Sheet, Profit & Loss Account
 and Cash Flow Statement read together with Significant Accounting
 Policies and notes to the Accounts annexed to and forming part thereof,
 give the information required by Companies Act, 1956, in the manner so
 required and materially give a true and fair view:
 
 a) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011 and,
 
 b) In the case of the Profit and Loss Account, of the loss for year
 ended on that date.
 
 c) In the case of Cash Flow Statement, of the cash flows of the company
 for the year ended on that date.
 
 I In respect of Fixed Assets: .
 
 (a) The company has not maintained proper records 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 at reasonable intervals having regard to the
 size of the company and nature of its assets.
 
 (c) The company has not disposed off a major part of the plant &
 machinery during the year, and the going concern of the company is
 therefore not affected.
 
 II In respect of its Inventories :
 
 The company did not have any inventory during the year
 
 III In respect of loans, secured or unsecured, granted or taken by the
 company to /from companies, firms and other parties covered in register
 required to be maintained under Section 301 of The Companies Act, 1956,
 
 (a) The Company has not taken loan from any party being company, firm
 and other persons covered in the register required to be maintained
 under Section 301 of The Companies Act, 1956.
 
 (b) The Company has granted loan to nine parties being company, firm
 and other persons covered in the register required to be maintained
 under Section 301 of The Companies Act, 1956. The maximum amount
 involved during the year was Rs. 164.91 lacks and the year end balance
 of such loans was Rs. 108.24 lacs. The loans being interest free are in
 our opinion prima facie prejudicial to the interests of the company.
 
 (c) We are informed that such loans granted by the company, are
 repayable on demand. However some of such loans granted are long
 outstanding.
 
 IV AS per the information provided to us, the company has not
 undertaken any purchase of goods or fixed assets hence we cannot
 comment on the adequacy of internal control procedures with regard to
 purchases of such items.
 
 V In respect of transactions covered u/s 301 of The Companies Act,
 1956:
 
 (a) According to the information and explanations given to us, register
 required to be maintained under Section 301 of the Companies Act, 1956
 has not been updated to include the transactions that needed to be
 entered therein.
 
 (b) In view of (a) above we are unable to express our opinion regarding
 the reasonability of rates of the transactions made in pursuance of
 contracts or arrangements required to be entered in the register
 maintained under Section 301 of the Companies Act, 1956 and exceeding
 the value of Rupee Five Lakhs in respect of any party during the year.
 
 VI According to the information and explanations given to us the
 Company has accepted deposits from the Public hence provisions of
 Section 58A and 58AA of the Companies Act, 1956 and the Companies
 (Acceptance of Deposits) Rules. 1975 with regard to the deposits
 accepted from the public are applicable to it. However the company has
 contravened the said provisions.
 
 VII The Company does not have an internal audit system.
 
 VIII According to the information and explanation given to us, the
 Central Government has not prescribed maintenance of cost records under
 Section 209 (I) (d) of the companies Act, 1956.
 
 IX In respect of statutory dues
 
 (a) As per the information provided to us, the company is not regular
 in depositing with appropriate authorities, the undisputed statutory
 dues including income tax, sales tax, Service Tax, wealth tax,
 provident fund, investor education protection fund, employees state
 insurance, custom duty, excise duty, cess and other material statutory
 dues, applicable to it.
 
 (b) According to the information and explanations given to us, the
 undisputed amounts payable in respect of income tax, sales tax, Service
 Tax, wealth tax, provident fund, investor education protection fund,
 employees state insurance, custom duty, excise duty, cess and other
 material statutory dues, applicable to it as per the records of the
 company, were in arrears, as at 31/03/2011 for a period of more than
 six months from the date they become payable are for Rs 36.89 lacs.
 
 (c) According to the information provided to us, the dues of sale tax,
 income tax, customs duty, wealth tax, excise duty and cess not
 deposited on account of any dispute are as detailed here in below:
 
 Statute                Demand            Nature of
                        Rs. in lacs        Demand
 
 Income Tax                55.72           U/s 143(3)
 (A.Y. 1999-2000)                          r.w.s. 154
 
 Income Tax               174.62           U/s 143(3)
 (A.Y. 2001-02)                            r.w.s. 246(1)(a)
 
 Income Tax               195.03           U/s 143(3)
 (A.Y. 2002-03)                            r.w.s. 246(1)(a)
 
 Income Tax                22.67           U/s 143(3)
 (A.Y. 2003-04)                            r.w.s 147
 
 Income Tax                18.38           U/s 271(1)C
 (A.Y. 2003-04)
 
 Income Tax               139.26           u/s 143(3)
 (A.Y. 2006-07)                            r.w.s 147
 
 Income Tax                43.91           u/s 143(3)
 (A.Y. 2008-09)
 
 Statute          Details of steps     Forum where     Date of filing
                  initiated by the     appeal is        such appeal
                  company              pending
 
 Income Tax       Appeal with CIT (A),  CIT(A)VI 11,      12/01/2010
 (A.Y.1999-2000)  Ahmedabad             Ahmedabad
 
 Income Tax       Appeal with ITAT,     TTAX              13/06/2005
 (A.Y.2001-2002)  Ahmedabad             Ahmedabad         (1607/A/05)
 
 Income Tax       Appeal with ITAT,     ItaT              12/05/2006
 (A.Y.2002-2003)  Ahmedabad             Ahmedabad         (1218/A/06)
 
 Income Tax       Appeal with ITAT      ItaT              09/02/2008
 (A.Y.2003-2004)                        Ahmedabad
 
 Income Tax       Appeal with CIT(A)    CIT(A)VI 11,      9/11/2009
 (A.Y.2003-2004)  Ahmedabad             Ahmedabad
 
 Income Tax       Appeal with CIT(A)    CIT(A)VI 11,      25/01/2011
 (A.Y.2006-2007)  Ahmedabad             Ahmedabad
 
 Income Tax       Appeal with CIT(A)    CIT(A)VI 11,
 (A.Y.2008-2009)  Ahmedabad             Ahmedabad         25/01/2011
 
 X The Company has balance of accumulated losses of Rs 2115.25 lacs as
 at end of the year and it has incurred loss of Rs. 215.43 lacs and cash
 loss of Rs. 212.32 lacs during the financial year covered by our audit
 while it had incurred a loss of Rs 78.82 lacs and cash loss of Rs 65.89
 Lacs in the immediate preceding financial year.  Accordingly the entire
 net worth of the company has been eroded.
 
 XI According to the information given to us, the company has defaulted
 in repayment of dues to a financial institutions and banks; hence the
 lenders have already initiated various actions against the company as
 disclosed in the Notes to accounts forming part of the Audited Balance
 Sheet. Further that the company does not have any outstanding towards
 the debenture holders.
 
 XII According to the information and explanation given to us, the
 company has not granted any 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 are not applicable to
 the Company.
 
 XIV According to the Information and explanation given to us, the
 Company is not dealing in or trading in shares, securities, debentures
 and other investments. Accordingly, the provisions of clause 4(xiv) of
 the Companies (Auditor''s Report) Order, 2003 are not applicable to
 the company.
 
 XV As informed to us, the company has not given any guarantee for loans
 taken by others from banks or financial institutions.
 
 XVI We are informed that no fresh term loan has been raised by the
 company during the year covered by the audit.
 
 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 long-term funds have been used to finance short-term assets
 except that to finance working capital and loss.
 
 XVIII We are informed that during the year, the company has not made
 any preferential allotment of shares to any one.
 
 XIX We are informed that the company has not issued any debentures
 during the period covered by our audit report.
 
 XX We are informed that the company has not raised any funds by way of
 public issues during the period covered by our audit report.
 
 XXI According to the information and explanations given to us no Fraud
 on or by the company has been noticed or reported during the year that
 causes the financial statements to be materially misstated.
 
                                        For GATTANI & ASSOCIATES,
                                           Chartered Accountants
 
 Place : Ahmedabad.                               SHARAD GATTANI
 
 Date : 25/08/2011                                       Partner