We have audited the attached Balance Sheet of Liberty Shoes Ltd. as on
 31st March, 2010, Profit & Loss Account for the year ended on that date
 and also the Cash Flow Statement for the year ended on that day annexed
 thereto. 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.
 
 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.
 
 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 a
 statement on the matters specified in paragraph 4 and 5 of the said
 Order.
 
 1.  Further to our comments in the annexure referred to above, we
 report that:-
 
 a) We have obtained all the information and explanation, which to the
 best of our knowledge and belief were necessary for the purpose of
 audit;
 
 b) In our opinion, proper books of accounts as required by law have
 been kept by the Company so far as appears from our examination of such
 books.
 
 c) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
 dealt with by the Report are in agreement with the books of accounts as
 submitted to us;
 
 d) In our opinion, the Balance Sheet, Profit & 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;
 
 e) On the basis of written representation received by us from the
 Directors of the Company as at 31st March, 2010 and taken on record by
 the Board of Directors, We report that no director is disqualified as
 on 31st March, 2010 from being appointed as Director of the Company
 under clause (g) of sub section (1) of section 274 of the Companies
 Act, 1956;
 
 f) In our opinion and to the best of our information and according to
 the explanation 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:
 
 i) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31 st March 2010;
 
 ii) In the case of Profit & Loss Account, of the profit of the Company
 for the year ended on that date; and
 
 iii) 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 para 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.
 
 b) During the year, there exists a regular programme of verification of
 Fixed Assets and which, in our opinion, is reasonable having regard to
 the size of the Company & nature of its assets. No material
 discrepancies were noticed on such verification.
 
 c) During the year, the Company has not disposed off any major part of
 the fixed assets. Thus the going concern status of the Company is not
 affected.
 
 II.  a) As explained to us, the physical verification of the inventory
 was carried out at reasonable intervals by the Management.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventory
 followed by the management are reasonable & adequate in relation to the
 size of the Company & the nature of its business.
 
 c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventory, and the discrepancies noticed on verification between the
 physical stock & book records were not material in relation to the
 operation of the Company & the same have been properly dealt with in
 the books of accounts.
 
 III.  a) The Company has not granted any loan to any Company, firm or
 parties listed in the register maintained under section 301 of the Act.
 
 b) The provisions of clause 4 (iii) (b) of Companies (Auditors Report)
 (Amendment) Order, 2004 are not applicable to the Company.
 
 c) The provisions of clause 4 (iii) (c) of Companies (Auditors Report)
 (Amendment) Order, 2004 are not applicable to the Company.
 
 d) The provisions of clause 4 (iii) (d) of Companies (Auditors Report)
 (Amendment) Order, 2004 are not applicable to the Company.
 
 e) The Company had taken short term loan from one Company, M/s Geofin
 Investments Pvt. Ltd. This Company is listed in the register maintained
 under section 301 of the Companies Act, 1956. The maximum amount
 involved during the year was Rs16,44,25,214/- & the year-end balance of
 loan taken from such party was Rs10,00,00,000/-.
 
 f) In our opinion, the rate of interest & other terms & condition on
 which loan has been taken from the above said Company listed in the
 register maintained under section 301 of the Companies Act, 1956 is
 not, prima facie, prejudicial to the interest of the Company.
 
 g) The Company has been regular in repaying the principal amount and
 payment of interest as stipulated.
 
 IV.  In our opinion & according to information & explanations given to
 us, there are adequate internal control procedures commensurate with
 the size of the Company & the nature of its business with regard to
 purchase of inventory, fixed assets & with regard to sale of goods and
 services. During the course of our audit, we have neither come across
 nor we have been informed of any major weaknesses in the aforesaid
 internal control system.
 
 V.  a) According to information & explanations given to us, we are of
 the opinion that the particulars of contracts or
 
 arrangements referred to in section 301 have been entered into the
 register maintained under section 301 of the Companies Act, 1956.  b)
 In our opinion & according to information & explanations given to us,
 the transactions made in pursuance of contracts or arrangements entered
 in the register maintained under section 301 of the Companies Act, 1956
 during the year have been made at prices which are reasonable.
 
 VI.  The Company has not accepted any deposit from the public as per
 the directives issued by Reserve Bank of India and the provisions of
 Section 58 A, 58 AA or any other relevant provisions of the Act and
 rules framed there under.
 
 VII.  In our opinion, the Company has an internal audit system
 commensurate with the size & 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. We have not,
 however, made a detailed examination of the same.
 
 IX.  a) According to the information and explanation given to us and on
 the basis of our examination of records of the
 
 Company, amounts deducted / accrued in the books of accounts in respect
 of undisputed statutory dues including Provident Fund, Employees State
 Insurance, Investor Education Protection Fund, Income Tax, Sales Tax,
 Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess & other
 material statutory dues have been regularly deposited during the year
 by the Company with the appropriate authorities.
 
 b) There are no undisputed amount payable in respect of Income Tax,
 Sales Tax/VAT, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess
 & other material statutory dues as at 31st March, 2010 which are
 outstanding for a period more than six months from the date they become
 payable.
 
 c) As at 31st March, 2010 according to the records of the Company and
 the information and explanations given to us, following are the
 particulars of disputed dues on account of Excise Duty, Income Tax and
 VAT which have not been deposited:
 
 Nature of Statute        Nature of dues                Amount (in Rs)
 
 The Central               Excise Duty                     2,99,75,448
 
 Excise Act, 1944 
 
 The Central Excise 
 
 Act, 1944                 Excise Duty                       11,95,268
 
 The Central Excise        Education Cess                     3,86,314
 
                           Service Tax on service 
 
 The Service Tax           received from outside India 
 
 Act, 1994                 prior to the applicability 
 
                           of the related law
 
 
                           Income Tax on account
 
 The Income Tax            of reduction in amount of
 
 Act,1961                  deduction u/s 80 HHC in           11,20,244
 
                           terms of Texation Law
 
                           Amendment Bill, 2005
 
 
                           Value Added Tax on 
 
 Punjab Value Added        account of classification          1913 016
 
 Tax, 2005                 of goods at different
 
                           rate of tax
 
                           Value Added Tax on
 
 Punjab Vajje Added        account of classiflcation of      22,30,998
 
 Tax,2005                  goods at different rate of tax
 
 
 Nature of Statute         Period to which the             Forum where
 
                            amount relates      the dispute is pending
 
    The Central            November 2004 to          Customs, Excise
 
 Excise Act,1944
                           June 2005 and May   & Service Tax Appellate
 
                           2006 to June 2006       Tribunal, New Delhi
 
 The Central Excise            Financial              Customs, Excise
 
    Act,1944
                              year2002-03      & Service Tax Appellate 
 
                                                   Tribunal, New Delhi
 
 The Central Excise            Financial              Customs, Excise
 
    Act,1944  
                              year2004-05      & Service Tax Appellate
 
                                                   Tribunal, New Delhi
 
 The Service Tax               Financial Year  & Service Tax Appellate
 
    Act,1944                     2002-2003         Tribunal, New Delhi
 
                                                        Commissioner
 
 The Incom Tax                Assessment Year           of Incom Tax
 
    Act,1961
                                 2002-2003                (Appeals)
 
 Punjab Value Added            Financial Year      Deputy Commissioner
 
    Tax, 2005
                                 2006-07                  (Appeals)
 
 Punjab Value Added              Financial         Deputy Commissioner
 
    Tax, 2005
                                 Year 2006-07             (Appeals)
 
 X.  The Company does not have any accumulated losses as at 31st March
 2010. The Company has not incurred any cash losses during the financial
 year covered by our audit & in the immediately preceding financial
 year.
 
 XI.  In our opinion & according to information & explanations given to
 us, the Company has not defaulted in repayment of dues to a financial
 institutions, bank or debenture holders.
 
 XII.  The Company has not granted any loans & advances on the basis of
 security, by way of pledge of shares, debentures & 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 (Auditors Report) (Amendment) Order, 2004 are not
 applicable to the Company.
 
 XIV.  In our opinion the Company is not dealing in or trading in
 shares, securities, debentures & other investments. Therefore, the
 provisions of clause 4 (xiv) of the Companies (Auditors Report)
 (Amendment) Order, 2004 are not applicable to the Company.
 
 XV.  In our opinion and according to the information and explanation
 given to us, the terms and conditions of the guarantees given by the
 Company, for loans taken by subsidiary from banks during the year are
 not prejudicial to the interest of the Company.
 
 XVI.  According to information & explanations given to us, the term
 loans have been applied for the purpose for which they were raised.
 
 XVII. According to information & 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.
 
 XVIILAccording to information & explanations given to us, the Company
 has not made any preferential allotment of shares to parties &
 Companies covered in the register maintained under section 301 of the
 Companies Act, 1956.
 
 XIX.  According to the information and explanations given to us the
 Company has not issued any secured debentures during the year.
 
 XX.  The Company has not raised any money through public issue during
 the year.
 
 XXI.  According to information & explanations given to us, no fraud on
 or by the Company has been noticed or reported during the course of our
 audit.
 
 
 
                                            For Pardeep Tayal & Co.
 
                                         Firm Registration No. 002733N
 
                                             Chartered Accountants
 
 
 
                                                  Pardeep Tayal
 
 Place: New Delhi                                    Partner
 
 Date: Thursday, 12th August, 2010        Membership Number 081643