We have audited the Balance Sheet of LOK HOUSING AND CONSTRUCTIONS
 LIMITED as at 31st March, 2011 and the profit & Loss Account of the
 Company for the year ended on that date annexed there to. These
 fnancial Statements are the responsibility of the Company’s management.
 Our responsibility is to express an opinion on these fnancial
 statements based on our audit.
 
 We have conducted our audit in accordance with the auditing standards
 generally accepted in India. These standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 fnancial statements are free of material misstatement.  An audit
 includes examining, on test basis, evidence supporting the amounts and
 disclosures in the fnancial statements. An audit also includes
 assessing the accounting principles used and Significant estimates made
 by management, as well as evaluating the overall fnancial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 We report that:
 
 1.  As required by the Companies (Auditor’s Report) Order, 2003 issued
 by the Company Law Board in terms of section 227 (4A) of the Companies
 Act, 1956, we give in the Annexure a statement on the matters specifed
 in paragraph 4 & 5 of the said Order.
 
 2.  Further to our comments in the Annexure referred to in Paragraph 1
 above, we state that:
 
 a.  We have 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 Books of
 the Company;
 
 c.  The Balance Sheet and profit & Loss Account and Cash Flow statement
 referred to in this report are in agreement with the Books of Account.
 
 d.  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 section 211(3C) of the Companies Act, 1956;
 
 e.  On the basis of the confrmations received from the directors, as on
 31st March, 2011 and taken on record by the Board of Directors, we
 report that none of the directors of the Company are disqualifed from
 being appointed as directors 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 knowledge and according to
 the information and explanation given to us the said Balance Sheet,
 profit & Loss Account and Cash Flow Statement read together with the
 notes there on attached thereto give the information required by the
 Companies Act, 1956 in the manner so required and, Subject to provision
 for interest and other charges payable upon final settlement
 particularly with State Bank Of India, the amount thereof being
 unascertainable.(See Notes 2(f) to Accounts.) 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 31st March, 2011;
 
 ii. In the case of the profit & Loss Account of the profit of the Company
 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 AUDITORS’ REPORT
 (Referred to in paragraph (1) of our Report of even date)
 
 1a. The Company has maintained proper records showing full particulars
 including quantitative details and situation of fi xed assets.
 
 1b. As per the information and explanations given to us physical verifi
 cation of fi xed assets has been carried out at regular intervals and
 we have been informed that no material discrepancies were noticed on
 such verification. In our opinion, the frequency of verifi cation is
 reasonable, having regard to the size of the Company and nature of its
 fi xed assets.
 
 1c. During the year, the Company has not disposed of any substantial /
 major part of fi xed assets.
 
 2a. As per the information furnished, the inventories have been
 physically verifi ed during the year by the management. In our opinion,
 having regard to the nature and location of stocks, the frequency of
 the physical verifi cation is reasonable.
 
 2b. In our opinion and according to the information and explanations
 given to us the procedure for physical verifi cation of inventory
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of business.
 
 2c. The Company is maintaining proper records of inventory. In our
 opinion, discrepancies noticed on physical verifi cation of stocks were
 not material in relation to the operations of the Company and the same
 have been properly dealt with in the books of account.
 
 3a. As per the information furnished, the Company has outstanding
 unsecured advances given aggregating to Rs.365.76 lacs (previous year
 Rs.1,689.91 lacs) to 1 party (previous year 5 parties ) listed in the
 register maintained under Section 301 of the Companies Act, 1956, the
 terms of which are prima facie prejudicial to the interest of the
 Company.
 
 3b. As per the information furnished, the Company has no loans taken
 (previous year nil) from any party (previous year no party) listed in
 the register maintained under Section 301 of the Companies Act, 1956,
 the terms of which are prima facia not prejudicial to the interest of
 the Company.
 
 4. 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 its
 business with regard to purchase of inventory and fi xed assets and for
 the sale of goods. During the course of our audit, no major weakness
 has been noticed in the internal control procedures.
 
 5a. Based on the audit procedures applied by us and according to the
 information and explanations provided by the management, we are of the
 opinion that the transactions that need to be entered into the register
 maintained under Section 301 have been so entered.
 
 5b.  In our opinion and according to the information and explanations
 given to us, there are no transactions exceeding the value of Rs. fi ve
 lacs each which have been made at prices which are unreasonable having
 regard to prevailing market prices at the relevant time.
 
 6.  In our opinion, the Company has not accepted any deposits during
 the year from the public within the meaning of the provisions of
 Section 58A and 58AA of the Companies Act, 1956 and rules made there
 under. Hence, the Clause (vi) of the order is not applicable.
 
 7.  The Company has an adequate internal audit system commensurate with
 the size of the Company and the nature of its business. However the
 same need to be strengthened.
 
 8.  We are informed that in case of the Company the Central Government
 has not prescribed maintenance of cost record as required under section
 209(1)(d) of the Companies Act,1956.
 
 9a. According to the information and explanations given to us and the
 records examined by us, the Company is generally depositing with
 appropriate authorities undisputed statutory dues including provident
 fund, investor education and protection fund, employees’ state
 insurance, income-tax, sales-tax, wealth-tax, customs duty,
 excise-duty, cess and other statutory dues wherever applicable.
 Undisputed arrears of statutory dues outstanding as at 31st March, 2011
 for a period of more than six months from the date they became payable
 are as under:
 
 Nature of                  Period              Undisputed Tax Amount
 dues                                                   (Rs. in lacs)
 
 Income tax             F.Y 2 008-09                           58.09
 
 9b. According to the records of the Company, dues of sales tax,
 income-tax, customs, wealth-tax, excise duty, cess (excluding interest)
 which have not been deposited on account of disputes and the forum
 where the dispute is pending are as under:
 
 Nature of                Period         Forum            Disputed
 dues                                                   Tax Amount
                                                     (Rs. in lacs)
 
 Income tax            F.Y 2002-03       CIT(A)             11.26
 
 Income tax            F.Y 2006-07       CIT(A)          7,568.88
 
 Income tax            F.Y 2006-07       ITAT              282.00
 
 Income tax            F.Y 2007-08       CIT (A)         5,936.15
 
 Income tax            F.Y 2007-08       ITAT              198.00
 
 Income tax            F.Y 2008-09       ITAT               26.46
 
 Please refer to note no. 3 of notes to accounts, regarding non
 provision of interest u/s 220 of the Income Tax Act, 1961.
 
 10.  There are no accumulated losses of the Company as on 31st March,
 2011. The Company has not incurred any cash losses during the fi
 nancial year covered by our audit and the immediately preceding fi
 nancial year.
 
 11.  The Company has defaulted in repayment of dues to fi nancial
 institutions, banks and debenture holders, and as per the Company’s
 records the amount outstanding in this respect are as under:
 
 Sr.  Name of                Amount of                Over due
 No.  Institution /          due o/s on               since
      Bank                   31-03-2011
                             (Rs. in lacs)
 
 1.   State Bank of India    4,580.29                 14.12.2007
 
 For the above purpose we have relied on fi gures as reflected in the
 books of account of the Company. The fi gures as claimed by the Banks /
 Financial Institutions are not available to us as the same are being
 disputed.
 
 12.  Based on our examination of the records and the information and
 explanations given to us, the Company has not granted any loans and/or
 advances on the basis of security by way of pledge of shares,
 debentures and other securities.
 
 13.  In our opinion, provisions of any special statute applicable to
 chit fund /nidhi / mutual benefi t fund/ society are not applicable to
 the Company.
 
 14.  In our opinion and according to the information and explanation
 given to us, the Company is not a dealer or trader in shares
 securities, debentures and other investments.
 
 15.  In our opinion and according to the information and explanation
 given to us, the Company has not given any guarantees for loans taken
 by others from banks or Financial Institutions.
 
 16.  In our opinion and according to the information and explanation
 given to us, on an overall basis, the term loans have been applied for
 the purpose of which they are obtained.
 
 17.  According to the information and explanations given to us and on
 the basis of an overall examination the balance sheet of the Company,
 in our opinion no funds raised on short-term basis have been used for
 long-term investment. Similarly no long-term funds have been used to fi
 nance short-term assets except permanent working capital.
 
 18.  According to the information and explanations given to us, during
 the year the Company has converted 16,66,600 optionally convertible
 share warrants into equity shares at Rs. 40/- per warrant (including a
 premium of Rs. 30/-) on preferential basis to parties and companies
 covered in the register maintained under section 301 of the Act.
 
 19.  According to the information and explanations given to us, during
 the year, the Company has not issued any debentures.
 
 20.  According to the information and explanations given to us, during
 the year the .Company has not raised any money by way of public issues.
 
 21.  According to the information and explanations given to us, no
 material fraud on or by the Company has been noticed or reported during
 the year.
 
                                            For BHUPENDRA SHROFF & CO.,
 
                                                 Chartered Accountants
 
                                                     Firm No. 101458W
 
                                                           B N SHROFF
 
                                                              Partner 
 
                                                  Membership No. 5039.
 
 Mumbai,
 
 Date : 30th June, 2011