(1) We have audited the attached Balance Sheet ot MODI INDUSTRIES
 LIMITED as at 31st March, 2009 and the Profit & Loss Account and Cash
 Flow Statement for the year ended on that date, both annexed thereto.
 The attached Balance Sheet does not include Assets and Liabilities
 including Contingent Liabilities and quantitative details of Steel Unit
 as at 31si March, 2009 but includes balances as on 31st March,
 1992,except for reduction of: (i) unsecured loans by Rs.323.95 Lacs in
 view of write-back of Rs.278.95 Lacs during the financial year 2004-05
 and payment of Rs.45 Lacs during 2005-06 on account of one-time
 settlement of dues of a bank and (ii) net fixed assets by Rs.649.37Lacs
 (Previous year Rs. 108.97Lacs) on account of provision for depreciation
 for the period 01.04.1993 to 31.03.2009 on opening balances of fixed
 assets as on 01.04.1992 as stated in Note 4(c) of Schedule 15. The
 Profit and Loss Account also includes profit and loss account of Steel
 Unit for three years i.e. 1993-94, 1994-95 and 1995-96 (Refer Schedule
 14) but does not include: (i) certain provisions as stated in Note 4(f)
 of Schedule 15 and (ii) accumulated losses, amount unascertained, of
 the Steel Unit for the year 1992-93 in view of non-incorporation of
 annual accounts of the Steel Unit for the above year. The Cash Flow
 Statement, except for certain adjustments made as stated in foot-note 2
 of cash flow statement, does not include adjustments for Cash Flows
 from investing/ financing activities and changes in current assets and
 liabilities of Steel Unit in view of non-availability of audited
 Balance Sheets of the Unit as on 31.03.2008 and 31.03.2009 (Refer Note
 4 of Schedule 15). These financial statements are the responsibility-of
 the Company management. Our responsibility is to express an opinion on
 these financial statements based on our audit.  .
 
 (2) Subject to paragraphs 1 & 3 of this report, 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 misstatements. 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 financialStatement presentation. We believe
 that our audit provides a reasonable basis for our opinion.
 
 (3) We report that:
 
 (A) The books of accounts, vouchers and other documents of the Steel
 Unit for 1992-93 were not made available to us and consequently audit
 could not be conducted in respect of the same (Note 4 of Schedule 15 to
 Annual Accounts). Therefore, as stated in Para 1 above, the attached
 Balance Sheet, Profit & Loss Account and Cash Flow Statement does not
 include: (a) the financial data/impact of working results and of
 declaration of closure/ post-closure transactions, which includes
 realization of depot sales/dues from debtors, payment of final dues of
 employees, transfer of funds (including cash) to/from Sugar Unit and
 payments to various parties by Sugar Unit by debit to Steel Unit of the
 Company, rental income and personnel/administration expenses, of the
 Steel Unit for the year 1992-93 during which the Unit had operated for
 ten months the exclusion of which, in our opinion, substantially
 impairs the presentation of above financial statements of the Company
 especially in view of the fact that (i) the assets and liabilities of
 Steel Unit constituted 28% and 43% respectively of the total Assets &
 Liabilities of the Company as at 31st March, 1992 and the Income &
 Expenditure of the Steel Unit constituted 30% and 32% respectively of
 the total Income & Expenditure of the Company for the said year which
 resulted in a loss of Rs. 787.22 Lacs for the Unit and (b) impact on
 assets , liabilities and cash flows on account of non-incorporation of
 balance sheets for the years 1993-94 to 2008-09 as stated in note 4(c)
 of Schedule 15.
 
 (B) As required by the Companies (Auditors Report) Order, 2003 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 paragraphs 4 and 5 of the said
 order except for certain matters relating to Steel Unit of the company
 in view of non-availability of information / details on account of
 nonrincorporation of: (i) annual accounts of the Steel Unit for the
 year 1992-93 and (ii) balance sheets for the years 1993-94 to 2008-09
 as stated in note 4(c) of Schedule 15 . (See Paragraph 3(A) above).
 
 (C) Further to our comments in paragraphs 1 and 3(A) above and in the
 Annexure referred to in paragraph 3(B) above, we report that:
 
 (i) We have obtained the information and explanations, which to the
 best of our knowledge and belief were necessary for the purpose of our
 audit of the Company except in case of Steel Unit in respect of which
 no details, information and explanations are available for the opening
 assets and liabilities as on 01.04.2008 and for contingent liabilities
 and quantitative details etc. as on 01.04.2008 in view of
 non-incorporation of (i) accounts of Steel Unit for 1992-93 and (ii)
 balance sheets for the years 1993-94 to 2008-09 as stated in note 4(c)
 of Schedule 15. (See Paragraphs 1 and 3A above).
 
 (ii) 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 the
 books except in respect of Steel Unit, where audited balances of
 opening assets, liabilities, contingent liabilities and quantitative
 details etc. as on 01,04.2008 were not available and consequently not
 incorporated in the books of account. (See Paragraph 3(A) above).
 
 (iii) The Balance Sheet referred to in this report, is in agreement
 with the books of accounts of all units and accounting centres taken
 together, other than Steel Unit, as on 31st March, 2009 as consolidated
 with the Balance Sheet of Steel Unit as stated in Note 4 (c)&(d) of
 Schedule 15 of Annual Accounts and hence is - not in agreement with the
 books of account of the Company as a whole. Further, the Cash Flow
 Statement for the year ended on that date, which does not include
 adjustments for Cash Flows from investing/ financing activities and
 changes in current assets and liabilities in view of non-availability
 of audited Balance Sheet of Steel Unit as on 31.03.2008 & 31-03-2009,
 is also not in agreement with the books of account. (Refer foot-note 2
 of cash flow statement): Except for non-incorporation of profit and
 loss accounts/ accumulated losses of Steel Unit for the year 1992-93,
 the Profit and Loss Account is in agreement with the books of accounts.
 
 (iv) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with the
 Accounting Policies and Notes thereon, so far as they relate to the .
 remaining Units i.e. other than Steel Unit, give the information
 required by the Companies Act, 1956 in the manner so required except
 for non-disclosure of information relating to micro, small and medium
 enterprises.( Refer note 15 of Schedule 15). In the case of Steel Unit,
 in view of non-incorporation of balance sheets of Steel unit as on
 31.03.2009 and 31.03.2008 on account of non-availability and
 consequently non-incorporation of audited opening balances as on
 01.04.2008 and 01.04.2007 respectively of assets, liabilities,
 contingent liabilities and quantitative details etc., the accounts do
 not give the information required by the Companies Act, 1956 in the
 manner so required for the Company as a whole.(Refer Note 4 of Schedule
 15).
 
 (v) On the basis of written representations received from the directors
 and taken on record by the Board of Directors, none of the directors is
 disqualified, as on 31st March, 2009, from being appointed as a
 director in terms of Clause (g) of Sub-Section (1) of Section 274 of
 the Companies Act, 1956.  Further, the company has been legally advised
 that provisions of Section 274(1 )(g) are prospective in nature and the
 defaults made by it prior to 13th December, 2000, for non-payment of
 deposits/interest on deposits on due dates and non-redemption of
 debentures on due dates, are not covered by Section 274(1 )(g) of the
 Companies Act, 1956, on which we have relied upon.  
 
 (D) (i) Understatement of accumulated losses on account of
 non-incorporation of impact of operational/ working results/declaration
 of closure and post closure transactions of Steel Unit for the year
 1992-93, amount/impact unascertained. (Refer Note 4 of Schedule 15 and
 Paragraph 3(A) above).  
 
 (ii) Though the Company has incurred losses far in excess of paid-up
 capital/reserves and has been declared a sick company, the accounts
 have been prepared on going concern basis for reasons stated in Note 20
 of Schedule 15.  
 
 (iii) Understatement of losses on account of:
 
 (1) Non-provision of depreciation on the value of buildings written-up
 consequent to revaluation, amount unascertained (Note 19);
 
 (2) Non-provision of earned leave encashment for Steel Unit, amount
 unascertained. (Note 28);
 
 (3) Non-provision of interest on loans, obsolete inventories, doubtful
 debtors/loan and advances and impairment loss, etc. in Steel Unit as
 stated in Note 4(f) of Schedule 15 of Annual Accounts. Amount of
 non-provision not ascertained.
 
 (iv) During the year 2006-07, the company had received 10,50,000 equity
 shares of Rs. 10 each issued at a premium of Rs.31.66 per equity share
 of Indofil Organic Industries Limited (IOIL) without any payment by the
 company in view of its holding investment of 7 Lac equity shares in
 Modipon Limited (MPL). The company was legally advised that either the
 fair values of shares of IOIL can be recognized as revenue or the price
 at which IOIL has issued shares on behalf.of MPL can be credited to
 Capital Reserve by debit to Investments in the books of the company.
 Based on the above legal opinion obtained by the company, an amount of
 Rs.437.43 Lacs, being the price at which IOIL issued shares, has been
 credited to Capital Reserve by debit to Investments in the books of the
 company as explained in note 17 of Schedule 15 of Annual Accounts. In
 our opinion, the cost to be allocated to the shares of IOIL should be
 either the amount which bears to the cost of acquisition of MPL.shares
 the same proportion as the net worth of MPL ¦ immediately before the
 sale of Chemical Division or on the basis of fall in the market value
 of shares of MPL after the sale of Chemical Division.
 
 (v) (1) Non-provision of Income Tax Rs.224.75 Lacs (Previous year
 Rs.224.75Lacs) on excess price realization of free sale sugar {Note
 9(b)};
 
 (2) Non-provision of interest Rs.2.40 Lacs for the year and Rs.132.05
 Lacs up to 31st March, 2009 on disputed price of levy sugar (Note 8);
 
 (3) Non-provision of late payment surcharge on electricity tariff
 amounting to Rs.536.34 Lacs (Previous year Rs.536.34 Lacs) {Note
 10(a)};
 
 (4) (a) Non-provision of interest on fuel surcharge amounting to
 Rs.117.10 Lacs (Previous year Rs.117.10 Lacs) {Note 10(b)};
 
 (b) Non-provision of late payment surcharge/recovery charges Rs.302.66
 Lacs (Previous year Rs.302.66 Lacs) {Notes 10(c)};
 
 (c) Non-provision of demands of UPSEB of Rs. 1199.72 Lacs (Previous
 year Rs. 778.17Lacs) for 1993-94 to 1999-2000.(Note 4 f (vii)) of
 schedule15 and foot-note 3 of schedule 14);
 
 (5)Non-provision of disputed ESI demand Rs.56.52 Lacs (Previous year
 Rs.55.35 Lacs) (Note 11); (6)Non-provision of disputed House-tax demand
 Rs.188.63Lacs (Previous year Rs.199.54Lacs) (Note 12); - ¦
 
 (7)Non-prdvision of Gratuity Liability on actuarial basis for the
 period up to 30th September, 1987, Rs.84.82 Lacs (Previous year
 Rs.84.82 Lacs) {Note 14(a)};
 
 (8)Non-provision of simple, penal and compound interest of Rs. 15760.79
 Lacs (for the year Rs.2772.11 Lacs) on term loans/debentures and public
 deposits {Note 21(a) and (g)} and interest/ bank charges Rs.3267.51Lacs
 (for the year Rs.514.88 Lacs) on cash credit from banks {Note 21(c) to
 (f)}; (9)Non-provision of: (i) Sales-tax Rs.2455.78 Lacs excluding
 interest (Previous year Rs.2455.78 Lacs) {Note 22(a)} and (ii) demands
 for sales-tax & penalty of Rs.135.16Lacs (Previous year Rs.135.16 Lacs)
 {Note 1(c) of Schedule 15). Further, no due certificate of Sale-tax
 authorities is awaited for waiver of balance amount of interest and
 penalty as mentioned in Note 22(c);
 
 (10)Non-provision of Wages Rs.27.46 Lacs (Previous year Rs.27.46 Lacs)
 for the lock-out period (Note 24);
 
 (11)Non-provision of diminution Rs.80 Lacs (Previous Year Rs.80Lacs) in
 the value of a long-term investment.(Note 29);
 
 (12) Non-provision of excise-duty Rs.167.43 Lacs (Previous Year
 Rs167.43 Lacs). (Note 35).
 
 (13) Non-provision of interest of Rs.77.37 Lacs and recovery charges of
 Rs.649.50 Lacs (Previous Year Rs.726.87Lacs) in view of the reasons
 stated in Note 41(a) & (c) of Schedule 15.
 
 (14) Non-provision of differential liability of Rs.848.12 Lacs
 (Previous year Rs.741.70 Lacs) of sugar cane price in view of reasons
 stated in note 42 of schedule 15.
 
 (E) Subject to paragraph (D) above and non-disclosure of impact on loss
 for the year on account of change
 
 in the method of valuation of raw-material and stores and spare-parts
 as stated in note 44 of Schedule 15, in our opinion, the Profit & Loss
 Account and Balance Sheet, so far as they relate to the remaining units
 i.e.  other than Steel Unit, comply with the requirements of the
 Accounting Standards referred to in Sub-Section (3c) of Section 211 of
 the Companies Act, 1956. However, in view of non-availability and
 consequently non-incorporation of audited (i) opening balances as on
 01.04.2008 of assets, liabilities, contingent liabilities and
 quantitative details etc. and (ii) profit and loss account for 1992-93
 of Steel Unit (Refer Paragraph 3(A) above), the accounts do not comply
 with the requirements of Accounting Standards referred to in Section
 211(3c) of the Companies Act, 1956, for the Company as a whole.
 
 (F) Confirmation of Debit/Credit balances of the debtors/
 creditors/certain banks and of parties- who have discounted sale bills
 of Sugar Unit were not obtained. (Note 33 of schedule 15 and foot-note
 6 of schedule 14).
 
 (G) The Company has not deposited unpaid unclaimed public deposits and
 interest accrued thereon amounting to Rs.11.25 Lacs with Investor
 Education & Protection Fund. Further, unpaid amount of such unclaimed
 debentures ,if any as on 31.O3.2003 has not been identified .(Note 36)
 
 (H) Cars costing Rs.100.09 Lacs (Previous Year Rs.100.09 Lacs)
 purchased in the name of employees/
 
 Corporate Advisor are yet to be transferred to the name of the company.
 However, these persons have given disclaimer in favour of the company
 (Refer Foot-Note D of Schedule 4).
 
 (I) We invite attention to note 39 regarding entering into agreements
 to sell 215 (previous Year 150) residential quarters, note 40 (a)
 regarding entering into lease, including perpetual lease, agreements
 for 11105.35 Sq. Meters out of total area of 6.75 Lac Sq. Meters
 approx. of factory land & buildings and note 40 (b) regarding entering
 into perpetual lease agreement for 1584 Sq.  Mtrs. of factory land for
 which the approvals of financial institutions, to whom these quarters
 and factory land & buildings are mortgaged, were not obtained.
 
 (J) As stated in note 27(b) of schedule 15, the remuneration paid of
 Rs.5.63 Lacs to a Managing Director is subject to the approval of
 Central Govt.
 
 (K) The maximum borrowings of the company during the current year were
 Rs.61.10 Crores which are in excess of limit of Rs.50 Crores approved
 by the shareholders of the company under section 293(1 )(d) of the
 Companies Act, 1956 .(Note 48).
 
 (L) We further report that, without considering items mentioned at3 (D)
 (i) to (iii) and 3(F) to 3(K) above, the effect of which could not be
 determined, had the observations made by us in paragraphs 3D (iv)(4) &
 (v) above been considered, the loss for the year after appropriations
 would have been Rs.3511.32 Lacs (as against the reported figure of loss
 of Rs. 125.25 Lacs), losses for the years 1993-94 and .1995-96 of Steel
 unit would have been Rs.1103.06 Lacs (as against the reported figure of
 loss of Rs.687.81Lacs), debit ¦ balance of Profit and Loss Account
 would have been Rs.35701.86 Lacs (as against the reported figure of
 Rs.9390.15 Lacs), total loan funds would have been Rs.32397.34 Lacs (as
 against reported figure of Rs. 13369.04 Lacs), Current Liabilities and
 provisions would have been Rs.20864.46 Lacs (as against the reported
 figure of Rs.13661.05 Lacs), Investments would have been Rs.270.89 Lacs
 (as against the reported figure of Rs.788.32 Lacs) and reserves and
 surplus would have been.Rs.3783.61 Lacs (as against the reported figure
 of Rs.4221.04 Lacs).
 
 (M) In view of the significance of our observations in paragraphs 1 and
 3(A) to (L) above and especially in view of the fact that the state of
 affairs would change substantially in case the profit & loss account
 for the financial year 1992-93 and balance sheet as on 31st March, 2009
 of Steel Unit were included, which we are unable to quantify, we are of
 the opinion, the said accounts DO NOT 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, 2009, (b) in the case of Profit & Loss Account, of
 the loss for the year ended 31st March, 2009 and (c) in the case of
 Cash Flow Statement, of the cash flows for the year ended on that date.
 
 ANNEXURE REFERRED TO IN PARA (3B) OF OUR MAIN REPORT OF EVEN DATE
 
 As required by the Companies (Auditors Report) Order, 2003 and on the
 basis of such checks as were considered appropriate and according to
 the information and explanations given to us, we further state that in
 our opinion:
 
 (A) The following matters reported at paragraphs (B) 2,6,9,11,12,15 and
 16 do not cover Steel Unit since (i) the accounts of the Steel Unit for
 the year f992-93 has not been incorporated and consequently the audit
 of which has not been carried out and (ii) the balance sheets of Steel
 Unit for 1993-94 to 2008-09 have not been incorporated due to
 non-availability of audited opening balances as on 01.04.1993. (Refer
 Note 4 of Schedule 15 and paragraphs 1 & 3A of our main audit report).
 
 (B) Subject to our comments in paragraph (A) above:
 
 (1) (a) Companys Sugar Unit since inception and other Units since
 November, 1968, have generally maintained proper records including
 quantitative details and situation of their major fixed assets except
 for: (i)locations in case of furniture and fixture and (ii) recording
 of additions/deletions of certain previous years in Sugar & Distillery
 units . Fixed asset register of Steel unit has not been produced to us.
 No physical verification of assets have been conducted by the
 Management since 1989 in sugar, steel and distillery Units and of
 Corporate office and since 2001-02 in respect of other units. ¦
 
 (b) The Company has not disposed off substantial part of Fixed Assets
 during the year.
 
 (2) (a) The inventory of the company, except in respect of stores and
 spare parts in paint unit, has been physically verified during the year
 by the management. In respect of stocks lying with third parties and
 consignee agents, these have substantially been confirmed.  -
 
 (b) Subject to foregoing, the procedures of physical verification of
 inventory followed by the management were found reasonable and adequate
 in relation to the size of the Company and the nature of its business.
 
 (c) On the basis of our examination of records of inventory, the
 company has maintained proper records of inventory and the
 discrepancies noticed on verification between the physical stocks and
 book records were not material.
 
 (3) The Company has not given/taken any loans, secured or unsecured
 to/from companies, firms or other parties covered in the register
 maintained u/s 301 of the Companies Act, 1956 except for: (i) unsecured
 interest free loan given to a company of-Rs.4.01 Lacs (net) during the
 previous years, the terms and conditions of which are prima facie not
 prejudicial to the interest of the Company and repayment of the
 principal amount will be as per the terms of sanctioned rehabilitation
 scheme of that company and (ii) unsecured loan of Rs.7.25Lacs taken
 from two subsidiaries of the company, the rate of interest ana terms
 and conditions of which are prima facie not prejudicial to the interest
 of the Company. We are unable to comment on the rate of interest
 and-terms and conditions with the two companies covered in the register
 maintained u/s 301 of the Companies Act, 1956 in view of pending
 execution of terms of settlement with those companies to whom Punjab
 National Bank and IDBI have agreed to assign their debts in view of the
 one time settlement of their dues. (Refer note 4(f)(1)(a) & (b) of
 schedule 15 of annual accounts). The company has taken interest free
 loan of Rs. 149.88 Lacs from a company covered in the register
 maintained under section 301 of the Companies Act, 1956, the terms and
 conditions of which are not prejudicial to the interests of the
 company.
 
 (4) There are generally adequate internal control procedures
 commensurate with the size and nature of the .  Companys business for
 the purchase of inventory and fixed assets and for the sale of goods
 except in respect of documentation/confirmation of
 rebate/trade-discount allowed to certain customers by Distillery Unit.
 Some of the key areas including rebate & discount allowed; recovery
 from customers and balance confirmation of customers /suppliers/parties
 who have discounted sale bills of Sugar Unit of the company needs to be
 strengthened. During the course of our audit, except as stated above,
 we have not observed any continuing failure to correct major weaknesses
 in internal controls.  :
 
 (5) (a) To the best of our knowledge and belief and according to the
 information and explanations given to us, we are of the opinion that
 the particulars of contracts or arrangements referred to in section 301
 of the Act read ¦with note 4(f)(i) (b & c) of schedule 15 of annual
 accounts have been entered in the register maintained under that
 section.
 
 (b) In our opinion and according to the information and 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 and exceeding the value of rupees five lacs in
 respect of any party during the year have been made at prices which are
 reasonable having regard to prevailing market prices at the relevant
 time (refer paragraph 3 above).
 
 (6) In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of Sections
 58A, 58AA or any other relevant provisions of the Act and the Rules
 framed there under except for amount borrowed by Sugar Unit of Rs.
 1267.62 Lacs from public during the current year by way of sale bills
 discounting. We are informed by the company that entire amount has been
 repaid till date. Further, due to accumulated losses, the deposits
 accepted during the-year and deposits outstanding as on 31st March,
 2009 are in excess of the limit. Matured/Claimed and unclaimed deposits
 amounting to Rs.126.88 Lacs and interest accrued are outstanding on
 31st March,2009. (Refer paragraph 3 (G) of our main report).The Company
 Law Board (CLB) vide its order dated 13th December, 1991,inter-aha,
 directed the company to pay principal amount of the deposits commencing
 from April, 1992 with a moratorium of 3 years from the date of the
 original maturity of the deposits. Against the above order, the company
 filed writ petition before Honble Allahabad High Court and vide its
 order dated 25th February 1992, the court directed that no penal action
 shall be taken against the company in pursuance of the order or CLB. We
 are informed that the matter is still pending for final adjudication of
 the court.
 
 (7) In our opinion, the company has an Internal Audit System
 commensurate with the size and nature of its business except in
 respect, of corporate office, Steel Unit and wholesale depot of
 Distillery Unit where no internal audit is being conducted.
 
 (8) (a) We nave broadly reviewed the books of account and other records
 maintained by the Company in respect of manufacture of Sugar, Gas and
 Distillery Units 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 we 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 records with a view to
 determining whether they are accurate or complete.  (b) To the best of
 our knowledge and according to the information given to us, the Central
 Government has not prescribed maintenance of cost records under section
 209(1 )(d) of the Companies Act, 1956, for any other product of the
 company. Further, Vanaspati and Steel Units are lying closed and hence
 no cost records are required to be maintained.
 
 (9) (i) During the current year, the company was regular in depositing
 with the appropriate authorities undisputed statutory dues except in
 following cases:
 
 (a) Sugar and Distillery units of the company were not regular in
 deposit of Provident Fund (PF), FPS and ESI dues and interest on
 overdue PF/FPS.
 
 (b) In respect of excise-duty, entry tax, fringe benefits tax and Tax
 Deducted at source, these, have been regularly deposited though there
 have been substantial delays in Sugar Unit and in a few cases of tax
 deducted at source in Distillery unit. In respect of tax collection at
 source, there have been substantial delays in Distillery Unit and in a
 few cases in Sugar Unit. In respect of sales-tax/ vat, these have been
 regularly deposited though there has been a slight delay in few cases
 in sugar unit and in a few depots of Paint Unit of the company.
 Further, water cess was not deposited in time in Distillery unit.
 
 (c) Investor Education and protection fund : 
 
 As on 31st March,2009, there were public deposits amounting to Rs.8.63
 Lacs which has remained unclaimed and unpaid for a period of more than
 seven years and interest accrued but not paid on these unclaimed
 deposits till the date of maturity amounts to Rs.2.62 Lacs . Details of
 unclaimed and unpaid debentures for a period of more than seven years
 have not been ascertained. These amounts have not been deposited with
 Investor Education and protection fund (Refer Note 36 of Schedule 15 of
 Annual Accounts).  (ii) (a) On the basis of such checks as were
 considered appropriate and according to the information and
 explanations given to us, Statement of Arrears of unpaid Undisputed
 Statutory Dues (excluding of Steel Unit) outstanding for more than six
 months as on 31st March, 2009 are as under :
 
 Nature of dues                       Amount (Rs. In Lacs)
 
 Interest on Provident Fund/FPS           105.44
 Tax deducted at source/Tax 
 collection at source                      43.02*
 Excise duty                                4.28
 U.P. Trade Tax/CST                       807.68
 Water Cess                                 5.90
 Fringe benefits tax                        5.52
 
 * includes Rs. 27.74 Lacs deposited subsequently but excludes tax not
 deducted at source.  (b) In respect of sales tax on sales effected by
 consignees in the previous years, we are unable to report such
 outstanding balances since the relevant records of consignees regarding
 collection and payment of sales tax were not made available to us.
 (iii) According to the records of the company and based on information
 and explanations furnished to us, the following custom duty, Excise
 duty, Income-tax and sales-tax dues (excluding unascertainable amounts
 and of Steel Unit) were not deposited on account of disputes pending at
 various forums:
 
 Name of Statute   Nature of the Dues Amount of dues Amount deposited
                                                                under
                                      (Rs. in Lacs)  protest (Rs. in 
                                                              Lacs)
 
 U. P. Vat Act    Vat Tax Penalty
                  lnteresl               3101.62          51.29
                  Exemption to New 
                  Units    
                  Vat Tax and Penalty   @ 470.77         308.01
                  Vat Tax and Penalty     216.60          19.24
                  Vat Tax                   0.12              -
 Central Sales    CST, Deferment/         129.18           6.86
 Tax Act          Exemption to New Unit.
                  Central Sales Tax        71.52          29.55
                  Central Sales Tax        47.64              -
                  Central Sales Tax         1.01              -
 State Sales Tax  State Tax                10.56           0.20
 Act.
                  Penalty(HGST)             0.30              -
                  State Tax                15.79           1.79
 Central Sales 
 Tax              Central Sales Tax         1.92           0.29
 Act (States)
 Income Tax Act   Income Tax              224.75         217.87
 Central Excise & Custom Duty              43.91              -   
 Custom Act
                  Excise Duty             167.45          50.00
                                           23.73           0.45
                                           49.93              -
                                            5.00              -
                                            0.14              -
 
 Name of Statute    Period to which the               Forum where dispute
                    amount relates                           is pending
 
 
 U. P. Vat Act   1981-82; 87-88, 89-90 to 92-93.     Allahabad High Court
                 May 91 to March 96 
                 1984-85,1985-86,1994-95 to          Commercial Tax Tribunal,
                 1997-98, 99-2000, to 2001-02        Ghaziabad/ Jaipur   
                 1982-83 to 1984-85 and 1986-         j,  Commr.(A) GnaZiabad
                 87, 1988-89                  
                 2005-06                              dY. CommissiOner
                                                      (Assessment), Modinagar
 
 
 Central Sales  1963-64 and 1992-93                   Allahabad High Court
 Tax Act
                1985-86,94-95 to 97-98,               Commercial Tax Tribunal,
                99-2000 to 2001-02                    Ghziabad
                1988-89                               Jt. Commr.(A), Ghaziabad
                2005-06                               Dy. Commissioner (Assessment),
                                                       Modinagar
 State Sales 
 Tax            1992-93                                Addl. Commr. Sales Tax,
 Act.                                                  Delhi
                1991-92                                Tribunal Sales Tax, Chandigarh
                1989-90 to 93-94, 98-99 and            Dy. Commissioner(A)-States
                2006-07
 
 Central Sales  1988-89 to 1992-93                     Appellae Authority/ DC
 Tax Act                                               (Appeals)
 (States)
 Income Tax Act 1981-82                                Delhi High Court
 Central        1.03.2001 to 25.04 2001                Civil Court, Ghaziabad
 Excise &
 Custom Act
 
                1985-86                                 Delhi High Court
                1996-97, 2002-03 to                     CESTAT
                2004-05, 2006-07
                February 1981 to February 1987          CESTAT
                2002-03 to 2005-06
                Information not available               Information not available
                2007-08                                 Commissioner of Central
                                                        Excise (Appeals), Ghaziabad
 
 (10) In our opinion, after considering the effect of the qualifications
 on the figures of cash/accumulated losses as per Profit & Loss Account,
 the accumulated losses of the Company at the end the Financial Year
 exceeds its net worth and the company was declared a sick industrial
 undertaking on 14th March,1991 and the Company has incurred cash losses
 in this Financial Year and in immediately preceding financial year.
 
 (11) In our opinion, and according to the information and explanations
 given to us, the Company has defaulted in repayment of dues to
 Financial Institutions, banks and debenture-holders of the Company. The
 details of defaults and period of defaults are as under: (Rs in Lacs)
 
 Particulars   Loan Amount  Interest including Total dues*   Period of
                            unprovided interest              default of 
                                                             principal
                                                             amount
 
 Loans from     423.13          7882.07         8305.20 , Loan amounts 
                                                          due for 18 
                                                          years
 Financial 
 Institutions:                                            i.e. since 
                                                          1991-92
 LoanfromBanks 485.10          3317.63          3802.73   Entire amount 
                                                          due.
 (Cash Credit
  /Overdraft)
 Debentures    737.36         12263.03         13000.39   Rs. 53 Lacs 
                                                          due since 
                                                          August 1990
                                                          Rs 100 Lacs 
                                                          due since 
                                                          September 1991
                                                          Rs 100 Lacs 
                                                          due since 
                                                          May 1992
                                                          Rs 30 Lacs 
                                                          due since 
                                                          December 1994
                                                          Rs 454.36 Lacs
                                                          due since 
                                                          February 1995 
                                                          to Feb 1997
 Total        7645.59         23462.73         25108.32 
 
 * excluding Steel Unit figures. Refer paragraph A above.
 
 (12) According to the information and explanations given to us, the
 company has not granted loans and advances on the basis of any security
 by way of pledge of shares, debentures and other securities.
 
 (13) The provisions of any special statute as specified under Clause 4
 (xiii) of the Order are not applicable to the Company.
 
 (14) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly the
 provision or clause 4(xiv) of the Companies (Auditors Report) Order,
 2003 are not applicable to the Company.
 
 (15) In our opinion, and according to the information and explanations
 given to us, during the current year, the Company has not given any
 guarantee for loans taken by others from Banks or Financial
 Institutions. However, in the past, the Company had given guarantees/
 undertakings as mentioned in Note 6 of Schedule 15 of Annual Accounts
 in respect of certain Companies (which presently have become Sick
 Industrial Undertakings) to financial Institutions.
 
 (16) In our opinion, and according to the information and explanations
 given to us, term loans were applied for the purpose for which loans
 were raised.
 
 (17) According to the information and explanation given to us and on an
 overall examination of the balance sheet of the company, we report that
 the no funds raised on short-term basis have been used for long- term
 investment except in respect of Sugar Unit where capital expenditure
 was financed by short term-funds.
 
 (18) The Company has not made any preferential allotment of shares
 during the year.
 
 (19) The Company has created security in respect of debentures issued
 in the past.
 
 (20) The Company has not raised any money by way of public issue during
 the year.
 
 (21) According to the information and explanations given to us, no
 fraud on or by the company has been noticed or reported during the
 course of audit.
 
                                                  for P.R. Mehra & Co.
 
                                                 Chartered Accountants
 
                                                       ASHOK MALHOTRA
 
 New Delhi                                                    PARTNER
 
 Dated:26th August, 2009                      Membership  No.   82648