We have, audited the attached Balance Sheet of M/s. Munak Chemicals
 Limited as at 30th June, 2002 and the Profit and Loss account for the
 year ended on that date, both 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 the auditing standards
 generally accepted in India.  Those standards requires 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, evidences supporting the amounts
 and disclosures in the financial statements. An audit 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 of our opinion.
 
 1. As required by the Manufacturing & other Companies (Auditors Report)
 Order, 1988 issued by the Company Law Board in Terms of Section 227
 (4A) of the Companies Act, 1956, we enclose in Annexure a Statement on
 the matters specified in paragraph 4 & 5 of the said order.
 
 2.  Further to our comments in the Annexure referred to above, we state
 that :
 
 1. 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.
 
 2.  In our opinion, proper books of account as required law have been
 kept by the Company so far as it appears from our examination of the
 books.
 
 3.  The Balance Sheet and the Profit and Loss Account dealt with by
 this report are in agreement with-the books of accounts.
 
 4.  In our opinion, the Balance Sheet and the Prof it & Loss Account
 comply with the mandatory Accounting Standards referred to in Section
 211 (3C) of the Companies Act, 1956.
 
 5.  On the basis of the written representations from the Directors,
 taken on record by the Board of Directors, none of the Directors is
 disqualified as on 30th June, 2002 from being appointed as a Director
 under Section 274(1) (g) of the Companies Act, 1956.
 
 6.  In our opinion, and to the best of our information and accounting
 to the explanations given to us, the said Balance Sheet and the Profit
 & Loss Account subject to that the Interest free loan from Govt. of
 Punjab through Director of Industries is secured against the charge on
 all immovable assets of the Co., however during the year under Audit
 the company has - sold Plant & Mach. except to the extent of Rs.
 3412862/- for which neither permission from the Punjab State Govt. nor
 vocation of charge from ROC has been shown to us, although Co. holds
 immovable assets in the shape of Factory Land & Building & Plant &
 Mach. to the Tune of Rs. 10654010/- against a secured loan b Rs.
 5600000/-, Note No. 1 (iii) regarding Non-Provision of Depreciation on
 Factory Building & Plant & Mach., Note, No. 7 A & 7B regarding change
 in accounting year, Note no. 9 regarding unconfirmed an unreconciled
 debit and credit balances of Customers and suppliers, Note No. 12
 regarding non-provision of write off in respect of leasehold land, in
 Schedule `P of Notes on Accounts and read together with the other
 Notes on Accounts and Significant Accounting Policies forming part
 thereof, give the information required by the Companies Act, 1956 in
 the manner so required and give a true and fair view :-
 
 i.  In so far as it relates to the Balance Sheet of the state of
 affaires of the company as it 30th June, 2002 and
 
 ii) In so far it relates to the profits and loss account of the company
 for the year ended on the date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 Referred to in Paragraph 1 of our report of even date :
 
 1.  The company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets. All the
 assets have not been physically verified by the management during the
 year but there is a regular programme of verification which, in our
 opinion, is reasonable having regard to the size of the Company and the
 nature of its business.  No material discrepancies have been noticed in
 such verification.
 
 2.  (a) None of the fixed assets have been revalued during the year.
 However, the depreciation on the revalued assets, which were revalued
 as on 30th September, 1992, has been directly charged to Revaluation
 Reserve. As a result of this, the Revaluation Reserve stands at Rs.
 10,16,640.00 as on 30th June 2002.
 
 (b) During the year under audit, the Company disposed of its plant
 &mach. for Rs. 1,11,74,5071 and incurred a loss of Rs. 2,46,62,719/-.
 Out of the above mentioned loss, an amount of Rs.  1,17,78,558/-has
 been charged to Capital Revaluation Reserve, which was lying in the
 credit of Capital Revaluation Reserve Account in respect of the said
 plant & mach. as on 1.04.2001, and the balance amount of Rs.
 1,28,84161/- has been charged to Profit & Loss A/C. The shareholders of
 the Company in their meeting held on 11.09.2001 authorised the Managing
 Director of the Company to affect the sale.
 
 3.  There are no stocks of finished goods and spare parts. The stocks
 of raw materials has been physically verified by the management during
 the year.
 
 4.  In our opinion, the procedures of physical verification of stocks
 followed by the management are reasonable and adequate in relation to
 the size of the company and nature of its business.
 
 5.  The discrepancies noticed on verification between physical stocks
 and the book records by the management were not material and have been
 properly dealt with in the book of accounts.
 
 6.  On the basis of our examination of the stock records, we are of the
 opinion, that the valuation of stocks is fair and proper in accordance
 with the normally accepted accounting principles and is the same basis
 as in preceding year.
 
 7.  The Company has taken interest free loans during the year from
 companies, firms or other parties listed in the registers maintained
 under Section 301 and from the companies under the same management. In
 our opinion, as no payment of interest is involved, so the terms are
 not prejudicial to the interests of the members of the Company.
 
 8.  According to information and explanations given to us, no loans
 have been granted to the companies, firms or other parties listed in
 the register maintained under section 301 and from companies under the
 same management. The debit balances of these Companies are in the
 nature of Advances Recoverable and according to the explanations
 received, they are not, prima facie, prejudicial to the interest of the
 Company.
 
 9.  The Company has given interest free loans and advance in the nature
 of loans to its employees and the principal amounts are being repaid as
 stipulated.
 
 10.  Since the company had already closed its operation, the sales and
 the stock of raw material lying at the close of the year are out of the
 opening stock of the raw material and hence the requirement of internal
 control procedure with regard to purchases of stores, raw materials
 including components, plant and machinery, equipment and other assets
 and sale of goods are not applicable.
 
 11.  In our opinion and according to the information and explanation
 given to us, transactions for purchase of goods and materials and sale
 of goods, materials and services, made in pursuance of contracts or
 arrangements entered in the registers maintained under Section 301 and
 aggregating during the year to Rs. 50000/- or more in respect of each
 party are at reasonable prices keeping in view the market rate.
 
 12. The provision for determination of unserviceable or damaged stores
 and raw materials and finished goods are not applicable, in view of the
 fact that the company had already closed down its operation and as a
 result there was no production during the year.
 
 13.  The Provisions of Section 58-A of Companies (Acceptance of
 Deposits) Rules, 1975, are not applicable to the Company.
 
 14 The Company has maintained reasonable records for the sale and
 disposal of realisable scrap.  However, there are no by products.
 
 15.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 16. As the company has closed its operation in the previous year, so,
 as, such in our opinion the provision of maintained of cost records, as
 prescribed by the Central Government under section 209 (1) (d) of the
 Companies Act. 1956, are not applicable.
 
 17. According to the information and explanation given to us, no
 personal expenses of employees or directors have been charged to
 revenue account, other than those payable under contractual obligations
 or in accordance with generally accepted business practices.
 
 18. According to the information and explanations given to us, no
 undisputed amounts payable in respect of income tax, wealth tax, sales
 tax, customs duty and excise duty were outstanding as at 30.6.2002 for
 a period of more than six months from the date they became payable.
 
 19.  The Company has not been regular in depositing the Provident Fund
 and Employees State Insurance dues with the appropriate authorities.
 As on 30th June, 2002, Provident Fund amounting, to Rs. 68,836/- and
 Employees State Insurance amounting to Rs. 34,702/- are in arrears.
 
 20.  The company is not a Sick Industrial Company within the meaning of
 clause (o) of sub-section (1) of section 3 of Sick Industrial Companies
 (Special Provisions) Act, 1985.
 
                                                   For S. C. Dewan&Co.,
                                                Chartered Accountants,
 
 Place : Panchkula                                       (S. C. Dewan)
 Dated : 14th October, 2002                                   Partner