We have audited the attached Balance Sheet of M/s. PAAM Drugs &
 Pharmaceuticals Limited as at 31st March, 2002 and the Profit & Loss
 Account for the period ended on that date, annexed thereto and have to
 report thereon as follows:
 
 1. As required by the Manufacturing and Other Companies (Auditors
 Report) Order, 1988, 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 specified in paragraph 4 and 5 of the said
 Order, to the extent applicable to the Company.
 
 2. Further to our comments in the annexure referred to  in paragraph 1
 above and subject to our comments in notes to accounts in schedule
 Q, we report 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 accounts as required by law have
 been kept by the Company so far as it appears from our examination of
 those books;
 
 c. The Balance Sheet and the Profit & Loss Account are in agreement
 with the Books of Accounts.
 
 d. In our opinion, the Profit & Loss Account and the Balance Sheet
 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 from the directors
 of the company all the directors are disqualified under section 274
 (1)(g)(B) of the Companies Act, 1956, as on 31st March, 2002.
 
 f. In our opinion, and to the best of our information and according to
 the explanation given to us, the said balance sheet and profit and
 loss account gives true and fair view, subject to our comments in
 Schedule Q:-
 
 (i) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2002.
 
 (ii) In the case of Profit & Loss Account, of the loss for the period
 ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT 
 
 (Referred to in paragraph (1) of our report of even date)
 
 1. As informed to us, the Company has maintained proper records
 showing full particulars, including quantitative details and situation
 of fixed assets. The fixed assets of the Company have been physically
 verified by the management at reasonable intervals.
 
 2. The Company has not revalued any of its fixed assets during the
 period.
 
 3. As explained to us, the stock of finished goods have been
 physically verified by the management at reasonable intervals during
 the period.
 
 4. According to the information and explanations given to us, the
 procedures of physical verification of stocks followed  by the
 managment during the period are reasonable and adequade in relation to
 the size of the company and the nature of its business.
 
 5. The discrepencies noticed of phycical verification of stocks as
 comparied to book records,which were not material, have been properly
 dealt with in the books of accounts.
 
 6. According to the information and explanations  given to us and as
 certified by managment, valuation  of stocks is fair and proper in
 accordance with the normally accepted accounting principals.
 
 7. The Company has taken loan from companies, firms and others
 parties   covered   under  Section   301   of  the Companies Act, 1956
 and/or from the companies under the same management as defined under
 section 370 (1 B) of Companies Act, 1956.
 
 8. The Company has  granted  loan to companies, firm and others
 parties  covered   under  Section   301   of  the Companies Act, 1956
 and/or to the companies under the same management as defined under
 section 370 (1B) of Companies Act, 1956.
 
 9. We are not in a position to comment upon the terms and conditions
 of    loans and advances granted  by the Company.  According to the
 information and explanation given to us, the Company has initiated
 legal  action, in few cases, against the parties defaulting in
 repayment of principle amount and interest thereon.
 
 10. According to the information and explanations given to us, there
 is an adequate internal control procedure commensurate with the size
 of the Company and the nature of its businesses for the purchases of
 goods if any.
 
 11. According to the information and explanations given to us,
 unserviceable or damaged  goods are determined and provision for loss,
 if any, has been made in the accounts.
 
 12. The Company has not accepted any deposits from public during the
 period under review and hence provisions of Section 58A of the
 Companies Act, 1956 and Rules made thereunder, do not apply.
 
 13. In our opinion, the Company does not have an internal audit system
 commensurate with its size and the nature of its business.
 
 14. As informed to us that the Company is no more engaged in
 manufacturing activities. So that no records have been maintained for
 sale and disposal of realisable scraps and by products.
 
 15. We have been informed by the management that the Company is not
 required to maintain cost records as prescribed by the Central
 Government under Section 209(1 )(d) of the Companies Act, 1956  as the
 Company is not engaged in manufacturing activities any more.
 
 16. The Company has defaulted in making the payment towards P.P. and
 E.S.I.C amounting Rs. 3,36,371/- and Rs30,379/- respectively.
 
 17. Read with note no. 18 of Notes On Accounts under schedule Q. the
 Company is Sick Industrial Company under section 3(1 )(o) of  the
 Sick  Industrial Company (Special Provisions) Act, 1985 and the  BIFR
 has opined for winding of the Company under Sec. 20(1) of the Sick
 Industrial Company (Special Provisions) Act, 1985.
 
 18. According to information and explanations given to us there is an
 disputed amount   Rs. 540.53   lacs towards Sale Tax, which is
 outstanding as at 31st March, 2002 for a period of more than 6 months
 from the date they become payable.
 
 19. According to information & explanation given to us, personal
 expenses have not been charged to Revenue Account.
 
                                  For Harvinder Arora & Associates 
                                         Chartered Accountants
 
 Place : Bhiwadi                           Harvinder Singh
 Date  : 29th June, 2002                     Proprietor