We have audited the attached Balance Sheet of The Scindia Steam
 Navigation Company Limited as at 31st March, 2011 and also the Profit
 and Loss Account and the Cash Flow Statement for the year ended on that
 date annexed thereto.  These financial statements are the
 responsibility of the Company''s 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 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 financial statement
 presentation.  We believe that our audit provides a reasonable basis
 for our opinion.
 
 As required by the Companies (Auditor''s Report) Order, 2003 as amended
 by the Companies (Auditor''s Report) (Amendment) Order, 2004 issued by
 the Central Government in terms of provisions of Section 227 (4A) 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.
 
 Further to our comments in the annexure referred to above, we report
 that:
 
 a) We have obtained all the information and the explanations, which to
 the best of our knowledge and belief were necessary for the purposes 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 those
 books.
 
 c) The Balance Sheet, Profit & Loss account and Cash Flow Statement
 dealt with by this report are in agreement with the Company''s 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 sub-section (3C) of Section 211 of the
 Companies Act, 1956;
 
 e) We are informed that in terms of clarification issued by Ministry of
 Finance, Justice and Company Affairs, Department of Company Affairs,
 Government of India vide General circular No.8 dated 22nd March, 2002 ,
 the directors of the Company are not subject to any disqualification
 under section 274(1 )(g) of the Companies Act, 1956, as their
 appointment is made by the Government of India;
 
 f) The shipping operations of the company stand suspended. The company
 has continuously incurred losses and thereby net worth of the company
 has been totally eroded and a substantial loss is carried forward as at
 31 March, 2011. The company has filed a petition with the High Court
 of Bombay on February 28, 2011 to wind up the company by Order of the
 court under the relevant provisions of the Companies Act, 1956. In view
 of these facts, the company will no longer be a ''Going Concern''.
 Despite this, the accounts of the company have been prepared on a
 ''Going Concern Basis'' in the absence of adequate data and information
 for its compilation on an alternative basis. Consequently, no
 adjustments are made in accounts relating to the recoverability of
 recorded asset amounts and in respect of recorded liabilities and
 contingent liabilities that might devolve on the company. (Refer note
 no. 5 of notes forming part of accounts)
 
 g) 77ie Company has granted a loan to Scindia Workshop Limited, the
 Subsidiary Company. Outstanding amount of such loan with accrued
 interest as at 31st March, 2011 is Rs.1707Lakhs (Previous year Rs.1938
 Lakhs).  The recoverability of this amount is, in our opinion,
 dependent on outcome of (he review application to be made before the
 Division Bench of the Higfi Court of Bombay by the Subsidiary for
 further enhancement of compensation for the land and buildings acquired
 by the Government of Maharashtra (Refer note no. 6 of notes forming
 part of accounts)
 
 We further report that subject to f and g above, the effect of which
 could not be quantified, 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 notes thereon 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 31st March, 2011; and (ii) in the case of the Profit and
 Loss Account, of the Loss 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 Paragraph 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) The fixed assets have been physically verified by the management at
 reasonable intervals and no discrepancies were noticed on such
 verification.
 
 (c) The Company has already disposed off substantial part of its fixed
 assets. (Also refer point f of our main report.)
 
 (ii) Since the Company does not hold any stock during the year, the
 requirement of clauses 4 (ii) (a), (b), (c) of the Order are not
 applicable to the company.
 
 (iii) The Company has not granted or taken any loans, secured or
 unsecured to/from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956 except
 for a loan of Rs.1707 Lakhs to its Subsidiary namely Scindia Workshop
 Limited (SWL). In respect of loan granted to subsidiary company there
 is no stipulation as regards repayment. Interest charged up to the
 financial year 1995-96 is also not recovered. The recovery of the
 principal and interest due from the said subsidiary is dependent on the
 outcome of the appeal filed for enhancement of compensation as detailed
 in note no 6 to the accounts.
 
 (iv) On the basis of checks carried out in course of our audit and
 according to the information given to us, we are of the opinion that
 there are adequate internal control systems commensurate with the size
 of the Company and the nature of its business although there are no
 purchase of fixed assets,
 
 sale of goods and services.
 
 (v) As informed to us, there are no transactions of purchase of goods,
 materials and services and sale of goods, material and services with
 the parties stated in the register maintained as per section 301 of the
 Companies Act 1956.
 
 (vi) During the year the Company has not accepted any deposits from the
 public, therefore the provisions of Section 58A, 58AA or other relevant
 provisions of the Companies Act, 1956 and the Companies (Acceptance of
 Deposit) Rules 1975 are not applicable to the Company.
 
 (vii) In our opinion, the Company''s present internal audit system,
 though not formal, is generally commensurate with the size and nature
 of its business.
 
 (viii) The maintenance of cost records under section 209(1) (d) of the
 companies
 
 Act, 1956 is not applicable to the Company.  
 
 (ix) (a) According to the records of the Company, the company has been
 generally regular in depositing undisputed statutory dues including
 Investor Education and Protection Fund, Income Tax, Wealth Tax, Service
 Tax, Custom Duty, Cess and other material statutory dues with the
 appropriate authorities.  Based on our audit procedures and according
 to the information and explanations given to us, there are no arrears
 of statutory dues which remained outstanding as at 31st March, 2011 for
 a period of more than six months from the date they became payable.
 
 (b) According to the information and explanations given to us and the
 records of the Company, there are no dues of sales tax, custom duty,
 income tax, wealth tax, service tax, excise duty/cess which have not
 been deposited on account of any dispute.
 
 (x) The Company''s accumulated losses, as on 31 March 2011 is more than
 fifty percent of its net worth. The Company has incurred cash losses in
 the financial year covered by this report and has also incurred cash
 losses in the immediately preceding financial year.  
 
 (xi) As per the books of the Company and as per the information and
 explanations given to us, the Company has defaulted in payment of dues
 to a bank on Cash credit account and the total amount due including
 interest thereon up to 31.03.2011 is Rs.2763 Lakhs (P.Y.2384 Lakhs).
 
 (xii) The Company has not granted loans and advance on the basis of the
 security by way of pledge of shares, debentures and other securities.
 
 (xiii) The Company is not a chit fund and nidhi/mutual benefit funds/
 societies and therefore the requirements of clauses 4 (xiii) are not
 applicable to the company.  
 
 (xiv) The Company does not deal or trade in shares, securities,
 debentures and other investments. Accordingly, the provisions of clause
 4
 
 (xiv) of the Order are not applicable to the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has not given guarantee for loans taken by others from bank or
 financial institutions.
 
 (xvi) There are no term loans obtained by the Company during the year.
 
 (xvii) According to the information and explanations given to us and on
 an
 overall examination of the balance sheet of the Company, we report that
 funds raised on short-term basis have not been used to finance long
 term
 investments.  
 
 (xviii) The Company has not made any preferential
 allotment of shares to parties
 or companies covered under section 301 of the Companies Act, 1956.
 
 (xix) During the year Company has not issued any debentures.  
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) Based upon the audit procedure and the information and
 explanation given to us, we report that there are no frauds on or by
 the Company noticed or reported during the year.
 
                                                   For K. S. AIYAR & CO.
 
                                                   Chartered Accountants
 
                                                   Firm Regn. No.100186W
 
                                                        RAGHUVIR M.AIYAR
                                                                 Partner
                                                    Membership No: 38128
 Mumbai,
 Date:20th June, 2011