We have audited the attached Balance Sheet of M/s. SHILPAX
 LABORATORIES 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
 N, 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:
 
 i) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2002 and
 
 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. The Company does not have the stock of finished goods, stores and
 spare parts.
 
 4. The Company has taken loan from companies, firm 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.
 
 5. 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.
 
 6. The Company had advanced a sum of Rs. 1,12,13,124/- to M/s. Paam
 Drugs & Pharmaceuticals Ltd. without charging any interest thereon.
 However as informed to us by the management that the said company
 decleared as Sick Company with in the meaning of section 3(1)(o) of
 SICA, 1985 and no amount could be recovered during the year.
 
 7. 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.
 
 8. According to the information and explanation given to us,
 unserviceable or damaged goods are determined and provision for loss,
 if any, has been made in the accounts.
 
 9. 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, does not apply.
 
 10. In our opinion, the Company does not have adequate internal audit
 system commensurate with its size and the nature of its business.
 
 11. As informed to us as the Company is no more engaged in
 manufacturing activities, no records have been maintained for sale and
 disposal of realisable scraps and by products.
 
 12. 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.
 
 13. Read with note no.17 of Note on Accounts under Schedule N the
 company does not qualify to be a Sick Industrial Company with in the
 meaning of Section 3(1)(o) read with section 3(1)(e) & (f) of the
 Sick Industrial Company (Special Provisions) Act, 1985.
 
 14. According to information and explanations given to us, there is
 undisputed amount payable in respect of Income Tax amounting to
 Rs. 5,50,456/- which is outstanding as at 31st March, 2002 for a
 period of more than six months from the date they become payable.
 
 15. According to information & explanation given to us, personal
 expenses have not been charged to Revenue Account.
 
                                       For Harvinder Arora & Associates
                                            Chartered Accountants
 
 Place : Surajpur(U.P.)                         Harvinder Singh
 Date  : June 29, 2002                             Proprietor