1.  We have audited the attached Balance Sheet of VANASTHALI TEXTILE
 INDUSTIRES LIMITED, as at 31st March 2011, the Profit and Loss Account
 and also 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.
 
 2.  We have conducted our audit in accordance with the 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 misstatement. 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.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003 as
 amended by the Companies (Auditor''s Report) order, 2004 issued by the
 Central Government of India in terms of subsection (4A) of section 227
 of the Companies Act, 1956, we enclose Annexure, a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that :
 
 (i) 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;
 
 (ii) 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;
 
 (iii) the balance sheet, profit and loss account and cash flow
 statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) in our opinion, the balance sheet, profit and loss account and the
 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 subject to the non provision of leave
 encashment as required by revised AS-15 on employee benefits.
 
 (v) on the basis of the written representations received from the
 directors, as on 31st March, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March, 2011 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956.
 
 (i) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements subject to
 the non provision of leave encashment as required by revised AS-15 on
 employee benefits together with other notes thereon and attached
 thereto 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 :-
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011,
 
 (b) in the case of the Profit and Loss Account, of the loss for the
 year ended on that date; and
 
 The Annexure referred to in the Auditor''s Report to the members of
 VANASTHALI TEXTILE INDUSTIRES LIMITED for the year ended 31st March.
 2011. We report that:
 
 (i) (a) The company is maintaining proper records showing full
 particulars, including quantitative details and situation of its fixed
 assets.
 
 (b) Physical verification of fixed assets was carried out during the
 year by the management in accordance with the companies policy of
 verifying the assets once in three years. In our opinion the frequency
 of verification is at reasonable intervals. No material discrepancies
 were noticed between the stock record and physical verifiction.
 
 (c) There was no substantial disposal of Fixed Assets during the year.
 
 (i) (a) The inventory of the company has been physically verified by
 the management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanation
 given to us, the procedure 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. As explained to us,
 there was no material discrepancies noticed on physical verification of
 inventory as compare to the book records.  company has not granted any
 loans secured or unsecured to companies/ parties covered in the
 register maintained under section 301 of the Companies Act, 1956.  In
 our opinion and according to the information and explanation given to
 us, The company has not granted any loans secured or unsecured to
 companies/ parties covered in the register maintained under section 301
 of the Companies Act, 1956.
 
 (b) (iii) (a) In our opinion and according to the information and
 explanation given to us, The company has not taken loan
 from companies / parties covered in the register maintained under
 section 301 of the Companies Act, 1956 during the year..
 
 (c) In our opinion, The rate of interest and other terms and conditions
 on which the loan has been taken from companies / parties covered in
 the register maintained under section 301 of the Companies Act,1956 are
 not, prima facie, prejudicial to the interest of the company.
 
 (d) In respect of loans taken by the company, the principal and the
 interest has not been paid regularly further stated that the status of
 all loan accounts in Banks are NPA as on 31.03.2011.
 
 (i) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the company and the nature of its business, for the
 purchase of inventory and fixed assets and for the sale of goods.
 
 (v) (a) In our opinion and according to the information and explanation
 given to us, the transactions that need to be entered into the register
 maintained under section 301 of the Companies Act, 1956 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, having regards to the comments in
 
 (v) (a) above, the transactions made in pursuance of contacts or
 arrangements entered in the register maintained under section 301 of
 the Companies Act, 1956 and exceeding the value of the five lakh rupees
 in respect of any party during the year have been made at prices, which
 are reasonable having regard to the prevailing market prices at the
 relevant time
 
 (vi) In our opinion and according to the information and explanations
 given to us the Company has not accepted any deposit from the public
 during the year and hence the provisions of clause 4 
 
 (vi) of the Companies (Auditors Report) Order 2003 regarding deposit
 from the public are not applicable to the company.
 
 (vii) In our opinion, the Company has an in-house internal audit system
 commensurate with the size of the company and nature of its business.
 
 (viii) As per information and explanations given to us, cost records
 prescribed by the Central Government u/s 209 (1) (d) of the Companies
 Act, 1956 are being maintained. However, we have not carried our
 detailed verification of these records.
 
 (ix) (a) According to the information and explanations given to us and
 according to the books and records as produced and examined by us, in
 our opinion, the undisputed statutory dues including provident fund,
 employees state insurance, Income-tax, sales-tax, wealth-tax, customs
 duty, excise duty, cess and other material statutory dues as applicable
 have generally been regularly deposited by the company during the year
 with the appropriate authorities. According to the information and
 explanations given to us, there are no arrears of outstanding statutory
 dues as mentioned above as at 31st March, 2011 for a period of more
 than six months from the date they become payable.
 
 Name Of the Statute  Forum where case  Nature of 
                                        Dues       Period of  AMOUNT (Rs)
                      is pending                   Dispute
 
 The Custom Act 1962  CESTAT.Ahmedabad  Custom 
                                        Duty       2004-05        216,000
 
 Central Excise Act   
 1944                 CESTAT           Excise 
                                        Duty       2008-09     95,042,002
 
 Central Excise Act
 1944                 AC.AIw.           Excise 
                                        Duty       2008-09        386,843
 
 Central Excise Act 
 1944                 AC.AIw.           Excise 
                                        Duty       2008-09        490,222
 
 Central Excise Act 
 1944                                   Excise 
                                        Duty       2008-09         36,432
 
 Central Excise Act 
 1944                Comm.(A)-JPR       Excise 
                                        Duty       2008-09         41,318
 
 Central Excise Act 
 1944                Comm. (A), 
                     Jaipur             Excise
                                        Duty       2008-09        261,735
 
 Central Excise Act
 1944                Comm.(A)-JPR       Excise 
                                        Duty       2008-09        479,611
 
 Central Excise Act 
 1944                Commi.(A)-JPR      Excise 
                                        Duty       2008-09        125,764
 
 Central Excise Act 
 1944                                   Excise 
                                        Duty       2008-09        486,856
 
 Central Excise Act 
 1944                                   Excise 
                                        Duty       2008-09        473,071
 
 Central Excise Act 
 1944                CESTAT             Excise 
                                        Duty       2008-09        757,610
 
 Central Excise Act 
 1944                CESTAT             Excise 
                                        Duty       2008-09        333,018
 
 Central Excise Act 
 1944                Comm.(A)-JPR       Excise 
                                        Duty       2009-10         325964
 
 Central Excise Act
 1944                CESTAT             Excise 
                                        Duty       1998-99        118,635
 
 Central Excise Act 
 1944                CESTAT             Excise 
                                        Duty       1998-99        107,312
 
 Central Excise Act
 1944                CESTAT             Excise 
                                        Duty       1998-99         63,474
 
 Central Excise Act 
 1944                CESTAT             Excise 
                                        Duty       1997-98         81,780
 
 Central Excise Act 
 1944                Comm. (A), 
                     Jaipur             Excise 
                                        Duty     1999-2000        131,880
 
 Central Excise Act 
 1944               Jt.Commiss
                    ioner-JPR           Excise
                                        Duty       2005-06     592,000.00
 
 Central Excise Act
 1944               CESTAT              Excise 
                                        Duty       2006-07      2,829,218
 
                                                           103,164,745.00
 
 Service Tax
 
 Finance Act 1994 
 (Chapter-V)        CSTAT               Service
                                        Tax        2007-08        229,732
 
 Finance Act 1994 
 (Chapter-V)        CSTAT                          2005-06,       412,673
 
                                        Service 
                                        Tax        2006-07
 
 Finance Act 1994 
 (Chapter-V)        CSTAT               Service 
                                        Tax        2006-07        444,050
 
 Finance Act 1994
 (Chapter-V)        CSTAT               Service 
                                        Tax        2007-08        193,825
 
 Finance Act 1994 
 (Chapter-V)        CSTAT               Service 
                                        Tax        2006-07        109,606
 
 Finance Act 1994 
 (Chapter-V)        CSTAT               Service 
                                        Tax        2007-08        498,561
 
 Finance Act 1994 
 (Chapter-V)        Comm.(A), 
                    Jaipur              Service
                                        Tax        2006-07        675,175
 
 Finance Act 1994 
 (Chapter-V)        Comm.(A), 
                    Jaipur              Service 
                                        Tax        2007-08        718,684
 
 Finance Act 1994 
 (Chapter-V)        Comm. Jaipur        Service 
                                        Tax        2007-08      6,402,836
 
 Finance Act 1994 
 (Chapter-V)        AC, Alwar           Service 
                                        Tax        2007-08        366,745
 
                                                               10,051,887
 
 Income Tax Act, 
 1961               High Court, 
                    Delhi               Income 
                                        Tax        2004-05      2,510,000
 
 Income Tax Act,
 1961               Appeal to CIT(A)    Income 
                                        Tax        2006-07     56,481,631
 
 Income Tax Act, 
 1961               Appeal to CIT(A)    Income 
                                        Tax        2007-08     28,712,500
 
                                                               87,704,131
 
 ESI                Commissioner        ESI                          0.64
 
                                                                     0.64
 
                                        Grand Total        201,136,763.64
 
 (b) Detail of the dues of Sales Tax/Income Tax/Service Tax/ Excise
 duty/cess/Custom which has not been deposited on account of dispute are 
 given below
 
 (x) The Company''s accumulated losses at the end of the financial year
 exceed 50% of Net Worth. Further the company has incurred cash losses 
 during this financial year and immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has defaulted in the repayment of dues to 
 Financial Institutions or Banks further the company is on default from 
 last two years and the amount of default is Rs.82,43,98,495 I-
 
 (xii) In our opinion and according to the information and explanations
 given to us, the Company has not granted any loans or advances on the 
 basis of security by way of pledge of shares, debentures and other 
 securities.
 
 (xiii) In our opinion the Company is not a Chit Fund or a Nidhi /
 Mutual benefit Fund / Society. Hence the provisions of clause 4 (xiii)
 of the companies (Auditor''s Report) Order, 2003 are not applicable.
 
 (xiv) According to the information and explanations given to us and
 according to the records as produced, in our opinion, the Company has
 maintained proper records of transactions and contracts relating to
 dealing and trading in shares and timely entries have been made
 therein. Further the investments wherever made have been held in the
 name of the Company only.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantees for loans taken by others from
 banks or financial institutions.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, the term loans were applied for the purpose for which the
 loans were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of Balance Sheet of the Company, we report that
 no funds raised on short term basis have been used for Long Term
 investment.
 
 (xviii) The company has not made any preferential allotment of shares
 during the year.
 
 (xix) The company has not issued any debentures during the year.
 
 (xx) There was no public issue during the year.
 
 (xxi) According to the information and explanations given to us, during
 the year, no fraud on or by the Company has been noticed or reported.
 
                                         M/S RAKESH RAJ & ASSOCIATES 
                                               CHARTERED ACCOUNTANTS
 
                                                      Reg.No.005145N
 
 Place : FARIDABAD                                    DEVENDER KUMAR
 
 DATE : 13-06-2011                                           PARTNER
 
                                                       M. No. 508825