Management's Responsibility for the Financial Statements :

The Company's Board of Directors is responsible for the matters stated in Sec. 134(5) of the companies Act 2013("The Act") with respect to preparation of these financial statements that give a true and fair view of financial position, financial performance and cash flows of the Company in accordance with the Accounting principles generally accepted in India, including Accounting Standards specified U/s 133 of The Act, read with rule 7 of the companies (account) rules 2014.This responsibility also includes the maintenance of adequate accounting records with the provisions of the act for safeguarding the assets of the company and for preventing and detecting the frauds and other irregularities; selection and application of appropriate accounting policies; making judgment and estimates that are reasonable and prudent; and design, implementation and maintenance of internal control, that were operating and presentation of financial statements that give a true and fair view and free from material misstatement, whether due to fraud or error.

Auditor's Responsibility: Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards on auditing issued specified U/s 143(10) of the Act those standard required that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An Audit involves performing procedure to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend upon auditor's judgment, including the assessment of the risk of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessment, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedure that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of financial statements.

We believe that audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion :

In our opinion and to the best of our information and according to the explanations given to us the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in case of the Balance Sheet, of the state of affairs of the Company as at 31/03/2015;

(b) in case of Statement of Profit and Loss, of the Loss of the Company for the year ended on that date; and

(c In the case of Cash Flow statement, of the cash flow for the year ended on that date

Report on Other Legal and Regulatory Requirements :

1. As required by Sec 143 (3) of the Act, we report that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit except

i. The Company has taken inter corporate loan of Rs 1.34 Lacs [ unsecured ] and unsecured loans from related parties/firms of Rs. NIL and from Non Related person Rs. NIL during the financial year under audit. The Closing Balance at the yearend are Rs. 681.11 Lacs in case of inter corporate loans and Rs.107.60 lacs for related parties and firms and from key management person and Rs.NIL from other parties. No interest provided on loan accounts. In absence of formal agreement or supporting other documents, we could not comment and could not quantify the non provision of interest thereon.

Out of total Inter Corporate Loans as above, the Company has taken Mortgage Loan of Rs. 5 Crore from Adani Enterprises Ltd in earlier years. We are not provided any formal Loan Agreement copy except Mortgage Deed which does not contain any repayment terms and interest rate. No interest is provided on such Loans. We are unable to comment upon non provision of interest, repayment schedule etc. in absence of any formal agreement with the company and related documents and information. Account confirmation copy is not available for our verification and consequently uncertainty arises in Financial Statements as to the exact amount. [Read with Notes No. 5 to the financial Statements].

Company has not made provision for doubtful Debtors of Rs 93.75 Lacs, for the debtors outstanding for the long time, to that extent, Current Assets have been overstated and current years Losses and accumulated losses have been understated. [Read with Notes No. 13 to the financial Statements].

ii. The Company has violated provisions of Income Tax Act, 1961 by non filing Income Tax Returns from FY 2008-09 onwards. Proper records are not made available to us for our verification and to compute Income Tax and related statutory liabilities. In this situation, we are unable to comment upon the non provision of statutory liabilities for current year as well as for the earlier years. [Read with Notes No. 28 to the financial Statements]

iii. The Company has not deducted TDS from Professional fees paid / credited on sum of Rs.290000 during the financial year under audit.

iv. Bank Balance certificate or Bank Statements for various banks for No lien accounts with banks showing total balance of Rs. 89.30 Lacs are not available with the company. Management is of opinion that banks are not providing such required bank statements or certificates hence all accounts are carried forward showing as bank balance. It is also not clarified that whether these bank balances in No-lien accounts are receivable by the company or adjusted against bank loans settled under OTS in earlier years since all respective banks debts have been settled under OTS in earlier years. In absence of such documents and clarifications, we could not comment upon the genuineness of balance with banks and as per our opinion, current assets are overvalued to the extent of this amount and to the extent losses are undervalued. [Read with Notes No. 21 to the financial Statements]

v. The Naroda Unit has been inoperative since last many years. Company is doing Trading activities during the year under audit but majority Financial indicators and operating indicators remained negative and to the date of Audit report and in absence of formal developments for financial support, there is substantial doubt that it will be able to continue as a going concern even though the books of accounts of the Company has been prepared on the assumption of a Going Concern basis. In this situation, adjustments may be required to the recorded assets amounts at current value and classification of liabilities is required. The financial statements do not disclose this fact.

vi. Delhi High Court has remanded back the company to BIFR in its pending appeal on 19th January, 2010 and thereafter in the next hearing held on 29/04/2010, and as per the order of the Honorable Delhi High-court, BIFR had appointed IDBI as OA to inspect the unit and submit the report thereon. In the last date of hearing on 29/08/2013, the honorable BIFR has directed the company to revise and resubmit with OA, the DRS, with cutoff date as 31/03/2013.The Company had submitted the revised DRS to OA as directed by the Honorable BIFR but in the hearing on 27/03/2014 due to late submission by OA (IDBI) with respect to certain query of the BIFR, the BIFR dismissed the company's reference. However the Company is filling an appeal with AAIFR against the order of BIFR.

b. In our opinion proper books of accounts as required by the law have been kept by the Company so far as appears from our examination of the books of accounts.

c. The Balance sheet, the Statement of Profit and Loss and the Cash Flow statement dealt with by this report are in agreement with the books of accounts.

d. In our opinion, Balance Sheet, the Statement of Profit and Loss and Cash Flow statements complied with the Accounting Standards referred to in Sec 133 of the companies Act, 2013,read with rules 7 of the Companies (Accounts) rules, 2014.

i. The Company has not complied with AS 28, introduced w.e.f. 1st April, 2004 while preparing the financial statements. The Management have not assessed technically the Plant and Machineries at Naroda Unit to decided about its impairment or carrying Value. The carrying amount of the assets was not reviewed for indication of impairment of assets on basis of internal/external factors. Plant at Naroda Division has been in operative for Seventeen years. Plant & Machinery of book value of Rs.18.27 lacs less residual value has not been written off to the extent to come down to its carry value. Loss for the year has been under stated to the extent of book value of plant and machinery balance not written off.

ii. The Company has not complied with AS 22, Accounting for Taxes on Income. The company failed to file Income Tax Returns for the F Y 2008-09 onwards. In absence proper documents and records, we could not quantify the Income Tax liability for which provision not made. Deferred Ta x Assets/ Deferred Tax Liabilities are not provided for in the books of accounts, in absence of proper working and database from the management. We could not quantify the non provision for DTL or disclosures regarding DTA.[Read with 1(a)(ii) above and read with note no. 28"]

e. On the basis of written representation received from the Directors as on March 31, 2015 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2015 from being appointed as a director in terms of sub-section (2) of the Section 164 of the Companies Act, 2013.

f. With respect to other matters included in Auditor's Report and to best of our information and according to the explanation given to us.

01 The Companies has not disclosed the impact of pending litigations on its financial position in its financial statements. Management informed that there are no pending litigations pending with any departments which may have financial effect in future but as per our opinion the company has not filled Income Tax Return since FY 2008-09, company has not done Tax Audit for the previous years also, No sales tax return filed for the F Y 2007-08 to FY 2012-13, certain matters are pending with different forum in sales tax department [ refer note no.29 ], vandha arji filed with Municipal Corporation is still pending, BIFR matter is still pending with AAIFR and the expenses incurred by the company for professional fees for lawyers which shows some matter might be under litigation and its exact status and its probable effect on financial statement is not disclosed with us.

02 Company has made provision, as required under the applicable law or Accounting Standards, for material foreseeable losses, if any, on long term contracts including derivative contract.

03 There has been delay in transferring amounts, required to be transferred, to the investor's education and protection fund by the company. Dividend declared in year 1995, 1996, 1997 and 1998 and remained unclaimed are due for transfer to Investors Education and Protection Fund under the provisions of Sec 205C of the Companies Act, 1956. It has been informed by the management that details for unclaimed dividend are not provided by the nominated bank, SBI [Previously SBS] , Industrial finance Branch, Ellisbridge, Ahmadabad and SBI [ Previously SBS Isanpur Branch, Ahmedabad]. In absence of proper records and supporting evidences, we could not quantify the amount not transferred as required by the law and its compliance. [Read with Notes No.27 to the financial Statements]

ANNEXURE TO THE AUDITORS' REPORT OF

KANEL INDUSTRIES LTD.

The annexure referred to in our report to the member of KANEL INDUSTRIES LTD. ('the company') for the year ended on 31st March, 2015, we report that;

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) During the year, fixed assets of the Company have not been physically verified by the Management. The management decided to implement program of regular physical verification of all fixed assets at least once in a two year, which in our opinion, is reasonable, having regard to the size of Company, present business operations and the nature of the Fixed Assets. In absence of physical verification report, we could not comment on material discrepancy in fixed assets of the company and its accounting effect.

2 (a) According to the information and explanation given to us, inventories have been physically verified by the management at reasonable intervals during the year.

(b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The Company is maintaining proper records of inventories. In our opinion, discrepancies noticed on physical verification of inventory were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account, if any except trading transactions of Ex go down where goods do not move from one place to other place on sale or purchase where no documentary evidence available for our verification regarding movement of goods and its control except invoice bill.

3. The company has not granted any loans, secured or unsecured to companies, firm or other parties covered in the registered maintained u/s 189 of The Companies Act,2013 during the year under audit hence sub clause (a) and (b) are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory and Fixed Assets and for the sale of goods. During the course of audit, no major weakness has been noticed in the internal controls (Read with notes No 2 (C ) above).

5. The company has not accepted deposits during the year under audit, the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other provision of the Companies Act and the rules framed there under are not applicable.

6. As per the information and explanation given by the management, the provisions of sub-section (1) of section 148 of the Companies Act for maintenance of cost records specified by the Central Government are not applicable to the company in the year under audit.

7. (a) According to the information and explanations given to us, the Company is not regular in depositing undisputed statutory dues towards Employees' State Insurance, TDS, Professional Tax, Income Tax and Municipal Tax during the year under audit.

The undisputed dues, as informed by the management, which are outstanding for more than six months as at the Balance Sheet date from the date they became payable were as follows.

SR.  NATURE OF DUE           AMOUNT OUTSTANDING AS ON 31/03/2015
                             [Rs. In Lacs] For more than 6 months 
                             And already due

01   Income Tax                               98.10

02   TDS Payable                               1.05

03   Sales Tax                                17.53

04   E.S.I.C.                                  0.56
  
05   FBT tax                                   0.06

06   Professional Tax                          0.34

07   Municipal Tax                             5.40

TDS is not deducted during the year under audit and not paid to central government is Rs.0.29 lacs, such details are not included in above figure since the company has not complied with the provisions of income tax act and not provided in books of accounts. Provisions of ESI and Professional Tax are also not complied with by the company and no provision for such liability provided in books of account. In absence of required statutory records to ascertain the total amount relating to Interest thereon, the above amount does not includes the interest and penalty portion. In absence of Sales Tax Assessment order/Return copy and non filing of Sales tax Returns for the F Y 2007-08 to 2012-13 and in absence of required details and documents, we are unable to quantify the statutory liabilities relating to tax as well as of Interest and penalty there on and total statutory liability outstanding at the end of financial year under audit

Amount due as per demand notice served by the Income Tax department is Rs.136.37 Lacs for the various assessment years previously. In continuation to its folloup, it was explained by the management that no final order received from the concern department consequently no provision made in books of account. No fresh order passed by the department during the year under audit for previous assessment years hence liability could not quantified while preparing books of accounts, as explained by the management.

(b) According to the information and explanation given to us by the management of the Company, there are no dues of Sales Tax and Income Tax which have not been deposited on account of any dispute except as mentioned in clause "a" above and as mentioned below. We are further informed by the management that during the F Y 2014-15, there were no further Order, Notice or other developments relating to matters pending for earlier years with different forum as well as for the year under Audit in case of Income tax and Sales tax Matter.

SR.  NATURE OF      AMOUNT          FORUM WHERE DISPUTE IS PENDING
NO.  DUES           [Rs. In Lacs]

01   Sales Tax      274.63          The Matter is remanded back to Asst.
                                    Comm.Of Sales tax. [A.Y. 1998-99]

02   Sales Tax      245.92          Pending with the Appellate tribunal
                                    of Sales Tax [A.Y. 1997-98]

03   Sales Tax       24.30          Appeal Pending with Jt. Commercial
                                    Tax Commissioner, Appeal 
                                    Division-1 [A.Y. 1999-2000]

04   Sales Tax        6.14          Appeal pending with Jt. Commercial
                                    Tax Commissioner, Appeal Divi.-1 
                                    [A.Y. 2000-01]

05   Sales Tax         2.88         Appeal pending with Jt. Commercial
                                    Tax Commissioner, Appeal Divi.-1 
                                   [A.Y. 2000-01]

06   Municipal Tax    10.95         Ahmedabad Municipal Corporation
                                    [Dues up to October, 2004]

(c) As per the information and explanations received from the management, there are no such amount required to be transferred to Investors Education and Protection Fund and not transferred except Dividend declared in year 1995, 1996, 1997 and 1998 and remained unclaimed are due for transfer to Investors Education and Protection Fund under the provisions of Sec 205C of the Companies Act, 1956.

It has been informed by the management that details for unclaimed dividend are not provided by the nominated bank, SBI [Previously SBS], Industrial finance Branch, Ellisbridge, Ahmadabad and SBI [Previously SBS Isanpur Branch, Ahmedabad]. In absence of proper records and supporting evidences from management and from the nominated banks, we could not quantify the amount not transferred as required by the law and its compliance.

(viii) In our opinion, the accumulated losses of the Company have exceeded fifty percent of the net worth as at the end of the financial year 2014-15. The Company has incurred Cash Losses of Rs. 1.10 crores during the financial year under audit and the company had incurred cash losses of Rs. 1.08 Crores the immediately preceding financial year.

(ix) We are of the opinion that the company has not defaulted in repayment of dues to banks or financial institutions in the year under audit. Further we have to report that banking dues have been settled under OTS in earlier years. The Company has taken secured Loans from the Company of Rs. 5 Crore in earlier year. There is no repayment towards principal or Interest. Management has not provided us copy of agreement of loans containing terms and conditions for repayment and interest charges. In absence of the required agreements and documents, we could not comment on repayment schedule or default status. The Company has no borrowings from Financial Institutions or by way of Debentures.

(x) According to information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year as per the information given by the management and available records made available for our verification.

(xi) In our opinion, no term loans were taken by the company in the year under audit.

(xii) In our opinion and according to the information and explanation given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

For, SHAH DINESH DAHYALAL & ASSOCIATES

Chartered Accountants

FIRM REGISTRATION NO. 120362W

Shah Dinesh D.                                     Place: Ahmedabad

Proprietor                                        Date : 30/05/2015