02. Management's Responsibility for the Financial Statements

The Board of Directors of the Company is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

03. Auditor's Responsibility

(01) 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 by the Institute of Chartered Accountants of India. Those standards require 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.

(02) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

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

04. Emphasis Matters

Without qualifying our opinion, we draw the attention to the following

(01) Item No.12 (Relating to Non-Disclosure of details under Employees Benefit) AS-15 (reversed) in Note 28 on Financial Statements, Non-Payment of contribution to Employees Gratuity Plan agreed upon with Life Insurance Corporation of India, amounting to Rs. 207.29 Lakh (as at 31-03-2015), amount determined based on the information available with the Company. Further no Actuarial Valuation report has been obtained by the company. Accordingly, the disclosure under AS-15, namely, Employees' Benefit has not been made and no amount has been charged to Statement of Profit & Loss on account of actuarial gain or loss.

(02) Item No 13 (Relating to Penalty and Interest) in Note 28 on Financial Statements, Interest & penalty leviable, if any, for non remittance of statutory dues, on account of delay / short remittance of statutory dues is not ascertainable at present.

(03) The deferred revenue expenses and deferred interest amounting to Rs.332.75 lakh and Rs.1202.28 lakh respectively, has not been charged to Statement of Profit and Loss but shown as assets, under the grouping Non-Current Assets, please refer Item No.06 in Note No. 28 on Financial Statements.

(04) The company has obtained bank loans, both long terms and short term, from various banks, under consortium. On the basis of our examination and according to the information and explanation given to us, we are of the opinion that during the year the company has defaulted in repayment of dues to the banks. A few banks (Assignor) have assigned their loan amounts (Along with their rights, claims, benefits, etc.) to two Asset Reconstruction Companies (ARC'S), invoking the option under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Based on the information available with the company, the amount due to the Assignor has been transferred to and is shown in the respective name of the ARC'S, under the grouping Secured Loans, Long Term Borrowings, or the case maybe, Short Term Borrowings. Accordingly, the company has not shown the amount defaulted to Assignor, just before assignment, under the Note No.04 (01), on Financial Statements, regarding default of the Loan and other related details. However, the amount due to the remaining banks continues to be shown and the amount defaulted is Rs. 809.30 Lakh and Rs 616.34 Lakh, towards principal and interest respectively, as at 31.03.2015.

(05) A few creditors have filed cases against the company, before the Honourable Madras High Court, under section 433 of the Companies Act, 1956, for winding up of the company. The company has taken up the matter; and it has been explained that company has been contesting the case and/ or following directions given by the Honourable Madras High Court.

(06) Item No.07 of Note No.28 on the Financial Statements, relating to diminution in the value of Investments made by the company.

(07) The company has paid all the fixed deposits which have matured and claimed; but the company has not paid the Fixed Deposits matured but not claimed. The amount of such deposits works out to Rs 104.26 Lakh, as at 31-03-2015; since the amount is due for payment, the same has been included and/ or shown under the under the grouping Current Liabilities.

(08) Shakespeare Forgings Ltd (SFL), a company incorporated in United Kingdom (UK) was a wholly owned subsidiary (WOS) of the Company. During the Financial Year under report, the UK based wholly owned subsidiary (WOS) of the company has ceased to be 100% foreign subsidiary February 2015) and has become as Associate Company (in UK) concern within the meaning of the Companies Act 2013. The books of account of the aforesaid associates company, relating to the financial year 2014-15, are yet to be audited, by the UK based Chartered Accountants. Accordingly, any adjustment relating to carrying amount as at 31-03-2015 of the investment, made by the Company in SFL, will be determined and accounted based on the audited financial statements. We also invite your attention to Item No.18 in Note No.28 on Financial Statements

(09) As said at the beginning of the paragraph, we have not qualified or modified our opinion on the aforesaid matters, including their impacts, on the Financial Statements.

05. Basis for Qualification of Opinion:

(01) Going Concern:

(a) The Company's operating results has been materially affected due to various factors during earlier years and also during the financial year ended 31st March, 2015, under report, and the Company has huge accumulated losses as on the aforesaid date, which has eroded the entire net worth of the company. Accordingly, the appropriateness of the going concern assumption is dependent on the Company's ability to establish consistent profitable operations as well as raising, obtaining or infusing adequate/ required fund to meet its short term and long term obligations

(b) At the end of the Financial Year 2014-15, net worth of the company has been totally eroded and become negative of an amount of minus Rs.5009.92 Lakh [ (01) after excluding amount of (a) Rs.1219.03 Lakh shown under capital Reserve (other than share premium) in the Notes 02, Reserves and Surplus, on Financial Statements; (in other words, this capital reserve has not been considered as part of reserve, Since it has been created on account of revaluation of fixed Assets/ conversion of fixed assets into stock in-trade); (b) Rs.1535.56 Lakh, relating to Deferred Interest and Deferred Revenue Expenses (Since in our opinion, these items are not an asset that can be realized, in the ordinary course of business, but only can be written off or charged as an expense), Note 12, Other Non-Current Assets, on Financial Statements; and (02) further accumulated loss of the Company amounting to Rs. 8981.89 Lakh (which includes Current year loss) as on the Balance Sheet date; in other words, the accumulated loss has also been considered to determine the net worth (This loss, i.e., deficit, has already been set off with available Surplus and shown as a overall negative figure in the Financial Statement) ].

(c) Further, the Company's Current Liabilities (as at 31st March, 2015) have also exceeded its Current Assets by an amount of Rs. 5723.54 Lakh. These factors also raise doubts about the ability of the Company to continue as a going concern.

(d) In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Liabilities (as at 31st March, 2015) which are not ascertainable, at this stage.

(02) Change in the Method of accounting

With effect from the Financial Year 2013-14 (Comprising a period of 9 months), the company has changed the method of accounting of Interest on Bank Borrowings (both short term and long term borrowings) from mercantile method to cash method. Accordingly, an amount (as determined by the management, based on the information available with them, and relied upon by the auditors) of Rs.1590.99 Lakh, relating to 12 months, comprising the period from April, 2014 to March, 2015 (i.e., Current Financial Year under report) has not been provided in the books of account and the same has not been charged as an expense in the Statement of Profit and Loss Account for the year under report. Had the aforesaid interest been provided, as per the earlier method of accounting, consistently followed by the company, the operating loss, for the year under report, would have been more by an amount of Rs.1590.99 Lakh and the Net worth, as at March 2015, of the company would have been less by an amount (or in other words, the minus figure of the net worth would be more by the amount of Rs.2641.82 Lakh (including the non-provided amount of Rs.1050.83 Lakh relating to earlier financial year 2013-14). In our opinion, the method of accounting the aforesaid Bank Interest, is not in accordance with the provisions of Sections 128, 129 and 134 of the Companies Act, 2013 read with Companies (Accounts) Rules 2014.

06. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, 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, of the state of affairs of the Company as at 31st March, 2015, the Loss for the year ended on that date and the cash flows for the year ended on that date.

07. Reason for Qualification

As required by Section 143(4) of the Companies Act, 2013, we give following reasons for the qualification (i.e., modified opinion) made by us on the aforesaid financial Statements.

(01) Regarding Going Concern

(a) The company has been incurring loss for the last 7 consecutive (immediately preceding) financial years, and has huge accumulated loss. The net worth of the company has become negative. The company is not in a position to meet its financial obligations.

(b) Accordingly, we are of the view that preparing the financial statements on going concern basis may not be relevant. Hence, we have qualified the same. However, we are not in a position to quantify the same, since the impact of the above could not be ascertainable as on the date.

(02) Regarding change in the accounting method:

(c) Section 128(1) of the Companies Act, 2013 requires that books of account of a company should be kept on accrual basis and according to the double entry system of accounting. Section 134(2)(c) and Section 134(5) of the Companies Act, 2013 cast a responsibility on the Board to include, in the Directors' Report, among other matter, "Directors' Responsibility Statement", in relating to the Financial Statements. Accordingly, selection of the method of accounting (including changing one method to another method) and following such methods, adopting proper accounting policies and procedures are the primary responsibility of the management of the company. Considering the statutory obligation rest with the Management of the Company, the reason advanced by the management in the above regard has been considered by us and included in the following paragraphs, regarding the change in the method of accounting.

(d) In continuation of the above, for the two financial years [Namely current financial year 2014-15 (a period of 12 months comprising of the months from 01-04-2014 to 31-03-2015) & 2013-14 (a period of 9 months comprising of the months from 01-07-2013 to 31-03-2014), the company has not paid any amount towards Bank Interest, since the company has acute financial constraints, in meeting its short term and long term obligations; accordingly the company has not charged any interest (Expenses) on the bank borrowings (both Long Term and Short Term) obtained by the company from the banks. Considering the overall level of the financial position of the Company, during the financial year 2013- 14, and as a prudent measure, the company decided to change method of accounting of expenses (Interest on bank borrowings) from Mercantile Method (Accrual Basis) to Cash Method (Cash Basis), with effect from the Financial Year 2013-14 and continued the same for the current financial year 2014- 15 also.

(e) In our opinion, the above practice is not in accordance with the provisions of the Companies Act 2013. Hence, we have qualified the same together with the amount involved thereof.

08. Report on other Legal and Regulatory Requirements

(01) As required by the Companies (Auditor's Report) Order, 2015, issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, and the basis of the such verification of books and records of the company, as we considered appropriate and according to information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable, to the company for the year under report.

(02) As required by Section 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 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 my examination of those books

(c) The report on the accounts of the branch offices, as required by clause (c) of sub-section (8) of section 143 of the Act, is not applicable for the year under report, since Company has not appointed any branch auditor, to audit the branch accounts, and accordingly dealing with the report of Branch Auditors, in preparing our report does not arise;

(d) The Balance Sheet and the Statement of Profit and Loss dealt with by this Report are in agreement with the books of account.

(e) Subject to the our observations, in the aforesaid paragraph, relating to basis for qualified opinion, in our opinion, the aforesaid Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(f) On the basis of written representations received from the directors as on 31-03-2015, taken on record by the Board of Directors, none of the directors is disqualified as on 31-03-2015, from being appointed as a director in terms of Section 164(2) of the Act.

(g) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us,

(A) The company has disclosed the impact of all the pending litigations on its financial position in its financial statement; please refer Item No.04 and 15 of Note No.28 on Financial Statements

(B) The company does not have any long term contracts including derivative contracts, which will have foreseeable material loss;

(C) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company, except in the case of the Financial Year 2007- 08, amounting to Rs.3.74 Lakh; please refer Item No 16 of Note No.28 on Financial Statements, relating to Investor Education and Protection Fund

Annexure to the Independent Auditor's Report on the Financial Statements (Standard alone) Addressed to the Members of El Forge Limited, CIN: L34103TN1934PLC000669)

[Referred in Paragraph 08(01) of the aforesaid Auditors' Report]

As required by the Companies (Auditor's Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Companies Act, 2013 and on the basis of such checks as we considered appropriate, we further state, on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable, that:

01. Clause 3(i) of the Order, relating to Fixed Assets

(01) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(02) The Management has the policy of physical verification of fixed assets once in every two years, which is, in my opinion, reasonable intervals, considering the nature of fixed assets and size of the company. Accordingly, the Management has carried out physical verification of these fixed assets at the year end;

(03) No material discrepancies were noticed by the Management on such physical verification; and

(04) Considering the observations made in the aforesaid sub-paragraph, the remaining part of the Clause of the Order, relating to "Whether the same (i.e., material discrepancies) have been properly dealt with in the books of account" is not applicable to the Company for the year under report; and accordingly, we have not made any observation thereon.

02. Clause 3(ii) of the Order, relating to Inventory

(01) The Management has the policy of physical verification of Inventories once in every year, which is, in our opinion, a reasonable interval, considering the nature of inventories, volume of the inventories, nature of business and size of the Company. Accordingly, the Management has carried out physical verification of these inventories at the year end;

(02) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the company and the nature of its business;

(03) The remaining part of the Clause of the Order, relating to "Reporting of inadequacies in procedures of physical verification of inventory" is not applicable for the year under report; and accordingly, we have not made any observation thereon.

(05) The company is maintaining proper records of Inventories;

(06) No material discrepancies were noticed by the Management on such physical verification; and

(07) Considering the observations made in the aforesaid sub-paragraph, the remaining part of the Clause of the Order, relating to "Whether the same (i.e., material discrepancies) have been properly dealt with in the books of account" is not applicable to the Company for the year under report and accordingly, we have not made any observation thereon.

03. Clause 3(iii) of the Order, relating to Loans Granted

(01) The Company has not granted, during the year under report, any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013.

(02) Considering the observations made in the aforesaid sub-paragraph, the remaining part of the Clause of the Order, given below, is not applicable to the Company for the year under report.

(a) Whether receipt of the principal amount and interest are also regular; and

(b) If overdue amount is more than Rupees One Lakh, whether reasonable steps have been taken by the Company for recovery of the principal and interest

(03) Accordingly, we have not made any observation, relating to the above.

04. Clause 3(iv) of the Order, relating to internal control system

(01) We are of the opinion that 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 and services.

(02) The remaining part of the Clause of the Order, relating to "Whether there is a continuing failure to correct major weaknesses in internal control system" is not applicable to the company for the year under report; and accordingly, we have not made any observation in this regard.

05. Clause 3(v) of the Order, relating to Deposits

In our opinion and according to the information and explanations given to us, the Company has accepted deposit from the public to which the directives issued by the Reserve bank of India, provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies [Acceptance of Deposits] Rules, 1975 are applicable. The company has filed details of deposits, in the prescribed form, with Registrar of Companies, Tamil Nadu, at Chennai, as required by the companies Act, 2013, relating to the aforesaid deposits. The company has paid all the fixed deposits which have been matured and claimed; but the company has not paid the Fixed Deposits matured but not claimed. The amount of such deposits works out to Rs 104.26 Lakh, as at 31-03-2015; since the amount is due for payment the same has been included and/ or shown under the under the grouping Current Liabilities in the Balance Sheet. The company has not made any amount as are required to be kept as liquid assets in respect of public deposit, since they are due now and not going to mature in the ensuing financial year. Further, according to the information and explanations given to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, on the Company in respect of deposits accepted.

01) As required by Paragraph 4 of the order, we give reason for our unfavorable or qualified remarks (Answers):

02) The company has not repaid the amount of deposits outstanding and falls due. Hence, we have qualified the same together with the amount remaining unpaid.

06. Clause 3(vi) of the Order, relating to Cost Records

The company has maintained pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013. We have broadly reviewed the aforesaid cost records, maintained by the Company and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

07. Clause 3(vii) of the Order, relating to Statutory Dues

(01) Unpaid undisputed amount:

(a) As per the records examined by us, the company is not regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax etc., with the appropriate authorities. As per the records examined by us, an amount of Rs 311.76 Lakh has been outstanding towards statutory dues, as at the last day of the financial year under report, for a Period of more than six months from the date they became payable.

(b) As required by Paragraph 4 of the order, we give reason for our unfavourable or qualified remarks (Answers):

Since the company has not paid the undisputed statutory dues, even though they are due, we have qualified the same together with the amount, as per the aforesaid clause of the Order.

(02) As at the end of the financial period under report, no undisputed amount of income tax / sales tax / Wealth tax / Service Tax / Custom duty / Excise duty / Cess has been outstanding except those, given below:

Sl.  Nature of the 
     Statue              Nature of the dues       Amount
No                                               (Rs. In Lacs)

1    ESI                 ESI Contribution            2.08

2    Income Tax          Income Tax Demand           0.03

3    Income Tax          Income Tax Demand          75.60

4    The Service Tax     Service Excise Demand      24.77

5    The Central Excise  Excise                      1.47
                         Demand

6    The Central Excise  Excise Demand               1.72

7    The Central Excise  Excise Demand               5.22

8    The Central Excise  Excise / Demand             8.49

Name of the Status       Year to which the     Forum where dispute
                         amounts relates       is pending

ESI                      Year - 2001           Employees Insurance
                                               court, Chennai

Income tax               Assessment Year       CIT Appeals, Chennai
                         2004 - 05

Income tax               Assessment Year       CIT Appeals, Chennai
                         2007 - 08

The Service Tax          2002 - 03             Commissioner Appeals
                                               of Central Excise & 
                         to                    Service Tax, Chennai 
                         2010 - 11

The Central Excise       2003 - 04 to          Commissioner of Central
                                               Excise Chennai IV 
                         2006 -07
                                               Commissionerate

The Central Excise       2002 to 2005          Customs, Excise and
                                               Service Tax Appellate
                                               Tribunal

The Central Excise       2008 - 09             Additional
                                               Commissioner of Central
                         to
                                               Excise Div. appeal
                         2012 - 13             Chennai III

The Central Excise       2007 - 08             Assistance commissioner
                                               of Central Excise
                                               Chennai III

01. Unfavourable or qualified observations (Answer)

(a) Without considering the consequential effects, if any, of matter described in the Basis for Qualified Opinion paragraph of our auditors' report, the Company's accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses in the current and immediately preceding financial year. The company's has accumulated loss amounting to Rs. 8981.89 Lakh at the end of the financial year under report.

(b) As required by Paragraph 4 of the Order, we give reason for our unfavourable or qualified remarks (Answers): Since the company has incurred loss during the year under report and has been incurring loss during preceding years, the aggregated amount has exceed the share capital and reserves, resulting in erosion of networth more than 50% .

09. Clause 3(ix) of the Order, relating to Repayment of Loans

(01) Unfavourable or qualified observations (Answer)

(a) Out of consortium of banks, a few banks (Assignor) have assigned their loan amounts (Along with their rights, claims, benefits, etc.) to two Assets Restructuring Companies (ARC), invoking the option under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Based on the information available with the company, the amount due to the Assignor has been transferred to and shown in the respective name of the ARC. Accordingly, the amount assigned by the Assignor, no longer appears in the name of the bank; these amount have been excluded for the purpose of this clause;

(b) In continuation of the above, based on our audit procedures and according to the information and explanations given to us, we are of the opinion that the company has defaulted in repayment of dues to financial institutions / banks amounting to Rs 809.29 Lakh and Rs. 616.33 Lakh towards principal and interest respectively as at 31.03.2015

(02) As required by Paragraph 4 of the Order, we give reason for our unfavourable or qualified remarks (Answers): As per the information and explanations given to us, the company has not entered into any agreement with ARC, hence it is not possible to classify the amount, in terms of the requirement of Schedule III to the Companies Act, 2013. Hence, the aforesaid observation.

10. Clause 3(x) of the Order, relating to Guarantee

01. Unfavourable or qualified observations (Answer)

a. The company has given a guarantee, much earlier to the 12-09-2013, the date from which Section 185 of the Companies Act, 2013 has come into force for loans taken by a domestic company from its banker. The domestic company is not in a position to repay the loan amount to its Banker. Their Banker issued notice under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Considering the aforesaid fcats, in our opinion, the guarantee given is prejudicial to the interest of the company.

b. As required by Paragraph 4 of the Order, we give reason for our unfavourable or qualified remarks (Answers): In the aforesaid circumstance, as it appears to us, the guarantee could be invoked by the banker at any time; hence we considered the same as prejudicial to the interest of the Company.

11. Clause 3(xi) of the Order, relating to application of Term Loan

01. The Company has not taken any Term Loan from banks or financial institution during the year under report.

02. Regarding the Term Loan taken by the Company from bank, during the earlier years, the Company has applied such Term Loan for the purpose for which the loans were obtained.

12. Clause 3(xii) of the Order, relating to Fraud

Based on the examination of the books of account and the information and explanations/ representation given to us, no fraud on or by the company has been noticed or reported during the year under report; accordingly, remaining part of the Clause of the Order relating to "the nature and the amount involved is to be indicated" is not applicable to the company for the year under report; and accordingly, we have not made any observation, relating to the above.

                                        For P. Rajagopalan & Co

                                          Chartered Accountants

                                  Regn No. of the Firm: 003408S

Place: Chennai                                      R.VENKATESH

Date: 13.08.2015                                        Partner

                                                     MNo:028368