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 (Auditors Report) Order, 2003 as amended by the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose as Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order, to the extent applicable to the Company.

4. (i) Other Current Assets include Rs. 8,56,92,687/- being the insurance claim receivable, which has not been received till date. The ultimate impact thereof on the loss for the year is not ascertainable.

(ii) The company has not assessed the impairment in the fixed assets, if any, as required by Accounting Standard 28 "Impairment of Assets" issued by Institute of Chartered Accountants of India. (amount not ascertained)

5. Further to our comments, in the annexure referred to in paragraph 3 and 4 above we report that :- 1. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit.

2. 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;

3. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the Books of Account;

4. 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; except for the Accounting Standard mentioned in paragraph 4 above;

5. On the basis of the written representations received from the directors as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

6. In our opinion and to the best of our information and according to the explanations given to us, the said Accounts, subject to our comment in Paragraph 4 above and the consequential cumulative impact thereof on the loss for the year, assets, liabilities and reserves of the Company, which is not ascertainable, read together with the Significant Accounting Polices and other 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 :

1. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March,2010 and

2. in the case of the Profit and Loss Account, of the Loss for the year ended on that date.

3. in case of the cash flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT [(Statement referred to in paragraph 3 of our report of even date to the members of Hanil Era Textiles Limited) on the accounts for the year ended 31st March, 2010]

On the basis of such checks as we considered appropriate and in terms of the information and explanations given to us, we report that:- I. In respect of the fixed assets:

a. The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets;

b. Majority of fixed assets have been verified during the year by the management in accordance with a program of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable interval having regard to the size of the company and the nature of its assets. Reconciliation has been made between the book records and actual fixed assets during the year and was found to be correct.

c. During the year, the Company has not disposed off any substantial/major part of Fixed Assets.

II. In respect of the Inventories:

a. As explained to us, the Management has physically verified the inventories of Raw Materials, Packing materials, Oil & Lubricant, Stores and spares and Finished goods at reasonable intervals during the year.

b. In our opinion and according to the information and explanations 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. On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. No material discrepancies were noticed on the verification between the physical stocks and book records.

III. The Company has neither granted nor 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 and hence clauses 4 (iii)(a) to (c) of the said Order are not applicable.

IV. In our opinion, there exists an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the Company.

V. There are no transactions that need to be entered in to a register in pursuance of Section 301 of the Companies Act, 1956. Hence, clause V (b) is not applicable to the company.

VI. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public, during the year to which the directives issued by the Reserve Bank Of India and the provisions of sections 58A and 58AA or other relevant provisions of the Companies Act, 1956 and the rules framed there under, are applicable.

VII. The Company has initiated an Internal audit system by engaging an independent firm of Chartered Accountants during the year. In our opinion the existing system commensurates with the size and nature of its business.

VIII. The Central Government has prescribed maintenance of cost records u/s 209(1)(d) of the Companies Act, 1956. In view of the fact that documents / records are not made available to us, we have not been able to make detailed examination of the same with a view to determine whether the same are accurate and complete.

IX. In respect of Statutory dues:

a. According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has generally been regular in depositing the undisputed statutory dues with the appropriate authorities during the year including Provident Fund, Profession Tax, Income Tax, Sales Tax, Service Tax, Custom duty, Excise Duty, Cess and any other dues except some instances of late payments.

b. According to the information and explanations given to us, there were no undisputed amounts payable in respect of statutory dues referred to above which have remained outstanding as at 31st March, 2010 for a period of more than six months from the date they became payable except for the liability (Excluding interest) in respect of Professional tax: Rs.3,03,150/-.

c. According to the information and explanation given to us, there are dues outstanding of income tax, sale tax, customs duty, excise duty and cess which have not been deposited on account of any dispute. However, the Company has filed appeals against the same.

X. The Company has no accumulated losses at the end of the financial year. The Company has incurred cash losses amounting Rs.7,78,16,984/- in the financial year covered by our audit. There were cash losses amounting to Rs.49,09,61,220/- in the financial year immediately preceding the current financial year.

XI. Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of opinion that the Company has defaulted in repayment of interest dues to banks and financial institutions and all accounts are NPA as on Balance sheet date.

XII. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

XIII. The Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

XIV. The Company has maintained proper records of transaction and contracts in respect of dealing and trading in shares, securities, debentures and other investments and that timely entries have generally been made therein. All shares, debentures and other securities have been held by the Company in its own name.

XV. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

XVI. To the best of our knowledge and belief and according to the information and explanations given to us, the company has not applied for any type of term loans during the year. Accordingly the provisions of clause (XVI) of the Companies (Auditors Report) order, 2003 are not applicable to the Company..

XVII. In our opinion and according to the information and explanations given to us, the Company has not been raised any funds on short-term basis.

XVIII. During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

XIX. The Company has not issued any debentures during the year.

XX. The Company has not raised any money by public issue during the year.

XXI. According to the information and explanations given to us, no fraud on or by the Company had been noticed or reported during the year.

For P.V. Page & Co.

Chartered Accountants, (PRAKASH V. PAGE)

PARTNER Membership No. : 30560

Place : Mumbai

Date : October 30, 2010.