II. Management's Responsibility forthe Financial Statements

The Company's Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 of India (the "Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Company Affairs). This responsibility includes the design, implementation and maintenance of internal control 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.

III. Auditors' 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 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.

An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider 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. 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.

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

IV. Basis for Qualified Opinion:

i) The Company has subscribed to 6% Redeemable Preference Shares of a Corporate in the year 2009 at a cost of Rs. 15 Crores by way of Long Term Investment and the Investee Company, due to inadequacy of profits, has not paid dividends since the date of issue. As per its latest audited financial statements, the Investee Company has ceased to carry on any meaningful business operations and its outstanding creditors are substantially higher than its Net worth. As per the indications, the expected cash flows from the investment are uncertain and in our opinion, there is a permanent decline in the value of these Long Term Investments.

As per the Accounting Standard 13 issued by the Institute of Chartered Accountants of India, when there is a decline other than temporary in the value of any investment, the carrying amount (i. e. cost price) is to be reduced to recognise the decline. The company has not made any such provision for permanent decline in the value of investment and it is a departure from the requirements of the Accounting Standard referred above. An amount ofRs. 15 Crores would have been required to write down the investments to the realisable value and accordingly the investments would have decreased by Rs. 15 Crores and the Shares holders Funds would have decreased by Rs. 15 Crores.

ii) The Company has borrowed Rs. 15.12 crores at 12% interest per annum. For its failure to service the loan, the creditor has filed suit for recovery. The Company has not provided for the annual interest of Rs. 1.81 Crores and the accumulated interest of Rs. 20.82 Crores.

Non Provision for such an enforceable liability is against fundamental accounting principle of accrual and prudence. An amount ofRs. 20.82 Crores would have been required to increase the unsecured creditors and accordingly the unsecured creditors would have increased by Rs. 20.82 Crores, the loss for the year would have been higher by Rs. 1.81 Crores and the Share holders funds would have decreased by Rs. 20.82 Crores.

V. Qualified Opinion:

In our opinion, and to the best of our information and according to the explanations given to us, except for the possible effects as described in 'Basis of Qualified Opinion'paragraph, the accompanying 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 generally accepted accounting principles in India;

* in the case of the Balance Sheet, of the state of affairs of the company as at 31st March 2014;

* in the case ofthe Statement of Profit and Loss, oftheLoss for the year ended on that date; and

* in the case ofthe Cash Flow Statement, ofthe cash flows for the year ended on that date.

VI. Report on Other Legal and Regulatory Requirements

1. As required by 'the Companies (Auditor's Report) Order, 2003', as amended by 'the Companies (Auditor's Report) (Amendment) Order, 2004', issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act (hereinafter referred to as the "Order"), we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 ofthe Order.

2. As required by Section 227(3) of the Act, 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 account as required by law have been kept by the Company so far as appears from our examination of those books;

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, Statement of Profit and Loss 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 Act (which continue to be applicable in respect of Section 133 ofthe Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 ofthe Ministry of Company Affairs) except as described in Basis of Qualified Opinion paragraph;

e. On the basis of written representations received from the directors as on March 31,2014, and taken on record by the Board of Directors, none ofthe directors is disqualified as on March 31,2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Based on the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:

i. In respect of fixed assets:

a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) Physical verification of fixed assets has been carried out by the Management at reasonable intervals. According to the information given to us, no material discrepancies were noticed on such verification.

c) No Fixed Assets are disposed off during the year so as to affect the going concern status of the company.

ii. In respect of inventories of finished goods, work-in-process, raw materials, stores and spares;

In the absence of any inventories, the provisions of paragraph 4(ii) of the Order are not applicable to the company.

iii. In respect of loans, secured or unsecured, granted or taken by the Company to / from Companies, firms or other parties covered in the Register maintained under section 301 of the Companies Act, 1956,

a) The Company had granted loan in earlier years to one party aggregating to Rs. 19.10 crores covered in the Register maintained under Section 301 of Companies Act, 1956. The company has made full recovery of the loan during the year and there is no balance outstanding at the end of the year.

b) The Company has not taken any loans from parties covered in the Register maintained under Section 301 of the Companies Act.

iv. In respect of internal control procedures

There is adequate Internal Control System commensurate with the size of the company and the nature of its business for the purchase of inventories, fixed assets and sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

v. In respect of transactions that need to be entered into a register in pursuance of section 301 of the Companies Act.

The particulars of transactions referred to in Section 301 of Companies Act, 1956, that need to be entered in the Register maintained under the said section, have been so entered.

vi. In respect of public deposits:

The Company has not accepted any deposits from the public. Therefore, the provisions of section 58A and 58AAof the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 are not applicable to the Company.

vii. In respect of internal audit system:

The Company has no internal audit system commensurate with the size and nature of its activities.

viii. In respect of cost records:

According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956, for any of the products of the Company.

ix. In respect of statutory dues:

a) The Company has been generally regular in depositing undisputed dues of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable Statutory dues with the appropriate authorities during the year.

b) In respect of Income Tax, Sales Tax, Service tax, Customs duty, Excise duty and Cess and applicable Statutory dues, there are no undisputed amounts outstanding as at March 31,2014 for a period of more than six months from the date they became payable.

c) The details of dues of income tax / wealth tax which have not been deposited due to disputes are as under

Period to which the   Disputed Tax       Forum where the dispute
Demand relates         Rs. Lakhs                is pending
(Assessment Year) 

1990-91 to 1993-94 
(wealth tax)              58.08            High Court, Chennai

x. In respect of losses:

The accumulated losses of the Company, as adjusted after taking in to account the qualifications in the audit report to the extent the qualifications are quantified, are more than 50% of its net worth. The company has incurred cash losses during the financial year covered by our audit and has not incurred cash losses in the preceding financial year.

xi. In respect of repayment of dues to financial institutions, banks and/or debenture holders:

During the year, there were no dues to debentures holders, banks and / or financial institutions.

xii. In respect of loans on the basis of security by way of pledge of shares, debentures and other securities:

The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. In respect of applicability of any special statutes:

In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society.

xiv. In respect of dealing in shares, securities, debentures and other investments:

The Company is holding Shares in other Body Corporate as investment. 885684 Equity Shares in a Body corporate, with a book value of Rs. 430.00 lakhs are yet to be transferred in the Company's name (Refer Note: 19 to Financial Statements).

xv. In respect of guarantees given by the Company for the loan taken by others from banks or financial institutions:

During the year, the company has not given any guarantees for the loans taken by others from banks and financial institutions.

xvi. In respect of utilization of term loans:

During the year, the company has not raised any Term Loans.

xvii. In respect of utilization of short term funds:

According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the Company has not used funds raised on short term basis for long term investment.

xviii. In respect of preferential allotment of shares:

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

xix. In respect of security or charge created against the debentures:

The Company has not issued any debentures during the year.

xx. In respect of public issues:

The Company has not raised any money by public issues.

xxi. In respect of frauds:

In our opinion and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

For P A REDDY & CO                             For CNGSN & ASSOCIATES
Chartered Accountants                          Chartered Accountants
Registration No: 007368S                       Registration No: 004915S

P ASHOK REDDY                                  C N GANGADARAN
Partner                                        Partner
Membership No: 023202                          Membership No: 011205