(b) The Company has given undertaking to Financial Institutions for non disposal of share holding (present and future) of the Company in Dalmia Fresenius Medicals Ltd. (DFML) as long as loans granted to DFML by the Financial Institutions remain unpaid. Further, the Company has also given undertaking to the Financial Institutions to meet the shortfall in the resources, if any, of DFML for completion of its project.

2. (a) The Office of Company Secretary is lying vacant since 01-01-2002. The company has initiated steps to appoint a Company Secretary to comply with the requirement of Section 383A of the Companies Act, 1956.

(b) The Company has not constituted the audit committee as required under section 292A of the Companies Act 1956 and clause 49 of the listing agreement.

(c) The Company has not published/Submitted / get reviewed by the auditors the quarterly results as required under Clause 41 of the listing agreement.

3. Accumulated losses of the company have exceeded its net-worth and presently dairy production facilities (Bharatpur Works) are under suspension but the company has no intention to close down the same. Consequently, these accounts have been prepared on the basis of "going concern concept." Reference made to BIFR as per the provisions of Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 has been subsequently rejected by BIFR in May'2002 and the company has filed appeal against the same in AAIFR. Pending decision of AAEFR, the company has made a re - reference to BIFR on the basis of account for the year 2001-02 and same has been registered.

4.(a) The operations of the Kolkatta Sales Office (including North Eastern Region N.E.R) of the company had been discontinued from May'99 and production/operation at Bharatpur Works is under suspension with effect from 5th Sept, 1998.Some of the employees/workers took over possession of the factory premises. Consequently, annual accounts have been finalized / verified on the basis of data/ details/information available at Delhi office only and could not be fully verified with the original/primary records maintained at above Sales Office/works/other offices/establishment of the company.

Due to inherent limitations and constraints as aforesaid, consequential impact arising out of verification of records, on various revenue heads, fixed assets, capital work in progress (CWIP), inventory, loans and advances, sundry debtors, sundry creditors and other balances will be accounted for in the year of verification and assessment.

(b) In view of note 4 (a) above, physical verification of fixed assets, CWIP and inventories could not be carried out. The difference, if any, between book records and physically verified balances will be accounted for in the year of verification.

(c) In view of note no. 4(a) above regarding suspension of production/operation, since 5th Sept'98, no provision for impairment in value of fixed assets and CWIP have been made.

(d) Debtors more than 6 months include Rs. 1,41,09,380 [including Rs. 19,00,000 (Previous Year Rs. 19,00,000) transferred from cheques in hand] (Previous Year Rs. 4,09,84,880) on account of sales made by Kolkatta Sales Office (Ref. note No. 4(a))

5. Certain secretarial records including board minutes, minutes of general meetings, register of charges, register of contract, register of investment or loan made, guarantee given or security provided (under Section 301,125, and, 372(A) of the companies act.) etc. and copy of Annual Return are not made available to the auditors for verification.

6. Balances of sundry debtors, sundry creditors, other current liabilities, loans and advances, fixed deposits, inter-corporate deposits, bank balances, secured loans and unsecured loans are subject to confirmation and / or reconciliation.

Necessary adjustments in the accounts in this respect will be made as and when reconciled/confirmed /settled.

7. Stores and Spares, loose tools and Raw Material amounting to Rs. Nil (Previous Year Rs. 1,01,77,029) , Rs. Nil (Previous Year Rs. 129792) and Rs.Nil (Previous Year Rs.25,08,337) respectively are lying for more than five years and being carried at the same value as it was in the previous year. In the opinion of the management, the same is usable/realizable and hence no provision there against is considered necessary.

8. (a) Provision for penal interest and liquidated damages on Term Loans/Debentures/Credit facilities has not been made for the period from 01.07.1998 to 31.03.2007 (amount unascertained), pending approval of the financial institutions, banks for one time settlement including relief/concessions in interest and liquidated damages etc.

(b) During the year, to facilitate scheme of One Time Settlement (OTS) with United Bank of India, State Bank of Bikaner & Jaipur, Bank of Tokyo and Canbank Mutual Fund, M/s G.T.C. Industries Ltd has financed the Company on the terms that its claim on the Assets of the Company will stand pam passu with the other remaining financial institutions. Since necessary formalities in this regard are yet to be completed and the charge of these Banks still exits, the balance outstanding of these banks has still been reflected after payment of Rs.3,6233,117/- to United Bank of India, State Bank of Bikaner & Jaipur, Bank of Tokyo. The payment to Canbank Mutual Fund has been paid in the month of April 2007. Since these account have been taken as settled, no provision for interest has been made in these accounts.

(c) No provision has been made for amount payable to the certain employees/ workers on account of salaries, wages, bonus and other allowance etc. (amount unascertained) the same will be accounted for as and when settled/paid.

9. Loans and Advances includes Inter Corporate Deposits given amounting to Rs.88,93,000 (Previous Year Rs. Rs.88,93,000) on which interest for the period from 1.10.99 to 31.03.2007 (amount unascertained) will be accounted for as and when received.

10. (a) Certain fixed deposits could not be repaid on maturity. On reference to the Company Law Board, time for re-payment was extended and all deposits were to be paid in 5 installments on or before 31st Dec 2001, together with interest. The Company has already paid first three installments, and for the balance installments the company had filed a petition with CLB for seeking extensions, time period sought to be extended has also been expired and no petition has been filed for further extension.

Fixed deposit return is pending to be filed with the registrar of Companies and also copy to the Reserve Bank of India. Interest (amount unascertained) for the period from the date of maturity to date of payment will be accounted for on payment basis.

In view of financial constraints and liquidity problems, the managements confident that no penal proceeding will be initiated against the company.

(b) Interest on 19% Secured Redeemable Non-Convertible Debentures and on Non- Convertible Zero Coupons Bond (amount unascertained) for the period from 28.08.98 to 31.03.2007 will be accounted for as and when paid.

(c) Unsecured loans included loan taken from bodies corporate amounting to Rs.71,65,000 (Previous Year Rs.71,65,000) which is subject to confirmation/reconciliation. Interest (amount ascertained) will be accounted for on confirmation/ reconciliation.

(d) Security deposit amounting to Rs 50,44,299 includes interest bearing security deposits also on which provision if any for interest (amount unascertained) will be accounted for at the time of payment.

11. Certain Buildings and Plant and Machinery's were revalued as at 30th September 1985 and 31st March 1989. The revaluation of certain buildings and Plant and Machinery was done and updated as at 31st March 1994, on the basis of current replacement cost by the Valuer appointed for the purpose. As a result, book value of said assets was increased by Rs.13,23,53,515, which had been transferred to Revaluation Reserve during the year ended 31st March 1994.

12. Unquoted investments including investment in Subsidiary Companies include investments amounting to Rs.13,93,48,165 (Previous Year Rs.13,93,48,165) where breakup value of investments is lower than the cost. No provision for diminution (amount unascertained) in value of unquoted investments is considered necessary. In the opinion of the management these are long term investments and the diminution in value is temporary in nature.

13. (a) In the year 1999-2000 the company had received a lump sum compensation amounting to Rs. 1,12,45,000 along with transfer in its favour of 24,79,964 nos' fully paid equity shares of Rs. 10/- each of D.F.M.L at nil value from Pharmaplan GmbH, Germany as one of joint venture partners of Dalmia Fresenius Medical Limited (DFML) in consideration of the assurances and representation about cancellation of outstanding demands of the Custom Authorities (amount unascertained) against DFML and for relieving, releasing and forever discharging of all the claims and liabilities against Pharmaplan GmbH, Fresenius AG and DEG arising out of or in connection with the agreement between them and cancellation thereof, pending F.I.B.P/ R.B.I approval. In consideration of above, further company has agreed to get approval in favour of Pharmaplan GmbH for re-export of Plant & machinery of DFML at an agreed price to DFML. The management is of the view based upon the expert opinion, that no such liability on this account will arise in future and hence, no provision has been considered necessary in the accounts.

(b) Due to reason cited above and misplacing of some other relevant data/details relating to acquisition of investment in Dalmia Fresanius Medical Ltd.(DFML) the accounting for investment in consolidated financial statement could not be carried out in terms of AS-23

(Accounting for Associates in Consolidated financial Statement) or AS-27 (Accounting for Interest in Joint venture.) as the case may be.

14. Advances recoverable in cash or kind include:-

(a) Due from Officers/Director of the Company Rs. Nil (Previous Year Rs.Nil) and maximum amount due during the year Rs.Nil(Previous Year Rs.Nil).

(b) Due from ex-employees of the Company Rs.4,25,045 and maximum amount due during the year Rs.4,25,045.

(c) Advance against capital expenditure Rs.76,67,410 (Previous Year Rs.76,67,410).

15. In connection with Naphthalene Project the company has incurred/paid Rs.2,49,94,191/- (Previous Year Rs. 2,49,94,191) [including increase due to withdrawal of the share of the co-promoters amounting to Rs.1,27,50,584 which was incurred in earlier years for Technical know-how Fee etc. (net). As amounts that may be irrecoverable can be ascertained only on final decision of the Company for implementation of Naphthalene Project in the State of Assam, no provision there against has been considered necessary.

16. During the year the company has received a sum of Rs.2,87,22,000.00 from bodies corporate and paid a sum of Rs.16,00,000.00 to bodies corporate, for which no relevant records/documents have been made available to us. Hence we cannot comment on the correctness and reliability of the same.

17. Guarantee given by the company on behalf of others amounting to Rs. 3,84,20,000 investment made in earlier years amounting to Rs. 44,99,96,000 and loan given to a body corporate amounting to Rs. 4,00,00,000 (since received) are pending for necessary approval from financial institutions as per the provisions of section 372A of the Companies Act, 1956.

18. Sundry Debtors, Loans and advances (including Inter Corporate Deposits) include Rs.2,35,96,075 (Previous Year Rs. 5,39,33,983) and Rs.10,07,42,807 (Previous Year Rs. 11,71,70,976) respectively against which legal and/or other necessary steps for recovery are due since the accounts are overdue for payment. In the opinion of the management, considering the present status no provision is required. In view of non- availability of party wise details for the reason stated in note no. 4(a) above ,Necessary provision will be made as and when reconciled/confirmed or finally settled/ recovered. .

19. In the opinion of the Board of Directors, current assets, loans and advances have a value on realization in the ordinary course of business, at least equal to the amount at which they are stated.

20. Provision for Deferred Tax Liabilities if any has not been made.

21. (a) The liability of income tax and interest thereon exclusive of additions/disallowance's set aside/deleted by the Appropriate Authorities in relevant/earlier years are estimated at Rs.16,12,000 (Previous Year Rs.16,12,000) such liabilities have been disputed by the company and based on its contention that these will get deleted during disposal of pending appeals and other proceedings, no provision has been made for the same. However, without prejudice to its contentions, the company has already made payment against the aforesaid liability.

(b) Advance payments of Taxes is net of provision for taxes amounting to Rs. 38,07,588 (Previous Year Rs.38, 07,588), year wise bifurcation of advances and provision is under preparation/ reconciliation.

22. Total accrued liability for Gratuity and Leave encashment as per certificate dated - 31st March, 05 is Rs 47,10,931 (Upto 31st Mar'05 Rs. 47,10,931) and Rs4,46,444 (Upto 31st Mar'05 Rs. 4,46,444) respectively for which no provision has been made in the accounts. The same shall be accounted for as and when paid.

23. Depreciation for the year includes Rs 60,01,059 (Previous Year Rs. 69,21,684) being depreciation on the increased amount of assets due to revaluation. An equivalent amount has been withdrawn from Capital Reserve No.2 and credited to Profit and Loss Account to arrive at profit under section 205 of the Companies Act, 1956.

*As identified and ascertained by the management read with note no.4 (a) and our inability to comment on the correctness of the same.

24. Prior period expenses amounting to Rs.1,41,997 (Previous Year Rs39,255) and prior period income amounting to Rs. Nil (Previous Year Rs.37992) has been debited/credited to respective heads of account.

25. Related party Disclosure *

List of Related Parties: - (Related party relationship and transaction are to the extent identified/ascertained by the management.)

Parties where control exists:

(a) Subsidiary Companies:

Bharatpur Investment Limited

Lakshmi Vishnu Investment Limited

Mourya Finance Limited

Sikar Investment Co. Limited

Chirawa Investment Limited

Swagatham Investment Limited

Dalmia Industries (Nepal) Limited

26. Since the Company has substantial carried forward business losses and unabsorbed depreciation, it is unlikely to have taxable profits in near future and hence it is not considered necessary to create deferred tax assets in accordance with the Accounting Standard - 22 issued by the Institute of Chartered Accountants of India.

27. As no commission is payable to the Directors for the year, the computation of Net Profit as per section 349 of the Companies Act, 1956 not given

28. Remuneration paid during the year to the Managing Executive /Whole time Directors:

29. Previous year's figures have been rearranged, reinstated and/or regrouped wherever necessary.