2. We have conducted our audit in accordance with 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 and amendments thereto issued by the Central Government of India in terms of Sec 227(4A) of The Companies Act 1956, we annex hereto a statement on the matters specified in the paragraphs 4 and 5 of the said order, to the extent applicable to the Company.

4. We further report that :

(i) 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;

(ii) 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;

(iii) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet and Profit and Loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March 2011, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2011 from being appointed as a director in terms of clause (g) of sub-section(1) of section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts 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:

(i) in the case of the Balance Sheet of the state of affairs of the Company as at 31st March 2011; and

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

Annexure to Auditors Report

Annexure referred to in paragraph 3 of the auditors report to the members of Hansaflon Plastochem Ltd, Gurgaon (HR) for the year ended 31st March, 2011

As required by the companies (Auditor Report) Order , 2003 and amendments thereto and according to the information and explanations given to us during the course of the audit and on the basis of such checks of the books and records as were considered appropriate we report that:

(i) a) The company has maintained proper record showing full particulars including quantitative details and situations of fixed assets. However as reported by the management the Fixed Assets Register and other related files are found missing from office and the information for the same had been recorded in respective police station vide DD No. 30A dated 30/06/2011.

b) All the assets have not been physically verified by the management in accordance with a phased programme of verification, The frequency of verification is reasonable and as reported by management discrepancies noticed on such physical verification were not material.

c) The assets disposed during the year are not significant and therefore do not affect the going concern assumptions.

(ii)a) The inventories have been physically verified by the management during the year at reasonable intervals.

b) The procedure of physical verification of the inventories followed by the management is reasonable and adequate in relation to the size of the company and the nature of its business.

c) The Company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to books records were duly adjusted.

(iii) a) The company has not granted unsecured loan to party covered in the register maintained under section 301 of the Companies Act, 1956. b) In view of our comments in Para (iii) (a) above, clauses 4 (iii) (b) to (d) of the said order are not applicable to the company.

e) The company has not taken unsecured loan from any parties covered in the register maintained under section 301 of the Companies Act, 1956.

f) In view of our comments in Para (iii) (e) above, clauses 4 (iii) (f) to (g) of the said order are not applicable to the company.

(iv) In our opinion and information given by the management to us, the company is yet to introduce adequate internal control systems commensurate with the size of the company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods and services.

(v) The transactions made in pursuance of contract or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 has been recorded in the register. However register is not available for verification, as reported by the management the Contracts Register and other related files are found missing from office and the information for the same had been recorded in respective police station vide DD No. 30A dated 30/06/2011.

(vi) The company has not accepted any deposits from the public within the meaning of the sections 58A, 58AA or any other relevant provision of the Act and the rules framed there under any directives report issued by the Reserve Bank of India. No order in relation thereto 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.

(vii) The Company has yet to establish formal internal audit system commensurate with its size and nature of its business.

(viii) The Central Government has not prescribed for maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 for the company.

(ix) a) According to the records available and information given to us by the company's management, the undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty and Excise Duty, Cess have regularly deposited with the appropriate authorities. There are no undisputed amount payable in respect of such statutory which have remained outstanding as at 31st March, 2011 for a period more then six months from the date they became payable.

b) According to the records available and information given to us by the company's management, there are no amount in respect of any disputed income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess.

(x) The company is a sick industrial company since financial year 2008-09 and has accumulated losses of Rs.757.31 lakhs at the end of the financial year 2009-10 and it has incurred losses in current financial year of Rs. 316.61 lakhs before provision of any tax, cash loss during the year is Rs. 272.20 Lakhs, total accumulated loss as on 31st March 2011 is 1073.92 Lakhs which is more the 50% of its net worth.

(xi) According to the records available and information given to us by the company's management the Company has not defaulted in repayment of its dues to banks and financial institutions.

(xii) According to the records available and information given to us by the company's management the company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or other securities.

(xiii) The provisions of any Special Statute applicable to Chit Fund, Nidhi Fund or Mutual Benefit Fund/Societies are not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the company is not a dealer or trader in shares, securities, debentures and other investments.

(xv) According to the records available and information given to us by the company's management the company has not given any guarantee for loan taken by others from banks and financial institutions.

(xvi) According to the records available and information given to us by the company's management, in our opinion, the term loan have not been applied for the purpose for which they were raised.

(xvii) According to the records available and information given to us by the company's management on an overall examination the Balance Sheet of the company, we report that no fund raised on short term basis have been used for long term investment.

(xviii) According to the records available and information given to us by the company's management the company has not issued any equity shares during the year.

(xix) According to the records available and information given to us by the company's management the company has not issued any debentures during the year and no charge has been created.

(xx) According to the records available and information given to us by the company's management has disclosed end use of money raised from public issues.

(xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year.

Place : New Delhi                 For Naresh J Gupta & Co.

                                 (CA Naresh Gupta)

                                  Partner

                                  M. No. 075291