Transport Corporation of India Ltd

To The Members of

Transport Corporation of India Ltd.

We have audited the attached Balance Sheet of Transport Corporation of India Ltd.as at 31st March 2011, the annexed Profit and Loss Account and the Cash Flow Statement ofthe Company for the year ended on that date in which are incorporated the audited accountsof the TCI Seaways division and the branches in Nepal as audited by other auditors.

1. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on ouraudit.

2. We conducted our audit in accordance with auditing standards generally accepted inIndia. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatements. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 (as amended) issuedby the Central Government of India in terms of sub-section (4A) of section 227 of theCompanies Act, 1956 and on the basis of such checks as we considered appropriate andaccording to the information and explanations given to us during the course of audit, weenclose in the Annexure hereto a statement on the matters specified in paragraph 4 & 5of the said Order.

4. Attention is invited to note 4 on Schedule 23 regarding income-tax demands and note6 on Schedule 23 regarding investments in overseas subsidiary and joint venture companies.

5. Further to our comments in the Annexure, referred to in paragraph 3 above, we reportthat:

i. We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purpose of our audit.

ii. In our opinion, proper books of account as required by law have been kept by theCompany so far as appears from our examination of the books and proper returns adequatefor the purpose of our audit have been received from the branches not visited by us. TheBranch Auditors’ Report has been forwarded to us and appropriately dealt with.

iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account and returns from the branches.

iv. In our opinion, the Profit and Loss Account, the Balance Sheet and the Cash FlowStatement, comply with the accounting standards referred to in section 211 (3C) of theCompanies Act, 1956.

v. On the basis of written representations received from the directors as on 31st March2011 and taken on record by the Board of Directors none of the directors is disqualifiedas on 31st March, 2011 from being appointed as a director under section 274(1) (g) of theCompanies Act, 1956.

vi. In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read together with the notes and accounting policiesthereon give the information required by the Companies Act, 1956 in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India:

a) In the case of Balance Sheet of the state of affairs of the Company as at 31st March2011;

b) In the case of Profit and Loss Account, of the profit of the Company for the yearended on that date and

c) In the case of Cash Flow Statement, of the cash flows for the year ended on thatdate.

referred to in paragraph 3 of our report of even date:

1. The Company has maintained records showing full particulars including quantitativedetails and situation of fixed assets. We are informed that a test physical verificationof these assets was carried out by the management during the year and no materialdiscrepancies were noticed.

2. The Company has transferred a substantial part of fixed assets during the year underthe Scheme of Arrangement for demerger of its real estate and warehousing division intoits subsidiary company, TCI Developers Limited effective from 1st April 2010. Suchtransfer has, in our opinion, not affected the going concern status of the Company.

3. Physical verification was conducted by the management in respect of inventories atreasonable intervals. The Company has maintained proper records of its inventories and nomaterial discrepancies were noticed on physical verification. The procedures followed bythe management for such physical verification are, in our opinion, reasonable and adequatein relation to the size of the Company and the nature of its business.

4. (a) The Company has during the year granted unsecured interest free loans to sixwholly owned overseas subsidiaries. All the above companies are covered in the registermaintained under Section 301 of the Act. The maximum amount involved during the yearaggregate to Rs. 555 lacs and the year end balances to Rs. 164 lacs. There are nostipulations as to the dates for repayment of the loans.

(b) The Company has taken unsecured loans of Rs. 541 lacs during the year from onecompany covered in the register maintained under Section 301 of the Act and was repaidduring the year.

(c) In our opinion, the rate of interest and other terms and conditions of the aboveloans are not prima facie prejudicial to the interest of the Company.

5. There is an adequate internal control system commensurate with the size and natureof the Company’s business for the purchase of inventories, fixed assets and for thesale of goods and services. During the course of our audit, no major weakness has beennoticed in the internal control system, nor we have been informed of any such instance.

6. (a) To the best of our knowledge and belief and according to the information andexplanations given to us, the particulars of contracts or arrangements that need to beentered into the register in pursuance of Section 301 of the Act, have been so entered.

(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts or arrangements entered into the register inpursuance of Section 301 of the Act, have been made at prices which are reasonable havingregard to the prevailing market prices at the relevant time.

7. The Company has complied with the provisions of Sections 58A, 58AA and otherrelevant provisions of the Companies Act, 1956 and the rules framed thereunder with regardto deposits accepted from the public.

8. The Company has appointed a firm of Chartered Accountants at the TCI ShippingDivision to do the internal audit regularly. At other places the in-house internal auditdepartment of the company conducted internal audit. The internal audit system is beingreviewed and strengthened to commensurate with the size and nature of Company’sbusiness.

9. We have broadly reviewed the accounts and records maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersection 209(1)(d) of the Act in respect of Electricity generation. We are of the opinionthat prima facie the prescribed accounts and records have been made and maintained.However we have not made a detailed examination of such records.

10. (a) According to the information and explanation given to us and the records of theCompany examined by us, in our opinion, the Company is generally regular in depositing theundisputed statutory dues including provident fund, investor education and protectionfund, employees’ state insurance, income-tax, sales-tax, wealth tax, service tax,custom duty and other material statutory dues as applicable with the appropriateauthorities.

(b) According to the information and explanations given to us and the records of theCompany examined by us, the particulars of dues of income-tax, trade tax andemployees’ state insurance as at March 31, 2011 which have not been deposited onaccount of a dispute and adjusted with the refunds due to the extent of Rs. 1503.77 lacs,are as under:

11. The Company has no accumulated losses as at March 31, 2011 and has not incurred anycash losses in the financial year ended on that date or in the immediately precedingfinancial year.

12. According to the records of the Company examined by us and the information andexplanations given to us, the Company has not defaulted in repayment of dues to anyfinancial institution or bank or debenture holders as at the balance sheet date.

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

14. The provisions of any special statute applicable to chit fund / nidhi / mutualbenefit fund / societies are not applicable to the Company.

15. In our opinion, the Company is not a dealer or trader in shares, securities,debentures and other investments. The investments in shares, securities, debentures etc.are held by the Company in its own name.

16. In our opinion, and according to the information and explanations given to us, theterms and conditions on which the Company has given guarantee for loans taken by othersfrom banks or financial institutions, are not prima facie prejudicial to the interest ofthe Company.

17. In our opinion, and according to the information and explanations given to us, onan overall basis, the term loans have been applied for the purposes for which they wereobtained.

18. On the basis of an overall examination of the balance sheet of the Company, in ouropinion and according to the information and explanations given to us, funds raised onshort-term basis have not been used for long-term investment.

19. The Company has not made any preferential allotment of shares during the year toparties and companies covered in the register maintained under section 301 of the Act.

20. There are no debentures outstanding at the year end.

21. The Company has not raised any money by public issues during the year.

22. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India, andaccording to the information given to us, a case of misappropriation by an employee offunds of Rs. 45 lacs approximately has occurred.

A part of the amount has since been recovered. We have not come across any otherinstance of material fraud on or by the Company, noticed or reported during the year.