Jalpac India Ltd Directors Report.

Independent Auditors

to the members of Jalpac India Limited –

Report on the financial statements

A) Report on Financial Statements

We have audited the accompanying financial statements of Jalpac India Limited, which comprise the Balance Sheet as at 31st March 2013, the Statement of the Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

B) Management’s responsibility for the financial statements

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 principles generally accepted in India including Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956("the Act"). 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.

C) Auditor’s 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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

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

D) Basis for Qualified Opinion:-

Attention is invited to the following Sub-Notes of Note No.2:

i. Note no. 14 regarding preparation of accounts of the company on a going concern basis (impact unascertained) for the reason as stated in said note. Even, company’s accumulated losses are in excess of net worth of the company and the company is a sick industrial company, which has been declared by Hon’ble BIFR’s Order dated 05.09.2006 and Vide order dt. 10.07.2012 recommendation for winding up of the Company BIFR to Hon’ble Uttrakhand High Court.

ii. Note No. 4(a) and 4(b)[read with note no. 4(c)] regarding non provision against custom duty saved on raw material consumed under advance license and fiscal penalty imposed respectively as stated in the said notes and on account of non fulfillment of export obligation.(impact unascertainable)

iii. Note No. 11 (a) & (b) regarding non-provision for shortfall in recovery against trade receivables and loans & advances for which recovery action has been initiated (amount unascertainable) as stated in the said note.

iv. Note No. 12 in respect of non confirmation/ reconciliation of balances of trade receivables, trade payables, Other Current Liabilities (including Statutory Dues) & Provisions , certain Long Term Loans & Advances, certain Short Term Loans & Advances , certain Secured loans, Unapplied Interest on Secured Loans, Unsecured Loans, certain Bank Balances, Fixed Deposits & Margin Money, Contingent liabilities considered as ascertained by the management, consequential impact whereof presently cannot be ascertained.

v. Note No. 15(b) & (c) In respect of non payment of certain statutory dues and non-filing of certain statutory returns/forms w.r.t. Employee State Insurance, Provident Fund, Tax Deducted at source, Service Tax, Sales Tax [read with note no. 1(iii)], Excise Duty and other taxes (including accounting of Penalty, Interest, etc.) (amount unascertainable) and our inability to comment thereon.

vi. Note No. 13 regarding non-provision of losses (impact unascertainable) on account of impairment of assets in use for the reason stated in the said note and in the absence of supportive audit evidence our inability to comment thereon.

vii. Note No. 15(a) regarding the non-provision of interest and penal interest etc. (amount unascertained).

viii.Note No. 16(a) regarding pending appointment of Company Secretary, compilation/updation of secretarial records and other non-compliance as stated in the said note.

ix. Note No. 16(b) regarding non- availability of full item wise detail of finished goods, raw material and stores & spares and valuation of inventory have been considered as taken and valued by the management (impact presently could not be ascertained).

x. Note No. 2.19 regarding managerial remuneration amounting to Rs.739 Thousands paid to an executive director is subject to requisite approval of Central Government.

xi. In view of our comment under para (i) to (x) above and on our comments in terms of Sec.227(4A)(CARO) the internal control system needs to be further strengthened to be made the same { read with note no. 12, 15 and 16(b) and 16 (c)} commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services.

We further report that the loss for the year, balance in profit & loss statement, current liabilities and Provisions, current assets and secured loans are without considering the impact of items mentioned above, the impact of which could not be determined and otherwise.

E) Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described under the head "Basis for Qualified Opinion" paragraph, the financial statements read together the note no. 2.3 and other Notes thereon, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India

a. In the case of the Balance Sheet, of the state of affairs of the company as at 31st March 2013,

b. In case of the Statement of the Profit and Loss, of the loss for the year ended on that date, and

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

F) Report on other legal and the regulatory requirements:

1. As required by the Companies (Auditors’ Report) Order, 2003 (The Order) (As Amended) issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956 (The Act), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. Further to our comments in the Annexure referred to in Paragraph 1 above, 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 purposes of our audit, read with our comments in para D above;

(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, read with our comments in para 2(a) above :

(c)The Balance Sheet, Profit & Loss Statement and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d)In our opinion, the Balance Sheet, Profit & Loss Statement and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956.

(e)On the basis of written representations received from the directors of the company and information and explanations given to us, we report that none of the directors is disqualified as on 31st March 2013 from being appointed as a director in terms of clause (g) of sub section (1) of section 274 of the Companies Act, 1956.

For LODHA & CO.
Firm Registration No-301051E Chartered Accountants
N. K. LODHA
Place : New Delhi (Partner)
Date : 24.7.2013 Membership No.: - 85155

ANNEXURE

(Referred to in paragraph (1) of under the heading "Report on other legal and regulatory requirements" of our report of even date of JALPAC INDIA LIMITED for the year ended 31st March 2013

1. (a) The Company has maintained proper records in respect of its fixed assets showing full particulars including quantitative details and situation of fixed assets except in respect of certain assets where these records are in the process of updation in respect of identification, quantitative details and location/ situation.

(b) As per information and explanations given to us, certain fixed assets have been physically verified by the Management [read with note no.2.16 (b)] according to the programme of physical verification once in every three years in phased manner, which in our opinion, is reasonable having regard to the size of the Company and the nature of its Fixed Assets. The discrepancies noticed on such physical verification were not material.

(c) As per the records and information and explanations given to us, fixed assets disposed off during the year were not substantial.

2. (a) As per the records and information and explanations given to us, the inventory of the company (except stocks lying with the third parties) has been physically verified by the management [read with note no.2.16 (b) and para D (ix) above] during the year.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business [read with note no. 2.16 (b) and para D (ix) above].

(c) In our opinion and according to the information and explanations given to us, the company has maintained proper records of inventory excluding work in progress where stocks are updated as and when physical verification has been carried out [read with note no. 2.16 (b) and para (b) above]. The discrepancies noticed on such physical verification of inventory as compared to book records were not material.

3. (a) The Company has not granted any loans, secured/ unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (b) to (d) of the Order are not applicable to the Company. (e) As per the information and records made available, during the year Company has taken unsecured loan from two parties covered in the register maintained under section 301 of the Companies Act, 1956.

The maximum balance involved during the year and the year-end balance of loan was Rs 29559 Thousands and Rs. 29559 Thousands respectively.

(f) As per the information and explanations given to us, the terms and conditions on which loan has been taken to/by the company are not, prima facie prejudicial to the interest of the Company.

(g) In accordance with the information and explanations given to us, in respect of the aforesaid loans, there were no as such stipulated terms (schedule) for repayment of principal and interest and the same are repayable on demand respectively.

4. In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources do not exist for obtaining comparable quotations or where user department has shown specific preference, the internal control system needs to be further strengthened to be made the same {read with note no. 2.12, 2.15 and 2.16(b) and 16 (c)} commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for 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.

5. According to the information and explanations given to us and based upon audit procedures performed, we are of the opinion that particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section; and transactions made in pursuance of such contracts or arrangements (exceeding the value of Rs. 5 lacs in respect of each party during the financial year), have been made at prices which are generally reasonable having regard to the prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us,the Company has not accepted any deposits from public within the meaning of section 58A and 58AA and the rules framed there under and any other relevant provisions of the Act with regard to deposits accepted from the public. We have been informed that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal in this regard.

7. The Company has an internal audit system, which needs to be further strengthened to make it commensurate with the size of the Company and nature of its business.

8. As per the information and explanations provided by the management to us, the Central Government has prescribed maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 in respect of the products of the Company. However, the company is in process of compilation/updation of the required records. In absence of the same, we are unable to comment thereupon.

9. (a) According to the records and informations and explanations given to us, undisputed statutory dues including Service Tax, Custom Duty, and Excise Duty, have generally been regularly deposited by the company except Provident Fund, Employee State Insurance, T.D.S, T.C.S, Sales Tax, Fringe Benefit Tax, Service Tax and Excise Duty amounting to Rs. 3591 Thousands, 74 Thousand, 5672 Thousands, 52 Thousand, 1371 Thousands, 312 Thousands, 46 Thousands and 72 Thousands respectively, which as on 31st March, 2013 are outstanding for more then six months from the date they become payable [read with note no. 2.15 (b) & (c)].

(b) According to the records and informations and explanations given to us, there are no dues in respect of Income Tax, Service Tax, Custom Duty, Cess and Wealth Tax that have not been deposited with the appropriate authorities on account of any dispute and the dues in respect of Sales Tax, Entry Tax and Excise Duty that have not been deposited with the appropriate authorities on account of dispute and the forum where the dispute is pending are given below (read with note no. 2.1): -

Statue Nature of Dues Period Amount (Rs.in thou- sands) Forum where dispute Pending
Central Sales Central Sales Tax 2000-2001 Commercial Tax
Tax Act (Disallowance of Exemptions) 2001-2001 4197 Tribunal, Noida
2003-2004
2004-2005
Central Sales Tax 2002-2003 517 Commercial Tax
(Disallowance of Exemptions) Tribunal, Noida
Central Sales Tax 2002-2003 210 Deputy Commissioner
(Non-Submission of ‘C’ Fomrs) Trade Tax, Haldwani
Central Sales Tax 2003-2004 358 Commercial Tax
(Non-Submission of ‘C’ Forms) Tribunal, Noida
Central Sales Tax 2003-2004 & 980 Deputy Commissioner
(Non-Submission of ‘C’ Forms) 2004-2005 Trade Tax, Haldwani
Central Sales Tax 2004-2005 183 Commercial Tax,
(Non-Submission of ‘C’ Forms) Tribunal, Noida
Central Sales Tax 2005-2006 1001 Addl. Commissioner (Appeals), Trade Tax Noida
Central Sales Tax* 2006-2007 2007-2008 & 2008-2009 71478 Deputy Commissioner Trade, Haldwani
Uttrakhand Sales Tax Act Sales Tax (Trade Tax on Stock Transfer) 1997-1998 8161 Trade Tax Tribunal Haldwani
Local Sales Tax* 2006-2007 708 Deputy Commissioner Haldwani
U.P. Sales Tax Act Sales Tax 2006-2007 43 Addl. Commissioner (Appeals), Trade Tax Noida
Uttrakhand EntryTax Act Entry Tax 2003-2004 690 Joint Commissioner (Appeals), Haldwani
Central Excise Act Excise Duty (Related to Valuation) 1995 1810 CESTAT, New Delhi
Excise Duty (Evaporation Boat) 1998 717 High Court, Nanital
Excise Duty (Related to Valuation) 1997-2000 10375 Commissioner Excise

10.The company’s accumulated losses at the end of the year are more than fifty percent of its net worth and it has incurred cash loss during the current financial year (read with our comments in Para D above) but has not incurred cash losses in the immediately preceding financial year.

11.On the basis of records made available and the information and explanation given to us the company has defaulted in repayment of dues to financial institution and banks. The amount overdue on account of principal is Rs. 366269 Thousands (Rs. 336446 Thousands up to 31-03-2012) consisting delays of 1 day to 2421 days and on account of interest Rs. 235112 Thousands (198908 Thousands up to 31-03-2012) consisting delays of 14 days to 2421 days. Further, this is to be read with Note no. 2.12, 2.14 and 2.15(a).

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

13. The Company is not a chit fund or a nidhi / mutual benefit fund /society, therefore, the provisions of clause 4(xiii) of the said Order are not applicable to the company.

14. According to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions.

16. During the year no term loans were received by company, accordingly the provisions of clause 4(xvi) of the Order are not applicable to the Company.

17. On the basis of information and explanations given to us and on an overall examination of financial statements of the company, no funds raised during the year in short term basis have been used for long term investment.

18. According to information and explanations given to us, the Company has not made any preferential allotment of shares to any parties or companies covered in the register maintained under section 301 of Companies Act 1956.

19. No debentures have been issued/ outstanding during the year hence; the question of security/ charges thereof does not arise.

20.The company has not raised any money through a public issue during the year.

21. Based on audit procedure performed and on the basis of information and explanations provided by the management and to the best of our Knowledge and belief, no fraud (read with our comments in clause (xi) of para D above) on or by the company has been noticed or reported during the course of our audit, nor we have been informed of any such case by the management.

For LODHA & CO
Chartered Accountants
Firm Registration No-301051E
Place : New Delhi N. K. LODHA
Date : 24.7.2013 Partner
Membership No.: - 85155