Vanasthali Textile Industries Ltd Auditor Reports

To the Members of VANASTHALI TEXTILE INDUSTRIES LIMITED,

Report on the Financial Statement.

We have audited the accompanying Consolidated financial statements of Vanasthali Textile Industries Limited, its Subsidiary (VDR Leasing & Credit Co. Pvt. Ltd.) which comprises the Consolidated Balance sheet as at 31st March 2015 and the Consolidated Statement of Profit and Loss and the Consolidated Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Managements Responsibility for the Consolidated Financial Statement

The Company’s Board of Directors for the matters stated in sub-section 5 of section 134 of the Companies Act, 2013 ("the Act") with respect to the preparation of these Consolidated financial statements that give a true & fair view of the Consolidated financial position, Consolidated financial performance and Consolidated cash flows of the company in accordance with the accounting principles generally accepted in India, including the accounting standard specifiefl under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of consolidated financial statements by the directors of the holding company, as aforesaid.

Auditors Responsibility.

Our responsibility is. to express an opinion on these consolidated financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under sub-section 10 of Section 143 of the Act Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of . material misstatement of the Consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the Consolidated financial statements.

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

Basis of Adverse Opinion

a) Refer Note no. 22.3 of Notes to Accounts, regarding non confirmation of balances with suppliers, customers, other creditors, recoverable advances, Margin money and loan facility from 1DBI & balance with HDFC & SBBJ banks which have been taken as per books, and are subject to confirmation/reconciliation.

In spite of our letters written to the bankers for confirmation of balances in bank/loan accounts, no response has been received from them. We are unable to comment on the consequential losses which may arise on such confirmations & reconciliations in future.

b) Refer Note No. 22.5 of Notes to Accounts, in view of abatement of B1FR reference , the company is no more a registered company under SICA and the provisions of rehabilitation comes to an end through BIFR. The management feels that the companys manufacturing process shall be restored once the settlement with lender banks takes place for which a proposal has been made to them. Whereas in view of multiple financial, operating & other indicator and in view of the event of closure of manufacturing facility and SARFESI action by bankers which effects the Going Concern Assumption and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business.

c) Refer Note No. 22.5 of Notes to Accounts, in the opinion of the management, no adjustment is required to the carrying amount of fixed assets and Capital Work in Progress, on account of impairment as required by AS-28. In view of the action taken by the lenders and the management’s inability to make an assessment about the future cash flows, asset liability mismatch and non availability of present value of the assets including those pending for capitalization, and therefore it may be unable to ascertain such impairment which may exist and required to be charged to profit and loss account

d) Refer Note No.22.6(a) of Notes to Accounts, regarding adjusting and set off of export debtors recoverable (related party) and non settlement of foreign bills, we are unable to express our opinion as to what legal complication which may arise due to nonsettlement of such foreign bills with the appropriate authority under foreign exchange regulations.

e) Refer Note No.22.6 of Notes to Accounts, regarding non provision foreign exchange fluctuation related to the adjusted debtors as well as debtors against which provision for bad & doubtful debts has been made, is contrary to the requirement of AS 11 of ICAI.

f) Refer Note no. 22.5(e) of Notes to Accounts, regarding non provision of interest on loan liabilities has resulted into understatement of losses of Rs 14.07 Crores and understatement of corresponding liabilities to the same tune.

g) Refer Note no. 22.1 of Notes to Accounts, regarding statutory liabilities; there is huge statutory liabilities and non settlement of dues. We cannot comment on the consequential effects from such defaults which may arise in future.

h) Adverse references contained in annexure to our audit report of even date as required by Companies Auditor Report Order 2015.

Adverse Opinion; „

In our opinion, because of significance of the matter described in Para (a) to (h) of Basis of Adverse Opinion and due to the cumulative impact being unascertainable, therefore the aforesaid Consolidated financial statements do not give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of Consolidated Balance Sheet, of the state of affairs of the Company as at 31st March 2015;

(b) In the case of Consolidated Statement of Profit & Loss, of the loss for the year ended on that date; and

(c) In the case of Consolidated Cash Flow Statement, of the cash flows for the year ended on that date Emphasis of Matter:

(a) Refer Note no. 22.7 of Notes to Accounts, where in view of the continuous default of Interest on Term loan, the subsidy has not been provided for the current period whereas the accumulated balance of Rs. 316.44 lacs is still recoverable under the loans & advances, the recovery of which is doubtful. In the opinion of the management the same shall be adjusted in case the waiver of interest under the scheme of rehabilitation.

(b) Attention of members is drawn to the default u/s 203 of the Companies Act 2013, regarding non appointment of Company Secretary and Chief Financial Officer during the period covered under the report

Other Matter

We have not audited the financial statements of the Subsidiary whose Financial Statement reflect total asset of Rs.29,89,050/- as at 31st March, 2015 and total revenue of Rs.60,000/- for the year ended on that date. These financial statements and other financial information have been audited by other auditor whose reports have been furnished to us and our opinion is based solely on the report of other auditors.

For fain Raj Associates Chartered Accountants FRN. 007535N CA. P.K. JAIN Partner SW M.No:086396 Place: New Delhi Date: November 9th, 2015

Annexure to the Auditors Report

Referred to in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date.

1) In respect of its fixed assets:

a) According to Fixed Asset Register provided by the management, the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

b) Physical verification of fixed assets was not carried out during the year by the management in accordance with company’s policy, though we are unable to comment on the discrepancies which may arise on such verification and reconciliation with that of the records.

2) In respect of its inventories:

(a) As explained to us, inventories of finished goods, semi finished, raw materials, stores and spare parts have been physically verified during the period by the management at reasonable intervals..

(b) The procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and on the basis of our examination of the records, the company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physically verification of stocks by the management.

3) Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act .However the Company has given Security deposit in VDR Leasing & Credit Co. Pvt. Ltd. of Rs.2053000/- which is its subsidiary company.

4) As per the information and explanations given to us, certain contracts of job work & sale of goods are of specialized nature for which comparable prices are not available. Read with above in our opinion, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets, and whereas in relation to sales made to related parties ,we are unable to comment as the necessary evidence in support of transaction that these are within arms length price were not provided to us. Further, on the basis of our examination of the books of records of the company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of major weaknesses in the aforesaid internal control procedures.

5) As per information and explanation given to us, the Company has not accepted any deposits during the year in accordance with sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under, the Company continues to carry forward Advance from Customer of Rs. 17,13,413/- which are outstanding for more than 12 months.

6) On the basis of records produced we are of the opinion that prima facie cost records and accounts prescribed by the Central Government under sub-section (lj of section 148 of the Companies Act, have been made and maintained. However we are neither required to carry out any detailed examination of such accounts and records.

7) In respect of Statutory Dues:*

a] As per the books and records examined by us and information & explanations given to us, the company has not been regular in depositing Provident Fund, Income-Tax, Sales-Tax, and other statutory dues, wherever applicable, with the appropriate authorities during the period.

Details of Undisputed Statutory dues are given below:-

Particulars	Amount (In Rs.)
Vat	1600
Contribution to ESI	1,47,633
TDS	10,38,450
Central Sales Tax	3,66,584
Service Tax Payable	8,44,260
TCS Payable	59,153
TOTAL	24,57,680

b) Details of the dues of Sales Tax/ Income Tax/ Service Tax/ Excise duty/ cess/ Custom, which have not been deposited on account of disputes given below:

Name of the Statue	Forum where case is pending	Nature of Dues	Period of Dispute	Amount (Rs.)
Central Excise Act, 1944	CESTAT	Excise Duty	2002-03	1,45,831
	CESTAT	Excise Duty	2003-04	2,25,998
	CESTAT	Excise Duty	2003-04 /2004- 05	2,16,000
	J,T. Comm., JPR	Excise Duty	2005-06	5,92,000
	CESTAT	Excise Duty	2006-07	28,29,218
	CESTAT	Excise Duty	2007-08	4,28,817
	Comm.(A), JPR	Excise Duty	2007-08	35,68,937
	CESTAT	Excise Duty	2008-09	19,16,54,243
	D C Customs, Tirupur	Excise Duty	2008-09	25,98,918
	Raj. High,Court	Excise Duty	2uu8-l>9	18,36,992
Service Tax	CESTAT	Service Tax	2005- 06, 2006- 07	4,12,673
	CESTAT	Service Tax	2006-07	5,53,656
	CESTAT	Service Tax	2007-08	9,22,118
Income Tax Act, 1961	Appeal pending before	Income Tax	2007-08	2,31,92,319
	1TAT, New Delhi
	Appeal pending before ITAT, New Delhi	Income Tax	2008-09	2,73,33,723
	Appeal to C1T(A)	Income Tax	2010-11	5,30,03,174
Sales Tax/Entry Tax
RET Act, 1999	D.C. Appeal, Alwar	Entry Tax	2006-07	7,04,835
RET Act, 1999	Rajasthan High Court (Stay)	Entiy Tax	2007-08 to 201213	14,92,735
R VAT Act, 2006	CTO, S JPR	C-Form Demand	2010-11	84,330
RVAT Act, 2006	CTO.SJPR	Demand Restored	1999-2000	71,205

The above does not include the un-provided interest liability of Rs 14.07 Cr for the year under perusal. Refers Note No 22.5(e).

c) According to information and explanation given to us , there is no amount required to be transferred to investor education and protection fund.

8] The Companys accumulated losses at the end of the financial year exceed 50% of Net Worth.

Further the company has incurred cash losses during this financial year and immediately preceding financial year.

9) In our opinion and according to the information and explanations given to us, the company has Defaulted in the repayment of dues to Financial Institutions or Banks further the company is on Default from last three years and the amount of default is as follows:

Name of Borrower	Amount(lNR)	Default Date
Term Loan
Federal Bank	9,98,59,272	31-03-2011
Oriental Bank of Commerce	13,47,03,122	31-03-2011
Syndicate Bank	1,19,43,368	31-03-2011
1DB1	28,64,60,449	31-03-2011
Working Capital
Crystallized Bills	36,48,915	31-03-2011
Federal Bank-Foreign Bill Purchase	2,33,32,365	31-03-2011
Federal Bank-Packing Credit	2,71,40,538	31-03-2011
ABIB-Packing Credit	5,51,01,226	31-03-2011
Oriental Bank of Commerce	9,31,49,154	31-03-2011
SBB]	2,36,95,592	31-03-2011
Bank Overdraft
Oriental Bank of Commerce	28,56,99,931	31-03-2011
Allahabad Bank	3,55,40,545	31-03-2011

10) According to the information and explanations given to us, the Company has not given any guarantee during the year whereas had given guarantee of Rs.16.50 Lacs during past periods.

11) We are informed that company has not obtained any new term loan during the year.

12) 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 fraud on or by the company, noticed and reported during the year, nor have we been informed of such case by the management.

For Jain Raj Associates Chartered Accountants Firm No 007535N

CA. P.K.jAIN

Partner

M.No.086396

Place: New Delhi Dated: November 9th, 2015