ఆడిటర్ నివేదిక MTZ Polyfilms Ltd.

Mar 31, 2010

We have audited the attached Balance Sheet of MTZ POLYFILMS LIMITED as at 31st March, 2010 and the Profit and Loss Account of the Company and the Cash Flow Statement for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order, to the extent applicable.

2. Further to our comments in the Annexure referred to in paragraph 1 above, we state that:

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

(b) In our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of such books.

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts of the Company.

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement read with Note No. B.6 of Schedule 16 dealt with by this Report, comply with the mandatory Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956.

(e) In our opinion and based on the information and explanations given to us, none of the Directors except Mr. Sanjay B. Shah and Mr. Arvind Oberoi are disqualified as on 31st March, 2010 from being appointed as Directors in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

(f) Subject to Note No. B. 6 regarding non-provision for the loss on account of continued deferment of the PET Chips manufacturing project amounting to Rs. 3130 lacs. Note No. B. 8 (a) regarding non-provision for Sundry Debtors of Rs. 350.53 lacs, Note No. B. 8 (b) regarding non-provision for Loans and Advances of Rs. 383.55 lacs and Note No. B. 8 (c) regarding non-provision for diminution in the value of an Investment aggregating to Rs 18.92 lacs, the combined effect of which is an under-provision of Rs. 3883 lacs in Expenses, in our opinion and to the best of our information and according to the explanations given to us, the Accounts read together with the other Notes thereon 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, 2010;

ii. in the case of the Profit and Loss Account, of the Loss after Extraordinary/Prior Period Items for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the Cash Flow for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT (Referred to in paragraph 1 of our report of even date)

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) The Company has formulated a programme of physical verification of all fixed assets which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. Accordingly, the physical verification of fixed assets has been carried out by the management during the year and no material discrepancies were noticed on such verification.

(c) The Company has not disposed-off any substantial part of its fixed assets so as to affect its going concern status.

2. (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) The procedure of physical verification of inventory 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 is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

3. (a) The Company has not granted/taken any loan(s) from parties covered under Section 301 of the Companies Act, 1956.

(b) In our opinion and according to the information and explanations given to us, the rate of interest, wherever applicable, and other terms and conditions are not, prima facie, prejudicial to the interest of the Company.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and also for the sale of goods. During the course of our audit, we have not observed any major weaknesses in internal controls.

5. In respect of transactions covered under Section 301 of the Companies Act, 1956:

(a) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements that needed to be entered in the Register maintained under Section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, there are no transactions in pursuance of contracts and arrangements entered in the Register maintained under Section 301 of the Companies Act, 1956 aggregating during the year to Rs. 5,00,000/- or more in respect of any party.

6. The Company has not accepted any deposits from the Public.

7. In our opinion, there was an inadequate internal audit system in the Company during the financial year under review.

8. We are informed that the maintenance of cost records has not been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956.

9. In respect of Statutory Dues:

(a) According to the records of the Company, the Company is regular in depositing undisputed Statutory Dues with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues excepting dues towards Gokul Gram Yojana (GST) Rs. 10.70 lacs, FBT Rs. 52.66 lacs and Employers Contribution to Provident Fund Rs. 26.34 lacs were outstanding as at 31st March, 2010 for a period of more than six months from the date of becoming payable.

(b) In our opinion and according to the information and explanations given to us, the Company has no disputed Statutory Dues outstanding.

10. The Company is registered with the Board for Industrial and Financial Reconstruction (BIFR) and its rehabilitation scheme has been sanctioned vide ordered dated 7th June, 2004.

11. As per the books and records maintained by the Company and according to the information and explanations given to us, the Company has defaulted in payment of dues to Standard Chartered Bank, Dena Bank, Bank of India and Bank of Baroda as per sanctions, negotiations and understandings from time to time. Excepting the above, the Company is regular in payment of dues to Banks and Financial Institutions in terms of sanctions.

12. In our opinion and according to the information and explanations given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of Shares, Debentures and other securities. Therefore, the provisions of Clause 4 (xii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

13. In our opinion, the Company is not a Chit Fund or a Nidhi/Mutual Benefit Fund/Society. Therefore, Clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

14. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities.

15. According to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from Banks or Financial Institutions during the year.

16. The Company has not raised any new terms loans during the year. The term loans outstanding at the beginning of the year were applied for the purpose for which they were raised.

17. On the basis of information received from the management and based on our examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long term assets and vice versa.

18. During the year, the Company has not made Preferential Allotment of Shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19. According to the information and explanations given to us, the Company has not issued any Debentures during the year for which security needs to be created.

20. The Company has not raised funds through Public Issue during the year.

21. In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year that could cause the financial statements to be materially mis-stated.

For R. K. CHAPAWAT & CO.

Chartered Accountants

RAVINDRA CHAPAWAT

Place : Mumbai Proprietor

Date : 12th October, 2010. MEMBERSHIP NO. 37720

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Mar 31, 2009

We have audited the attached Balance Sheet of MTZ POLYFILMS LIMITED as at 31st March, 2009 and the Profit and Loss Account of the Company and the Cash Flow Statement for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We 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 mis-statement. 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order, to the extent applicable.

2. Further to our comments in the Annexure referred to in paragraph 1 above, we state that:

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

(b) In our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of such books.

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts of the Company.

(d) In our opinion, the Balance Sheet and Profit and Loss Account read with Note No. B.6 of Schedule 12 dealt with by this Report, comply with the mandatory Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956.

(e) In our opinion and based on the information and explanations given to us, none of the Directors except Mr. Sanjay B. Shah and Mr. Arvind Oberoi are disqualified as on 31st March, 2009 from being appointed as Directors in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

(f) Subject to Note No. B.6 mgarding non-provision for the loss on account of continued deferment of the PET Chips manufacturing project amounting to Rs. 3130 lacs, Note No. B.8(a) regarding non-provision for loans and advances of Rs. 112.32 lacs and Note No. B.8(b) regarding non-provision for diminution in the value of an Investment aggregating to Rs 18.92 lacs, the combined effect of which is an under-provision of Rs. 3261.24 lacs in Expenses, in our opinion and to the best of our information and according to the explanations given to us, the Accounts read together with the other Notes thereon 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, 2009;

ii. in the case of the Profit and Loss Account, of the Loss after Extraordinary/Prior Period Items for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the Cash Flow for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT (Referred to in paragraph 1 of our report of even date)

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) The fixed assets have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable having regard to the size of the Company and nature of its fixed assets.

(c) There was no substantial disposal of fixed assets during the year which would affect the going concern status of the Company.

2. (a) The management has conducted physical verification of inventory at reasonable intervals.

(b) The procedure of physical verification of inventory 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 is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

3. (a) The Company has not granted loan(s) to/taken loan(s) from parties covered under Section 301 of the Companies Act, 1956.

(b) In our opinion and according to the information and explanations given to us, the rate of interest, wherever applicable, and other terms and conditions are not, prima facie, prejudicial to the interest of the Company.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and also for the sale of goods. During the course of our audit, we have not observed any major weaknesses in internal controls.

5. In respect of transactions covered under Section 301 of the Companies Act, 1956:

(a) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements that needed to be entered in the Register maintained under Section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, there are no transactions in pursuance of contracts and arrangements entered in the Register maintained under Section 301 of the Companies Act, 1956 aggregating during the year to Rs. 5,00,000/- or more in respect of any party.

6. The Company has not accepted any deposits from the Public.

7. In our opinion, there was an inadequate internal audit system in the Company during the financial year under review.

8. We are informed that the maintenance of cost records has not been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956.

9. In respect of Statutory Dues:

(a) According to the information and explanations given to us, no undisputed amounts payable in respect of Statutory Dues excepting dues towards Gokul Gram Yojana (GST) Rs. 14.35 lacs, FBT Rs. 52.66 lacs and Employers Contribution to Provident Fund Rs. 27.96 lacs were outstanding as on 31st March, 2009 for a period of more than six months from the date of becoming payable.

(b) In our opinion and according to the information and explanations given to us, the Company has no disputed Statutory Dues outstanding.

10. The Company is registered with the Board for Industrial and Financial Reconstruction.

11. As per the books and records maintained by the Company and according to the information and explanations given to us, the Company has defaulted in payment of dues to Standard Chartered Bank, Dena Bank and Bank of Baroda as per sanctions, negotiations and understandings from time to time.

12. In our opinion and according to the information and explanations given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of Shares, Debentures and other securities. Therefore, the provisions of Clause 4 (xii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

13. In our opinion, the Company is not a Chit Fund or a Nidhi/Mutual Benefit Fund/Society. Therefore, Clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

14. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities.

15. According to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from Banks or Financial Institutions during the year.

16. The Company has not raised any new terms loans during the year. The term loans outstanding at the beginning of the year were applied for the purpose for which they were raised.

17. On the basis of information received from the management and based on our examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long term assets and vice versa.

18. According to the information and explanations given to us, the Company has not made Preferential Allotment of Shares during the year to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19. According to the information and explanations given to us, the Company has not issued any Debentures during the year for which security needs to be created.

20. The Company has not raised funds through Public Issue during the year.

21. In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year that could cause the financial statements to be materially mis-stated.

For R. K. CHAPAWAT & CO. Chartered Accountants

RAVINDRA CHAPAWAT

Place: Mumbai Proprietor

Date : 3rd July, 2009. MEMBERSHIP NO. 37720