Twilight Litaka Pharma Ltd Auditor Reports

To the Members of Twilight Litaka Pharma Ltd. Report on the Financial Statements

We have audited the accompanying financial statements of Twilight Litaka Pharma Ltd. (the Company), which comprise the Balance Sheet as at June 30th, 2014, and the Statement of Profit and Loss and the cash flow statement for the year ended on that date, and a summary of significant accounting policies and other explanatory information.

Managements 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 of the Company in accordance with the 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.

Auditors 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 ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the 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 Companys preparation and presentation 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 the effectiveness of the Companys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by 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.

Basis for Adverse Opinion

(i) As explained in note 32 provisional liquidator has been appointed by the Honorable Bombay High Court to take charge of the Companys movable and immovable assets and properties, books of account and passed other restraints on the Directors. Companys application against the aforesaid order is pending.

(ii) As explained in note 33 Company has filed application to BIFR for being classified as a sick undertaking and the matter is pending.

(iii) As explained in note 31 secured lenders have issued notice under section 13 of the SARFAESI Act and further majority of the lenders have assigned their receivables in favor of Asset Reconstruction Company.

(iv) As explained in note 35 & 37, the company is negotiating with unsecured lenders and creditors for waiver of interest and grant of time for repayment of dues. Due to ongoing one time settlement negotiations with secured lenders, the management is of the view that the provision for interest in books of account along with principle outstanding is adequate to meet proposed settlement. We are informed by the company that due to ongoing negotiation, bank balances are subject to confirmation and reconciliation.

(v) As explained in note 34 Company is in the process of filing recovery suits against debtors aggregating to Rs 195 Crs. These are considered good by the management and no provision is made in respect thereof in the accounts.

(vi) As stated in Note 30 of notes to financial statements, disputed sales tax of interest of Rs. 5,44,297 and Income tax demand of Rs. 92 Crores that are pending in appeal are considered by the management as contingent in nature.

(vii) We are unable to express any opinion on recoverability of loans & advances and statutory dues.

(viii) The company has neither obtained a valuation report regarding accrued employee retirement benefits from approved Actuary nor has provided for these benefits under Accounting Standards - 15.

The above are significant to the overall financial statements and these would materially affect the preparation and presentation of financial statements.

Adverse Opinion

The significance of the matter described in the Basis for Adverse Opinion paragraph indicate the existence of a material uncertainty that may cast doubt about the companys ability to continue as a going concern and in our opinion the 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 the Balance Sheet, of the state of affairs of the Company as at June 30, 2014;

(b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date: and

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 purpose of our audit;

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

c. the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account

d. in our opinion, except for matters described in basis for adverse opinion paragraph, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement, comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the directors as on June 30, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

	For V. Sankar Aiyar & Co.
	Chartered Accountants
	Firm Regn No: 109208W
	V Mohan
Place : Mumbai	Partner
Date : 29th August, 2014	Membership No.: 17748

ANNEXURE TO THE AUDITORS REPORT

Referred to in Paragraph 1 of "Report on Other Legal and Regulatory Requirements" section of our Independent auditors Report of even date for the period ended 30th June 2014:

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

(b) According to the information and explanations given to us, the Company has formulated a regular program of verification by which all assets of the company shall be verified in phased manner, which in our opinion, is reasonable having regard to the size of the Company and nature of its assets. To the best of our knowledge, no material discrepancies were noticed on verification conducted during the period as compared with the book records.

(c) There was no disposal of a substantial part of fixed assets.

2) (a) The stock of finished goods and raw material has been physically verified during the period by the Management. The Company has a perpetual inventory system in respect of stores and spare parts. In our opinion, the frequency of verification is reasonable. In the case of material lying with the third parties, certificates confirming stocks have been received in respect of a substantial portion of the stocks held.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material having regard to the size of the operations of the Company.

3 During the period the company has neither taken nor granted any loans, secured or unsecured from/to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

4) In our opinion and according to the information and explanation 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, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventories and fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any major weakness in the internal controls.

5 (a) In our opinion and according to the information and explanations given to us, the transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

(b) Transaction made in pursuance of such contracts or arrangements have been made at prices which are 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 deposits from the public during the period. Therefore, the provisions of clause 4(vi) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

7) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8) According to the information and explanations given to us, the Central Government has prescribed under Section 209(1)(d) of the Companies Act, 1956, the maintenance of cost records in respect of certain products. We have broadly reviewed the books of account maintained and in our opinion, the prescribed accounts and records have prima facie been made and maintained by the Company. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9) (a) There have been delays in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, TDS, Service Tax, Excise Duty and other statutory dues during the period. At the end of the Financial Period, arrears of outstanding statutory dues for a period of more than 6 months from the date they become payable is as under:

Nature of Dues	Amount	Period	Due Date	Date of Payment
Advance tax	15,83,69,999	FY 2009-10	15th of last month	Not Paid
under Income		FY 2010-11	in each quarter
Tax Act, 1961
Advance tax	31,22,730	FY 2011-12	Upto September	Not Paid
under Income			2012
Tax Act, 1961
TDS under	93,89,496	Up to FY	07th Of	Not Paid
Income Tax		2011-12	Every Month
Act 1961	42,50,770	FY 2012-13
	10,67,120	FY 2013-14
Employees State	40,77,851	Upto FY	15th Of Every	Not Paid
Insurance		2011-12	Month
	12,99,343	FY 2012-13
Provident Fund	67,85,394	Upto FY	15th Of Every	Not Paid
		2011-12	Month
	65,47,863	FY 2012-13
	18,93,674	FY 2013-14
Sales Tax	3,10,82,255	Upto FY	21st Of Every	Not Paid
		2011-12	Month
	1,20,36,105	FY 2012-13
	19,76,097	FY 2013-14

(b) Based on the information and explanation given to us, there are no dues towards Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or Cess which are disputed and not deposited.

Disputed dues on account of sales tax not deposited with appropriate authorities are given below.

Name of the Statute	Nature of the Dues	Amount (Rs.)	Period to which the amount relates	Forum where dispute pending
Sales Tax	Interest	5,44,297	2003-04	Sales Tax Tribunal, Mumbai
Income Tax	Demand	92,89,00,000	From AY 06-07 to AY 12-13	CIT (A), Pune

10) The Accumulated losses of the company as on balance sheet date are not more than fifty percent of its net worth. Company has incurred cash losses during the financial period covered by our audit however it has not incurred cash losses in the immediately preceding financial year.

11) The Company has defaulted in repayment of loan and interest as on 30th June 2014. According to the information and explanation given to us, the Company is negotiating for one time settlement for several lenders which are pending finalization.

12) Based on our examination of the records and 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) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

14) In our opinion and according to the information and explanation given to us, the Company is not dealing in shares, securities and debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

15) The Company has not given corporate guarantee for loan taken by others.

16) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purpose for which they were raised.

17) In our opinion and according to the information and explanation given to us, and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on the short-term basis have been utilized for long-term investment.

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

19) In our opinion and according to the information and explanation given to us, the company has not issued any secured debentures during the period covered by our report. Accordingly, the provisions of clause (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

20) As informed to us, during the period covered by our Audit report, the Company has not raised any money by public issue.

21) To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud on or by the company has been noticed or reported during the course of our Audit.

	For V. Sankar Aiyar & Co.
	Chartered Accountants
	Firm Regn No: 109208W
	V Mohan
Place : Mumbai	Partner
Date : 29th August, 2014	Membership No. 17748