2. 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 misstatement. An audit also 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.

3. Attention is invited to the following:

We draw attention to Note 1 of Schedule-13 in the financial statements. The Company incurred a net loss of Rs.1824.58 lacs during the year ended 31st A/larch 2008 and as of that date the accumulated loss was Rs. 30956.10 lacs, the net worth was negative and total liabilities exceeded its total assets by Rs. 29456.10 lacs. Considering these factors along with other matters, we are of the opinion that the Company is no longer a going concern.

4. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government 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.

5. Further to bur comments referred to in paragraph 3 and in the Annexure referred to in paragraph 4 above, we report that:

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

(ii) 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.

(iii) The Balance Sheet and the Profit & Loss Account dealt with by this report are in agreement with the books of account.

(iv) In our opinion, the Balance Sheet and Profit & Loss Account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

(v) On the basis of the written representations received from the Directors as on 31st March 2008 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31 st March 2008 from being appointed as a Director in terms of clause (g) of sub- section (1) of Section 274 of the Companies Act, 1956.

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read in conjunction with Schedules 1 to 13, 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:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2008 and

b) in the case of the Profit & Loss Account, of the loss for the year ended on that date.

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

ANNEXURE TO AUDITORS REPORT

Referred to in paragraph 4 of our report of even date.

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

(b) We were given to understand that the management has physically verified the fixed assets during the year and this revealed no material discrepancies during such verification between book records and physical balance.

(c) We also draw attention to Note 1 and 8 of Schedule- 13 of the financial statements where it has been stated that the Company is not a going concern.

(ii) In view of the nature of the Companys business, the matter prescribed in this clause is not applicable to the Company.

(iii) The Company has not granted or taken any loan secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the explanations given to us there is an adequate internal control procedure commensurate with the size of Company and nature of its business, for purchase of fixed assets. The Company does not deal with purchase and sale of goods and services. As such there is no major weakness in internal control system during the period under audit.

(v) There are no contracts or arrangements referred to Section 301 of the Act have been entered in the register required to be maintained under that Section.

(vi) Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 is not applicable to the Company as it is operating as a Housing Finance Company. The public deposit accepted by the Company is governed by the National Housing Banks Directions, 2001. During the year, the Company has not accepted any public deposit. However, Rs. 216.47 lacs remains unclaimed as on 31st March 2008 but the same amount has been fully funded with State Bank of India. As such no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other Tribunal in respect of the public deposit.

(vii) The Company has no internal audit system. As per the information and explanations given to us, the internal audit has not been introduced as the Company has stopped its operational activity. Attention is also drawn to Note 1 of Schedule 13 of the financial statements.

(viii) In view of the nature of the Companys business, the matter prescribed in this clause is not applicable to the Company.

(ix) The Company has been regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. As informed to us, Employees State Insurance Scheme is not applicable to the Company. As per the information and explanations given to us, no cess is payable under Section 441A of the Companies (Second Amendment) Act, 2002.

(x) According to the information and explanations given to us, there are no dues under dispute before any taxation authorities. However, appeals filed by the company before Commissioner of Income Tax (Appeals) for the assessment years 1999-2000, 2000-01 and 2001-02 against disallowences of certain provisions/expenses are pending. Appeal before Income Tax Appellate Tribunal for the Assesment Years 2002-03 and 2003-04 against disallowance of certain provisions/ expenses have been partly allowed. However the same does not have any financial implication on the Company.

(xi) The Company has been registered for a period more than five years and has accumulated loss of Rs.30956.10 lacs as on 31st March 2008. which has totally eroded the net worth. The Company has reported a cash loss of Rs. 1824.58 lacs and Rs. 467.31 lacs for the financial year ended 31st March 2008 and 31st March 2007 respectively.

(xii) The Company has defaulted in repayment of dues to Bank. The amount of default is Rs. 30338.14 lacs as on 31st March 2008 and started defaulting since September 2003. However, during the year under report the Company made a payment of (Previous Years - Rs. 2001.30 lacs) Rs. 553.00 lacs towards part discharge of unpaid interest on the loan with State Bank of India.

(xiii)The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other investments during the financial year 2007-08.

(xiv) The provision of any special statutes applicable to the Chit Funds, Nidhi or Mutual Benefit Society are not applicable to the Company.

(xv) The Company is not dealing or trading in shares, securities, debentures and other investments.

(xvi) The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvii) During the current financial year, the Company has not obtained any Term Loan.

(xviii) During the current financial year, the Company has not raised any funds on short-term basis.

(xix) During the current financial year, 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.

(xx) No debentures have been issued during the current financial year.

(xxi) No money has been raised by public issues during the current financial year.

(xxii) As per the information and explanations given to us no fraud on or by the Company has been noticed or reported during the current financial year.

                                         For S. N. MUKHERJI & CO.  
                                         Chartered Accountants

                                            Sudip K. Mukherji 
Place: Kolkata                              Partner
Date: 18th April, 2008                     (Membership No. 13321)