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Auditor Report of KM Sugar Mills Ltd.

Mar 31, 2015

1. We have audited the accompanying standalone financial statements of K.M. Sugar Mills Ltd. (the "Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss and Cash Flow Statement for the period then ended and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management's Responsibility for the Standalone Financial Statements

2. The Company's Management is responsible for the preparation of these standalone 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.

Auditors' Responsibility

3. Our responsibility is to express an opinion on these standalone 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.

4. 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 auditors consider 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 but not for the purpose of expressing an opinion on the effectiveness of the entity's 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.

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

Opinion

6. In our opinion, and to the best of our information and according to the explanations given to us, the accompanying standalone financial statements 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 , 2015;

(b) in the case of the Statement of Profit and Loss, of the profit for the period ended on that date; and

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

Emphasis of Matters

7. We draw attention to the following matters in the Notes to the standalone financial statements:

(a) Note 2.29(10) to the financial statements which indicates that the company has accounted for an amount of Rs.782.45 lacs due to the company from State Government as financial assistance as per announcement made in this regard. Our opinion is not modified in respect of these matters.

Other Matters

8. The Ministry of Corporate Affairs had on 1stApril, 2014, vide its General Circular No.07/2014, Dissemination of Information with regards to the provisions of the Companies Act, 2013 as notified till date vis a vis corresponding provisions of the Companies Act, 1956, identified such sections of the Companies Act, 1956 that would cease / continue to have effect from 1st April 2014. Accordingly, in terms of the aforesaid Circular, our reporting in respect of section 227(3)(f) of the Companies Act, 1956, and Clauses (iii), (v) (a) and (b), (vi), (viii), (xiv), (xviii) of the Companies (Auditor Report) Order, 2003 (dealing with sections 49, 58A, 58AA, 209(1)(d) and 301 of the Companies Act, 1956) is only for the period beginning from 1st October 2013 to 31st March, 2014 since as per the aforesaid MCA Circular, these sections have ceased to have effect from 01st April, 2014.

Report on Other Legal and Regulatory Requirements

9. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of Section 227(4A) of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

10. 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, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211(3C) of the Act;

(e) On the basis of written representations received from the directors as on March 31, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March, 2015, from being appointed as a director in terms of Section 274(1)(g) of the Act [corresponding Section 164 (2) of the Companies Act, 2013].

ANNEXURE TO DRAFT INDEPENDENT AUDITORS' REPORT REFERRED TO IN PARAGRAPH (9) OF OUR REPORT OF EVEN DATE

Re: K.M. Sugar Mills Ltd. for the period ended 31st March, 2015

(i) (a) The Company has generally maintained records to show particulars, including quantitative details and situation of fixed assets.

(b) The Fixed Assets of the Company have been physically verified by the management during the year in accordance with a regular programme of verification, which, in our opinion, provides for physical verification of all the assets at reasonable intervals. Accordingly to the information and explanation given to us, no material discrepancies were noticed on such verification.

(c) In our opinion and according to information given to us, the Company has not disposed off any substantial part of fixed assets during the year and hence, going concern status of the company is not affected.

(ii) (a) As explained to us, the inventory has been physically verified by the management to the extent practicable at reasonable intervals during the year.

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

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) According to the information and explanations given to us, the Company has granted unsecured loan to a company covered in the register maintained under Section 301 of the Companies Act, 1956 and total amount of Rs.285 lacs was outstanding as on 31.03.2015. (Previous Year Nil)

(b) In our opinion and according to the information and explanations given to us, the terms and conditions of the said loan given by the company were not prima facie prejudicial to interest of the company.

(c) and (d) In our opinion and according to the information and explanation given to us, the repayment of principal and interest was not due during the year and there was no overdue amount of principal and interest at the year end.

(e) According to the information and explanations given to us, the Company has taken unsecured loans from three parties covered in the register maintained under Section 301 of the Companies Act, 1956 and a sum of Rs.154 lacs was outstanding as on 31.03.2015. (Previous Year - Rs.154 lacs)

(f) to (g) In our opinion and according to the information and explanations given to us, the terms and conditions of the said loan taken by the company are not prime facie prejudicial to interest of the Company. Further, the repayment of these loans is not due hence no repayment was made during the year.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the internal control system.

(v) In respect of contracts or arrangements entered in the Register maintained in pursuance of section 301 of the Companies Act 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

a) The particulars in respect of certain contracts or arrangements referred to in section 301 of the Companies Act, 1956 that needed to be entered in the register maintained under that section, have been so entered.

b) As far as we could ascertain on the basis of our selective checking and according to the information and explanations given to us, the transaction made in pursuance to aforesaid contracts or arrangements have been made at the prevailing market prices at the relevant time.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year. Hence, provisions of section 58A & 58AA or any other relevant provisions of the Companies Act, 1956 and rules of Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits are not applicable to the Company.

(vii) In our opinion, the internal audit system of the company is commensurate with the size and nature of the business of the Company.

(viii) We are informed by the management that the required cost records pursuant to the order made by Central Government under Section 209(1)(d) of the Companies Act, 1956 regarding production have been maintained by the Company and are of the opinion that prima-facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanation given to us and the records examined by us, the undisputed statutory dues including provident fund, investor education and protection fund, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues applicable to the company have generally been regularly deposited with the appropriate authority except small delays in certain cases and no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2015 for a period of more than six months from the date of becoming payable. As informed, the provisions of the Employees State Insurance Act are not applicable to the Company.

b) According to the information and explanation given to us, the particulars of dues of excise duty, entry tax, central sales tax and income tax outstanding as at 31.03.2015, which have not been deposited on account of disputes, are as follows :-

Name of the Statute Nature of Dues Amount Forum, where the (Rs. In dispute is pending lacs) Entry Tax Act Entry Tax Commercial Tax 2007-08 0.04 Tribunal, Faizabad

Central Excise Act Excise Duty F.Y 2005-2006 11.46 Joint Commissioner

FY 2006-07 467.30 CESTAT

FY 2007-08 22.40 CESTAT

July, 2007 to June 2237.16 Appeal is yet to be 2012 including filed penalty

July, 2012 to March, 2013 including 473.43 Appeal is yet to be penalty filed

Income Tax Act A.Y. 2010-2011 7198.21 CIT(A)

A.Y 2011-2012 7460.05 CIT(A)

A.Y 2012-2013 8087.76 CIT(A)

All aforesaid dues are not accounted for in the books and are shown as contingent liabilities in Note No. 2.29 (1) of the Standalone Financial Statements except excise duty demand of Rs.1355.30 lacs raised vide order dated 31.03.2015 has been duly provided for in the books. [Refer Note 2.29 (9)].

(x) The Company's accumulated losses as on 31.03.15 are of Rs.4079.23 lacs, which is not less than 50% of its net worth. The Company has not incurred cash losses during the current financial year as well as in the immediate preceding financial year.

(xi) Based on our audit procedures and as per information and explanation given to us by the management, the continuing defaults in repayments of loans as on 31.03.2015 are as under :

Installments of Rs.1485 lacs against principal loan payable to Sugar Development Fund (SDF) and interest thereon of Rs.82.28 lacs are not paid in time and are overdue. (Refer Note 2.3)

(xii) In our opinion and as per information and explanation 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.

(xiii) 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.

(xiv) In our opinion and according to the information and explanation given to us, the Company is not dealing or trading in shares, securities, debentures and other investments, and hence, the requirement of Para 4(xiv) of the Companies (Auditors/ Report) Order, 2003 is not applicable to the Company.

(xv) 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.

(xvi) According to the information and explanations given to us, term loans were generally applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and based on an overall examination of the balance sheet and other relevant records, we report that no funds raised on short term basis have been used for long term purposes.

(xviii) During the 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.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the period covered by our audit.

(xx) According to the information and explanations given to us, the company has not raised any money by way of public issue during the period covered by our audit.

(xxi) According to the information and explanation given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For Mehrotra & Mehrotra

Chartered Accountants

(FRN - 0226C)

CA. Rajesh Jhalani Partner (M.No. 074809) Place: Lucknow

Date : 28th May, 2015


Sep 30, 2013

Report on the Financial Statements

1. We have audited the accompanying financial statements of K.M. Sugar Mills Ltd. (the "Company"), which comprise the Balance Sheet as at 30th September, 2013, the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s 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 Section 211(3C) 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

3. 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.

4. 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 auditors consider 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 management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

6. in our opinion, and to the best of our information and according to the explanations given to us, the accompanying financial statements 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 30th September, 2013;

(b) in the case of the Statement of Profit and Loss, of the profit 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

7. As required by the Companies (Auditor''s Report) Order, 2003, as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of Section 227(4A) of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and g records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8. As required by section 227(3) of the Act, we reportthat:

(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, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211(3C)oftheAct;

(e) On the basis of written representations received from the directors as on September 30,2013 taken on record by the Board of Directors, none of the directors is disqualified as on 30th September, 2013, from being appointed as a director in termsof Section 274(1)(g)oftheAct.

ANNEXURE TO DRAFT INDEPENDENT AUDITORS'' REPORT

REFERRED TO IN PARAGRAPH (7) OF OUR REPORT OF EVEN DATE Re: K.M. Sugar Mills Ltd. for the year ended 30th September, 2013 (i) (a) The Company has generally maintained records to show particulars, including quantitative details and situation of fixed assets but still it is incomplete and its updation is in progress.

(b) The Fixed Assets of the Company have been physically verified by the management during the year in accordance with a regular programme of verification, which, in our opinion, provides for physical verification of all the assets at reasonable intervals. Accordingly to the information and explanation given to us, no material discrepancies were noticed on such verification.

(c) In our opinion and according to information given to us, the Company has not disposed off any substantial part of fixed assets during the year and hence, going concern status of the company is not affected.

(ii) (a) As explained to us, the inventory has been physically verified by the Management to the extent practicable at reasonable intervals during the year.

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

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (b) to (d) As the company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Act, clauses (iii) (b) to (iii) (d) of paragraph 4 of the said order are not applicable to the Company.

(e) According to the information and explanations given to us, the Company has taken unsecured loans from three parties covered in the register maintained under Section 301 of the Companies Act, 1956 anda sum of Rs.154 lacs was outstanding as on 30.09.2013. (Previous Year-Rs. 154 lacs).

(f) to (g) In our opinion and according to the information and explanations given to us, the terms and conditions of the said loan taken by the company are not prime facie prejudicial to interest of the Company.

Further, the repayment of these loans is not due hence no repayment was made during the year.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the internal control system.

(v) In respect of contracts or arrangements entered in the Register maintained in pursuance of section 301 of the Companies Act 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

a) The particulars in respect of certain contracts or arrangements referred to in section 301 of the Companies Act, 1956 that needed to be entered in the register maintained under that section, have been so entered.

b) As far as we could ascertain on the basis of our selective checking and according to the information and explanations given to us, the transaction made in pursuance to aforesaid contracts or arrangements have been made at the prevailing market prices at the relevant time.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year. Hence, provisions of section 58A& 58AAor any other relevant provisions of the Companies Act, 1956 and rules of Companies (Acceptance 6f Deposits) Rules, 1975 with regard to the deposits are not applicable to the Company.

(vii) In our opinion, the internal audit system of the company is commensurate with the size and nature of the business of the Company.

(viii) We are informed by the management that the required cost records pursuant to the order made by Central Government under Section 209(1)(d) of the Companies Act, 1956 regarding production have been maintained by the Company and are of the opinion that prima-facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanation given to us and the records examined by us, the undisputed statutory dues including provident fund, investor education and protection fund, income tax, sales tax, wealth tax, service tax, custom duty, exci''O duty, cess and other statutory dues applicable to the company have generally been regularly deposited with the appropriate authority except small delays in certain cases and no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 30th September, 2013 for a period of more than six months from the date of becoming payable. As informed, the provisions of the Employees State Insurance Act are not applicable to the Company.

b) According to the information and explanation given to us, the particulars of dues of excise duty, entry tax, central sales tax and income tax outstanding as at 30.09.2013, which have not been deposited on account of disputes, are as follows:-

Name of the Statute Nature of Amount (Rs. Forum, where the Dues In lacs) dispute is pending

Entry Tax Act Entry Tax Commercial Tax

2007-08 0.04 Tribunal, Faizabad

2011-12 1.69 Additional Comm.

2012-13 36.00 (A)

Central Sales Tax Act CST2009-10 1.90 Additional Comm.

(A)

Central Excise Act Excise Duty

FY 2005-2006 32.00 Joint Comm. &

FY 2006-07 467.30 CESTAT

Comm. Excise & FY 2007-08 16.09 CESTAT

CESTAT

Income Tax Act A.Y. 20 10-11 8378.89 CIT(A)

Total 8933.91

All aforesaid dues are not accounted for in the books of account and are shown as contingent liabilities in Note No. 2.29 of the

Financial Statements.

(x) The Company''s accumulated losses as on 30.09.2013 are of Rs.4872.15 lacs, which is not less than 50% of its net worth. The Company has not incurred cash losses during the current financial year as well as in the immediate preceding financial year.

(xi) Based on our audit procedures and as per information and explanation given to us by the management, the loans were restructured under Corporate Debt Restructuring Mechanism (CDR) vide letter of approval dated 27.03.2012 issued by CDR EG. This CDR package has since been implemented and necessary impact has been considered in these financial statements to the extent allowed by the banks. Outstanding loan amount on account of default is Nil at the year end. Interest of Rs.33.90 lacs become due as on 30.09.2013 has been subsequently paid.

Other continuing defaults as on 30.09.2013 are given here- under:

Overdue installments amounting to Rs.1173 .43 lacs of various loans taken from Sugar Development Fund (SDF) could not be paid till 30.09.2013. Further, interest of Rs.211.62 lacs on the said loans was overdue as on 30.09.2013.

(xii) In our opinion and as per information and explanation 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.

(xiii) 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.

(xiv) In our opinion and according to the information and explanation j given to us, the Company is not dealing or trading in shares, , securities, debentures and other investments, and hence, the requirement of Para 4(xiv) of the Companies (Auditors/ Report) Order, 2003 is not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks orfinancial institutions except guarantees given to the bank on behalf of its employees, who have taken vehicle loans from a bank and a sum of Rs.0.42 lacs was outstanding at the year-end 30.09.2013 on this account.

(xvi) According to the information and explanations given to us, term - loans were generally applied for the purpose for which the loans were obtained.

(xvii)According to the information and explanations given to us and based on an overall examination of the balance sheet, cash flow and other relevant records, we report that no funds raised on short term basis have been used for long term purposes during the year.

(xviii)During the 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.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the period covered by our audit.

(xx) According to the information and explanations given to us, the company has not raised any money by way of public issue during the period covered by our audit.

(xxi) Based on the audit procedure performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanation given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit nor we have been informed of such case by the management that causes the financial statements to be materially misstated.

For Mehrotra & Mehrotra

Chartered Accountants FRN:00226C

Sd/-

RajeshJhalani

Place: Lucknow Partner

Date: 28th November, 2013 M. No. 074809


Sep 30, 2012

1. We have audited the attached Balance Sheet of K M Sugar Mills Ltd. as at 30th September, 2012 and also the Statement of Profit & Loss and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company''s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor''s Report) Order, 2003, as amended by Companies (Auditor''s Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks of books and records of the company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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 purposes of our 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 the books of the Company;

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

(iv) In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow Statement 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 representation received from the Directors of the Company and taken on record by the Board of Directors, we report that none of the director is disqualified as on 30th September, 2012 from being appointed as a director in terms Section 274(1 )(g) 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 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:-

(i) In the case the Balance Sheet, of the state of affairs of the Company as at 30th September, 2012;

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

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

ANNEXURE TO THE AUDITORS'' REPORT

Statement referred to in our report of even date to the members of K.M. Sugar Mills Ltd. on the accounts for the year ended 30th September, 2012.

(i) (a) The Company has generally maintained records to show particulars, including quantitative details and situation of fixed assets but still it is incomplete and its updation is pending.

(b) The Fixed Assets of the Company have been physically verified by the management during the year as per information provided to us and as explained no material discrepancies were noticed on such verification.

(c) In our opinion and according to information given to us, the Company has not disposed off any substantial part of fixed assets during the year and hence, going concern status of the company is not affected.

(ii) (a) As explained to us, the inventory has been physically verified by the Management to the extent practicable at reasonable intervals during the year.

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

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) According to the information and explanations given to us, the Company has granted unsecured loan to a party covered in the register maintained under Section 301 of the Companies Act, 1956 but nothing was outstanding as on 30.09.2012 against the said loan. The maximum amount outstanding during the year was Rs.9.04 lacs. (Previous Year outstanding: Rs.9.04lacs).

(b) to (d) In our opinion and according to the information and explanations given to us, the terms and conditions of the said loan given by the company were not prime facie prejudicial to interest of the Company except that it was interest free loan.

(e) According to the information and explanations given to us, the Company has taken unsecured loans during the year from three parties covered in the register maintained under Section 301 of the Companies Act, 1956 and a sum of Rs.154 lacs was outstanding as on 30.09.2012. The maximum amount outstanding during the year was also Rs.154.00 lacs. (Previous Year- Rs.Nil).

(f) to (g) In our opinion and according to the information and explanations given to us, the terms and conditions of the said loan taken by the company are not prime facie prejudicial to interest of the Company. Further, the repayment of these loans is not due hence no repayment was made during the year.

(iv) In our opinion and according to the information and explanations given to us during the course of audit, there is adequate internal control system commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the internal control system.

(v) In respect of contracts or arrangements entered in the Register maintained in pursuance of section 301 of the Companies Act 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

a) The particulars in respect of certain contracts or arrangements referred to in section 301 of the Companies Act, 1956 that needed to be entered in the register maintained underthat section, have been so entered.

b) As far as we could ascertain on the basis of our selective checking and according to the information and explanations given to us, the transaction made in pursuance to aforesaid contracts or arrangements have been made at the prevailing market prices at the relevant time.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framed there-under.

(vii) In our opinion, the Company''s existing in-house internal audit system does not cover major areas of operations and which requires to be strengthened to make it commensurate with the size and nature of the business of the Company.

(viii) We are informed by the management that the required cost records pursuant to the order made by Central Government under Section 209(1)(d) of the Companies Act, 1956 regarding production have been maintained by the Company and are of the opinion that prima-facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanation given to us and the records examined by us, the undisputed statutory dues including provident fund, investor education and protection fund, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues applicable to the company have generally been regularly deposited with the appropriate authority except small delays in certain cases and no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 30th September, 2012 for a period of more than six months from the date of becoming payable. As informed, the provisions of the Employees State Insurance Ad are not applicable to the Company.

b) According to the information and explanation given to us, the particulars of dues of excise duty, entry tax and income tax outstanding as at 30.09.2012, which have not been deposited on account of disputes, are as follows:-

Name of the Statute Nature of Amount Forum, where the Dues (Rs. in dispute is pending lacs)

Entry Tax Act Entry Tax-A.Y 0.04 Commercial Tax 2007-08 Tribunal, Faizabad

Excise Act Excise Duty F.Y 2005-2006 32.00 Joint Commissioner and CESTAT

FY 2006-07 467.30 Asst. Commissioner and CESTAT

FY 2007-08 16.09 CESTAT

Income Tax A.Y. 2009-10 5969.00 CIT(A)

Total 6484.43

All aforesaid dues are not accounted for in the books of account and are shown as contingent liabilities in Note No. 2.29 of the Financial Statements.

(x) The Company has incurred losses amounting to Rs.624.21 lacs during the financial year ended 30.09.2012 and its accumulated losses as on 30.09.2012 are more than 100% of its net worth. The Company has not incurred cash losses during the current financial year as well as in the immediate preceding financial year.

(xi) Based on our audit procedures and as per information and explanation given to us by the management, we are of the opinion that the Company has defaulted in repayment of the dues to the Financial Institutions and Banks during the year and details of continuing defaults as on 30.09.2012 are given here-under:-

a) Overdue installments amounting to Rs.968.43 lacs of various loans taken from Sugar Development Fund (SDF) could not be paid till 30.09.2012. Further, interest ofRs.244.28 lacs on the said loans was overdue as at 30.09.2012. (Refer Note No.2.3 of the financial statements for continuing defaults in repayment of installments and interest.)

b) The company has defaulted in repayment of installments and interest of Term Loan taken from Punjab National Bank (PNB) and principal $um and interest towards Corporate Loans taken from PNB and Allahabad Bank. Subsequently,these loans were restructured under Corporate Debt Restrucuring Mechanism (CDR) vide letter of apprioval dated 27.03.2012 issued by CDR EG. This GQft package has been partly implemented during the year and nowthere is no default at the year-end except non-payment of an installment'' (Rs.7.00 lacs) of FITL and Interest (Rs.5.29 lacs), which became due on 30.09.2012. (Refer Note No.2.3 and 2.7 of the financial statements for continuing defaults in repayment of installments and interest).

(xii) In our opinion and as per information and explanation 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.

(xiii) 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.

(xiv) In our opinion and according to the information and explanation given to us, the Company is not dealing or trading in shares, securities, debentures and other investments, and hence, the requirement of Para 4(xiv) of the Companies (Auditors/ Report) Order, 2003 is not applicable to the Company.

(xv) 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 except guarantees given to the banks on behalf of its employees, who have taken vehicle loans from a bank and a sum of Rs.0.41 lacs was outstanding at the year-end 30.09.2012 on this account.

(xvi) According to the information and explanations given to us, term loans were generally applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and based on an overall examination of the balance sheet, cash flow and other relevant records, we report that no funds raised on short term basis have been used for long term purposes during the year.

(xviii)During the 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.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the period covered by our audit.

(xx) According to the information and explanations given to us, the company has not raised any money by way of public issue during the period covered by our audit.

(xxi) Based on the audit procedure perfoimed for the purpose of reporting the true and fair view of the financial Statements and as per the information and explanation given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit nor we have been informed of such case by the management that causes the financial statements to be materially misstated.

For Mehrotra & Mehrotra

Chartered Accountants

FRN: 00226C

Sd/-

Rajesh Jhalani

Race: Lucknow M. No. 074809

Date. 30th November, 2012 Partner


Sep 30, 2010

1. We have audited the attached Balance Sheet of K M SUGAR MILLS LIMITED as at 30th September, 2010 and also the Profit & Loss Account and the Cash Flow Statement for the year ended on that date 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.

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

3. As required by the Companies (Auditors Report) Order, 2003, as amended by Companies (Auditors Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks of books and records of the company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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 purposes of our 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 the books of the Company;

(iii) The Balance Sheet, Profit & Loss Account and

Cash Flow Statement dealt with by this report are in agreement with the books of account of the Company; (iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement 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 representation received from the Directors of the Company and taken on record by the Board of Directors, we report that none of the director is disqualified as on 30th September, 2010 from being appointed as a director in terms Section 274(1 )(g) 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 financial statements read together with the Notes to the Accounts in Schedule 17 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 the Balance Sheet, of the state of affairs of the Company as at 30th September, 2010;

(ii) In the case of the Profit & Loss Account, of the loss for the year ended on that date; and

(iii) In the case of Cash Flow Statement of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 3 of our report of even date)

(i) (a) The Company has generally maintained records to show particulars, including quantitative details and situation of fixed assets but still it is incomplete and its updation is pending.

(b) The Fixed Assets of the Company have been physically verified by the management during the year as per information provided to us and as explained no material discrepancies were noticed on such verification.

(c) In our opinion and according to information given to us, the Company has not disposed off any substantial part of fixed assets during the year and hence, going concern status of the company is not affected.

(ii) (a) As explained to us, the inventory has been physically verified by the Management to the extent practicable at reasonable intervals during the year or at the end of the year.

(b) According to information and explanations given to us, the procedures for physical verification of the inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) According to the information and explanations given to us, the Company has granted an unsecured loan to a company covered in the register maintained under Section 301 of the Companies Act, 1956 and a sum of Rs. 10.88 lacs was outstanding as on 30.09.2010 (Previous year outstanding Rs.10lacs).

(b)to{d)ln our opinion and according to the information and explanations given to us, the terms and conditions of the said loan given by the company are not prime facie prejudicial to interest of the Company except that it is interest free loan but however, the repayment is within the terms and conditions of the loan.

(e) According to the information and explanations given to us, the Company has not taken during the year any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause (f) and (g) of the order are not applicable.

(iv) In our opinion and according to the information and explanations given to us during the course of audit, there is adequate internal control system commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the internal control system.

(v) In respect of contracts or arrangements entered in the Register maintained in pursuance of section 301 of the Companies Act 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

a) The particulars in respect of certain contracts or arrangements referred to in section 301 of the Companies Act, 1956 that needed to be entered in the register maintained under that section, have been so entered.

b) As far as we could ascertain on the basis of our selective checking and according to the information and explanations given to us, the transaction made in pursuance to aforesaid contracts or arrangements have been made at the prevailing market prices at the relevant time.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framed there-under.

(vii) In our opinion, the Companys existing in-house internal audit system does not cover all the areas and which requires to be strengthened to make it commensurate with the size and nature of the business of the Company.

(viii) We are informed by the management that the required cost records pursuant to the order made by Central Government under Section 209(1 (d) of the Companies Act, 1956 regarding production have been maintained by the Company and are of the opinion that prima-facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they areaccurateorcomplete.

(ix) (a) According to the information and explanation given to us and the records examined by us, the undisputed statutory dues including provident fund, investor education and protection fund, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues applicable to the company have generally been regularly deposited by it with the appropriate authority except delays in certain cases. As informed, the provisions of the Employees State Insurance Act are not applicable to the Company.

(b) According to the information and explanation given to us, there is no material undisputed amount payable in respect of aforesaid dues which were outstanding for a period of more than six months as on 30.09.2010.

(c) According to the information and explanation given to us, the particulars of dues of excise duty, sales tax, trade tax and income tax outstanding as at 30.09.2010, which have not been deposited on account of dispute, are as follows:-

Name of the Staute Natute of Dues Amount Forum, where the

(Rs ln Lacs) dispute is pending

Central Excise Act, Cenvat Matter 0.51 The Commissioner

1944 2005-06 (Appeals),

Allahabad U.P. Trade Tax, Trade Tax-F.Y. 22.13 The Joint Commissioner Act, 1948 2005-06 and 2006-07 (Appeals), Faizabad

Entry Tax Act Entry Tax-F.Y. 260.31 The Joint Commissioner 2005-06 and 2006-07 (Appeals), Faaabad Demand is stayed by the Hanbte Allahabad High Court

Entry Tax-F.Y. 67.74 The Joint Commissioner 2007-08 (Appeals), Faizabad

Central Sales CTS 87.84 The Joint Commissioner

Tax Act (Appeals), Faizabad

Income Tax Income Tax 61.67 The Commissioner of

Act, 1961 income Tax (Appeals)

Total 500.20

All aforesaid dues are not accounted for in the books of account and are shown as contingent liabilities in the Schedule 17-Notes to Accounts.

(x) The Company has incurred losses amounting to Rs. 1829.71 lacs during the financial year ended 30.09.2010 and its accumulated losses as on 30.09.2010 are more than 50% of its net worth. The Company has incurred cash losses during the current financial year. However, there was no cash loss in the immediately preceding financial year ended 30.09.2009.

(xi) Based on our audit procedures and as per information and explanation given to us by the management, we are of the opinion that the Company has defaulted in repayment of the dues to the Financial Institutions and Banks as per details given here-under:-

a) The term loan installments of Rs.223.43 lacs payable during the year towards loan from Sugar Development Fund (SDF) could not be paid till 30.09.2010. Further, interest of Rs.108.06 lacs on the said loan was overdue as at 30.09.2010.

b) As per revised terms and conditions of the term loan availed from bank, the interest of Rs.65.61 lacs on the said term loan was overdue as at 30.09.2010.

(xii) In our opinion and as per information and explanation 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. (xiii) 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.

(xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments, and hence, the requirement of Para 4(xiv) of the Companies (Auditors/ Report) Order, 2003 is not applicable to the Company.

(xv) 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 except guarantees given to the banks on behalf of its employees, who have taken vehicle loans from the banks and a sum of Rs.6.84 lacs was outstanding at the year end 30.09.2010 on this account.

(xvi) According to the information and explanations given to us, term loans were generally applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and based on an overall examination of the balance sheet, cash flow and other relevant records, we report that the funds of Rs.700 lacs (approx.) raised on short term basis have been used during the year for long term purposes.

(xviii) During the 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.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the period covered by our audit.

(xx) According to the information and explanations given to us, the company has not raised any money by way of public issue during the period covered by ouraudit.

(xxi) Based on the audit procedure performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanation given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit nor we have been informed of such case by the management that causes the financial statements to be materially misstated.

For Mehrotra & Mehrotra

Chartered Accountants

Sd/-

Rajesh Jhalani

Partner

Membership No.74809

Place: Lucknow

Dated: 30th November, 2010


Sep 30, 2009

1. We have audited the attached Balance Sheet of K.M. SUGAR MILLS LIMITED as at 30th September, 2009 and also the Profit & Loss Account and the Cash Flow Statement for the year ended on that date 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 out audit.

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

3. As required by the Companies (Auditors Report) Order,2003, as amended by Companies (Auditors Report) (Amendment) Order, 2004, Issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks of books and records of the company as we considered appropriate and according to the information and explanations given to us. We enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 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 purposes of out 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 the books of the Company.

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

(iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by the 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 representation received from the Directors of the Company and taken on record by the Board of Directors, we report that none of the director is disqualified as on 30th September, 2009 from being appointed as a director in terms Section 274 (l)(g) 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 financial statements read together with the Notes to the Accounts in Schedule 17 give the information required by the Companies Act, 1956 in the manner so required and given a true and fair view in conformity with the accounting principles generally accepted in India:-

(i) In the case the Balance Sheet, of the state of affairs of the Company as at 30th September, 2009

(ii) In the case of the Profit & Loss Account, of the profit for the year ended on that date; and

(iii) In the case of Cash Flow Statement, of the cash flow for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT

(i) (a) The Company has generally maintained records to show particulars including quantitative details and situation of fixed assets but still it is incomplete and its update is pending.

(b) The Fixed Assets of the Company have been physically verified by the management during the year as per information provided to us and as explained no material discrepancies were noticed on such verification.

(c) in our opinion and according to information given to us. the Company has not disposed off any substantial part of fixed assets during the year and hence, going concern status of the company is not affected,

(ii) (a) The inventory has been physically verified by the Management to the extent practicable at reasonable intervals during the year or at the end of the year as per information provided to us.

(b) According to information given to us, the procedures for physical verification of the inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of out examination of the records of inventory, we are the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) According to the information and explanations given to us, the Company has granted an unsecured loan to a company covered In the register maintained under section 301 of the Companies Act, 1956 and a sum of Rs. 10 lacs was outstanding as on 30,09,2009

(b) to (d) In our opinion and according to the information and explanations given to us, the terms and conditions of the said loan given by the Company are not prime facie prejudicial to interest of the Company except that it is interest free loan but however, the repayment is within the terms and condition of the loan,

(e) According to the information and explanations given to us, the Company has not taken during the year any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause

(f) and (g) of the order are not applicable. Further, the loans taken in the immediate preceding financial year ending 30.09.2008 has been repaid during the year.

(iv) In our opinion and according to the information and explanations given to us during the course of audit, there is adequate internal control system commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the internal control systems.

(v) {a} As per information and explanations given to us by the management, we are of the opinion that all the particulars in respect of certain contracts or arrangements referred to in section 301 of the Companies Act, 1956 and need to be entered in the register maintained under that section, have been so entered.

(b) As far as we could ascertain on the basis of our selective checking and according to the information and explanations given to us, the transaction made in pursuance to aforesaid contracts or arrangements have been made at the prevailing market prices at the relevant time.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framed there-under.

(vii) In our opinion, the Company has in house internal audit systems which requires further to strengthen to make it commensurate with the size and nature of the business of the Company.

(viii) We are informed by the management that the required cost records pursuant to the order made by Central Government under Section 209(1 )(d) of the Companies Act, 1956 regarding to the production of sugar have been maintained by the Company and are of the opinion that prima-facie the prescribed accounts and records have been maintained. We have not however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanation given to us and the records examined by us, the undisputed statutory dues including provident fund, investor education and protection fund, income tax, sales tax, wealth tax service tax custom duty, excise duty cess and other statutory dues applicable to the company have generally been regularly deposited by it with the appropriate authority except delays in certain cases. As informed the provisions of the Employees State Insurance Act are not applicable to the Company.

(b) According to the information and explanation given to us, there is no material undisputed amount payable in respect of aforesaid dues which were outstanding for a period of more than six months as on 30.09.2009.

(c) According to the information and explanation given to us, the particulars of dues of excise duty, sales tax, trade tax and income tax outstanding as at 30.09.2009, which have not been deposited, on account of dispute are as follows:

Nature of the Nature of Dues Amount Forum, where the dispute is pending Statute (Rs. In Lacs)

Central Excise Act, Canvat Matter - 2005-06 0.51 The Commissioner (Appeals) 1944 Allahabad

U.P. Trade Tax, Trade Tax-AY 2005-06 22.13 The Joint Commissioner (Appeals) Act,1948 and 2006-07 Faizabad

Entry Tax-AY. 2005-06 260.31 The Joint Commissioner (Appeals), and 2006-07 Faizabad Demand is stayed by the Honble Allahabad Court

Central Sales Tax CST 87.84 The Joint Commissioner (Appeals) Act Faizabad

Income Tax Act, Income Tax 60.79 The Commissioner of income Tax 1961 (Appeals) Faizabad

Total 431.58

All aforesaid dues are not accounted for in the books of account and are shown as contingent liabilities in the Schedule-17 Notes to Accounts

(x) The Company has not incurred losses during the financial year ending 30.09.2009 and its accumulated losses as on 30,09,2009 are not more then 50% of its net worth. The Company has not incurred cash losses during the current financial year and in the immediately preceding financial year ending 30,09.2008

(xi) Based on our audit procedures and as per information and explanation given to us by the management, we are of the opinion that the Company has not defaulted in the repayment of the dues to the financial Institutions and Banks as per details given here-under.

(a) The term loan installment of Rs, 58,43 lacs payable during the year towards loan from Sugar Development Fund (SDF) could not, be paid till 30.09.2009. Further interest of Rs 115 lacs payable to SDF is also unpaid till 30,09,2009

(b) The repayment terms of the term loan availed by the company from a Bank has been rescheduled during the year. As per rescheduled terms the quarterly installment of Rs. 110 lacs due for payment on 30th June, 2009 was paid with some delay. Further, the interest of Rs. 68.06 lacs payable on the said term loan was unpaid till 30.09.2009.

(XII) In our opinion and as per information and explanation 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.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/ society, therefore clause 4 (xiir) of the Companies (Auditors Report) Order 2003 is not applicable to the Company,

(xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments, and hence, the requirement of Para 4(xiv) of the Companies (Auditors/Report) Order, 2003 is not applicable to the Company,

(xv) 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 except guarantees given to the banks on behalf of its employees, who have taken vehicle loans from the banks and a sum of Rs 10,48 lacs was outstanding at the year end 30.09.2009 on this account.

(xvi) According to the information and explanations given to us. terms loans were applied for the purpose for which the loans were obtained,

(xvii) According to the information and explanation given to us and based on an overall examination of the balance sheet, cash flow and other relevant records we report that the funds raised on short term basis have not been used during the year for long term purposes,

(xviii) During the 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.

(xix) According to the information and explanations given to us, the company has not issued any debentures during .the period covered by our audit .

(xxi) According to the information and explanations given to us the company has not raised any money by way of public issue during the period covered by our audit. (xxi) Based on the audit procedure performed for the purpose of reporting the true and fair view of the financial statement and as per the information and explanation given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit nor we have been informed of such case by the management that causes the financial statements to be materially misstated,

For Mehrotra & Mehrotra Chartered Accountants

sd/-

Rajesh Jhalani

Partner

Membership No. 74809

Place: Lucknow

Dated :19th December, 2009

 
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