1.  We have audited the attached Balance Sheet of M/s Ballarpur
 Industries Limited, as at 30th June 2010, and also the Profit and Loss
 Account and the Cash Flow Statement for the year ended on that date
 annexed thereto, in which are incorporated the audited accounts of Unit
 of the Company, audited by other auditors.
 
 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 have conducted our audit in accordance with the 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 the Companies (Auditors Report) (Amendment) Order, 2004 (‘the
 Order) issued by the Central Government of India in terms of
 sub-section (4A) of section 227 of the Companies Act, 1956, we enclose
 in the Annexure ‘A 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 also 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
 books;
 
 iii.  The reports on the accounts audited by the Unit Auditors, have
 been properly dealt with by us while preparing our report;
 
 iv.  The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 v. In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement read together with the Notes thereon comply with the
 accounting standards referred to in sub-section (3C) of section 211 of
 the Companies Act, 1956;
 
 vi.  On the basis of written representations received from the
 Directors, as on 30th June, 2010 and taken on record by the Board of
 Directors, we report that none of the Directors is disqualified as on
 30th June, 2010 from being appointed as a Director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956; and
 
 vii.  In our opinion and to the best of our information and according
 to the explanations given to us, the said Accounts read with the Notes
 thereon give the information required by the Companies Act, 1956, in
 the manner so required and give a true and fair view in conformity with
 the accounting principles generally accepted in India:
 
 a.  in the case of the Balance Sheet, of the state of affairs of the
 Company as at 30th June, 2010;
 
 b. in the case of the Profit and Loss Account, 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.
 
 ANNEXURE ‘A
 
 (Referred to in paragraph 3 of our report of even date)
 
 In terms of the information and explanations given to us and books and
 records examined by us and the Unit Auditors in the normal course of
 audit and to the best of our information and belief, we state that:
 
 1.  a. The Company has maintained proper
 
 records showing full particulars including quantitative details and
 situation of fixed assets.
 
 b. The fixed assets were physically verified during the year by the
 Management in accordance with a programme of verification, covering all
 fixed assets over a period of three years. There were no material
 discrepancies noticed on such verification. In our opinion, having
 regard to the size of the Company and the nature of its operations, the
 frequency of verification is reasonable.
 
 c. Based on the information and explanations given by the Management
 and on the basis of audit procedures performed by us, we are of the
 opinion that the fixed assets disposed off during the year does not
 constitute a substantial part of the fixed assets of the Company and
 such disposal has not affected the going concern.
 
 2.  a. The inventory (excluding stocks
 
 with third parties and stocks lying at outside warehouses) has been
 physically verified by the Management. In our opinion, the frequency of
 verification is reasonable.
 
 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 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.
 
 3.  The Company has not granted or taken any loan, secured or
 unsecured, to or from companies, firms or other parties covered in the
 registers maintained in pursuance of Section 301 of the Companies Act,
 1956. Accordingly, paragraph 4(iii) of the Companies (Auditors Report)
 Order is not applicable to the Company.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items
 purchased/ services availed are of special nature for which suitable
 alternative sources do not exist for obtaining comparative quotations,
 there are adequate internal control systems commensurate with the size
 of the Company and the nature of its business with regard to purchases
 of inventory, fixed assets and with regard to the sale of goods. During
 the course of our audit, no major weakness has been noticed in the
 internal controls system.
 
 5.  In respect of the transactions entered in the registers maintained
 in pursuance of Section 301 of the Companies Act, 1956:
 
 a. To the best of our knowledge and belief and according to the
 information and explanations given to us, transactions that needed to
 be entered into the register have been so entered.
 
 b. In our opinion and according to the information and explanations
 given to us, and excluding certain transactions of purchase of goods/
 services availed and material of special nature for which alternative
 quotations are not available, where each of such transactions is in
 excess of five lakh rupees in respect of any party, transactions have
 been made at prices which are prima facie reasonable having regard to
 prevailing market prices at the relevant time.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of the
 Section 58A and 58AA of the Companies Act, 1956 and the Companies
 (Acceptance of Deposits) Rules, 1975 with regard to the deposits
 accepted from the public. According to the information and explanations
 given to us, no order has been passed by the Company Law Board on the
 Company.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 8.  We have broadly reviewed the books of account and records
 maintained by the Company relating to the manufacture of Paper pursuant
 to the Rules made by the Central Government for the maintenance of cost
 records under Section 209 (1) (d) of the Companies
 
 Act, 1956 and we are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. We have, however,
 not made a detailed examination of the records with a view to
 determining whether they are accurate or complete.
 
 9.  a. According to the records of the Company, the Company is regular
 in depositing with appropriate authorities undisputed statutory dues
 including provident fund, investor education protection fund,
 employees state insurance, income tax, sales tax, wealth tax, service
 tax, custom duty, excise duty, cess and other statutory dues applicable
 to it.
 
 b. According to the information and explanations given to us, no
 undisputed amounts payable in respect of income tax, wealth tax, sales
 tax, service tax, custom duty and excise duty were outstanding, as at
 30th June, 2010 for a period of more than six months from the date they
 became payable except where the liabilities are specifically deferred
 by the Government.
 
 c. According to the information and explanations given to us and the
 records of the Company, the particulars of dues of sales tax, excise
 duty, custom duty, income tax and cess as on 30th June, 2010 which have
 not been deposited on account of disputes have been stated in Note 2(b)
 of Schedule M of the financial statements.
 
 10. The Company has no accumulated losses as at 30th June, 2010 and it
 has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 11. According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holders as at the Balance Sheet date.
 
 12. According to 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. The provisions of any special statute applicable to chit fund/
 nidhi/ mutual benefit fund/ societies are, in our opinion, not
 applicable to the Company.
 
 14. In our opinion, the Company is not a dealer in shares, securities,
 debentures and other investments
 
 15. According to the information and explanations given to us, the
 Company has not given guarantee for loans taken by others from banks or
 financial institutions.
 
 16. In our opinion, according to the information and explanations given
 to us and to the best of our knowledge and belief on an overall basis,
 the term loans taken and/ or utilized during the year have been applied
 for the purpose for which they were obtained, other than temporary
 deployment of such funds.
 
 17. On the basis of an overall examination of the balance sheet of the
 Company, in our opinion and according to the information and
 explanations given to us, there are no funds raised on a short-term
 basis which have been used for long-term investment and vice versa.
 
 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 Act.
 
 19. The Company has created security or charge in respect of secured
 debentures issued and outstanding at the year end.
 
 20. The Company has not raised any money by public issue during the
 year.
 
 21. During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 material fraud on or by the Company, noticed or reported during the
 year, nor have we been informed of such case by the Management.
 
                         DINESH KUMAR BACHCHAS PARTNER
                         Membership No. 097820 
                         For and on behalf of
 
                         K.K.MANKESHWAR & CO.,   
 
                         CHARTERED ACCOUNTANTS FRN- 106009W
 
                         New Delhi, dated the 19th August 2010