1.  We have audited the attached Balance Sheet of Balmer Lawrie &
 Company Limited (the Company) as at 31st March 2011, and also the
 Profit and Loss Account and Cash flow Statement for the year ended on
 that date annexed thereto, in which are incorporated the accounts of
 the Regions audited by Branch Auditors in accordance with the letter of
 appointment issued by the Comptroller and Auditor General of India.
 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 have conducted our audit in accordance with auditing standards
 generally accepted in India. Those Standards require that we pIan 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 (Auditor''s Report) Order, 2003 (''the
 order'') as amended, issued by the Central Government of India in terms
 of Sec 227(4A) of the ''Companies Act 1956'' of India (the Act), we
 enclose in the Annexture a statement on the matters specified in
 paragraphs 4 and 5 of the said order.
 
 4.  Further to our comment in the Annexure referred to 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 our
 audit subject to some observations as under:
 
 a) ICICI Venture Fund Management Co. Ltd.  exited the joint venture
 unit, Transafe Services Ltd. (TSL) with full benefits without retaining
 any right of recovery on the part of Balmer Lawrie & Co. Ltd. (BL) for
 possible losses.  Specific joint venture agreement between BL and ICICI
 specifying the exit clause, important for any joint venture agreement
 could not be provided.
 
 Consequent to exit of ICICI Ventures from TSL, the entire financial
 burden fell upon and/or assumed by Balmer Lawrie & Co. Ltd. (BL) for
 arranging necessary fund for settling the accounts of ICICI Ventures
 with premium as well as bringing in new partner namely Balmer Lawrie
 Van Leer Ltd. (BLVL), another unit of joint venture arrangement with
 BL.
 
 Investment of Rs. 553.28 lakhs during the previous year, a fresh
 further Investment of a sum of Rs. 1330.00 lakhs during the current
 year by way of acquiring preference shares in TSL and providing
 unsecured loan of Rs. 1817.92 lakhs to BLVL for the purpose of purchase
 of shares held by ICICI Venture, was done without going through a
 process of Due Diligence. In addition the interest falling due for
 payment as on 31/03/2011 has also been not serviced.  Therefore, in our
 opinion, all these investments totaling to Rs.  3701.20 lakhs appear to
 be prejudicial to the interest of the company.
 
 b) The internal control system as regards management of debtors and
 generation of scrap by the manufacturing units of the Company needs to
 be further strengthened.
 
 (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. The related Branch Auditor''s Reports have been forwarded
 to us and have been appropriately dealt with in preparing this report;
 
 (iii) The Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) In our opinion, the Profit and Loss Account, Balance Sheet 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 Act;
 
 (v) This being Government Company, the provisions of the Section 274(1)
 (g) of the Act relating to disqualifications of directors are not
 applicable; vide Government of India, Department of Company Affairs
 Notification No. GSR 829(E) dated 21 October, 2003
 
 (vi) Subject to our observation in 4 (i) above, in our opinion and to
 the best of our information and according to the explanations given to
 us, the said accounts together with the notes and accounting policies
 thereon and annexed thereto, 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 of the Balance Sheet of the state of the Company''s
 affairs as at 31st March 2011;
 
 (ii) in the case of Profit and Loss Account, of the Profit for the year
 ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Annexure to Auditor''s Report
 
 The Annexure referred to in paragraph 3 of the Auditor''s Report of even
 date to the members of Balmer Lawrie & Company Limited (''the Company'')
 on the financial statements for the year ended 31st March, 2011. We
 report that:
 
 1.  a.  The Company has maintained proper record showing full
 particulars including quantitative details and situations of fixed
 assets.
 
 b.  The Company has a regular programme of physical verification of its
 fixed assets by which plant and machinery are verified every year, and
 other fixed assets are verified in a phased manner over a period of
 three years which, in our opinion, is reasonable having regard to the
 size of the Company and the nature of its assets. As explained to us,
 in accordance with its programme, plant and machinery and certain other
 fixed assets were verified during the year and no material
 discrepancies were noticed on such verification.
 
 c.  In our opinion and according to the information and explanations
 given to us, the Company has not disposed off a substantial part of the
 fixed assets during the year.
 
 2.  a.  The inventory of the Company has been physically verified
 during the year by the management. In our opinion, having regard to the
 nature and location of inventory, the frequency of verification is
 reasonable.
 
 b.  In our opinion, the procedure of physical verification of the
 inventory followed by the management is 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 inventory records, in our
 opinion, the Company has maintained proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material.
 
 3.  As represented to us, there are no Companies, firms or other
 parties to be listed in the register maintained under Section 301 of
 the Companies Act, 1956 (''the Act'').  Accordingly, paragraphs 4 (iii)
 (b) to 4 (iii) (g) of the Order are not applicable.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items
 purchased are of special nature for which suitable alternative sources
 do not exist for obtaining comparative quotations, there is an adequate
 internal control system commensurate with the size of the Company and
 the nature of businesses, for the purchase of inventory and fixed
 assets and for the 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 on the part of the Company to correct major
 weaknesses in the aforesaid internal control system.
 
 5.  In view of our comment in paragraph (3) above, paragraphs 4(v) (a)
 and 4(v) (b) of the order in respect of contracts or arrangements
 referred to in Section 301 of the Act, and transaction made in
 pursuance of such contracts ''or arrangements exceeding the value of
 Five Lakhs Rupees in respect of any party, are not applicable to the
 company.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of the sections 58A, 58AA of the Act and the rules framed
 there under.
 
 7.  In our opinion, the Company''s present internal audit system as
 conducted in phased manner, by a firm of chartered accountants, is
 commensurate with its size and nature of its business but the same
 needs to be further strengthened with regard to widening the coverage
 of various areas like. investments made and its follow- up and in the
 matter of scrap management.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company in respect of the products of Grease and Lubricants (petroleum
 products) and Tea Blending where, pursuant to the Rules made by the
 Central Government of india, the maintenance of cost records has been
 prescribed under Section 209(1) (d) of the Act, and 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
 such records with a view to determine whether they are accurate or
 complete.
 
 To the best of our knowledge and according to the information and
 explanations given to us, the Central Government under the aforesaid
 Act has not prescribed the maintenance of cost records for any other
 products or services of the Company.
 
 9.  a.  According to the information and explanations given to us and
 the records of the Company examined by us, the Company is generally
 regular in depositing with the appropriate authorities undisputed
 statutory dues including Provident Fund, Employees State Insurance,
 Income Tax, Sales Tax, ''Wealth Tax, Service Tax, Custom Duty and Excise
 Duty, Cess and any other material statutory dues applicable to it.
 
 b.  According to the information and explanations given to us and the
 records of the Company examined by us, the particulars of dues of
 income-tax, sales-tax, service-tax, excise duty and cess as at 31st
 March, 2011 aggregating to Rs. 6952.14 lacs; which have not been
 deposited on account of a dispute, are as mentioned in note on accounts
 showing the amounts involved and the forum where dispute is pending.
 
 10.  The Company has no accumulated losses as at 31st March, 2011, and
 it has not incurred any cash losses during the financial year ended on
 the 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 as at the
 balance sheet date.  The Company has no debenture holder.
 
 12.  The Company has not granted any loans or advances on the basis ,of
 security by way of pledge of shares, debentures or other securities.
 
 13.  In our opinion, the provisions of any Special Statute applicable
 to Chit Fund, Nidhi Fund or Mutual Benefit Fund/Societies are not
 applicable to the Company.
 
 14.  In our opinion and according to the information and explanations
 given to us, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  In our opinion and according to the information and explanations
 given to us, the Company has not given any guarantee for loans taken by
 others from bank or financial institutions.
 
 16.  In our opinion, and according to the information and explanations
 given to us, and on an overall basis, the term loans have been applied
 for the purposes for which they were obtained. The Company did not have
 any outstanding term loan as at 31st March, 2011.
 
 17.  On an overall examination 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 short-term basis which have been used for
 long term investment during the year.
 
 18.  In view of our comment in paragraph (3) above, the question of any
 preferential allotment of shares to parties and companies covered in
 the register maintained under section 301 of the Act does not arise.
 
 19.  The Company has not issued any debentures during the year and no
 amount is outstanding in respect of debentures as on the balance sheet
 date.
 
 20.  The Company has not raised any money by way of public issue during
 the year.
 
 21.  During the course of our audit, and according to the information
 and explanation given to us, we have neither come across any instance
 of fraud on or by the Company nor reported during the year, nor have we
 been informed of such case by the management.
 
 
                                                For J. GUPTA & CO.
 
                                            Chartered Accountants
 
                                           Firm Reg. No.: 314010E
 
                                                      S. P. Dutta
 
 Kolkata                                                  Partner
 
 Date: 28th May 2011                         Membership No. 13852