1.  We have audited the attached Balance Sheet of Cals Refineries
 Limited, (the ''Company'') as at March 31, 2011, and also the Cash Flow
 Statement for the year ended on that date annexed thereto (collectively
 referred as the ''financial statements''). 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 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 (Auditor''s Report) Order, 2003 (the
 ''Order'') (as amended), issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of the Companies Act, 1956
 (the ''Act''), we enclose in the Annexure a statement on the matters
 specified in paragraphs 4 and 5 of the Order.
 
 4.  Without qualifying our opinion, we draw attention to:
 
 a) Note 1 of Schedule 11 to the financial statements which indicates
 the existence of significant uncertainty about the Company''s ability to
 continue as a going concern. The Company''s ability to continue as a
 going concern is significantly dependent on its ability to successfully
 arrange the balance funding and achieve financial closure to fund its
 refinery project.
 
 b) Note 2 of Schedule 11 to the financial statements. In view of the
 mutual non- fulfillment of contractual obligations arising out of the
 Company''s contracts with certain suppliers/contractors, the Company has
 not accrued liability amounting to Rs. 5,361,960,970.  The ultimate
 performance of such contractual obligations and their impact on current
 liabilities cannot presently be determined and no adjustment that may
 result has been made in the financial statements for the year ended
 March 31, 2011. Our opinion on financial statements for the year ended
 March 31, 2010 included an emphasis on the same matter and such items
 aggregated to Rs. 5,153,656,980 as on March 31, 2010.
 
 c) Note 2 of Schedule 11 to the financial statements which indicates
 that the Company is in the process of negotiating an extension from the
 supplier for compliance of terms related to supply of plant and
 machinery and certain process units in respect of its refinery project.
 The Company has given advances amounting to Rs. 3,355,930,000 to such
 supplier in terms of the agreement executed by the Company for the said
 supply which will not be recoverable if the necessary extension is not
 granted by the supplier. In view of the ongoing negotiations with the
 supplier as mentioned above, the ultimate performance of the
 contractual obligations under the said agreement cannot presently be
 determined and no adjustment with respect to this advance, that may
 result, has been made in the financial statements for the year ended
 March 31, 2011.
 
 d) Note 2 of Schedule 11 to the financial statements.  The Company has
 given advances amounting to Rs.  311,400,048 to various
 suppliers/contractors in terms of the agreements executed by the
 Company for the implementation of its refinery project.  Such advances
 may not be recoverable in the event of non-fulfillment of the
 contractual obligations by the Company. The ability of the Company to
 fulfill its contractual obligations cannot presently be determined and
 no adjustment with respect to such advances, that may result, has been
 made in the financial statements for the year ended March 31, 2011.
 Our opinion on financial statements for the year ended March 31, 2010
 included an emphasis on the same matter and such items aggregated to
 Rs. 8,360,400,558 as on March 31, 2010.
 
 5.  As more fully explained in Note 13 of Schedule 11 to the financial
 statements, the Company has derecognized the provision for income-tax,
 service tax payable and tax deducted at source payable amounting to Rs.
 56,165,790, Rs. 5,437,653 and Rs. 6,001,848 respectively and has not
 accrued interest for non-payment of tax deducted at source and income
 tax amounting to Rs. 218,407 and Rs. 2,389,182 respectively. In our
 opinion, these amounts should have been recognised as liabilities in
 the financial statements.
 
 6.  As more fully explained in Note 18 of Schedule 11 to the financial
 statements, the Company has included the exchange differences arising
 on reporting monetary assets and liabilities at closing rate, interest
 on outstanding statutory dues and certain indirect expenses not
 directly attributable to construction up to the year ended March 31,
 2011 aggregating to Rs.  837,817,270 in the carrying amount of capital
 work in progress. In our opinion, these items are revenue in nature and
 accordingly should be recognized in the Profit and Loss Account. Our
 audit opinion on financial statements for the year ended March 31, 2010
 was qualified on the same matter and such items aggregated to Rs.
 814,931,602 up to the year ended March 31, 2010.
 
 We further report that had the observations made by us in paragraph 5
 and 6 above been considered, the net profit after tax for the year
 ended March 31, 2011 would have increased by Rs. 547,062,100 and the
 net profit after tax for the year ended March 31, 2010 would have
 increased by Rs. 502,958,525, reserves and surplus as of March 31, 2011
 would have increased by Rs.614,528,840 and reserves and surplus as of
 March 31, 2010 would have increased by Rs.570,425,264, capital work in
 progress as of March 31, 2011 would have increased by Rs.899,984,884 and
 capital work in progress as of March 31, 2010 would have increased by
 Rs. 814,931,602, current liabilities as of March 31, 2011 would have
 increased by Rs.11,439,501 and current liabilities as of March 31, 2010
 would have increased by Rs. Nil, provisions as of March 31, 2011 would
 have increased by Rs.346,920,936 and provisions as of March 31, 2010
 would have increased by Rs.311,973,077, loans and advances as of March
 31, 2011 would have increased by Rs. 5,437,653 and loans and advances
 as of March 31, 2010 would have increased by Rs.Nil and earnings per
 share for the year ended March 31, 2011 would have increased by Rs.
 0.07 and earnings per share for the year ended March 31, 2010 would
 have increased by Rs.0.05.
 
 7. Subject to our comments in paragraph 5 and 6 above and further to
 our comments in the Annexure referred to above, 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 purposes 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 financial statements dealt with by this report are in agreement
 with the books of account;
 
 d.  On the basis of written representations received from the
 directors, as on March 31, 2011 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2011 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Act;
 
 e.  In our opinion and to the best of our information and according to
 the explanations given to us, the financial statements dealt with by
 this report comply with the accounting standards referred to in
 sub-section (3C) of section 211 of the Act and the Rules framed there
 under and 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, in the case of:
 
 i) the Balance Sheet, of the state of affairs of the Company as at
 March 31, 2011; and
 
 ii) the Cash Flow Statement, of the cash flows for the year ended on
 that date
 
 ANNEXURE TO AUDITORS’ REPORT
 
 Based on the audit procedures performed for the purpose of reporting a
 true and fair view on the financial statements of the Company and
 taking into consideration the information and explanations given to us
 and the books of account and other records examined by us in the normal
 course of audit, we report that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets have been physically verified by the management
 during the year and no material discrepancies were noticed on such
 verification. In our opinion, the frequency of verification of the
 fixed assets is reasonable having regard to the size of the Company and
 the nature of its assets.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed off during the year.
 
 (ii) The Company does not have any inventory. Accordingly, the
 provisions of clause 4(ii) of the Order are not applicable.
 
 (iii) (a) 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. Accordingly, the provisions of clauses
 4(iii)(b) to (d) of the Order are not applicable.
 
 (b) The Company had taken interest-free loan from one company covered
 in the register maintained under section 301 of the Act. The maximum
 amount outstanding during the year was Rs. 187,871,035 and the year-end
 balance was Rs. Nil.
 
 (c) In our opinion, the terms and conditions for such loans are not,
 prima facie, prejudicial to the interest of the Company.
 
 (d) In respect of loans taken, the principal amount and interest amount
 are payable on demand in accordance with the terms and conditions.
 
 (iv) There are no transactions pertaining to purchase of inventory and
 sale of goods and services during the year.  In our opinion, there is
 an adequate internal control system commensurate with the size of the
 Company and the nature of its business for the purchase of fixed
 assets.
 
 (v) The Company has not entered into contracts or arrangements referred
 to in section 301 of the Act.  Accordingly, the provisions of clause
 4(v) of the Order are not applicable.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of sections 58A and 58AA of the Act and the Companies
 (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of
 clause 4(vi) of the Order are not applicable.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 (viii) The Company is not presently engaged in production, procuring
 and manufacturing of crude oil, gases (including Compressed Natural Gas
 or Liquified Natural Gas and re-gasification thereof) or any other
 petroleum product and is accordingly not required to maintain cost
 records as prescribed by the Central Government under notification no
 G.S.R 686(E) dated October 8, 2002.
 
 (ix) (a) Undisputed statutory dues including provident fund, investor
 education and protection fund, employees'' state insurance, income-tax,
 sales- tax, wealth-tax, service-tax, custom duty, excise duty, cess and
 other material statutory dues, as applicable, have not been regularly
 deposited with the appropriate authorities and there have been
 significant delays in a large number of cases.  Undisputed amounts
 payable in respect thereof, which were outstanding at the year end for
 a period of more than six months from the date they became payable are
 as follows:
 
 Name of       Nature of    Amount      Period to   Due Date Date of
 the statute   the dues       (Rs.)     which                Payment
                                        the amount                            
                                        relate
 
 Finance Act,  Service tax  57,756,586  September   5th of   Not paid
 1994 -        payable and              2007 to     each 
 Service tax   interest                 September   subseque
               thereon                  2010        -nt
                                                    month
 
 Note: The above table excludes the amounts derecognized and not accrued
 referred to in paragraph 5 of our report.
 
 (b) There are no dues in respect of income tax, sales tax, wealth tax,
 service tax, customs duty, excise duty and cess that have not been
 deposited with the appropriate authorities on account of any dispute.
 
 (x) In our opinion, the Company''s accumulated losses at the end of the
 financial year are less than fifty per cent of its net worth. Further
 the Company has not incurred cash losses during the financial year
 covered by our audit and the immediately preceding financial year.
 
 (xi) In our opinion, the company has not defaulted in repayment of dues
 to a bank. The Company has no dues payable to a financial institution
 or debenture holders during the year.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities. Accordingly, the provisions of clause 4(xii) of the Order
 are not applicable.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
 benefit fund/society. Accordingly, the provisions of clause 4(xiii) of
 the Order are not applicable.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable.
 
 (xv) The Company has not given any guarantees for loans taken by others
 from banks or financial institutions.  Accordingly, the provisions of
 clause 4(xv) of the Order are not applicable.
 
 (xvi) In our opinion, the Company has applied the term loans for the
 purpose for which the loans were obtained.
 
 (xvii) In our opinion, no funds raised on short-term basis have been
 used for long-term investment.
 
 (xviii) The Company has made preferential allotment of shares to
 parties or companies covered in the register maintained under section
 301 of the Act. In our opinion, the price at which shares have been
 issued is not prejudicial to the interest of the Company.
 
 (xix) The Company has neither issued nor had any outstanding debentures
 during the year. Accordingly, the provisions of clause 4(xix) of the
 Order are not applicable.
 
 (xx) The Company has not raised any money by public issues during the
 year.
 
 (xxi) No fraud on or by the Company has been noticed or reported during
 the period covered by our audit.
 
 For Walker, Chandiok & Co.            For Arun K. Gupta & Associates
 Chartered Accountants                 Chartered Accountants
 Firm Registration No: 001076N         Firm Registration No: 000605N
 
 By B P Singh                          By Sachin Kumar
 Partner                               Partner
 Membership No. 70116                  Membership No. 503204
 
 
 Gurgaon                               Gurgaon 
 May 30, 2011                          May 30, 2011