We have audited the attached Balance Sheet of Dhampur Sugar Mills
 Limited (the Company), as at 31 st March,2011, the Profit and Loss
 Account and also the Cash Flow Statement for the 18 months ended on
 that date annexed thereto and signed by us, this day under reference to
 this report. 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.
 
 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 the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 1.  As required by the Companies (Auditors Report) Order, 2003, issued
 by the Central Government of India in terms of Section 227(4A) of the
 Companies Act, 1956, we enclose in the Annexure, a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 2.  Further to our comments in para 1 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 Balance Sheet, the Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report comply with the requirements
 of the Accounting Standards referred to in section 211 (3C) of the
 Companies Act, 1956;
 
 e) On the basis of written representation received from the directors
 as on 31st March,2011 and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as on 31.03.2011 from
 being appointed as director under Clause (g) of sub-section (1) of
 Section 274 of the Companies Act, 1956.
 
 f) Attention is drawn to note III-2 of schedule 15 relating to
 accounting for cane purchase liability for the sugar season 2007-08 at
 Rs. 110 per quintal instead of State Advised Price of Rs. 125 per
 quintal fixed by the Uttar Pradesh State Government as the legal
 proceedings are pending in the matter.
 
 g) In our opinion and to the best of our information and according to
 the explanations given to us, the aforesaid Balance Sheet, the Profit
 and Loss Account and the Cash Flow Statement together with 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
 accounting principles generally accepted in India:
 
 i) in the case of the Balance Sheet of the state of affairs of the
 Company as at 31 st March, 2011;
 
 ii) in the case of Profit and Loss Account of the Profit for the 18
 months ended on that date; and
 
 iii) in the case of Cash Flow Statement, of the cash flows for the 18
 months ended on that date.
 
 Annexure to the Auditors Report
 The Annexure referred to in the Auditors report to the members of
 Dhampur Sugar Mills Limited (the Company) for the 18 months ended 31st
 March, 2011:
 
 i) (a) The Company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets have been physically verified by the management at
 the end of the period. In our opinion the frequency of verification is
 reasonable considering the size of the Company and nature of its
 business.
 
 (c) The Company has not disposed off a substantial part of its fixed
 assets during the period and the going concern status of the Company is
 not affected.
 
 ii) (a) The inventory except stores, has been physically verified
 during the period by the management. In our opinion, the frequency of
 verification of inventory, except stores is reasonable.
 
 (b) 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) 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) The Company had granted interest free unsecured loans/advances
 to three companies covered in the register maintained under section 301
 of the Companies Act, 1956.
 
 - The maximum amount involved during the period is Rs.  26.56 crore.
 
 -The year end balance due is Rs. 24.37 crore.
 
 (b) In our opinion, the other terms and conditions on which interest
 free unsecured loans/advances have been granted to a company listed in
 the register maintained under section 301 of the Companies Act, 1956
 are not, prima facie, prejudicial to the interest of the Company.
 
 (c) The payments of principal amount are regular, wherever stipulated.
 
 (d) There is no overdue amount of loans/advances, more than rupee one
 lac, granted to companies, firms or other parties listed in the
 register maintained under section 301 of the Companies Act, 1956.
 
 (e) The Company had taken interest free unsecured loans/advances from
 four companies covered in the register maintained under section 301 of
 the Companies Act, 1956.
 
 - The maximum amount involved during the period is Rs. 7.60 crore.
 
 -The year end balance due is Rs. 0.36 crore.
 
 (f) In our opinion, the other terms and conditions on which
 loans/advances have been taken from companies listed in the register
 maintained under section 301 of the Companies Act, 1956 are not, prima
 facie, prejudicial to the interest of the Company.
 
 (g) The payments of principal amount are regular, wherever stipulated.
 
 iv) In our opinion and according to the information and explanations
 given to us, 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 and services. During the course of our audit, we have not
 observed any continuing failure to correct major weaknesses in internal
 controls.
 
 v) (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contract or arrangements
 referred to in Section 301 of the Companies Act, 1956 have been entered
 into the register maintained under section 301 of the Companies Act,
 1956.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements exceeding the value of rupees five lac in respect of any
 party during the period have been made at prices which are reasonable
 having regard to prevailing market prices at the relevant time.
 
 vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the directives issued by the
 Reserve Bank of India and the provisions of Section 58A and section
 58AA of the Companies Act, 1956 or any other relevant provisions of the
 Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,
 1975 with regard to the deposits accepted from public. As informed to
 us, no order has been passed by the Company Law Board or National
 Company Law Tribunal or Reserve Bank of India or any court or any other
 Tribunal.
 
 vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 viii) We have been informed that the cost records as have been
 prescribed under section 209 (1)(d) of the Companies Act, 1956 have
 been made and maintained.
 
 ix) (a) As explained to us, the statutory dues payable by the Company
 comprises mainly of Provident Fund, Investor Education Protection Fund,
 Employees State Insurance, Income-tax, Sales-tax (VAT), Wealth-tax,
 Service-tax, Custom Duty, Excise Duty, Cess, Entry tax, Purchase tax
 and other material statutory dues applicable to it. According to the
 records of the Company and information and explanations given to us,
 the Company has been generally regularly depositing the aforesaid
 undisputed statutory dues with the appropriate authorities. There are
 no undisputed statutory dues as referred to above as at 31st March,2011
 outstanding for a period of more than six months from the date they
 become payable.
 
 (b) According to the information and explanations given to us, there
 were no dues on account of Income Tax and Wealth Tax which were not
 deposited on account of any dispute. However, the particulars of
 Service-tax, Sales-tax, Custom Duty, Excise Duty, Entry tax. Stamp duty
 and other statutory material dues, which have not been deposited on
 account of any dispute, are as referred to in the Details of Contingent
 Liabilities in Schedule 15.
 
 x) The Company does not have any accumulated losses at the end of the
 financial year. The Company has not incurred any cash losses during the
 financial year covered by the audit and in the immediately preceding
 financial year.
 
 xi) In our opinion and according to the information and explanations
 given to us, there is no default in repayment of dues to any Financial
 Institution and Bank during the period under report, as per the terms
 of the respective loans.
 
 xii) In our opinion and according to the information and explanations
 given to us, the Company has not granted 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, as such the provisions of paragraph 4(xiii) of
 the Companies (Auditors Report) Order, 2003 are not applicable to the
 Company.
 
 xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments, accordingly the
 provisions of paragraph 4 (xiv) of the Companies (Auditors Report)
 Order, 2003 are not applicable to the Company.
 
 xv) In our opinion, the Company has not given any guarantees for loans
 taken by others from banks or financial institutions, as such the
 provisions of paragraph 4(xv) of the Companies (Auditors Report)
 Order, 2003 are not applicable to the Company.
 
 xvi) The term loans obtained by the Company have been applied for the
 purposes for which they were obtained.
 
 xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we report
 that the no funds raised on short- term basis have been used for
 long-term investment during the period.
 
 xviii)The Company has not made any preferential allotment of shares
 during the period to parties covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 xix) The Company has not issued any debentures during the period.
 
 xx) The Company has not raised any money during the period by public
 issue.
 
 xxi) To the best of our knowledge and belief and according to the
 information and explanations given to us, no fraud on or by the Company
 was noticed or reported during the course of our audit.
 
 
 
 For S. Vaish & Co.,                           For Mittal Gupta & Co.,
 
 (S.P. Agrawal)                                           (B. L Gupta)
 Partner                                                       Partner
 Chartered Accountants                           Chartered Accountants
 Membership No. 07269                            Membership No. 073794
 FRN 00001C                                                  FRN01874C
 
 Place : Kanpur
 Dated : 24th May, 2011