1.  We have audited the attached Balance Sheet of THE OUDH SUGAR MILLS
 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. 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 the auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the fi
 nancial 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 signifi cant 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.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 (as
 amended) 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 statement on the matters specifi ed in paragraphs 4
 and 5 of the said Order.
 
 4.  Without qualifying our opinion, we draw attention to Note No. 7 on
 Schedule 23, regarding accounting of Sugarcane purchases at Hargaon &
 Rosa Sugar units in Uttar Pradesh @ Rs. 110 per quintal for sugar
 season 2007-2008 as against the State Advised Price (SAP) of Rs. 125
 per quintal in view of the interim order dated 8th September 2008 of
 the Honble Supreme Court. The maximum liability on account of above
 comes to Rs. 2422.74 Lakh. However, since the matter is subjudice, the
 actual impact, if any, is presently undeterminable and hence, no
 provision thereof has been made in the accounts.
 
 5.  Further to our comments 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 purpose 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
 those books;
 
 (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 as submitted to us;
 
 (iv) In our opinion, the Balance Sheet, Profit and 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, subject to our comments in para (vi) below.
 
 (v) 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 disqualifi ed 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;
 
 (vi) Attention is drawn to Note No. 8(a) on schedule 23 regarding
 recognition of Deferred Tax Asset (DTA) (net) of Rs. 3,054.68 Lakh up
 to 30th June 2010, based on the future profitability projections made
 by the management. However, we are unable to express any opinion on the
 above projections and their consequent impact, if any, on such
 recognition of Deferred Tax Asset. Had the impact of above been
 considered, there would be a loss of Rs. 11,282.58 Lakh as against the
 reported loss of Rs. 8,227.90 Lakh for the year and the profit and
 loss account debit balance would be Rs. 8,046.06 Lakh as against the
 reported figure of Rs. 4,991.38 Lakh as on the balance sheet date.
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the said Statements of Account, Subject to
 the matters stated in para (vi) above, 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 Balance Sheet, of the state of affairs of the
 Company as at 30th June, 2010;
 
 (b) in the case of Profit and Loss Account, of the loss of the Company
 for the year ended on that date; and
 
 (c) in the case of Cash Flow Statement, of the cash fl ows for the year
 ended on that date.
 
 Annexure To The Auditors Report (referred to in our report of even
 date to the members of The Oudh Sugar Mills Limited as at and for the
 year ended 30th June, 2010)
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situations of fi xed
 assets.
 
 (b) Fixed Assets have been physically verifi ed by the management
 during the year based on a phased programme of verifying all the assets
 over a period of two years, which in our opinion, is reasonable having
 regard to the size of the Company and the nature and value of its
 assets. As informed, no material discrepancies were noticed on such
 verifi cation.
 
 (c) There was no substantial disposal of fi xed assets during the year.
 
 (ii) (a) The management has conducted physical verifi cation of
 inventory at reasonable intervals during the year.
 
 (b) The procedures of physical verifi cation of inventory 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 and no
 material discrepancies were noticed on such physical verifi cation.
 
 (iii) (a) As informed, the Company has not granted any loans, secured
 or unsecured to companies, fi rms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956 and
 hence the requirements of clauses (iii) (b) to (d) of the order are not
 applicable.
 
 (b) The Company has taken loans of Rs. 500 Lakh from a company covered
 in the register maintained under section 301 of the Companies Act,
 1956. The maximum outstanding during the year as well as the year-end
 balance of such loan was Rs. 500 Lakh.
 
 (c) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (d) There are no stipulations for repayment of the above loans but the
 same are stated to be repayable on demand. As informed, the lenders
 have not demanded repayment of the above loan during the year and thus,
 there has been no default on the part of the company.  Further,
 interest on the above loans, as informed, was regularly paid by the
 Company.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory and fi xed assets and for the sale of goods and
 services.  During the course of our audit, no major weakness has been
 noticed in the internal control system in respect of these areas and we
 have not observed any continuing failure to correct major weakness in
 internal control system of the company.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangements
 referred to in Section 301 of the Companies Act, 1956 that need to be
 entered into the register maintained under the above section, have been
 so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding the value of Rupees fi ve Lakh entered into
 during the financial year, are at prices which are reasonable having
 regard to the prevailing market prices at the relevant time.
 
 (vi) In respect of deposits accepted, in our opinion and according to
 the information and explanations given to us, the directives issued by
 the Reserve Bank of India and the provisions of Sections 58A, 58AA or
 other relevant provisions of the Companies Act, 1956 and the rules
 framed thereunder, to the extent applicable, have been complied with by
 the Company. We are informed by the management that no order has been
 passed by the Company law Board, National Company Law Tribunal or
 Reserve Bank of India 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 broadly reviewed the books of account maintained by the
 Company 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 in respect of its products and are of the opinion that prima
 facie, the prescribed accounts and records have been made and
 maintained.
 
 (ix) (a) The Company has generally been regular in depositing
 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 with appropriate authorities except for Cane
 Purchase Ta x of Rs. 75.75 Lakh relating to the sugar unit in Bihar
 which has remained unpaid as on the Balance sheet date.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 441 A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of 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 were outstanding, at the year end for a
 period of more than six months from the date they became payable.
 
 (c) According to the records of the Company, the dues outstanding in
 respect of income tax, sales tax, wealth tax, service tax, custom duty,
 excise duty and cess on account of any dispute are as follows:
 
 Name of the statute       Nature of dues        Amount
                                               (Rs in Lakh)
 
                      Tax on sale of Alcohol to
                      country vendors& non
 Bihar Finance Act, 
 1981                                             31.95
                      submission of declaration
                      forms
 
 The Uttar Pradesh 
 Tax on               On Sales of sugar            3.50
 entry of goods Act, 
 2000
 
                      On Sales of Baggasse        19.05
 Central  Sales  Tax 
  Act,                Central Sales Tax demand on
                                                   9.29
 1956                 interstate sale
 
                      Various Sales Tax / Entry tax 4.15
                      demands on assessment
 
                      Interstate Baggasse sales   11.17
 
                      Demand for Sales Tax / non
                      – submission of Declaration  3.36
                      Forms
 
                      Disallowance of Cenvat
 Central Excise 
 Act, 1944            Credit on certain inputs / 307.74
                      capital items
 
                      Excise Duty on burnt / waste
                      and loss on storage of      41.27
                      molasses etc.
 
                      Non-payment of Sugar Cess   86.18
 
                      Reversal of excise duty on  36.50
                      Baggasse sales
 
                      Excise duty on loss on      47.48
                      reprocessing of brown sugar
 
 
 
 Name of the             Period to which the     Forum where dispute is
 Statue                   amount relates              pending
 
                                                  Joint Commissioner
 Bihar Finance Act, 1981  1984-85 to 1989-90,     (Appeals); Appellate
                          1995-96, 2002-03        Tribunal; High Court,
                                                   Patna
 
 The Uttar Pradesh Tax on
 entry of goods Act, 2000     2000-01             High Court, Allahabad
 
                                                  Additional Commissioner
                              2006-07             (Appeals)
 
 Central  Sales  Tax  Act,
 1956                                             Joint Commissioner
                          1993-94 to 2004-05      Appeals
 
                                                  Appellate Tribunal,    
                          1977-78 to 1981-82,     Lucknow / High Court,
                          2000-01                 Allahabad
 
                          2001-02, 2006-07        High Court, Lucknow
 
                                                  Joint Commissioner
                          2003-04                 (Appeals) / High Court,
                                                  Allahabad
 
 Central Excise Act, 1944                         Commissioner (Appeals)
                          1998-99, 2001-02 to    / CESTAT / High Court,
                          2008-09                 Allahabad
 
                                                  Commissioner (Appeals)
                          1992-93, 2002-03 to     / CESTAT / High Court,
                          2005-06                 Allahabad
 
                          2007-08                 Commissioner (Appeals)
                          2009-10                 Commissioner (Appeals)
 
                          1988-89, 2003-04,       Commissioner Appeals;
                          2006-07 to 2008-09      CESTAT, Delhi
 
 (x) The Companys accumulated losses at the end of the financial year
 (after considering the impact of deferred tax assets), are more than fi
 fty per cent of its net worth and it has incurred cash losses in the
 current year but it had not incurred cash loss in the immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to any bank and / or fi
 nancial institution, read with the fact that the due date of 30th June,
 2010 for loan repayment of Rs. 2,197 Lakh (including interest) has been
 reseheduled by the bank and hence, there is no default as on the
 balance sheet date. There were no debentures outstanding during the
 year.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced 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 and therefore, the provisions of clause
 4(xiii) of the order are not applicable.
 
 (xiv) In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments and therefore, the
 provisions of clause 4(xiv) of the order are not applicable.
 
 (xv) According to the information and explanations given to us, the
 Company has given guarantees for loans taken by others from a bank, the
 terms and conditions whereof are stated to be not prima-facie
 prejudicial to the interest of the Company.
 
 (xvi) Based on the information and explanations given to us by the
 management, term loans were applied for the purpose for which these
 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 Rs. 19,784 Lakh approx. raised on short-term basis have been used
 for long-term investment (without considering permanent working
 capital).
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year to parties or companies covered in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as
 per the information and explanations given 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 S. R. BATLIBOI & CO.
 
                                    Firm Registration No. 301003E
 
                                            Chartered Accountants
 
                                                Per R. K. AGRAWAL
 Place: Kolkata                                          Partner
 
 Dated: 27th August, 2010                    Membership No. 16667