We have audited the attached Balance sheet of SURYA PHARMACEUTICAL
 LIMITED as at 31st March, 2012 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
 Company''s management. Our responsibility is to express an opinion on
 these financial statements based on ouraudit.
 
 1.  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 also
 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
 
 2.  As required by the Companies (Auditors'' Report) Order, 2003 issued
 by the Company Law Board in terms of Section 227 (4A) of the
 CompaniesAct, 1956 we enclose in theAnnexureAstatement on the matters
 specified in paragraph 4 & 5 of said order:
 
 3.  As stated in note 28.10 of the financial statement, the managerial
 remuneration to directors exceeded the limits specified in the relevant
 provisions of the Companies Act,1956, by Rs. 270.62 lacs. As informed
 to us, the company taken necessary steps to seek approval from central
 Government and expects such approval. Pending such approval the impact
 thereof on the financial statement has not been determined.
 
 4.  Further to our comments in the annexure referred to in paragraph
 (2) 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 purpose of
 ouraudit;
 
 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 the
 books;
 
 c) The Balance sheet and Profit and LossAccount dealt with by this
 report are in agreement with the books of accounts;
 
 d) In our opinion, the Balance Sheet and the Profit and Loss account
 comply with the accounting standards referred to in sub section (3C) of
 section 211 of the CompaniesAct, 1956, subject to Notes on Accounts
 forming part of Balance Sheet.
 
 e) As per information and explanations given to us, none of the
 directors of the company is disqualified from being appointed as a
 director in terms of clause (g) of subsection (1) of section 274 of the
 CompaniesAct, 1956.
 
 f) Subject to our comments in paragraph (3) above and para 3(b) of
 annexure A, the effect of which has not been ascertained, in our
 opinion and to the best of our information and according to the
 explanations given to us, the said accounts give the information
 required by the CompaniesAct, 1956, in the mannerso required and give a
 true and fair view.
 
 (i) In the case of the Balance Sheet of the State of affairs of the
 company as at 31st March, 2012 and
 
 (ii) In the case of the Profit and Loss account, of Loss of the company
 for the year ended on that date.
 
 (iii) In case of cash flow statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE ''A'' REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF THE AUDITORS
 TO THE MEMBERS OF SURYA PHARMACEUTICAL LIMITED ON THEACCOUNTS
 FORTHEYEAR ENDING 31st MARCH, 2012
 
 1 (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The company has a regular program of physical verification of its
 fixed assets by which all fixed assets are verified every year. In our
 opinion, the periodicity of physical verification is reasonable to the
 size of the company and nature of its assets.  No material
 discrepancies were noted on such verification.
 
 (c) The fixed assets disposed off during the year were not substantial,
 and therefore, do not affect the going concern assumption.
 
 2 (a) Physical verification of stock of finished goods, stores, spares
 and raw materials was conducted by the management during the year and
 in our opinion, the frequency of such verification was reasonable.
 
 (b) Procedures for 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
 book records were not material. The expired stock of Rs. 15.72 crore
 detected during physical verification has been written off by the
 company.
 
 3 In respect of unsecured loans granted by the company to companies
 covered in the register under section 301 of the CompaniesAct, 1956 and
 according to information and explanation given to us-
 
 (a) The company has granted unsecured loans to six Companies/ Firms/
 Trusts and other Parties Listed in the register maintained under
 Section 301 of the CompaniesAct, 1956 and the amount outstanding as on
 31.03.2012 was Rs. 84.92 crore (Rs. 5.10 crore). The maximum balance
 outstanding during the year was Rs.109.56 crore.
 
 ( b) According to the information and explanation given to us , we are
 of the opinion that the rate of interest and terms and conditions of
 loan given by the company to companies/firms/ trusts in which directors
 of the company, are interested are prima facie prejudicial to the
 interest of the company on account of following.
 
 (c) The company has granted the interest free loans, where the company
 is paying interest to banks and institutions
 
 (d) The company has agreement for recovery with a stipulation of four
 years.
 
 (e) The company has taken unsecured loans from companies/firms or other
 parties listed in the register maintained under section 301 of the
 CompaniesAct, 1956.Theoutstandingamountason31-03-2012isRs.2.93crore.
 
 (f) The loans are interest free and not prejudicial to the interest of
 the company.
 
 (g) The company has agreementfor repayment with a stipulation of three
 years.
 
 4 In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the company and the nature of its
 business with regard to the purchase of stores, raw materials including
 the Plant & Machinery, Vehicles, Equipment and other assets and for the
 sale of these goods. In our opinion and according to the information
 and explanations given to us, there is no continuing failure to correct
 the major weaknesses in internal control system. We have not observed
 any major weakness in the internal control system during the course of
 our audit.
 
 5 In respect of contracts or arrangements entered in the register
 maintained in pursuance of section 301 of the CompaniesAct, 1956, to
 the best of our knowledge and belief and according to information and
 explanation given to us:
 
 a) The particulars of contracts or arrangements referred to in section
 301 that were needed to be entered in the register maintained under
 said section have been so entered.
 
 b) Where each of such transaction is in excess of Rs. 5 lakhs in
 respect of any party, the transaction have been made at price prima
 facie reasonable having regard to the prevailing market prices at
 relevant time.
 
 6.  In our opinion, and according to the information and explanations
 given to us, the company has accepted deposits from public during the
 year and has complied with the provisions of Section 58A of the Act and
 the Companies (Acceptance of Deposits) Rules, 1975 with regard to the
 deposits accepted from the public.
 
 7 The company has an internal audit system, which in our opinion is,
 commensurate with the size of the company and nature of its business.
 
 8 We have broadly reviewed the books of account maintained by the
 company pursuant to the rules prescribed by the Central Government for
 maintenance of cost records under section 209(1)(d) of the companies
 Act, 1956 and are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained. However, we have
 not made a detailed examination of the records.
 
 9 (a) The company has generally been regular in depositing undisputed
 dues, including Provident Fund ,Investor Education and Protection Fund,
 Employees'' State Insurance ,Income Tax, Sale Tax, Wealth Tax Service
 Tax ,Custom Duty ,Excise Duty, cess and other material statutory dues
 applicable to it with the appropriate authorities.
 
 (b) No undisputed amounts payable in respect of Provident Fund,
 Investor Education and Protection Fund, Employees'' State Insurance,
 Income Tax, Sale Tax, Custom Duty, Excise Duty, cess were in arrears as
 at March 31.03.2012 fora Period of more than six months from the date
 they became payable.
 
 (c) Detail of dues of Sales Tax, Service Tax and Income Tax which have
 not been deposited as at March 31.03.2012 on account of disputes are
 given below :-
 
 Name of Statute     Nature of Dues  Amount   Period to which   Forum
                                     In       the amount 
                                              relates           where 
                                                                dispute
                                     Lacs(*)                    is 
                                                                pending
 
 The Central            
 Excise Act, 
 1944.                                2 16       1998           CESTAT
 
 The Central 
 Excise              Demand          17.96       1999           CESTAT
 
 Act, 1944                            3.69       2002
 
                                      0.86       2003
 
                                     94.12       2005
 
                                      6.34       2008
 
                                    371.53       2009
 
                                     34.42       2010
 
                                   1508.42       2011
 
                                   2039.51
 
 Service Tax         Demand           2.89       2007          Department
 
                                     13.25       2008
 
                                      2.00       2009
 
                                    138.34       2010
 
                                     45.29       2011
 
                                    201.77
 
 Custom Act          Demand         313.27       2008          Department
 
 Total                             2556.71
 
 Net of pre-deposit amount
 
 10.  The Company does not have accumulated Losses. The Company has
 incurred cash losses of Rs. 358.60 crore during the financial year
 covered by our audit previous year Nil.
 
 11.  The Company has defaulted in repayment of dues amounting to Rs.
 22.20 crore principal and Rs. 39.78 crore interest to banks and
 financial institutions. The company has approached the Corporate Debt
 Restructuring cell for restructuring of loans and working capital
 limits, where its application has been accepted and is in process of
 approval.
 
 12.  In our opinion and according to the information and explanations
 given to us, the Company has not granted loans & advances on the basis
 of security byway of pledge of shares, debentures & other securities.
 
 13.  In our opinion and according to the information and explanations
 given to us the provisions of chit fund are not applicable to the
 company.
 
 14.  In our opinion and according to the information and explanations
 given to us, the Company is not dealing in shares securities and
 debentures. Therefore the provision of clause 4(xiv) of CARO are not
 applicable to the Company.
 
 15.  In our opinion and according to the information and explanations
 given to us, having regard to the fact that the subsidiary is wholly
 owned the term and conditions of the guarantee given by the Company for
 loan taken by the subsidiary from a bank are not prima facie
 prejudicial to the interest of the Company
 
 16.  In our opinion and according to the information and explanations
 given to us, the term loan have been applied for the purpose forwhich
 they were raised.
 
 17.  In our opinion and according to the information and explanations
 given to us and on an overall examination of the Balance Sheet of the
 Company, we report that funds raised on short term basis have not been
 used during the year for long term investment.
 
 18.  According to the information and explanations given to us during
 the period covered by our audit, the Company has converted 10,00,000
 convertible warrants out of 47,00,000 convertible share warrants issued
 earlier into 1,00,00,000 equity shares to the parties and companies
 covered in the register maintained under Section 301 of the
 CompaniesAct-1956.
 
 19.  According to the information and explanations given to us, during
 the year covered by our report, the Company has not issued any secured
 debenture
 
 20.  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
 explanation given to us, we have neither come across any instance of
 fraud on or by the Company noticed or reported during the year.
 
                                                  FOR AAD & ASSOCIATES
 
                                                 CHARTERED ACCOUNTANTS
 
                                                            Sd/-
 
                                                      SHAMSHER SINGH
 
                                                        (PROPRIETOR)
 
 PLACE: CHANDIGARH                                      M.NO. 083898
 
 DATE: July 7, 2012
 
                                                         FRN-020624N