Uttam Sugar Mills

1.  We have audited the attached Balance Sheet of UTTAM SUGAR MILLS
 LIMITED as at 31 st December 2008, the Profit & Loss Account and also
 the Cash Flow Statement for the period of fifteen months 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 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 misstatements. 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.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 (The
 Order),as issued by the Central Government of India in terms of
 Section 227 (4A) of the Companies Act, 1956 (The Act), we enclose in
 the annexure a statement on the matters specified in paragraphs 4 & 5
 of the said Order.
 
 4.  Further to our comments in Annexure referred to in paragraph 3
 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 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 such
 books;
 
 c) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with books of account;
 
 d) In our opinion, Balance Sheet, Profit & Loss Account and Cash Flow
 Statement dealt with by this report comply with accounting standards
 referred to in Section 211 (3C) of the Act.
 
 e) On the basis of written representations received from the directors
 and taken on record by the Board of Directors, we report that none of
 the Directors are disqualified as on 31st December 2008 from being
 appointed as a Director in terms of clause (g) of Sub Section (1) of
 Section 274 of the Act.
 
 f) Without qualifying our opinion, we draw your attention to note
 no.9(ii) of schedule 19 relating to the accounting for sugar cane
 purchase liability for the sugar season 2007-08 at an interim price of
 Rs.110/- per quintal which is as per the directions of Honble Supreme
 Court or at the amount already paid to some sugar cane suppliers which
 is in excess of Rs.110/- per quintal instead of State Advisory prices
 of Rs.125/127 per quintal fixed by the State Governments. Pending the
 final decision of the Honble Supreme Court in this matter, the effect
 thereof presently is not ascertainable.
 
 g) In our opinion, and to the best of our information and according to
 the explanations given to us, the said accounts read together with the
 significant accounting policies and others notes thereon, and attached
 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 Balance Sheet, of the State of affairs of the Company
 as at 31st December, 2008.
 
 ii) in the case of Profit & Loss Account, of the Loss of the Company
 for the period of fifteen months ended on that date; and
 
 iii) in the case of Cash Flow Statement, of the cash flows of the
 Company for the period of fifteen months ended on that date.
 
 Annexure to the Auditors Report
 
 (Referred to in paragraph (3) of our Report of even date to the
 shareholders of UTTAM SUGAR MILLS LIMITED for the period ended 31st
 December 2008.)
 
 1.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of its
 principal fixed assets, other than the location of furniture and
 fixture and office equipments, which are under compilation,
 accordingly the fixed assets are physically verified by the management
 according to a phased programme designed to cover all the items over a
 period of three years which, in our opinion, is reasonable having
 regards to the size of the company and the nature of its assets.
 Pursuant to the programme, a portion of the fixed assets has been
 physically verified by the management during the year and no material
 discrepancies have been noticed on such verification.
 
 (b ) In our opinion and according to the information and explanations
 given to us, a substantial part of the fixed assets has not been
 disposed off by the Company during the period.
 
 2.  (a) The physical verification of inventory has been conducted by
 the management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification 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) On the basis of our examination, in our opinion, the Company has
 maintained proper records of inventory.  Discrepancies noticed on such
 physical verification of inventory as compared to the book records were
 not material.
 
 3.  (a) According to information made available to us, the Company has
 not granted any loans, secured or unsecured to companies, firms or
 other parties covered in the register maintained under section 301 of
 the Act, accordingly clause 4(iii) (b) to (d) of the Order are not
 applicable to the Company.
 
 (b) According to information made available to us, the Company has
 taken unsecured loans from six parties covered in the register
 maintained under section 301 of the Act. Total outstanding for such
 loans at the period-end amounted to Rs.277450 thousands and maximum
 outstanding during the period amounts to Rs.285150 thousands. Further,
 the Company has not taken any secured loan from the aforesaid referred
 parties.
 
 (c) The rate of interest and other terms and conditions of the
 unsecured loans taken by the Company are prima- facie not prejudicial
 to the interest of the Company.
 
 (d) As informed to us, the repayment of the principal amount of
 unsecured loans and interest thereon, wherever there is stipulation as
 regards the payments, are regular.
 
 4.  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 nature of its business, for purchase
 of inventory and fixed assets and for the sale of goods and services.
 Further, on the basis of our examination and according to the
 information and explanations given to us, we have not observed any
 continuing failure to correct major weaknesses in internal control
 system.
 
 5.  (a) Based on our examination and 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 Act have
 been entered in the register required to be maintained under that
 section.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements and exceeding the value of rupees five lakhs in respect of
 any party have been made at prices which are reasonable having regard
 to prevailing market price at the relevant time.
 
 6.  On the basis of information and explanations given to us, the
 Company has not accepted any public deposits from the public within the
 meaning of Section 58A, 58AA or any other relevant provisions of the
 Act, and rules framed thereunder.
 
 7.  The Company has an internal audit system which needs to be
 strengthened to make it commensurate with the size and nature of the
 Companys business.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company pursuant to the order made by the Central Government for the
 maintenance of the cost records under section 209(1) (d) of the Act and
 are of the opinion that, prima-facie, the prescribed account and
 records have been maintained and are being made up. We however as not
 required have not made a detailed examination of such records with a
 view to determine whether these are accurate or complete.
 
 9. (a) According to the information and explanations given to us the
 Company is generally regular in depositing with appropriate
 authorities, undisputed statutory dues including Provident Fund, Income
 Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty,
 Cess and other statutory dues applicable to it, except few cases of
 delay in deposit of Tax Deducted at Source and Service Tax. As
 explained to us, the provisions of Employees State Insurance are not
 applicable to the Company, No amount was due to be deposited under
 investor Education and Protection Fund. Further, there was no arrears
 of undisputed statutory dues outstanding as at 31st December 2008 for a
 period of more than six months from the date they became payable.
  
 (b) According to the information and explanations given to us, the
 disputed statutory dues of Income Tax, Sales Tax & Excise duty
 aggregating to Rs.43698 thousands that have not been deposited are
 given below: -
 
 Name of                   Nature of             Period to
 Statue                      Due                  which it
                                                  Pertains
 
 Sales Tax Laws            Sales Tax             1999-2000
 
                                                 2003-2004
                                                 2007-2008
 
                           Entry Tax             2007-2008
 
 Central Excise            Excise Duty           2004-2005
 Act, 1944
 
 Income Tax                Income Tax            2005-2006
 
                                                 2006-2007
 
 Amount              Forum where dispute
 (Rs. in                      is pending
 Thousands)
 
     47               Joint Commissioner
                     (Appeal)
 
   2773               Joint Commissioner
                     (Appeal)
 
   9678              Deputy Commissioner
                    (Assessment)
 
   2674             Allahabad High Court
 
  23352             CESTAT
 
   3398             Income Tax Appellate
                    Tribunal
 
   1776             Commissioner
                   (Appeal)
 
  43698
 
 Further, in respect of Custom Duty, Wealth Tax, Service Tax and Cess,
 it has been informed that there are no dues, which have not been
 deposited on account of any dispute.
 
 10.  The companys accumulated losses at the end of the period under
 report are less than fifty percent of its Net Worth. The company has
 incurred cash losses during the period of fifteen months ended 31st
 December, 2008, and also in the immediately preceding financial year
 ended 30th September, 2007.
 
 11.  In our opinion and according to the information and explanations
 given to us, the Company has defaulted in repayment of its dues to
 Banks. The particulars of delays which relates to interest/installment
 during the year ended 31st December, 2008 are as follows: -
 
 Particulars      Amount (including Interest)* Period of Delay (Days)
                     (Rs. in Thousands)
 
 Banks                       346288                     1-30
 
                             328342                    31-60
 
                             227202                    61-90
 
                              28683                  91-More
 
                              20000           Pending reschedulement.
                             950515
 
 * Includes Rs. 8,86,212/- thousands paid during the year.  There are no
 dues of debenture holders.
 
 12.  According to the information and explanations given to us, the
 Company has not granted any loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 13.  The Company is not a chit fund or a Nidhi / mutual benefit fund /
 society, therefore provisions of clause 4(xiii) of the order are not
 applicable to the Company.
 
 14.  In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments. Accordingly, provisions
 of clause 4(xiv) of the order are not applicable to the Company.
 
 15.  According to the information and explanations given to us, the
 Company has given corporate guarantees for loans taken by others from
 Banks. In our opinion, the terms & conditions of these guarantees are
 not prejudicial to the interest of the company.
 
 16.  In our opinion and on the basis of information and explanations
 given to us and on overall basis, term loans availed by the Company
 were, prima-facie applied by the Company for the purposes for which the
 loans were raised, other than amounts temporarily held in Fixed Deposit
 pending utilization of the funds for the stated use.
 
 17.  On the basis of overall examinations of the balance sheet of the
 Company, in our opinion and according to the information and
 explanations given to us funds raised on the short term basis to the
 extent of Rs. 4,32,174/- thousands upto the date of the Balance Sheet
 have been used for long-term investment, primarily in the nature of
 capital expenditures and repayment of Loans.
 
 18.  During the period Company has not made any preferential allotment
 of shares to parties and companies covered in the register maintained
 under section 301 of the Act.
 
 19.  The Company has not issued any debenture, therefore, no comment is
 required under para 4(xix) of CARO, 2003.
 
 20.  The company has not raised any money by way of public issue during
 the period under report.
 
 21.  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
 has been noticed or reported during the course of our audit.
 
                                                  For B.K.Kapur & Co.
                                               Chartered Accountants,
 
 Place : Noida                                    (M.S.Kapur) F.C.A.
 Dated : 31st March, 2009                                   Partner
                                                        M. No.74615