1.  We have audited the attached Balance Sheet of UTTAM SUGAR MILLS
 LIMITED as at 31st March 2011, the Profit & Loss Account and also 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 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 (Auditor''s 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 31s1 March,2011 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.8
 (a) of schedule 19 relating to the accounting for sugar cane purchase
 liability in respect of units situated in the state of Uttar Pradesh
 for the sugar season 2007- 08 at an interim price of Rs.110/- per
 quintal which is as per the directions of Hon''ble Supreme Court instead
 of State Advisory Prices of Rs.125/- per quintal fixed by the State
 Government. Pending the final decision of the Hon''ble 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 March, 2011;
 
 ii) in the case of Profit & Loss Account, of the Loss of the Company
 for the year ended on that date; and
 
 iii) in the case of Cash Flow Statement, of the cash flows of the
 Company for year 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 year ended 31st
 March,2011.)
 
 1.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of its
 principal fixed assets, 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 year.
 
 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
 fully repaid unsecured loans taken by way of conversion into preference
 shares from four parties covered in the register maintained under
 section 301 of the Act. There was no outstanding of principal amount of
 such loan at the year end and maximum outstanding during the year
 amounts to Rs 2938 Lacs. 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
 Company''s 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 Income Tax, Tax Deducted at Source, Wealth Tax 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
 March, 2011 for a period of more than six months from the date they
 became payable except the Income Tax dues of Rs 98.87 Lacs plus
 applicable interest thereon relating to the assessment year 2005-2006
 and 2006-2007.
 
 (b) According to the information and explanations given to us, the
 disputed statutory dues of Sales Tax & Excise duty aggregating to Rs
 397.16 Lacs that have not been deposited are given below: -
 
 Name of Statue   Nature of Due       Amount       Forum where
                                   (Rs.in Lacs)    dispute is pending
 
 Sales Tax Laws   Sales Tax           3.30         Commissioner of
                                                   Trade Tax
 
 Central Excise   Excise Duty       340.72         CESTAT
 
 Act, 1944                           53.14         Commissioner(Appeal)
 
                                    397.16
 
 Further, in respect of Income Tax ,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 company''s accumulated losses at the end of the year under
 report are less than fifty percent of its Net Worth. The company has
 not incurred any cash losses during the year ended 31th March, 2011,
 however there was cash losses in the immediately preceding period of
 fifteen months ended 31st March, 2010.
 
 11.  In our opinion and according to the information and explanations
 given to us, the Company has defaulted in the nature of delays in
 repayment of its dues to Banks. The particulars of delays after
 considering the effect of reschedulement of repayment terms of
 borrowing from Banks, approved by Corporate Debt Restructuring(CDR)
 Empowered Group which relates to interest/installment during the year
 ended 31s'' March 2011 are as follows: -
 
 Particulars          Amount (including Interest)*    Period of Delay
                              (Rs. in lacs)               (Days)
 
 Banks                            6462.77                   1-30
 
                                  2362.17                  31-60
 
 * Includes Rs. 8458 Lacs 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 term & 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.
 
 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.4820 Lacs 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 year the Company has made preferential allotment of
 840000, 6.5% Cumulative Redeemable Shares Series I @ Rs.100/- each,
 redeemable at par and 1675000, 10% Cumulative Redeemable Shares Series
 II @ Rs.100/- each, issued at premium of 100/- each, redeemable at
 premium of 100/- each to parties and companies covered in the register
 maintained under section 301 of the Act. In our opinion, prices at
 which shares have been issued is not prejudicial to the interest of the
 company.
 
 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.
 
                                      Firm Registration Number 000852C
 
                                            Chartered Accountants,
 
 Place : Noida                                (M.S.Kapur) F.C.A.
 
 Dated : May 27th 2011                               Partner
 
                                                   M. No.74615