India Sugars & Refineries Ltd.की ऑडीटर रिपोर्ट

Sep 30, 2013

Report on the Financial StatementsWe have audited the accompanying financial statements of THE INDIA SUGARS & REFINERIES LIMITED ("the Company"), which comprise the Balance Sheet as at September 30,2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended ("financial statements"), and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 ("the Act") read with General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Qualified Opinion

The company has considered a sum ofRs. 101.83 lakhs representing Sugar Export subsidy claim receivable from Government ofKarnataka (GOK) as doubtful following the rejection of the claim by GOK. But no provision has been made by the Company in the attached financial statements on the ground that legal steps are being initiated in this regard andBIFR is also being approachedfor appropriate relief. Had management provided for the claim mentioned above, the net loss would have increased by Rs.101.83 lakhs and share holders'' fund would have reduced by Rs.101.83 lakhs.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matter described in the Basis for qualified opinion paragraph, the financial statements 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:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at September 30,2013;

b) in the case of Statement of Profit and Loss, of the loss for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following Notes to the Financial Statements (i) Note 28.6 regarding adoption of Going Concern assumption in preparation of financial statements (ii) Note 28.5 regarding provision of interest to banks on an estimated basis and (iii) Note 28.7(e) regarding claim from Government of Karnataka aggregating Rs.150.94 lakhs being regarded as Contingent liability.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 those books

c) the financial statements dealt with by this Report are in agreement with the books of account.

d) in our opinion, the financial statements comply with the Accounting Standards notified under the Compa nies Act, 1956 ("the Act") read with General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013 except for non disclosure of certain details regarding compensated absences mandated by Accounting Standard-15 Employee Benefits.

e) on the basis of written representations received from the directors as on September 30,2013, and taken on record by the Board of Directors, none of the directors is disqualified as on September 30, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURETO THE INDEPENDENT AUDITORS'' REPORT

The Annexure referred to in paragraph 1 under ''Report on Other and Regulatory Requirements'' section of the Our Report of even date.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

1. (a) The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) As explained to us, fixed assets have been physically verified by the management once during the year and no material discrepancies were noticed on such verification.

(c) In our opinion substantial part of the fixed assets has not been disposed during the year and therefore the going concern assumption is not affected.

2. (a) As explained to us, inventories have been physically verified during the year 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 inventories followed by the management are reasonable and adequate in relation to the size of thecompanyandthe nature of its business.

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. Discrepancies noticed on physical verification of stocks by the management as compared to book records have been properly dealt with.

3. On the basis of our examination of the books of accounts, the Company has not granted any loans, secured or unsecured, to /from companies, firms or other parties covered in the register maintained under section 301 of the Act. The Company has taken loans from, parties and companies listed on the register maintained under section 301 of the Act (and those termed as ''Promoters1 with the Board for Industrial and Financial Reconstruction (BIFR)) numbering in all,7 and involving in the maximum Rs.505.15 lakhs of which Rs. 494.33 lakhs is outstanding at the end of the year. The payment of the principal amount, interest and other terms and conditions, if any, on the said loans are governed by the order of the BIFR. With regard to loans not so governed, the payment of the principal amount and interest are as per the terms agreed with the parties and are prima facie not prejudicial to the interest of the company.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventories & fixed assets and payment for expenses, sale of goods and services. During the course of our audit, no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

5. Based on the audit procedures applied by us and according to the information and explanations provided by the management, the Company has entered all the particulars of contracts or arrangements referred to in section 301 of the act in the register required to be maintained under that section.

6. The transactions pursuant to contracts or arrangements referred to in section 301 of the Act and exceeding five lakh rupees in respect of any party have been prima-facie made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

7. The Company has not accepted any deposits from the public and hence our commenting on the compliance with the directives issued by the Reserve Bank of India and the provisions of sections 58A and 58AAof the Act and the rules framed there under does not arise.

8. Internal audit has been carried out by an independent Chartered Accountant. We are informed, that the Internal Audit function is in the process of being strengthened to, include operations audit as well.

9. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whetherthey are accurate or complete.

10. (a) The company has been regular in depositing undisputed statutory dues pertaining to excise duty,service tax, employees provident fund and pension fund and income tax deducted at source with the appropriate authorities. It has not been regular in depositing undisputed statutory dues pertaining to commercial taxes and unpaid bonus with the appropriate authorities. The arrears of such dues outstanding as at the end of the financial year for a period of more than six months from the date they became payable is as under:

Period to Name of Nature Amount (Rs which the the Statute of Dues .in Lakhs) amount relates

Karnataka Sales Tax March 1999 to March Act, 1957 Sales tax 208.56 2005

Central Various periods from Sales tax Central November 2000 to Act, 1956 Sales Tax 2.81 September 2012

Value Value Various periods from Added Tax Added July 2008 to Act, 2003 Tax 26.39 November 2012

Tax on entry of Various periods from goods Act, March 1999 to March 1979 Entry Tax 55.14 2013

Karnataka Labour Welfare fund October 2008 to Act, 1965 Bonus 24.52 September 2010

Total 317.43



Name of the Status Date of Due Date payment

Karnataka Sales Tax Act 20th of subsequent 1957 month Unpaid till date

Central Sales Tax Act, 20th of subsequent 1956 month Unpaid till date

Value Added Tax Act, 2003 20th of subsequent month Unpaid till date

Tax on Entry of goods Act, 20th of subsequent 1979 month Unpaid till date

Karnataka Labour welfare 9 months from the fund Act, 1965 end of accounting period Unpaid till date

Deposit with / remittance to Investor Education and Protection Fund, Employees State Insurance Corporation, income tax, wealth tax and custom duty are not applicable to the company.

(b) There are no amounts payable in respect of income tax, wealth tax, customs duty and cess which have not been deposited on account of any disputes. Details of excise duty, sales tax and service tax not remitted on account of disputes are as under:

Period to which the Forum where the dispute is Nature of Dues Dues (Rs. in Lakhs) amount relates pending

Various Periods from 7.75 October 2011 to March Deputy Commr. Appeal at Excise Duty and Cess 2012 CESTAT Thereon

Various periods from 4.01 June 2009 to October Commr. Appeals 2009

From January 2005 to 2.27 5th of May 2006 Appeal before CESTAT

Service Tax and From November 2005 Comm of Central Excise thereon to January 2006 (Appeals)

1.00 From April 2007 to Comm of Central Excise (Appeals) September 2008

11. The company has accumulated losses as at September 30,2013 which is not less than fifty percent of its net worth. The Company has incurred cash loss for the year and in the immediately preceding financial year.

12. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has defaulted in the payment of dues towards principal and interest to financial institution and bank and the defaulted amounts aggregated to Rs.2,303.75 lakhs covering the period from 1.10.2010 up to 30.09.2013.

13. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

14. The Company is not a chit fund or a nidhi /mutual benefit fund/society. Therefore, the provision of this clause of the Companies (Auditor''s Report) Order, 2003 (as amended) is not applicable to the Company.

15. The Company is not dealing or trading in Shares, Mutual funds and other Investments.

16. In respect of guarantee extended by the Company for loans taken by others from banks or financial institutions, the terms and conditions thereof, in our opinion, are not prejudicial to the interest of the Company.

17. Based on our audit procedures and the information given by the management, we report that the company has not raised any term loans during the year.

18. On an overall examination of the Balance Sheet of the Company as at 30th September, 2013, we report that no funds raised on short-term basis have been used for long-term investment by the Company.

19. Based on the audit procedures performed, we report that the Company has not made any preferential allotment of shares during the year, to parties and companies covered in the Register maintained under section 301 of the Act.

20. The Company has no outstanding debentures during the period under audit and hence the question of our commenting on the security or charge created in respect of debentures does not arise.

21. The Company has not raised any money by public issue during the year.

22. Based on the audit procedures performed, we report that no fraud on or by the Company has been noticed or reported during the year, nor have we been informed of such case by the management.

For M.S. Krishnaswami& Rajan

Chartered Accountants

FRN:01554S

M.S. Murali

Partner

Membership No.: 26453

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Sep 30, 2012

1. We have audited the attached Balance sheet of The India Sugars & Refineries Limited as at September 30, 2012 the relative Statement of Profit and loss and the Cash flow statement for the year ended that date (the year), signed by us under reference to this report. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with the auditing and assurance standards generally accepted in India. The said 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 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 issued by the Central Government 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 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

(i) 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.

(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 financial statements dealt with by this report are in agreement with the books of account.

(iv) In our opinion, the aforesaid financial statements comply in all material respects with the applicable Accounting Standards referred to in section 211 (3C) of the Act, except for non disclosure of certain details regarding compensated absences mandated by Accounting Standard-15 Employee Benefits.

(v) In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements read with the Significant accounting policies and Notes to the Accounts, give the information required by the Act in the manner so required and also, read with Note 25.5 regarding adoption of the Going Concern assumption in preparation of financial statements for the year, give a true and fair view, in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance sheet, of the state of the affairs of the Company as at September 30,2012;

b) in the case of the Statement of Profit and loss, of the loss for theyear; and

c) in the case of Cash flow statement, of the cash flows for the year.

5. Based on the representation received from the directors of the Company and taken on record by the Board of Directors as on September 30, 2012, we report that none of the directors is disqualified as on September 30, 2012 from being appointed as a director in terms of section 274(1) (g) of the Act.

ANNEXURE TO THE AUDITORS'' REPORT (Referred to in paragraph 3 of our report of even date)

As required by the Companies (Auditor''s Report) Order, 2003 (CARO) issued by the Government of India in terms of section 227(4A) of the Companies Act, 1956, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we report that:

1. In our opinion, the Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. The management has represented that the fixed assets have been physically verified once during the year and no material discrepancies were noticed on such verification. Substantial part of the fixed assets has not been disposed off during the year.

2. Physical verification of inventory has been conducted at reasonable intervals by the management and the procedures of such 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. The Company is maintaining proper records of inventory and no material discrepancies were noticed on such verification.

3. The company has not granted loans companies listed on the register maintained under section 301 of the Act. For this purpose Trade Advances are not considered as Loans. The Company has taken loans from, parties and companies listed on the register maintained under section 301 of the Act (and those termed as ''Promoters'' with the Board for Industrial and Financial Reconstruction (BIFR)) numbering in all , seven, and involving in the maximum Rs. 505.15 lakhs which is outstanding at the end of the year. In our opinion, the rate of interest and other terms and conditions of such loans taken are prima facie not prejudicial to the interest of the company. The payment of the principal amount and interest, if any, on the said loans are governed by the order of the BIFR.With regard to loans not so governed, the payment of the principal amount and interest are as per the terms agreed with the parties and are prima facie not prejudicial to the interest of the company.

4. In our opinion, 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 fixed assets and for the sale of goods and services. There were no major weaknesses in the internal control system.

5. According to the information and explanation given to us, the Company has entered all the particulars of contracts or arrangements referred to in section 301 of the act in the register required to be maintained under that section.

6. The transactions pursuant to contracts or arrangements referred to in section 301 of the Act and exceeding five lakh rupees in respect of any party have been prima-facie made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

7. The Company has not accepted any deposits from the public to which the directives issued by the Reserve Bank of India and the provisions of section 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules, 1975 apply and accordingly our commenting on the compliance thereof does not arise. For this purpose balances in the current account of directors are not considered as deposits.

8. In our opinion the Company has an internal audit system commensurate with its size and nature of its business.

9. We have broadly reviewed the cost records maintained by tbe Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(l)(d) of the Companies Act, 1956 and are of the opinioft that prima facie the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

10. The company has been regular in depositing undisputed statutory dues pertaining to excise duty , service tax, employees provident fund and pension fund and income tax deducted at source with the appropriate authorities. It has not been regular in depositing undisputed statutory dues pertaining to commercial taxes with the appropriate authorities. The arrears of such dues outstanding as at the end of the financial year for a period of more than six months from the date they became payable aggregated to Rs. 1346.34 lakhs. Deposit with / remittance to Investor Education and Protections Fund, Employees State Insurance Corporation, income tax, wealth tax, custom duty and other Statutory dues are not applicable to the company. There are no dues of income tax / sales tax / service tax / customs duty / wealth tax / excise duty / cess which have not been deposited on account of any dispute.

11. The accumulated losses of the Company at the end of the year are not less than fifty percent of its net worth. The Company has incurred cash loss for the year but has not incurred the same during the immediately preceding financial year.

12. The Company has defaulted in the payment of dues towards principal and interest to financial institution and bank and the defaulted amounts aggregated to Rs 1994.27 lakhs, covering the period from 1.10.2010 up to 30.09.2012.

13. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

14. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.

15. The Company is not dealing or trading in shares, securities, debentures and other investments.

16. In respect of guarantee extended by the Company for loans taken by others from banks or financial institutions, the terms and conditions thereof, in our opinion, are not prejudicial to the interest of the Company.

17. The Company has not availed any term loan during the year.

18. The funds raised by the Company on short-term basis have not been used during the year for long-term investments.

19. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

20. The Company has not issued any debentures during the year.

21. The Company has not raised money by public issues of shares or other securities.

22. We have not come across nor have any instances of fraud perpetrated on or by the Company been reported.

For M.S. Krishnaswami & Rajan

Chartered Accountants

Firm Regn. No.01554 S

M.S. Murali - Partner

Membership No. 26453

Place : Bengaluru

Date -23-2-2013

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Sep 30, 2011

1. We have audited the attached Balance sheet of The India Sugars & Refineries Limited as at September 30, 2011 the relative Profit and loss account and the Cash flow statement for the year ended that date (the year), signed by us under reference to this report. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with the auditing and assurance standards generally accepted in India. The said 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 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 issued by the Central Government 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 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

(i) 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.

(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 financial statements dealt with by this report are in agreement with the books of account.

(iv) In our opinion, the aforesaid financial statements, comply in all material respects with the applicable Accounting Standards referred to in section 211(3C) of the Act.

(v) In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements read with the Significant accounting policies and Notes to the Accounts, 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:

a) in the case of the Balance sheet, of the state of the affairs of the Company as at September 30, 2011;

b) in the case of the Profit and loss account, of the profit for the year; and

c) in the case of Cash flow statement, of the cash flows for the year.

5. Based on the representation received from the directors of the Company and taken on record by the Board of Directors, we report that none of the directors is disqualified as on September 30, 2011 from being appointed as a director in terms of section 274(l)(g) of the Act.

ANNEXURE TO THE AUDITORS'REPORT

(Referred to in paragraph 3 of our report of even date)

As required by the Companies (Auditor's Report) Order, 2003 (CARO) issued by the Government of India in terms of section 227(4A) of the Companies Act, 1956, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we report that:

1. In our opinion, the Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. The management has represented that the fixed assets have been physically verified once during the year and no material discrepancies were noticed on such verification. Substantial part of the fixed assets has not been disposed off during the year.

2. Physical verification of inventory has been conducted at reasonable intervals by the management and the procedures of such 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. The Company is maintaining proper records of inventory and no material discrepancies were noticed on such verification.

3. The company has not granted any secured or unsecured loans, but has taken such loans from, parties and companies listed on the register maintained under section 301 of the Act numbering seven and involving in the maximum Rs.560.26 lakhs which is outstanding at the end of the year. In our opinion, the rate of interest and other terms and conditions of such loans taken are prima facie not prejudicial to the interest of the company. The payment of the principal amount and interest, if any, on the said loans are governed by the order of the Board for Industrial and Financial Reconstruction (BIFR). With regard to loans not so governed, the payment of the principal amount and interest are as per the terms agreed with the parties and are prima facie not prejudicial to the interest of the company.

4. In our opinion, 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 fixed assets and for the sale of goods and services. There were no major weaknesses in the internal control system.

5. There are no contracts or arrangements referred to in section 301 of the Act and exceeding five lakh rupees in respect of any party in the year under report which would have been entered in the register required to be maintained under the said section.

6. The Company has not accepted any deposits, as defined in section 58A of the Act and the rules framed there under, from the public. For this purpose balances in the current account of directors are not considered as deposits.

7. In our opinion the Company has an internal audit system commensurate with its size and nature of its business.

8. On the basis of the records produced, we are of the opinion that prima facie, the cost records and related accounts prescribed by the Central Government under section 209( 1)(d) of the Act have been made and maintained by the Company. However, we are not required to carry out and have not carried out any detailed examination of such records and accounts.

9. The company has been regular in depositing undisputed statutory dues pertaining to service tax with the appropriate authorities. It has not been regular in depositing undisputed statutory dues pertaining to commercial taxes, excise duty employees provident fund and pension fund and income tax deducted at source with the appropriate authorities. There are however no arrears of such dues outstanding as at the end of the financial year for a period

of more than six months from the date they became payable except for commercial taxes aggregating to Rs. 12,33,38,550. Deposit with / remittance to Investor Education and Protections Fund, Employees State Insurance Corporation, income tax, wealth tax, custom duty and other Statutory dues are not applicable to the company. Regarding dues of commercial taxes, the BIFR by its order dated 06.1.2011 directed the Secretary, Government of Karnataka to consider the case of the company sympathetically in line with other sick companies in the State of Karnataka and consider providing necessary relief with regard to deferment of purchase tax as applicable under the State Policy. The matter is still pending. There are no dues of income tax / sales tax / service tax / customs duty / wealth tax / excise duty / cess which have not been deposited on account of any dispute.

10. The accumulated losses of the Company at the end of the year are not less than fifty percent of its net worth. The Company has not incurred cash loss for the year but in the immediately preceding financial year.

11. The Company has defaulted in the payment of dues towards principal and interest to financial institution and bank and the defaulted amounts aggregated to Rs. 12,14,10,163.00 covering the period from 01.10.2010 up to 30.09.2011.

12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.

14. The Company is not dealing or trading in shares, securities, debentures and other investments.

15. In respect of guarantee extended by the Company for loans taken by others from banks or financial institutions, the terms and conditions thereof, in our opinion, are not prejudicial to the interest of the Company.

16. The Company has applied the term loans for the purpose for which they were obtained.

17. The funds raised by the Company on short-term basis have not been used during the year for long-term investments.

18. The 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 debentures.

20. The Company has not raised money by public issues of shares or other securities.

21. We have not come across nor have any instances of fraud perpetrated on or by the Company been reported.

For M.S. Krishnaswami & Rajan Chartered Accountants Firm Regn. No.01554 S

M.K. Rajan - Partner Membership No. 4059

Place: Bengaluru

Date: 27-02-2012

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Sep 30, 2010

1. We have audited the attached Balance sheet of The India Sugars & Refineries Limited as at September 30, 2010 the relative Profit and loss account and the Cash flow statement for the year ended that date (the year), signed by us under reference to this report. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with the auditing and assurance standards generally accepted in India. The said 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. 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.

4. 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.

5. The financial statements dealt with by this report are in agreement with the books of account.

6. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements read with the Significant accounting policies and Notes to the Accounts, give the information required by the Companies Act, 1956 (the Act) in the manner so required and give a true and fair view, in conformity with the accounting principles generally accepted in India:

6.1 in the case of the Balance sheet, of the state of the affairs of the Company as at September 30, 2010;

6.2 in the case of the Profit and loss account, of the loss for the year; and

6.3 in the case of Cash flow statement, of the cash flows for the year.

7. In our opinion, the aforesaid financial statements, comply in all material respects with the applicable Accounting Standards referred to in section 211(3C) of the Act.

8. Based on the representation received from the directors of the Company and taken on record by the Board of Directors, we report that none of the directors is disqualified as on September 30, 2009 from being appointed as a director in terms of section 274(1 )(g) of the Act.

9. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government and on the basis of our examination of the Companys books of account carried out in accordance with the generally accepted auditing and assurance standards in India and to the best of our information and according to the explanations given to us, our observations pertaining to the year ended September 30, 2009, unless otherwise stated, are as under:

9.1 In our opinion, the Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. The management has represented that the fixed assets have been physically verified once during the year and no material discrepancies were noticed on such verification. Substantial part of the fixed assets has not been disposed off.

9.2 Physical verification of inventory has been conducted at reasonable intervals by the management and the procedures of such 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. The Company is maintaining proper records of inventory and no material discrepancies were noticed on such verification.

9.3 The company has not granted any secured or unsecured loans, but has taken such loans from, parties and companies listed on the register maintained under section 301 of the Act numbering seven and involving in the maximum Rs.478.65 lakhs which is outstanding at the end of the year. In our opinion, the rate of interest and other terms and conditions of such loans taken are prima facie not prejudicial to the interest of the company. The payment of the principal amount and interest, if any, on the said loans are governed by the order of the Board for Industrial and Financial Reconstruction (BIFR). With regard to loans not so governed, the payment of the principal amount and interest are as per the terms agreed with the parties.

9.4 In our opinion, 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 fixed assets and for the sale of goods and services/There were no major weaknesses in the internal control system.

9.5 There are no contracts or arrangements referred to in section 301 of the Act and exceeding five lakh rupees in respect of any party in the year under report which would have been entered in the register required to be maintained under the said section.

9.6 The Company has not accepted any deposits, as defined in section 58A of the Act and the rules framed thereunder, from the public. For this purpose balances in the current account of directors are not considered as deposits.

9.7 In our opinion the Company has an internal audit system commensurate with its size and nature of its business.

9.8 On the basis of the records produced, we are of the opinion that prima facie, the cost records and related accounts prescribed by the Central Government under section 209(1 )(d) of the Act have been made and maintained by the Company. However, we are not required to carry out and have not carried out any detailed examination of such records and accounts.

9.9 The company has been regular in depositing undisputed statutory dues pertaining to excise duty and service tax with the appropriate authorities. It has not been regular in depositing undisputed statutory dues pertaining to commercial taxes, employees provident fund and pension fund, income tax deducted at source with the appropriate authorities. Deposit with / remittance to Investor Education and Protections Fund, Employees State Insurance Corporation, income tax, wealth tax, custom duty and other Statutory dues are not applicable to the company. Regarding dues towards provident fund and commercial taxes amounts of Rs.6,91,879 and Rs,10,61,98,198.12 respectively were in arrears for more than six months as on 30.09.2010. Regarding dues of commercial taxes the BIFR by its order dated 06.1.2011 directed the Secretary, Government of Karnataka to consider the case of the company sympathetically in line with other sick companies in the State of Karnataka and consider providing necessary relief with regard to deferment of purchase tax as applicable under the State Policy. The matter is still pending.

9.10 The accumulated losses of the Company at the end of the year are not less than fifty percent of its net worth. The Company has incurred cash loss for the year and not in the immediately preceding financial year.

9.11 The Company has defaulted in the payment of dues towards principal and interest to financial institution and bank and the defaulted amounts aggregated to Rs.4,71,21,628.47 covering the period from 30.09.2009 to 30.09.2010.

9.12 The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

9.13 The provisions of special statute applicable to chit fund are not applicable to the Company.

9.14 The Company is not dealing or trading in shares, securities, debentures and other investments.

9.15 In respect of guarantee extended by the Company for loans taken by others from banks or financial institutions, the terms and conditions thereof, in our opinion, are not prejudicial to the interest of the Company.

9.16 The Company has applied the tern loans for the purpose for which they were obtained.

9.17 The funds raised by the Company on short-term basis have not been used during the year for long-term investments.

9.18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

9.19 The Company has not issued any debentures.

9.20 The Company has not raised money by public issues of shares or other securities.

9.21 We have not come across nor have any instances of fraud perpetrated on or by the Company been reported.

For M.S. Krishnaswami & Rajan Chartered Accountants Firm Regn. No.01554 S

M.K. Rajan - Partner Membership No. 4059

Place : Bengaluru

Date : 4th March 2011

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Sep 30, 2009

1. We have audited the attached Balance sheet of The India Sugars & Refineries Limited as at September 30, 2009, the relative Profit and loss account and the Cash flow statement for the year ended that date (the year), signed by us under reference to this report. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with the auditing and assurance standards generally accepted in India. The said 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. 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.

4. 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.

5. The financial statements dealt with by this report are in agreement with the books of account.

6. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements read with the Significant accounting policies and Notes to the Accounts, give the information required by the Companies Act, 1956 (the Act) in the manner so required and give a true and fair view, in conformity with the accounting principles generally accepted in India:

6.1 in the case of the Balance sheet, of the state of the affairs of the Company as at September 30,-2009;

6.2 in the case of the Profit and loss account, of the loss for the year; and

6.3 in the case of Cash flow statement, of the cash flows for the year.

7. In our opinion, the aforesaid financial statements, comply in all material respects with the applicable Accounting Standards referred to in section 211(3C) of the Act.

8. Based on the representation received from the directors of the Company and taken on record by the Board of Directors, we report that none of the directors is disqualified as on September 30, 2009 from being appointed as a director in terms of section 274(1 )(g) of the Act.

9. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government and on the basis of our examination of the Companys books of account carried out in accordance with the generally accepted auditing and assurance standards in India and to the best of our information and according to the explanations given to us, our observations pertaining to the year ended September 30, 2009, unless otherwise stated, are as under:

9.1 In our opinion, the Company is maintaining proper records showing full particulars including quantitative

details and situation of fixed assets. The management has represented that the fixed assets have been physically verified once during the year and no material discrepancies were noticed on such verification. Substantial part of the fixed assets has not been disposed off.

9.2 Physical verification of inventory has been conducted at reasonable intervals by the management and the procedures of such 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. The Company is maintaining proper records of inventory and no material discrepancies were noticed on such verification.

9.3 The company has not granted any secured or unsecured loans, but has taken such loans from, parties and companies listed on the register maintained under section 301 of the Act numbering nine and involving in the maximum Rs.308 lakhs of which Rs. 298 lakhs due to eight parties is outstanding at the end of the year. In our opinion, the rate of interest and other terms and conditions of such loans taken are prima facie not prejudicial to the interest of the company. The payment of the principal amount and interest, if any, on the said loans are governed by the order of the Board for Industrial and Financial Reconstruction (BIFR). With regard to loans not so governed, the payment of the principal amount and interest are as per the terms agreed with the parties.

9.4 In our opinion, 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 fixed assets and for the sale of goods and services. There were no major weaknesses in the internal control system.

9.5 There are no contracts or arrangements referred to in section 301 of the Act and exceeding five lakh rupees in respect of any party in the year under report which would have been entered in the register required to be maintained under the said section.

9.6 The Company has not accepted any deposits, as defined in section 58A of the Act and the rules framed thereunder, from the public. For this purpose balances in the current account of directors are not considered as deposits.

9.7 In our opinion the Company has an internal audit system commensurate with its size and nature of its business.

9.8 On the basis of the records produced, we are of the opinion that prima facie, the cost records and related accounts prescribed by the Central Government under section 209(1 )(d) of the Act have been made and maintained by the Company. However, we are not required to carry out and have not carried out any detailed examination of such records and accounts.

9.9 The company has been regular in depositing undisputed statutory dues including Investor education and protection fund, income tax, wealth tax, sales tax, service tax, custom duty, excise duty, cess and any other statutory dues with appropriate authorities. It has been generally regular in depositing undisputed provident fund dues. Regarding dues of commercial

taxes aggregating Rs.1032 lakhs upto June 3, 2007 the BIFR had recommended to the Government of Karnataka to consider the deferment of such taxes till such time the BIFR takes a final view in the matter. Regarding the outstanding amount of Rs.51.02 lakhs as at September 30, 2009 representing commercial taxes due after June 4, 2007, the deferment of payment is pending before the BIFR for its final order in the matter.

9.10 The accumulated losses of the Company at the end of the year are not less than fifty percent of its net worth. The Company has not incurred cash loss for the year or in the immediately preceding year.

9.11 The Company has not defaulted during the year under report in repayment of dues to financial institution or bank except for principal amount of Rs 52.80 lakhs and interest of Rs.20.04 to IFCI Limited, the nodal agency for Government of India for the Sugar Development Fund.

9.12 The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

9.13 The provisions of special statute applicable to chit fund are not applicable to the Company.

9.14 The Company is not dealing or trading in shares, securities, debentures and other investments.

9.15 In respect of guarantee extended by the Company for loans taken by others from banks or financial institutions, the terms and conditions thereof, in our opinion, are not prejudicial to the interest of the Company.

9.16 The Company has applied the term loans for the purpose for which they were obtained.

9.17 The funds raised by the Company on short-term basis have not been used during the year for long-term investments.

9.18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

9.19 The Company has not issued any debentures.

9.20 The Company has not raised money by public issues of shares or other securities.

9.21 We have not come across nor have any instances of fraud perpetrated on or by the Company been reported.

For M.S. Krishnaswami & Rajan Chartered Accountants Firm Regn. No.01554

M.K. Rajan - Partner Membership No. 4059

Place : Bangalore

Date :31s1 May 2010