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 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 (Auditors Report) Order, 2003. issued by the Central Government of India, in terms of section 227 (4A) of the Companies Act. 1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 & 5 of the said order to the extent applicable to the company.

4. Further to our comments in the Annexure referred to in paragraph 3 above:

(a) 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; (b) in our opinion, proper books of accounts as required by law have been kept by the company so far as appears from our examination of the books; (c) the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts;

(d) " in our opinion the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards (AS) referred to in sub-section (3C) of section 211 of the Companies Act. 1956 except AS-15 regarding accounting for retirement benefits as stated in significant accounting policies no. I(e) in schedule 20. non-disclosure of Provisions, Contingent Liabilities and Contingent Assets in accordance with AS-29. non-compliance of AS- 20 in as much as the amount of preference dividend on cumulative preference shares for the year has not been reduced from the profits for computing Earning per share and AS-2 regarding valuation of inventories to the extent slated below

Though the valuation of inventory of finished product and raw material has been done on the same basis as in earlier years, the method of valuation continues to include element of interest and other administrative charges as slated in significant accounting policies no. l(d) in schedule 20 of financial statements. This is not in conformity with AS-2 issued by the Institute of Chartered Accountants of India. This has resulted in overstatement of current assets as at the end of the year by Rs I3.6()lacs. The differentia! impact on the operating results of the company has resulted in profits for the year higher by Rs. 5.60 lacs

(e) On the basis of the 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 the balance sheet date, from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act. 1956;

(t) in our-opinion and to the best of our information and according to the explanations given to us. the said accounts subject to significant accounting policy no. l(e) regarding non-provision of gratuity liability and liability on account of leave encashment to employees; non-provision of income tax liability of earlier years of Rs. 252.15 lacs (reference is also invited to note no. 10 of notes on accounts); recoverability of Rs. 368.87 lacs and Rs. 433.56 lacs in respect of licence fee and purchase tax respectively in respect of which we are unable to form an opinion (refer note no. 5 & 6 of notes on accounts in schedule 20). note no 15 regarding non-ascertainment of the extent of recoverability of certain debts and advances and the provision required tliereagainst as well as non- ascertainment of the extent of recoverability of other sundry debtors outstanding for period exceeding six months and note no. 16 regarding balance confirmation with parties and its impact, if any, on profit for the year and accumulated losses of the company; and read together with other notes on accounts in Schedule 20 give the information required by the

Companies Act. 1956. in (the manner so required and give a true and fair view:

(i) in the case of Balance Sheet of the state of affairs of the Company as on 31st March, 2006; (ii) in the case of the Profit & Loss Account of the profit of the company for the year ended on that date; and (iii) in the case of Cash Flow Statement of the cash flows for the year ended on that date.

ANNEXURE IX) AUDITORS REPORT ON THE ACCOUNTS OF J.R. ORGANICS LIMITED (FORMERLY:- SOMAIYA ORCANICS (INDIA) LIMITED) FOR THE YEAR ENDED 31.03.2006. (Referred to in para 3 of our report of even date)

l.(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets in respect of its Barabanki unit. However, reconciliation of these records with the nooks of account which was in progress since the previous financial year has not been completed. In respect of Caplainganj unit of the company, we were informed that the process of compilation of fixed assets records is in progress.

(b) As informed to us. the company has prepared a programme for physical verification of its fixed assets in a phased manner which in our opinion is reasonable having regard to the size of the company and nature of its business Pursuant to the said programme, a portion of the fixed assets of the company has been physically verified by the management during the year and as informed to us no material discrepancies were noticed during the course of such verification.

(c) During the year, the company has not disposed off a substantial part of its fixed assets.

2.(a) As informed to us. physical, verification of inventory was conducted by the management during the year. In our opinion, the frequency of verification is reasonable.

(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 were found reasonable and adequate in relation to the size of the company and nature of its business.

(c) In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of inventory, the company is maintaining proper records of inventory. We were explained that discrepancies noticed on physical verification of inventory as compared to book records were not material.

3.(a) According to the information and explanations given to us, the company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under section 301 of the Companies Act. 1056. However, on the basis of information and explanations furnished to us, the Company has taken unsecured loan aggregating to Rs. 468.12 lacs from a company and unsecured interest- free loans Rs. 107.20 lacs from 3 parties (balance as on 31.03.2006 is Rs. 50.66 lacs) covered in the register maintained under section 301 of the Companies Act, 1956.

(b) According to the information and explanations furnished to us. the company has not provided any interest on unsecured loan of Rs. 468 12 lacs mentioned above in view of note no. 13 of notes on accounts in Schedule 20. It has been represented to us by the management that no other terms and conditions have been prescribed in respect of unsecured loans taken by the company, as such, we are unable to comment further.

(c) We have been explained that no stipulations regarding repayment of principal and interest on the above loans have been prescribed. As such, we are unable to comment further.

4. In our opinion and according to the information and explanations given to us during the course of audit, there are adequate internal control systems commensurate with the size of the company and the nature of its business with regard to purchase of inventories and fixed assets and for sale of goods.

5. It has been represented to us by the management that the company has not entered into any contracts or arrangements referred to in section 301 of the Companies Act. However, the register maintained under section 301 of the Companies Act 1956 has not been produced before us for verification.

6. In our opinion and according to the information and explanations given to us. the company has not accepted any deposits from the public to which the provisions of section 58A and 58AA of the Companies Act, 1956 read with the Companies (Acceptance and Deposits) Rules, 1975 would be applicable. However, it has represented to us by the management that Bill discounting facilities availed by the company referred to in note no. 14 of Notes to Accounts is not covered under section 58A and 58AA of the Companies Act, 1956 read with the Companies (Acceptance and Deposits) Rules, 1975.

7. The company has an internal audit system. However considering the size of the company and nature of its business it requires to be further strengthened.

8. The company according to the information and explanations given to us, is maintaining cost records prescribed by the Central Government under section 209( 1 )(d) of the Companies Act, 1956. The content of these records have not been examined by us.

9.(a) According to the records of the company the undisputed statutory dues are generally being regularly deposited by the company with the appropriate authorities. According to the information and explanations furnished to us there are no undisputed amounts payable in respect of statutory dues which have remained outstanding as at 31.03.2006 for a period of more than six months from the date they become payable.

(b) On the basis of the information & explanation furnished to us by the management, details of dues of Income Tax/ Sales Tax/ Wealth Tax/ Service Tax/ Custom

10. The company has accumulated losses as at the end of the financial year which are more than fifty percent of its net worth. However, the company has neither incurred any cash losses during the financial year under audit nor in the immediately preceding financial year.

11. According to the information and explanations furnished to us, the company has not defaulted in repayment of dues to financial institutions and banks.

12. According to the information and explanations furnished 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. According to the information and explanations furnished to us, the provisions of any special statute applicable to chit fund are not applicable to the company.

14. As explained to us, the company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations furnished to us, the company has not given any guarantee for loans taken by others from banks and financial institutions.

16. To the best of our knowledge and belief and according to the information and explanations given to us. no term loan from banks/ financial institutions has been availed by the company during the year.

17. According to the cash flow statement and records examined by us and according to the information and explanations given to us. on overall basis, funds raised on short- term basis have, prima facie, not been used during the year for long term investment.

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 Companies Act. 1956 during the year.

19. The company has not issued any debentures during the year

20. The company has not raised any money by way of public issues during the year.

21. On the basis of information and explanations given to us, no fraud, on or by the company has been noticed or reported during the year.

Place: Lucknow                                   for Jain Kapoor & Co
Date : 04.09.2006                                Chartered Accountants

                                                               Partner
                                                 Menber ship No. 77590