Chennai Petroleum Corporation Ltd

Report of the Auditors to the Members of Chennai Petroleum Corporation Limited

1. We have audited the attached balance sheet of Chennai Petroleum CorporationLimited, as at 31^st March 2010, the profit and loss account and also thecash flow statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the company's management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act,1956, we enclose in the Annexure-I, a statement on the matters specified in paragraphs 4and 5 of the said Order.

4. Further to our comments in the Annexure-I referred to above, we report that:

(i) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purposes of our audit;

(ii) In our opinion, proper books of accounts as required by law have been kept by thecompany so far as appears from our examination of those books;

(iii) The balance sheet, profit and loss account and cash flow statement dealt with bythis report are in agreement with the books of account;

(iv) In our opinion, the balance sheet, profit and loss account and cash flow statementdealt with by this report comply with the accounting standards referred to in sub-section(3C) of section 211 of the Companies Act, 1956;

(v) Disclosure in terms of clause (g) of sub-section (1) of section 274 of theCompanies Act, 1956 is not required for Government Companies as per notification No.GSR829(E) dated October 21, 2003, issued by the Department of Company Affairs.;

In our opinion, and to the best of our information and according to the explanationsgiven to us, the said accounts, give the information required by the Companies Act, 1956,in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India;

(a) in the case of the balance sheet, of the state of affairs of the company as at 31^stMarch 2010

(b) in the case of the profit and loss account, of the profit for the year ended onthat date; and

(c) in the case of the cash flow statement, of the cash flows for the year ended onthat date.

Annexure to auditor's report referred to in paragraph 3 of our report of even date

(i) (a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) All the assets have not been physically verified by the management during the yearbut there is a regular programme of verification which, in our opinion, is reasonablehaving regard to the size of the company and the nature of its assets.

(c) During the year, no substantial part of the fixed assets of the company weredisposed off.

(ii) (a) The inventory has been physically verified during the year by the management.In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the managementare reasonable and adequate in relation to the size of the company and the nature of itsbusiness.

(c) The company is maintaining proper records of inventory. The discrepancies noticedon verification between the physical stocks and the book records have been appropriatelydealt with in the books of account.

(iii) We are informed that there is no company, firm or party to be listed in theRegister referred to in Section 301 of the Companies Act, 1956 and hence we have nocomments to offer in respect of clauses 4 (iii) (a), 4 (iii) (b), 4 (iii) (c), 4 (iii)(d), 4 (iii) (e), 4 (iii) (f) and 4 (iii) (g) of the Companies (Auditor's Report) Order,2003.

(iv) In our opinion and according to the information and explanations given to us,there are adequate internal control systems commensurate with the size of the company andthe nature of its business with regard to purchases of inventory, fixed assets and withregard to the sale of goods and services. During the course of our audit, we have notobserved any continuing failure to correct major weaknesses in internal control system.

(v) We are informed that there is no company, firm or party to be listed in theRegister referred to in Section 301 of the Companies Act, 1956 and hence we have nocomments to offer in respect of clauses 4 (v) (a) and 4 (v) (b) of the Companies(Auditor's Report) Order, 2003.

(vi) The company has not accepted any deposits from the public and hence we have nocomments to offer in respect of clause 4(vi) of the Companies (Auditor's Report) Order,2003.

(vii) In our opinion, the company has an internal audit system commensurate with thesize and nature of its business;

(viii) We have broadly reviewed the books of account maintained by the company pursuantto the Rules made by the Central Government for the maintenance of cost records undersection 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima faciethe prescribed accounts and records have been made and maintained.

(ix) (a) The company is regular in depositing with appropriate authorities undisputedstatutory dues including

Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, WealthTax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory duesapplicable to it. We are informed that no employee of the company is covered by Employees'State Insurance Scheme

(b) The company, in the absence of suitable notification by the Central Governmentspecifying the applicable rate of cess under section 441A of the Companies Act, 1956 onturnover payable by the company, towards Rehabilitation and Revival Fund, the company hasneither paid nor provided for cess.

(c) The details of disputed dues of Income tax, Sales tax, Wealth tax, Service tax,Customs duty, Excise duty and Cess, which have not been deposited, are given in Annexure -II to our report.

(x) The company does not have any accumulated losses as on 31^st March 2010.The company has not incurred cash losses during the financial year covered by our auditand has incurred cash loss in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, thecompany has not defaulted in repayment of dues to a financial institution or banks.

(xii) The company has not granted any loans and advances on the basis of security byway of pledge of shares, debentures and other securities and hence we have no comments tooffer in respect of clause 4 (xii) of the Companies (Auditor's Report) Order, 2003.

(xiii) The company is not a chit fund or a nidhi, mutual benefit fund/society.Therefore, the provisions of clauses 4(xiii) of the Companies (Auditor's Report) Order,2003 are not applicable to the company.

(xiv) The company is not dealing in or trading in shares, securities, debentures andother investments. Accordingly, the provisions of clause 4(xiv) of the Companies(Auditor's Report) Order, 2003 are not applicable to the company.

(xv) In our opinion and according to the information and explanations given to us, thecompany has not given any guarantees for loans taken by others from banks or financialinstitutions and hence we have no comments to offer in respect of clause 4 (xv) of theCompanies (Auditor's Report) Order, 2003.

(xvi) In our opinion, the term loans have been applied for the purpose for which theywere raised.

(xvii) According to the information and explanations given to us and on an overallexamination of the balance sheet of the company, we report that no funds raised onshort-term basis have been used for long-term investment

(xviii) The company has not issued shares during the year and hence we have no commentsto offer in respect of clause 4 (xviii) of the Companies (Auditor's Report) Order, 2003

(xix) The company has not issued any debentures during the year nor there is anyoutstanding as on 31^st March 2010 and hence we have no comments to offer inrespect of clause 4 (xix) of the Companies (Auditor's Report) Order, 2003

(xx) The company has not raised money by public issues in the recent past and hence wehave no comments to offer in respect of clause 4 (xx) of the Companies (Auditor's Report)Order, 2003

(xxi) As represented to us by the management and based on our examination in the normalcourse of audit, no fraud on or by the company has been noticed or reported during theyear.