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Bihar Sponge Iron Ltd.

BSE: 500058 Sector: Metals & Mining
NSE: BIHARSPONG ISIN Code: INE819C01011
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VOLUME 19070
52-Week high 3.02
52-Week low 1.40
P/E
Mkt Cap.(Rs cr) 15
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1.83
CLOSE 1.75
VOLUME 19070
52-Week high 3.02
52-Week low 1.40
P/E
Mkt Cap.(Rs cr) 15
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Bihar Sponge Iron Ltd. (BIHARSPONG) - Auditors Report

Company auditors report

TO THE MEMBERS OF BIHAR SPONGE IRON LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of BIHAR SPONGE IRON LIMITED("the Company") which comprise the Balance Sheet as at 31st March 2017 theStatement of Profit and Loss the Cash Flow Statement for the year then ended and asummaryofthesignificantaccounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accounting prin-ciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectivelyfor ensuring the accuracy and completeness of the accounting recordsrelevant to the preparation and presentation of the financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor’s judgement including the assessment of the risks of material misstatementof the financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to theCompany’s preparation of the financial statements that give a true and fair view inorder to design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company’s Directors as wellas evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the financial statements.

Basis for Qualified Opinion

As explained in the Notes to the financial statement the company has not providedunder noted liabilities: i. Non recognition of liability on account of currencyfluctuations on foreign currency loan and interest thereon (as required under AccountingStandard 11 Revised) amounting to Rs. 258213 thousands as provided in the BIFR Schemedt. 29.07.2004 and also confirmed by AAIFR/ Single Bench of Jharkhand High Court Ranchisince the company against the order of Single Bench of High Court has filed LettersPatent Appellate Jurisdiction (LPA) before the Divisional Bench of High Court ofJharkhand Ranchi (refer other note no. 3(II) appearing in Annexure 1)

ii. Non recognition of penalty of Rs. 21528 thousands recovered by South Eastern CoalFields Ltd. on account of short lifting of coal quantity in terms of Fuel Supply Agreementsince the matter has been disputed by the Company under writ petition filed before theHon’ble High Court of Chhattisgarh (refer other note no 5 of An -nexure I).

iii. No provision has been made in the books of accounts in respect of the undernoteditems of expense in view of Shutdown of the Plant & Suspension of operations since10th August 2013 as well as other reasons contented by the company:-

a) Interest on unsecured loan taken from Promoters and other parties from 10.08.2013 to31.03.2017 (amount unascertained) {refer note 7(i)(a) of Annexure I}.

b) Interest on Soft Loan taken from the Government of Jharkhand under the IndustrialRehabilitation Scheme 2003 amounting to Rs. 196365 thousands from 10.08.2013 to31.03.2017 which is subject to representation from the company for waiver and approvalthereof by the lender {refer note 7(i)(b) of Annexure I}.

c) Salaries Wages Allowances Provident Fund including interest on overdue amount aswell as employee benefits expense w.e.f. 10.08.2013 to 31.03.2017 (amount unascertained){refer note 7(i)(c) of Annexure I}.

d) Interest on unpaid statutory dues such as Provident Fund Family Pension Fund as perthe respective Acts (amount unascertained) {refer note 7(i) (d) of Annex-ure I}.

Taking into consideration non provision of likely liabilities mentioned paragraph iii iii (b) & (e) above

a) Loss for the year would have been more by Rs. 476106 thousands as compared to thedisclosed loss of Rs. 37659 thousands.

b) Accumulated losses would have been Rs.2892795 thousands as compared to disclosedlosses of Rs. 2416689 thousands.

c) The above losses is however subject to ascertainment of liabilities as mentioned inPara iii (a) (c) and (d).

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis of QualifiedOpinion paragraph above the aforesaid financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:

a) in the case of the Balance Sheet of the state of affairs of the Company as at March31 2017;

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

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

Emphasis Matters

We draw attention to Note No. 3 (X) of part III of Annexure I of the financialstatements on ‘’Rehabilitation Scheme of the Company’ the management hasexplained its reasons for preparing financial statements on ‘going concernbasis’.The explanation is as under:-

With the revival of the steel industry considering the substantial accumulated lossesfull erosion of working capital and the liabilities including long term borrowings havingmatured fully along with interest having fallen due. The company has initiated requisitesteps for making the plant ready for operations and has in this direction with a view togenerate revenue and make the plant operational the company has on 01-04-2017 entered into a Facility User Agreement with a company specializing in contract manufacturing. Underthe said agreement part of the plant and machinery shall be operated by the said company.With the restart of the plant by them the management believes that the company shallgradually start earning surplus and losses incurred in past will get wiped out in duecourse and there after the company will be able to operate in normal course of itsbusiness. The financial statements as such have been prepared on going concern basis onthe strength of management’s plan of revival including restructuring of liabilitiesproviding the adequate finance for the operations and reorganization of business of thecompany.

Our opinion is not modified in respect of this matter since the company contemplatesas explained above to run and operate the company on going concern basis.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Companies Act 2013 we give in the Annexure A statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable to the company. Asrequired by section 143(3) of the Act we report that:

a) We have sought & obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;

b) Except for the effects of the matter described in the Basis for Qualified OpinionParagraph above in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books;

c) The Balance Sheet the Statement of Profit and Loss and Cash Flow Statement dealtwith by this Report are in agreement with the books of account;

d) Except for the effects of the matter described in the Basis of Qualified Opinionparagraph above in our opinion the aforesaid financial statements comply with theAccounting Standards specified under section 133 of the Act read with rule 7 of theCompanies (Accounts) Rules 2014.

e) The matter described in the basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the company.

f) On the basis of written representations received from the Directors as on 31stMarch 2017 taken on record by the Board of Directors we report that none of directors isdisqualified as on 31 st March 2017 from being appointed as a director in terms ofsection 164 (2) of the Act.

g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.

h) The company has laid down adequate internal financial controls over financialreporting system however in some of areas the internal financial control over financialreporting system is not operating effectiveness of such controls refer to our separatereport inAnnexure ‘B’.

i) With respect to the other matters to be included in the Auditor’s Report inaccordance with rule 11 of the Companies(Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The company has disclosed the in its financial statements Refer other notes III ofAnnexure I (1) its (i) to (xii) to the financial statements;

ii. The company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the company.

iv. The company has provided requisite disclosures in the financial statements as tothe holdings as well as dealings in Specified bank Notes 8th November 2016 to 30thDecember 2016. Based on audit procedures and relying on the management representation wereport that the disclosures are in accordance with the books of accounts maintained by thecompany and as produced to us by the management (refer note no. 18 of other Note inAnnexure I).

For Thakur Vaidyanath Aiyar & Co
Chartered Accountants
FRN: 000038N
(M.P. Thakur)
Place: New Delhi Partner
Date: 29th May 2017 M. No. : 052473

Annexure "A’" to Independent Auditors' Report

Referred to in paragraph 1 under "Report on Other Legal and RegulatoryRequirements" even date on the financial statements of Bihar Sponge Iron Limited forthe year ended March 31 2017.

i) Fixed Assets

a) The Company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets

b) The Company had a programme of verifying all of the fixed assets over a period ofthree years having regard to the size of the Company and nature of assets till 31stMarch 2013 which in our opinion was reasonable. However no physical verification ofFixed Asset have been carried out by the management since last four years i.e. F.Y.2013-14 to 2016-17 as the plant is under shutdown and suspension of production hencediscrepancies if any between the physical balance and book balance and their adjustmentin the books of accounts at the year end has not been dealt in the books of accounts.

c) The title deeds of immovable properties are held in the name of the company exceptin respect of the freehold land having value of Rs 593 thousands (Previous year Rs 593thousand) for which registration in favour of the company is pending for want of mutationfrom competent authorities. The gross and net carry value of such fixed asset as on31.03.2017 is Rs 3100 thousands.

ii) Inventories

The stock of raw materials stores & spare parts and finished goods have not beenphysically verified by the management at reasonable intervals i.e. year end during thelast four years since the plant is under shut down and operations suspended w.e.f.10.08.2013. As no physical verification of inventories were carried out during the end oflast four financial year the discrepancies between book balance & physical balanceif any have neither been ascertained nor the same have been properly dealt in the booksof accounts.

iii) Transactions with parties u/s 189 of the Companies Act 2013

The company has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties during the year or in earlier years covered in theregister maintained under section 189 of the Companies Act2013 as such para (a) (b)& (c) of clause are not applicable.

iv) Loans Investments Guaranties & Securities etc. covered u/s 185 & 186 ofthe Act.

The company has neither given any loans investments guarantees and security coveredunder section 185 and 186 of the Act during the year under audit nor in earlier year.

v) Deposits

The Company has not accepted any deposits during the year or in earlier years which arecovered under the directives issued by the Reserve Bank of India and the provisions ofsection 73 to 76 or any other relevant provisions of the Companies Act 2013 and the rulesframed thereunder.

vi) Cost Records

The maintenance of cost records has been specified by the Central Government under subsection (1) of Section 148 of the Companies Act 2013. Since there have been no operationssince 10.08.2013 till date no records have been made & maintained by the company.

vii Statutory Dues

a) According to the books and records examined by us and information and explanationsgiven to us the company is not regular in depositing the undisputed statutory duesincluding Provident Fund employees' state insurance income-tax (tax deducted atsource& tax collected at source) sales-tax service tax cess & any otherapplicable statutory dues to the appropriate authorities during the year.

The arrears on account of such statutory dues as at the end of the financial year 31stMarch 2017 for a period of more than six months from the date they become payable areService Tax: Rs 4741thousands Provident fund: Rs 7752 thousands: Family Pension Scheme:Rs. 1531 thousands Income Tax (TDS/TCS) Rs. 9473 thousands (including Rs. 8242thousands unprovided liabilities) Electricity Duty: 320 thousands and Iron Ore Cess Rs. 1thousand.

b) The details of dues of income tax or sales tax or service tax or duty of customs orduty of excise or value added tax etc. which have not been deposited on account ofdispute are given hereunder:

Name of the statute Forum where Dispute pending Nature of dues Period of dispute Amount (Rs. ‘000)
1. The Customs Act 1962 CESTAT Kolkata Custom Duty & Demurrage 1991-92 10427
Charges and interest on imported Stores& spare parts. 1994-95 5032
2. JVAT Act 2005 Jt. Commissioner of Commercial Taxes (Appeals) Jamshedpur Tax on Non –submission of JVAT forms 2006-07 2397
3. The C.S.T. Act 1956 Jt. Commissioner of Commercial Taxes (Appeals) JSR Tax on Non-Submission of "C" Forms 2006-07 311
4. JVAT Act 2005 Jt. Comm. of Commercial Taxes (Appeals) Jsr. (Amt. paid on appeal Rs. 587 thousands). Tax on JVAT. 2010-11 5879
5. JVAT Act 2005 Jt. Comm. of Commercial Taxes (Appeals) Jsr (Amt. paid on appeal Rs.1500 thousands on 19.10.2012) Tax on JVAT. 2010-11 24786
6. JVAT Act 2005 Commissioner of Commercial Taxes Jharkhand Ranchi. Tax on JVAT. 2010-11 8140
7. JVAT Act 2005 Commissioner of Commercial Taxes Jharkhand Ranchi. Central Sales Tax 2010-11 3096
8. JVAT Act 2005 Commissioner of Commercial Taxes Jharkhand Ranchi. Central Sales Tax 2011-12 70549
9. JVAT Act 2005 Commissioner of Commercial Taxes Jharkhand Ranchi.(amount recovered by DCCT Rs. 175 thousands from Company’s Bank Account in 2016-17) Tax on JVAT 2011-12 13977
10. JVAT Act 2005 Joint Commissioner of commercial Taxes Ranchi Tax on JVAT 2012-13 778
11. The C.S.T. Act 1956 Joint Commissioner of commercial Taxes Ranchi Central Sales Tax 2012-13 118
12. Central Excise Act 1944 The Commissioner of Central Excise (Appeals) (Amount paid Rs. 176 thousands on appeal) Excise Duty 2014-15 4706
13. Central Excise Act 1944 The Commissioner of Central Excise (Appeals) (Amount paid Rs. 487 thousands on appeal) Excise Duty of Rs. 6499 thousands and Penalty demand of Rs. 6499 thousands raised in F.Y. 2016-17 2006-07 12998
2007-08
2008-09

viii) The company has not defaulted in repayment of loans to a financial institutions& banks except the liability on accountoffluctuationon foreign currency loan andinterest thereon amounting to Rs 258213 thousands disputed by the company and pendingbefore the Hon’ble High Court Jharkhand Ranchi. Further Soft loan obtained underRehabilitation Scheme 2003 from Government of Jharkhand amounting to Rs 325000thousands principal and interest of Rs 4709984 thousands (inclusive of unprovidedinterest of Rs 196365 thousands upto 31.03.2017)which was due after 30.09.2011 as perBIFR Scheme {also refer note 3(f)}. There is no debenture in the Company.

ix) The Company has not raised any money by way of initial public offer or furtherpublic offer (including debts instruments) and term loans and hence the application ofsuch money for the specified purposes does not arise.

x) Based upon the audit procedures performed and on the basis of information andexplanations provided by the management we report that no fraud by the company or anyfraud on the company by its officers or employees has been noticed or reported during theyear under audit.

xi) The managerial remuneration has been paid or provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theCompanies Act 2013.

xii) The company is not a Nidhi Company and hence the clause is not applicable.

xiii) According to the records of the company and information and explanation providedto us all transactions with the related parties are in compliance with sections 177 and188 of Companies Act 2013 where applicable and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.

xiv) The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review as such therequirement of Section 42 of the Companies Act as covered under the clause is notapplicable to the company.

xv) As per the records of the company and information and explanation provided to usthe company has not entered into any non-cash transactions with directors or personsconnected with him and hence the clause is not applicable.

xvi) The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For Thakur Vaidyanath Aiyar & Co
Chartered Accountants
FRN: 000038N
(M.P. Thakur)
Place: New Delhi Partner
Date: 29th May 2017 M. No. : 052473

Annexure ‘B’ to Independent Auditors’ Report

(Referred to in paragraph (2)(h) under the head ‘Report on Other Legal andRegulatory Requirements’ of even date) Report on the Internal Financial Controlsunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act ("theAct") to the members of Bihar Sponge Iron Ltd. on the financial statements for theyear ended March 31 2017

1. We have audited the internal financial controls over financial reporting of BiharSponge Iron Ltd. ("the Company") as of March 31 2017 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

2. The Company’s management is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company’s policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.

Auditors’ Responsibility

3. Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accor-dance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols both applicable to an audit of internal financial controls and both issued bythe ICAI. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operate deffectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor’s judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficientand appropriate toprovide a basis for our audit system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

6. A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

7. Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

8. According to the information and explanation given to us and based on our audit thefollowing material weakness have been identified as at March 31 2017:

a) The company’s internal control system with respect to physical verification ofStores & Spares parts and Fixed Assets have not been operate deffectively sinceneither physical verification was carried out nor adjustment for discrepancies (includingdeterioration/ obsolesce for fixed assets) if any between the physical balance and bookbalance at the year end 31.03.2017 have been dealt in the books of accounts.

b) Confirmation of balance and reconciliation of Sundry Creditors & SuppliersService Providers / Contractors Lenders and Advances etc. are pending since last 3 yearsat the year end.

In our opinion because of the possible effects of the material weakness as describedabove on the achievements of the objectives of internal control criteria the company hasnot maintained adequate internal financial control over financial reporting and suchinternal financial controls over financial reporting were not operating effectively withrespect to inventories and fixed assets as on March 31 2017 ; and We have considered thematerial weaknesses identified and reported above he nature timing and extent of audittest applied in our audit of the year endeddeterminingt March 31 2017 financialstatements of the company and these material weaknesses don’t affect our opinion onthe financial statements of the company.

For Thakur Vaidyanath Aiyar & Co
Chartered Accountants
FRN: 000038N
(M.P. Thakur)
Place: New Delhi Partner
Date: 29th May 2017 M. No. : 052473