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Bihar Sponge Iron Ltd.

BSE: 500058 Sector: Metals & Mining
BSE 00:00 | 22 May 1.34 -0.07






NSE 05:30 | 01 Jan Bihar Sponge Iron Ltd
OPEN 1.35
VOLUME 21280
52-Week high 3.40
52-Week low 1.34
Mkt Cap.(Rs cr) 12
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1.35
CLOSE 1.41
VOLUME 21280
52-Week high 3.40
52-Week low 1.34
Mkt Cap.(Rs cr) 12
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Bihar Sponge Iron Ltd. (BIHARSPONG) - Director Report

Company director report

To the Members

The Directors have pleasure in presenting the 35th Annual Report of the Company alongwith audited accounts for the year ended 31st March 2017.

(Rs. Lacs)
Financial Parameters 2016-17 2015-16
Sales (Net of Excise Duty) - 3.48
Other Income 242.62 231.22
Loss before Interest Depreciation & Exceptional Items 28.57 135.84
Interest & Finance Charges 14.97 13.45
Depreciation 434.55 437.77
Loss for the year before Exceptional Items 478.09 587.06
Exceptional Items (Net expenditure/ (income)) (101.50) -
Provision for Tax - -
Loss for the year carried to Balance Sheet 376.59 587.06


The Plant is under shut since 9th August 2013 on account of sudden stoppage of coalsupply by Central Coalfields Limited a Unit of Coal India Limited against long term FuelSupply Agreement. The Company is pursuing with Jharkhand State Mineral DevelopmentCorporation Ltd. (JSMDC) for supply of coal. JSMDC vide letter No. 1194 dated 15thOctober 2014 approved the supply of 30000 ton of Coal per month from Sikni Coal Mine tothe Company. It was further informed by the JSMDC vide letter No. 1088 dated 20th July2015 that they have reduced the proposed supply to

10000 ton of Coal per month initially which is highly insufficient for the operationsof the plant at breakeven level. Representations have been made to various authoritiesunder Ministry of Coal Government of India Coal India Limited and Central CoalfieldsLimited for supply of sufficient coal quantity to enable the Company to run the plantsmoothly at the requisite operational level.

Currently the steel market is reviving but the same is not yet stable. The Managementexpects that the recession phase of the steel market will be over soon. Some of thesponge iron manufacturing units have started using imported coal for higher productivity.The Company is exploring viability in different combinations and aspects to restart theplant as and when the sponge iron market further improves and the economy in production ofsponge iron is visible like optimum combination of using local coal and/or imported coalwhether to operate two small klins with capacity of 100 MT per day each or one big klinwith capacity of 500MT per day as well as to restart the plant by the Company or oncontract basis to minimize the overall cost to diversify the business activity in theareas of manufacturing of electrode wire drawing projects etc.

In view of the current market development the Company has entered into a facility useragreement on 1st April 2017 with G S Pharmbutor Pvt. Ltd. a company specialized incontract manufacturing wherein part of the plant and machinery shall be operated by thesaid Company. The said contract manufacturing company is considering to re-start theoperations of the Company and evaluating all the options available under presentcircumstances.


The Company was allotted Ghatkuri Iron Ore Mine in April 2007 in the State ofJharkhand with 406.40 hectares of land having estimated reserves of 35.65 million tons.However the Department of Geology Ministry of Mines Government of Jharkhand hasconducted the survey and assessed the reserve to be about 11.00 Million tons in its reportof February 2012. The Terms of Reference (ToR) for Ghatkuri Iron Ore Mine expired on 13thMay 2016 and therefore the company made an online application for extension of ToR forone year (i.e. up to 13th May 2017) on MOEFCC’S Portal.

Ministry of Environment Forest and Climate Change Impact Assessment Division (MOEFCC)called a meeting on 21-02-2016. The Company has made a representation through MECON toexplain the necessity of ToR extension. MOEFCC vide letter dt. 12-04-2016 intimated thatthe proposal is deferred and be considered after carrying capacity study is completed byIndian Council of Forestry Research and Education (ICFRE).


The Company from the existing power plant generates 5 MW Power based on dolo char beingproduced in the manufacturing of sponge iron. Since the Company is not able to consume theentire dolo char the Company has entered into an agreement with G S Phambutor Pvt. Ltd.(GSP) to install a 5 MW Power Plant. Whenever the existing power plant goes under regularmaintenance the Company has to generate power from DG Set which is highly uneconomical.During such time the Company will take the power from GSP and for the rest of the periodGSP will consume the power in induction furnace to produce pencil ingot. The 5 MW powerplant is ready to be commissioned. The Company has been informed that once the sponge ironplant starts its operations the said power plant will be commissioned and steps forsetting up induction furnace will be initiated.


The Company has been receiving constant demands from employees and local residents forestablishment of a higher educational institution for the development of the area and tocreate employment opportunities for the residents. Due to lack of basic infrastructuralfacilities like institutions imparting higher education at Chandil the attrition ofemployees was quite high resulting in substantial loss to the Company.

Considering the necessity of providing higher and technical education the Company hasdecided to set up a trust for establishment of educational institution for providinghigher and technical education. The Company is not covered under Section 135 of theCompanies Act 2013 and rules made thereunder during the F. Y. 2016-17 this step has beentaken by the company voluntarily.


In view of the loss incurred by the Company no dividend has been proposed for thefinancial year ended 31st March 2017.


During the year under review your Company did not accept any deposits within themeaning of provisions of Chapter V – Acceptance of Deposits by Companies of theCompanies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014.


The Company has not given any loans guarantees or made any investments under Section186 of Companies Act 2013 during the financial year 2016-17.


The Company has adopted policies and procedures for ensuring the orderly and efficientconduct of its business including adherence to the Company’s policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation of reliablefinancial disclosures.


Pursuant to Section 178 of the Companies Act 2013 and Part D of Schedule II to theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board of theCompany has approved and adopted the Company’s Nomination and Remuneration policy.Members interested may inspect the same at the Registered

Office of the Company or write to the Company Secretary for a copy. The same is alsodisclosed on the Company’s website Details of the Committee isprovided in the corporate governance report annexed with this report.


In compliance of Section 177 (9) & (10) of the Companies Act 2013 and in terms ofRegulation 22 of the SEBI (Listing Obligations and Disclosure Requirements)

Regulations 2015 the Company has set up a whistle blower policy which can be viewedon the Company's website In terms of the said policy the Directors andemployees are given direct access to the Chairman of the Audit

Committee to report on alleged wrong doings. Your Company hereby affirms that noDirector/ employee has been denied access to the Chairman of the Audit Committee and thatno complaints were received during the year.


Transactions entered by the Company with Related Parties were in the ordinary course ofbusiness and at Arm’s Length Price . The Audit Committee granted omnibus approval forthe transactions (which are repetitive in nature) and the same was reviewed by the AuditCommittee and the Board of Directors.

The materially significant transactions with Related Parties during the financial year2016-17 were within the limits approved by the Shareholders in 33rd Annual General Meetingof the Company. Suitable disclosures as required under AS-18 have been made in the Notesto the financial statements.

The policy on Related Party Transactions has been uploaded on the Company’swebsite: Member may inspect the same at the Registered Office of theCompany or write to the Company Secretary for a copy.

The particulars of contract and arrangements entered into by the Company with relatedparties referred to in sub-section (1) of section 188 of the Companies Act 2013 read withRegulation 23 of the SEBI (Listing Obligations and Disclosure

Requirements) Regulations 2015 are disclosed separately in Form No. AOC -2 as Annexure– D and forms part of this report.


The extract of the Annual Return for 2016-17 in Form No. MGT – 9 is givenseparately as Annexure - E which form part of the Board’s report.


The particulars of employees are given in Annexure – F to this report asrequired under Section 197 (12) of the Companies Act 2013 read with Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014.


The Board of Directors of the Company have appointed M/s. R. Singhal & AssociatesCompany Secretaries (PCS Registration No. 10699) as the Secretarial Auditor of the Companyin relation to the financial year 2016-17 in terms of Section 204 of the Companies Act2013. The Secretarial Audit Report for financial year 2016-17 is in Annexure – Gwith this report and is available on the Company's website www. Theobservation in secretarial audit report are self explanatory and therfore do not call forany further explanation. Further due to shutdown of the plant and suspension of operationssince 09.08.2013 various dues could not be paid on due dates. Necessary steps are beingtaken to re-start the Company and payment of all such dues shall be made after re-start ofoperation of the Company.



Since last reported the following changes have taken place in the Board of Directors:In accordance with the provisions of Section 152 of the Companies Act 2013 and Article128 of the Articles of Association of the Company Mrs. Kumkum Modi (DIN: 00522904)retires by rotation and is eligible for re-appointment.

Mrs. Anshuli Arya cease to hold office of Nominee Director pursuant to section 167 (1)(b) of the Companies Act 2013 w.e.f. 12th August 2016. Bihar State IndustrialDevelopment Corporation Limited (BSIDC) further nominated Mrs. Anshuli Arya (DIN:02753144) vide there letter no. 181/G dated 23rd August 2016.

Bihar State Industrial Development Corporation has nominated Mr. Subbiah Siddharth(DIN: 01208759) and withdrawn the nomination of Mrs. Anshuli Arya (DIN: 02753144) videthere letter no. 163/G dated 19th July 2017. Dr. Rohit Garg was appointed as anAdditional Independent Director on 14th

November 2016 by the Board who shall hold the office of Independent Director for aterm of 5 years w.e.f. 14th November 2016 pursuant to section 149 (10) of the CompaniesAct 2013 subject to the shareholders approval in 35th Annual General Meeting of theCompany.

Mr. Bal Kishan Goel resigned from the post of Chief Financial Officer (CFO) of theCompany w.e.f. 5th March 2017.

Mr. Anil Kumar Sinha was appointed as Chief Financial Officer (CFO) of the Companyw.e.f. 29th March 2017.

None of the directors of the Company are disqualified under Section 164 (2) of theCompanies Act 2013. Your directors have made necessary disclosures as required undervarious provisions of the Companies Act 2013.


The Company has received declaration by all Independent Director(s) that they meet thecriteria of independence as provided in sub-section (6) of Section 149 of the CompaniesAct 2013. The declaration received from the independent directors were placed at themeeting of the Board of Directors of the Company held on 29th May 2017.


Pursuant to the provisions of Section 134 of the Companies Act 2013 and Regulation 17of the SEBI (Listing Obligations and Disclosure Requirements)

Regulations 2015 Independent Directors at their meeting without the participation ofthe Non-Independent Directors and Management considered/ evaluated the Boards’performance Performance of the Chairman and other Non-Independent Directors.

The Board subsequently evaluated the performance of Independent Directors as per thecriteria laid down and has recommended their continuation on the Board of the Company. Theworking of its Committees (Audit Nomination and Remuneration and StakeholdersRelationship Committee) and Independent Directors (without participation of the Directorbeing evaluated) were also evaluated. The criteria for performance evaluation have beenprovided in the Corporate Governance Report which is attached as Annexure- B tothis Report.


The Board of the Company met for four times i.e. on 25th May 2016; 12th August2016; 14th November 2016 and 13th February 2017 during financial year 2016-17.


Pursuant to Section 134 (5) of the Companies Act 2013 the Directors of your Companydeclare as under: (a) that in the preparation of the annual accounts the applicableaccounting standard had been followed along with proper explanation relating to materialdepartures; (b) that the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit and loss of the company for that period; (c) thedirectors had taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of thecompany and for preventing and detecting fraud and other irregularities; (d) that thedirectors had prepared the annual accounts on a going concern basis; and

(e) that the directors had laid down and implemented internal financial controls to befollowed by the company and that such internal financialcontrols are adequate and wereoperating effectively.

Explanation For the purposes of this clause the term "internalfinancialcontrols" means the policies and procedures adopted by the company forensuring the orderly and efficient conduct of its business including adherence tocompany’s policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information; and

(f) That the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.


The composition of Audit Committee is disclosed in the corporate governance reportannexed with this report and forms part of it. Further there has not been any instancewhere the Board had not accepted any recommendation of the Audit Committee.


M/s. Thakur Vaidyanath Aiyar and Co. Chartered Accountants (Firm Registration No.000038N) Statutory Auditors of the Company shall retire as Statutory Auditors in the 35thAnnual General Meeting pursuant to Section 139 of the Companies Act 2013 read with rulesmade thereunder.

The Board has proposed the appointment of M/s. K. K. Jain & Co. CharteredAccountants (Firm Registration No. 002465N) on the recommendation of Audit Committee in35th Annual General Meeting of the Company till the conclusion of 40th Annual GeneralMeeting subject to ratification by members at every annual general meeting. The Companyhas received a letter from them to the effect that their appointment if made would bewithin the prescribed limits under Section 139 of the Companies Act 2013.


Notes to accounts referred to in the Auditor’s Report are self-explanatory andtherefore do not require call for any further explanation. However the following has notbeen not been recognized as explained below: a. Rs. 258213 thousand againstfluctuationofforeign currency loan has not been recognized as the Company has filed LettersPatent Appellate

Jurisdiction (LPA) before the Divisional Bench of High Court of Jharkhand Ranchi andit is hopeful that the decision will be in favour of the Company. b. Rs. 21528 thousandsrecovered by South Eastern Coal Fields Ltd as penalty on account of short lifting of coalquantity in terms of Fuel Supply Agreement as the matter has been disputed by the Companyunder writ petition filed before the Hon’ble High Court of Chhattisgarh. It ishopeful that the Company would get the order in its favour. c. Interest on unsecured loantaken from Promoters and other parties from 10.08.2013 to 31.03.2017 has not been taken onaccounts as the Company has applied to the lenders for the waiver of the interest onunsecured loan. d. Interest on Soft Loan taken from the Government of Jharkhand under theIndustrial Rehabilitation Scheme 2003 amounting to Rs. 196365 thousands from 10.08.2013to 31.03.2017 has not been provided as the Company will make representation for waiver onre-start of the Company’s operations. e. Salaries Wages Allowances Provident Fund(PF) including interest on overdue amount as well as employee benefit expenses w.e.f.10.08.2013 to 31.03.2017 has not been provided in view of the shutdown of the plant andsuspension of operation from 9th August 2013. f. Interest on unpaid statutory dues suchas PF and Family Pension Fund as per the respective acts is not ascertained.

Further due to shut down of the plant and suspension of operation from 9th August 2013various dues could not be paid on due dates. Necessary steps are being taken to re-startthe Company and payment of such dues shall be made after re-start of operation of theCompany.


As per Section 2(87) of the Companies Act 2013 the Company does not have anysubsidiary in the financial year 2016-2017.


A separate report on Corporate Governance is attached as Annexure B to thisreport. The Auditors’Certificateconfirming compliance of conditions of CorporateGovernance as required under Schedule V of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is included in the said Corporate Governance Report.


In terms of Regulation 34 read with Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 Management Discussion and Analysis Report isannexed as Annexure – C and forms part of this report.


The equity shares of the Company continues to be listed in the Bombay Stock Exchangeand listing fee for the Financial Year 2017-18 has been paid.


Information pursuant to Section 134 of the Companies Act 2013 and rules made thereunder a statement giving the required information relating to energy conservationtechnology absorption foreign exchange earnings and outgo is annexed hereto as Annexure-Aand form part of this report.


Your Directors take this opportunity to place on record their sincere thanks to allstakeholders various departments of Central Government the Government of Bihar andJharkhand Financial Institutions and Banks for their valuable assistance.

Your Directors equally acknowledge the trust reposed by you in the Company. TheDirectors also wish to place on record their appreciation for the all round support andco-operation received from the employees at all levels.

For & on behalf of the Board
S. K. Gupta R. K. Agarwal
Place: New Delhi (Director-Works) (Director)
Date: 29th July 2017 DIN: 03537417 DIN: 00298252