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Orissa Minerals Development Company Ltd.

BSE: 590086 Sector: Metals & Mining
NSE: ORISSAMINE ISIN Code: INE725E01024
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OPEN 1749.40
CLOSE 1754.30
VOLUME 1277
52-Week high 2342.30
52-Week low 1550.00
P/E 549.22
Mkt Cap.(Rs cr) 1,035
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Orissa Minerals Development Company Ltd. (ORISSAMINE) - Auditors Report

Company auditors report

TO THE MEMBERS OF

THE ORISSA MINERALS DEVELOPMENT COMPANY LIMITED Report on theStandalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statementsof The Orissa Minerals Development Company Limited ("the Company") whichcomprise the Balance Sheet as at 31st March 2017 the Statement of Profit and Loss(including Other Comprehensive Income) the Cash Flow Statement and the Statement ofChanges in Equity for the year then ended signed by us under reference to this report anda summary of the significant accounting policies and other explanatory information. Thesefinancial statements are the responsibility of the Company's management.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters statedin Section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone Ind AS financial statements that give a true and fair viewof the state of affairs (financial position) Profit or loss (financial performanceincluding other comprehensive income) and cash flows and changes in equity of the Companyin accordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.

This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone Ind ASfinancial statements based on our audit.

We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements inaccordance with the Standards on Auditing specified under Section 143(10) of the Act.Those Standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the standalone Ind AS financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence aboutthe amounts and the disclosures in the standalone Ind AS financial statements. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the

Standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the standalone Ind ASfinancial statements.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the standalone Ind AS financialstatements.

Basis for Qualified Opinion

1. The original title deeds of immovable properties including leaseholdwere not made available to our examination.

2. Leasehold land and lease hold properties considered as financiallease up to previous year have been reclassified in the reporting year as operating lease.In absence of sufficient details available we are unable to determine whether such leasedproperties should have been classified as financial or operating lease. The mining leaseof the Company have not been renewed since September 2010 and operation of those mineshave been suspended since then. In view of that in our opinion the carrying value of thepermanent structure i.e. Buildings and other civil constructions Roads Railway Sidingsetc. constructed on such leasehold land and mining rights need to be amortised along withcarrying value of such lease hold land and properties unless such mining lease arerenewed. The exact amount of such assets could not be ascertained for the want of details.

3. Plant Machineries and Equipments shown in the accounts are not inuse because of suspension of mining operation and closure of Sponge Iron Plants since along time. As such based on technical evaluation provision needs to be made for restoringthe assets in running condition.

4. A substantial portion of the Capital Work in Progress relates tomines whose operation has been suspended and lease period has not been renewed. As suchthe expenditure to the tune of Rs. 43.79 lacs appear to be infructuous hence needs to beprovided for.

5. Reference is invited to Accounting Policy given in Note 4.8 to theFinancial Statements. Contrary to the policy stated in the said notes (i) any provisionagainst non moving inventory has not been made. Inventory of raw materials and finishedgoods are carried in the accounts since 2009-10. On account of embargo put by the StateMining Department Govt of Odisha company is not able to use or sell such inventory (ii)Further stock of raw material has been considered at cost as carried from last account(iii) Valuation of finished goods has been made as per rates given in the latest report ofIndian Bureau of Mines (IBM) (iv) As there is no certainty in movement of inventorywithin next 12 month it should not have been considered as current assets.

6. Other receivables grouped under Current Financial Assets include asum of Rs. 119.63 lacs receivable from Bisra Stone Lime & Company Ltd. The aforesaidamount is carried in the account since a long time. The said amount neither recovered noradjusted upto the close of the reporting year as such should be considered doubtful andneeds to be provided for.

7. The Company had entered into a Joint venture with M/ s Usha (India)Ltd. for managing the affairs of M/s East India Minerals Ltd. (EIML). However over theperiod the company has lost any

finance control over the said Company. The matter is under dispute andpresent state of affairs of the said company is not available. The Company has notprovided the likely loss in the value of its investment in Joint Venture of Rs. 281.10lakhs.

8. Balances in respect of Advances Receivables and Payables aresubject to confirmation. The effect of any adjustment as may be required onreconciliation with the parties' confirmation is not currently ascertainable.

Qualified Opinion

In our opinion and to the best of our information and according to theexplanations given to us except for the effects of the matter described in the Basis forQualified Opinion paragraph above the overall effect as far as could be ascertained isoverstatement of Assets by Rs 444.52 lacs and understatement of Expenses to the sameextent the aforesaid standalone Ind AS 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 including Ind AS of the state ofaffairs (financial position) of the Company as at 31st March 2017 and its profit(financial performance) and its cash flows and the changes in equity for the year ended onthat date. Had the effect of above non provisions amounting to Rs. 444.52 lacs given inthe accounts then the net profit of Rs 586.18 lacs would have reduced to Rs. 141.66lakhs.

Emphasis of Matter

I Reference is invited to the Note 41 to the Financial Statementsmining operation of the Company is continued to be remained suspended due to non-renewalof the leases and non-receipt of requisite clearances from the Government of Odisha andthe Central Government. These conditions indicate the existence of a material uncertaintyto resume the mining operations. These financial statements have been prepared on a goingconcern basis mainly for the initiative taken by the Company's management for opening ofthe mines and resumption of mining operations.

ii. Reference is invited to Note - 8.2 to the Financial Statements. TheCompany held 25434 shares of Rs. 10 each of its holding company namely the EasternInvestments Ltd. These shares are however been held prior to it has become subsidiary ofthe said Company.

iii. Reference is invited on note 9.1 i.e. trade receivables to theFinancial Statements. These trade receivables are carried since long time and in absenceof readily available details we could not vouch safe whether such debt has been created onaccount of debit note raised on the customers due to changes in Government levies.However such receivable has been fully provided.

iv. Reference is invited to Note 8.4 to the Financial Statement theCompany has not prepared consolidated financial statements in accordance with theprovisions of section 129 of the Companies Act 2013 in respect of its Joint Venture.

v. Current Liabilities include Rs. 509.00 lacs being aggregate amountof outstanding dues on account of Provision for Property Tax Rs. 40.86 lacs Dead Rent Rs.365.16 lacs and Surface Rent Rs. 102.98 lacs. In absence of supporting documentsliability has been considered on estimated basis.

v. The following accounting policies disclosed in the accounts does notappear to be relevant/applicable in the reporting period:

a) Note no. 4.12 : Accounting for Government Grants
b) Note no. 4.16.5 : Assessment of embedded derivatives
c) Note no. 5.1.2 : Provision for Restoration and Rehabilitation of Mining Sites.
d) Note no. 5.1.3 : Ore reserve and mineral resource estimates.
e) Note No. 5.1.4 : Deferred stripping expenditure.
f) Note No.4.3 : Mining Rights under head Intangible Assets.

Our opinion is not modified on account of above matters.

Other Matters

1) The comparative financial information of the for the year ended 31stMarch 2016 and the transition date opening balance sheet as at 1st April 2015 included inthese standalone Ind As financial statements are based on the previously issued statutoryfinancial statements prepared in accordance with the Companies (Accounting Standards)Rules 2006 audited by the predecessor auditor whose report for the year ended 31st March2016 and 31st March 2015 dated 20th June 2016 and 3rd July 2015 respectively expressed anunmodified opinion on those standalone financial statements as adjusted for thedifference in the accounting principals adopted by the company on transition to the Ind ASwhich have been audited by us.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of Section 143of the Act we give in Annexure A a statement on the matters specified in paragraphs 3and 4 of the Order to the extent applicable.

2. In terms of the Directions and Sub-Direction under section 143(5) ofthe Act we give in Annexure B our report on the matters included in the Directions andSub-Directions as aforesaid.

3. As required by Section 143 (3) of the Act we report that:

a) We have sought and obtained except any report as might have made bythe Vigilance department of the Company all the information and explanations which to thebest of our knowledge and belief were necessary for the purposes of our audit.

b) Except for the effects of the matter described in the Basis forQualified Opinion paragraph above in our opinion proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of thosebooks.

c) The Balance Sheet the Statement of Profit and Loss and the CashFlow Statement and statement of changes in equity dealt with by this Report are inagreement with the books of account.

d) Except for the effects of the matter described in the Basis forQualified Opinion paragraph above in our opinion the aforesaid standalone Ind ASfinancial statements comply with the Indian Accounting Standards specified under Section133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

e) The provisions of section 164(2) are not applicable to the Companyas it is a Government Company.

f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls werefer to our separate report in Annexure C; and

g) The matter described in the Basis for Qualified Opinion paragraphand the Emphasis of Matter paragraph above in our opinion may have an adverse effect onthe functioning of the Company.

h) The qualification relating to the maintenance of accounts and othermatters connected therewith are as stated in the Basis for Qualified Opinion paragraphabove.

i) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:

a. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements - Refer Note 36 to the Standalone Ind ASfinancial statements.

b. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.

c. There has been delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.

Instance of Delay (Rs. In lacs) Date required to be transferred Date of Transfer
Unpaid/ unclaimed Dividend for 2008-09 34.20 04.12.2016 07.02.2017

For M. C. Bhandari & Co.

Chartered Accountants

FRN: 303002E

CA Neeraj Jain

Partner

M No.: 064393

Place: Kolkata

Date: 26th May 2017

ANNEXURE A

TO THE INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF

THE ORISSA MINERALS DEVELOPMENT COMPANY LIMITED

[Referred to in paragraph 1 under head Report on Other Legal andRegulatory Requirements of the Auditors' Report of even date]

1. (a) The Company is maintaining proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) The fixed assets of the Company have been physically verified bythe management during the year and discrepancies noticed during the course of physicalverification have been duly adjusted in the accounts. In our opinion the frequency ofverification is reasonable.

(c) The title deeds of immovable properties including leasehold werenot made available for our examination.

2. (a) As per the information the management has conducted the physicalverification of inventory at reasonable intervals.

(b) The discrepancies noticed on physical verification of inventory ascompared to book records were not adjusted and have not been properly dealt with in thebooks of account. However valuation of inventory has been done on the basis of physicallyverified inventory.

3. According to the information and explanations given to us theCompany has not granted any loan secured or unsecured to companies firms limitedliability partnership or other parties covered in the register maintained under section189 of the Companies Act 2013. Accordingly the provision of clauses 3(iii) (a) (b) and(c) of the order is not applicable to the companies and hence not commented upon.

4. In our opinion and according to information and explanations givento us the Company has not granted any loan and given guarantee and security to anycompanies as such the provision of section 185 and 186 of the Companies Act 2013 notapplicable.

5. The Company has not accepted any deposits from the public and hencethe directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76or any other relevant provisions of the Act and the Companies (Acceptance of Deposit)Rules 2015 with regard to the deposits accepted from the public are not applicable.

6. The Central Government of India has prescribed maintenance of costrecords under subsection (1) of Section 148 of the Act for the products of the company.However as the turnover of such products is lower than the prescribed threshold limitsin our opinion maintenance of cost records is not applicable.

7. (a) According to the information and explanations given to us andthe records of the Company examined by us in our opinion the Company is generallyregular in depositing the undisputed statutory dues including employees' state insuranceincome-tax sales-tax wealth tax service tax duty of customs duty of excise valueadded tax cess and any other statutory dues with the appropriate authorities exceptprovident fund.

The extent of the arrears of statutory dues outstanding as at 31stMarch 2017 for a period of more than six months from the date they became payable inrespect of share of shortfall of distributable interest on Provident Fund are as f ollows-

Name of Statute Nature of due Amount (Rs in Lacs) Period to which it relates Due date of payment
Provident Fund Act 1952 Share of shortfall of distributable interest 3.83 2012-13 Various
Provident Fund Act 1952 Contribution to Fund 4.67 February 2014- August 2015 IS1" March 2014 to 15th September 2015

(b) According to the information and explanations given to us and therecords of the Company examined by us the particulars of dues of sales-tax service taxduty of excise and value added tax as at 31st March 2017 which have not been deposited onaccount of a dispute are as follows-

Name of the statute Nature of dues Amount (Rs in Lacs) Period to which the amount relates Forum where the dispute is pending
Mines and Minerals Development Act 1957 Cost of excess production 539539.24 2000-01 to 2009-10 Mines Tribunal
The Central Sales Tax Act 1956 Central Sales Tax 4.44 2003-04 Sales Tax Tribunal
Odisha Value Added Tax Act 2004 VAT 21.34 2005-06 Odisha High Court
Odisha Entry Tax Act 1999 Entry Tax 34.79 2005-06 Odisha High Court
Odisha Entry Tax Act 1999 Entry Tax 2.31 2006-07 Commissioner of Commercial Taxes (Appeal)
Odisha Entry Tax Act 1999 Entry Tax 0.88 2007-08 Sales Tax Tribunal
Odisha Value Added Tax Act 2004 VAT 224.25 2006-07 Commissioner of Commercial Taxes (Appeal)
Finance Act 1994 Service Tax 7.05 2012-13 Commissioner of Service Tax (Appeal)

8. According to the records of the Company examined by us and theinformation and explanation given to us the Company has neither taken any loan fromfinancial institution bank or Government nor issued any debentures.

9. Based upon the audit procedures performed and the information andexplanations given by the management the Company has neither raised any money by publicissues of shares or debentures nor obtained any term loans during the year.

10. During the course of our examination of the books and records ofthe Company carried out in accordance with the generally accepted auditing practices inIndia and information and explanations given to us we have not come across any instancesof material fraud by the Company or on the Company by its officers or employees noticedor reported during the year nor we have been informed of any such case by the management.

11. In our opinion and according to the information and explanationsgiven to us the provisions of section 197 read with Schedule V to the Act are notapplicable to the Company.

12. As the Company is not a Nidhi Company the Nidhi rules 2014 are notapplicable to it. The provisions of clause 3 (xii) of the Order are not applicable to theCompany.

13. According to the information and explanations given to us and therecords of the Company examined by us the requirements of sections 177 and 188 of the Actis not applicable to this Company.

14. According to information and explanations given to us and on anoverall examination of the Balance Sheet of the Company has not made a preferentialallotment/ private placement of shares or fully or partly convertible debentures duringthe year under review and hence reporting requirements under clause 3(xiv) of the orderare not applicable to the Company and not commented upon.

15. Based upon the audit procedures performed and the information andexplanations given by the management we have not come across any instances where theCompany has entered into any non-cash transactions with its directors or persons connectedwith him. Accordingly the provisions of clause 3 (xv) of the Order are not applicable tothe Company.

16. In our opinion the Company is not required to be registered undersection 45 IA of the Reserve Bank of India Act 1934 and accordingly the provisions ofclause 3 (xvi) of the Order are not applicable to the Company.

For M. C. Bhandari & Co.

Chartered Accountants

FRN: 303002E

CA Neeraj Jain

Partner

M. No: 064393

Place: Kolkata

Date: 26th May 2017

ANNEXURE- B

TO THE INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF

THE ORISSA MINERALS DEVELOPMENT COMPANY LIMITED

[Referred to in paragraph 2 under sub head - Report on Other Legal andRegulatory Requirements of the Auditors' Report of even date]

I. Directions

Description Auditor's Response
1 Whether the Company has clear title/lease deeds for freehold and leasehold land respectively? The title deeds of the freehold land of 207.135 acres having a book value of Rs.28020 and lease deeds for leasehold land of 56.372 acres having a book value of Rs.19677000 were not made available for our examination.
If not please state the area of freehold and leasehold land for which title/lease deeds are not available.
2 Whether there are any cases of waiver/ write off of debts/loans/interest etc. if yes the reasons there for and the amount involved. No debts/ loans/ interest have been written off/ waived. Provisions have been created for long outstanding balances considered doubtful of recovery.
3 Whether proper records are maintained for inventories lying with third parties & assets received as gift/grant(s) from Govt or other authorities. As per the records and information made available to us no inventory is being held/lying with Third Parties and any assets has not been received as gift/ grant from Government or other authorities in the period under audit.

For M. C. Bhandari & Co.

Chartered Accountants

FRN: 303002E

CA Neeraj Jain

Partner

M. No: 064393

Date: 26th May 2017

Place: Kolkata

ANNEXURE- C TO THE INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF

THE ORISSA MINERALS DEVELOPMENT COMPANY LIMITED

[Referred to in paragraph 3 (f) under head Report on Other Legal andRegulatory Requirements of the Auditors' Report of even date]

Report on the Internal Financial Control under Clause (i) of Sub-sections 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of The Orissa Minerals Development Company Limited ("the Company") asof 31st March 2017 in conjunction with our audit of the financial statements of theCompany for the year ended on that date.

Management's Responsibility for Internal Financial Control

The Company's management is responsible for establishing andmaintaining Internal Financial Controls based on the internal control over FinancialReporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India". 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 safeguarding ofits 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 Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's InternalFinancial Controls over Financial Reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of Internal Financial Controls both applicable to an auditof Internal Financial Controls and both issued by the Institute of Chartered Accountantsof India. 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 operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the Internal Financial Controls system over Financial Reporting and theiroperating effectiveness. Our audit of Internal Financial Controls over Financial Reportingincluded obtaining an understanding of Internal Financial Controls over FinancialReporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the Financial Statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's Internal FinancialControls system over Financial Reporting.

Meaning of Internal Financial Control over Financial Reporting

A Company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statement for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that:

1) Pertain to the maintenance of the records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company;

2) Provide reasonable assurance that the transactions are recorded asnecessary to permit preparation of financial statement in accordance with generallyaccepted accounting principles and that receipts and expenditure of the Company are beingmade only in accordance with authorization of management and directors of company; and

3) Provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the financial statement.

Inherent Limitations of Internal Financial Control over FinancialReporting

Because of inherent limitation of internal financial control overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to errors or fraud may occur and not bedetected. Also projections of any evaluations of the internal financial control overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate. Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31st March 2017 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For M. C. Bhandari & Co.
Chartered Accountants
FRN: 303002E
CA Neeraj Jain
Place: Kolkata Partner
Date: 26th May 2017 M. No: 064393

In their Report the auditors have made certain observations.

The observations along with the comments of management thereon asbelow:

Observations of Auditor Management Replies
1 The original title deeds of immovable properties including leasehold were not made available to our examination Copy of title deeds are available with OMDC. Records available with the Revenue Department of the state clearly indicate that the title is in the name of OMDC. OMDC is paying Land Tax to State Govt. based on such record.
2 Leasehold land and lease hold properties considered as financial lease up to previous year have been reclassified in the reporting year as operating lease. In absence of sufficient details available we are unable to determine whether such leased properties should have been classified as financial or operating. The mining lease properties of the Company have not been renewed since September 2010 and operation of those mines have been suspended since then. In view of that in our opinion the carrying value of the permanent structure i.e. Buildings and other civil constructions Roads Railway Sidings etc. constructed on such leasehold land need to be amortised along with carrying value of such lease hold land and properties which in the current year has been grouped in the account as operating lease under the head - Other Assets. The exact amount of such assets could not be ascertained for the want of details. In view of implementation of IND AS from the Financial Year 2016-17 the IND AS Standard No 17 under the heading 'Leases' shall be applicable in the instant case. The Para 15A under the subheading of the said standard namely 'Classification of Leases' which states :- Quote "When a lease includes both land and buildings elements an entity assesses the classification of each element as a finance or an operating lease separately. In determining whether the land element is an operating or a finance lease an important consideration is that land normally has an indefinite economic life" Unquote. The Leasehold land has finite economic life as the lease period is pre-defined. Hence the upfront fees paid to renew the Lease is classified as 'Pre-payment'. The Carrying Value of the permanent structure i.e. Buildings civil constructions Roads Railway Sidings etc constructed on such leasehold land and mining rights are depreciated over the no of years as prescribed under Companies Act 2013 based on initiatives taken by the company's management to open the mines and resumption of mining activities and the 'Going Concern' concept of preparation of financial statements.
3 Plant Machineries and Equipments shown in the accounts are not in use because of suspension of mining operation and closure of Sponge Iron Plants since a long time. As such based on technical evaluation an additional amount needs to be provided for restoring the assets in running condition. Though mining operation and Sponge Iron Plants are suspended normal wear and tear expenses are spent by the company in regular intervals to keep the equipments in running condition. Hence no provision is required to be made.
4 A substantial portion of the Capital Work in Progress relates to mines whose operation has been suspended and lease period has not been renewed. As such the expenditure to the time of Rs. 43.79 lacs appear to be infructuous hence needs to be provided for The company is expecting resumption of operation mines after renewal of leases. On resumption the Capital work in progress amount will be capitalised on its completion. However the company will re-assess the amount if required and necessary provision will be made in subsequent period.
5 Reference is invited to Accounting Policy given in Note 4.8 to the Financial Statements. Contrary to the policy stated in the said notes (i) any provision against non moving inventory has not been made. Inventory of raw materials and finished goods are carried in the accounts since 2009-10. On account of embargo put by the state Mining Department Govt. Of Odisha company is not able to use or sell such inventory (ii) Further stock of raw material has been considered at cost as carried from last account (iii) Valuation of finished goods has been made as per rates given in the latest report of Indian Bureau of Mines (IBM) (iv) As there is no certainty in movement of inventory within next 12 months it should not have been considered as current assets. Management has already taken initiative to open the Mines and resumption of Mining Activities. The inventory of raw materials and finished goods are carried at cost and IBM prices (cost/IBM price whichever is less) respectively considering the mines may open and the mining activities may resume at any point of time. Therefore the Raw Materials Finished Goods having its nature of saleability at any point of time has not been considered as non-moving materials.
6 Other receivables grouped under Current Financial Assets include a sum of Rs. 119.63 lacs receivable from Bisra Stone Lime & Company Ltd. The aforesaid amount is carried in the account since a long time. The said amount neither recovered nor adjusted upto the close of the reporting year as such should be considered doubtful and needs to be provided for. Regular follow up for recovery of the said amount with fellow subsidiary M/s.BSLC is being made. The observation of Statutory Audit has been noted. However neessay action will be taken in FY 2017-18 based on the point of recoverability from M/s. BSLC.
7 The Company had entered into a Joint venture with M/s Usha (India) Ltd. for managing the affairs of M/s East India Minerals Ltd. (EIML). However over the period the company has lost any finance control over the said Company. The matter is under dispute and present state of affairs of the said company is not available. The Company has neither provided the likely loss in the value of its investment in Joint Venture nor has prepared the consolidated financial statement incorporating the financial statements of the said company. "Matter is under subjudice. The company has not made consolidated financial statement for nonavailability of financial data of M/s.East India Minerals Ltd. The company has been fighting legal battle in the court. Any loss of financial control and dimunition in the value of investment would depend on the outcome of the court verdict and hence no provision is made. Further it is to be noted that pursuant to a MOU entered into between the company and Usha (India) Limited on the lines as approved by Govt of
India MoS a JV by the name East India Minerals Limited was incorporated. As per the MOU approved by shareholders in the Extra Ordinary General Meeting held on 22.7.92 EIML had allotted 26 % of its paid up capital i.e. 10 equity shares of face value of Rs.10 each fully paid up and 2811000 equity shares of face value of Rs.10/- each initially treated as paid up Re.l/- each only to the company as considerations for authorising use of certain facilities extended to them including a right to use a portion of land for setting up of an ore sizing and processing plant in the company's mining area without an financial investment by OMDC."
8 Balances in respect of Advances Receivables and Payables are subject to confirmation. The effect of any adjustment as may be required on reconciliation with the parties' confirmation is not currently ascertainable. Regarding confirmation of balance Company make correspondences with the parties in regular interval and also at year end. The confirmations not received from the parties are considered as in order and hence no adjustment is made in the Financial Year. A review & reconciliation committee has been constituted for logical conclusion in this regard.