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Bihar Sponge Iron

BSE: 500058|NSE: BIHARSPONG|ISIN: INE819C01011|SECTOR: Steel - Sponge Iron
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Mar 14
Notes to Accounts Year End : Mar '15
1. a) Disputed liability amounting to Rs.232381 thousands (P.Y.
 Rs.275409 thousands) on account of currency fluctuations on Foreign
 currency loans obtained by the Company and interest thereon, as per
 BIFR scheme dated 29.07.2004 and also confirmed by AAIFR/Single Bench
 of Jharkhand High Court, has not been provided by the Company pending
 disposal of Letters Patent Applent Jurisdiction (LPA) filed before the
 divisional bench of the Jharkhand High Court, Ranchi, against the above
 order.
 
 b) The Term Loans (Rupee and Foreign Currency) from Indian and Foreign
 Financial Institutions and Banks are secured by first mortgage on all
 the Company''s immovable properties, both present and future and a first
 charge by hypothecation of all the movable assets of the Company, save
 and except book debts, but including movable machinery, machinery
 spares, tools and accessories, both present and future, subject to the
 prior charges created / to be created in favour of the Company''s
 Bankers on the Company''s stocks of raw materials, semi-finished and
 finished goods, consumable stores, book debts and such other movables
 as may be agreed by the Financial Institutions and Commercial Banks for
 securing borrowings for working capital requirements in the ordinary
 course of business of the Company ranking pari-passu inter se.
 
 c) Working Capital Loans from Banks are secured by first charge by way
 of Hypothecation of all the stocks of the raw materials, semi finished
 and finished goods, consumable stores, spares, book debts etc.  ranking
 pari-passu. There has been no balance of working capital loans since
 earlier years.
 
 d) Soft Loan (including interest thereon) under Jharkhand Industries
 Rehabilitation Scheme, 2003 from the State Government of Jharkhand are
 secured by
 
 (i) A mortgage of all immovable properties both present and future; and
 a charge by way of hypothecation in favour of the lender of all the
 movable, including movable machinery, machinery spares, tools and
 accessories, present and future, stock of raw materials, semi-finished
 goods, consumable stores and such other movables as may be agreed upon
 
 (ii) Additionally secured by way of pledge of new equity share capital
 of Rs.325000 thousands allotted to the private promoter. (MLCSL)
 
 The mortgage and charge referred to in (i) and (ii) mentioned above;
 shall be in terms of the Rehabilitation Scheme 2003 of the Government
 of Jharkhkand Sanctioned by the BIFR and be subject and subservient to
 the mortgages and charges created and / or to be created in favour of
 the secured creditors.
 
 e) The amount of term loans (included foriegn currency loans )of
 Rs.700000 thousands as per BIFR scheme dated 29.04.2004 was repayble in
 30 quarterly instalments of Rs.23333 thousands each commencing from
 15th July 2004 to 30th Spetember, 2011 which has been fully repaid
 except the element of disputed liability on account of currency
 fluctation as stated (a) above. The modification / satisfaction of the
 charges to this extent is still in the process of filing.
 
 f) As per para 8.4 of the sanctioned BIFR Scheme dated 29.07.2004, the
 interest on Soft loan under Rehabilitation Scheme, 2003 from Govt.of
 Jharkhand shall be funded over the entire rehabilitation period i.e.
 upto 30.09.2011. The Soft loan and the funded interest is repayable
 after 30.09.2011 and the defaulted amount of Principal and interst as
 on 31.03.2015 comes to Rs.325000 thousands and Rs.355950 thousands (p/y
 Rs. 325000 thousands and Rs. 305145 thousand) respectively, for which
 the company has approached Government of Jharkhand for reschedulement
 which has also been proposed in the Modified Draft Rehabitation Scheme
 filed before the BIFR.
 
 g) A sum of Rs. 265980 thuosands payable against the acceptance as on
 31-3-2013 has been transfered to long term borrowing and shown as loans
 and advances from a body corporate as per Party ledger wide dated
 24.09.2013 which carry interest @ 8% p.a upto 09.08.2013. No interest
 has been accrued since the party has waived such interest due to
 uncertainty involved (i.e. shut down of the plant). Since there is no
 stipulation regarding repayment, no disclosure has been made for amount
 of instalments due for repayment.
 
 h) There has been no stipulation for repayment of unsecured loans &
 advances from related parties and hence no disclosure has been made.
 
                                                             (Rs. 000'')
 
                                                        As at     As at
                                                      31.3.15   31.3.14
      
 2.   Contingent Liabilities:
 
 Claims not acknowledged as debts are as under: -
 
 (i)  Custom duty and interest on Imported Stores 
 & Spares                                               15459     15459
 
 (ii) (a) JVAT Demand under appeal before the 
 Jt. Commissioner of Commercial Taxes (Appeals)
 Jamshedpur for the Asst. Year 2006-07.                  2397      2397
 (excludes amount Rs.23.07 lacs and paid by the
 company but not considered as credit by deptt.)
 
 (b)  Central Sales Tax demand (including 
 interest) under appeal before the Jt. 
 Commissioner of Commercial Taxes (Appeals)               311       311
 Jamshedpur for the Financial Year 2006-07
 
 (c)  Disputed demand for JVAT for the F.Y. 
 2010-11 u/s 70(5)(b) under appeal before the 
 Jt. Commissioner of Commercial Taxes                    5879      5879
 (Appeals), Jsr. However stay has been granted 
 on 20.01.2012 (Amount paid as advance on appeal
 Rs. 5.87 Lacs previous year Rs. 5.87 Lacs).
 
 (d)  Demand raised by DCCT, Jsr for tax due 
 and penalty imposed or interest payable under 
 JVAT Act 2005 of the F.Y. 2010-11 under                24786     24786
 dispute before JCCT(Appeals), Jamshedpur.
 
 Stay has been granted on 06-10-2012 till final 
 disposal(Adv paid on appeal Rs.15 lacs on 
 19.10.2012)
 
 (e)  JVAT demand for the assessed tax and 
 penalty vide demand notice No.18872 dt.
 28.03.2014 (order dt.12.03.2014) for F.Y.               8140         -
 2010-11 raised by the Dy. Commissioner
 of Commercial Taxes, Adityapur, JSR (net of 
 amount paid Rs.13489 thousands) for which the 
 Company is seeking details for examining the 
 merits of demand in order to consider filing 
 of appeal with the appellant authority.
 
 (f)  CST Demand for assessed tax and penalty 
 vide demand notice dt.28.03.2014 for the 
 F.Y.2010-11 (vide order dt.12.03.2014) raised           3096         -
 by the Dy. Commissioner of Commercial Taxes,
 Adityapur, JSR (net of amount paid Rs.3055 
 thousands) for which the Company is seeking 
 details for examining the merits of demand in
 order to consider filing of appeal with the 
 appellant authority.
 
 (g)  CST Demand for assessed tax and penalty 
 vide demand notice dt.24.03.2015 for the F.Y. 
 2011-12 vide order dt.20.03.2015 by the                70549         -
 Dy. Commissioner of Commercial Tax, JSR is 
 (net of amount paid Rs.2353 thousands for 
 which the Company is seeking details for 
 examining the merits of demand in order to 
 consider filing of appeal with the appellant 
 authority.
 
 (h)  JVAT Demand for assessed tax and penalty 
 vide demand notice dt.24.03.2015 for the F.Y. 
 2011-12 vide order dt.20.03.2015 by                    13977         -
 Dy. Commissioner of Commercial Tax, JSR (net of
 amount paid Rs.3060 thousands) for which the 
 Company is seeking details for examining the
 merits of demand in order to consider filing 
 of appeal with the appellant authority.
 
 (i)  Demand for electricity duty raised by 
 the Dy. Commissioner / Asstt. Commissioner 
 under Electricity Duty Rules (Rule 14) vide             2281         -
 Order No.18431 dt.18.03.2014 for Rs.1271 
 thousands (F.Y. 2012-13) for Rs.1011 thousands
 (FY) 2011-12 the Company is seeking details 
 for examining the merits of demand in order to
 consider filing of appeal with the appellant 
 authority.
 
 (iii) Demand for water charges and interest 
 thereon disputed under writ petition before 
 Jharkhand High Court, Ranchi                          250947    211975
 
 (iv) Railway Authorities has imposed penalty 
 on the Company earlier which was dismissed by 
 the Jharkhand High Court, Ranchi. Railway               5600      5600
 Authority has now filed a petition before 
 Supreme Court, Delhi.
 
 (v) (a) Disputed liability on account of 
 currency fluctuation on foreign currency loans
 and interest thereon, pending before the              232381    275409
 Hon''ble High Court, Jharkhand, Ranchi.
 
 (b)Liability on account of currency fluctuation
 on upfront payment of foreign currency loan and 
 additional 2% interest rate in lieu of                263714    279753
 guarantee of Govt. of Jharkhand matter pending 
 in SLP before the Hon''ble Supreme Court, Delhi
 
 (vi) Disputed Income Tax demand including 
 interest and penalty for short deduction/
 collection or Tax at source based on NSDL               8334      8334
 report for the F.Y. 2004-05 to 2008-09 u/s 156 
 raised by DCIT, JSR under appeal before the 
 CIT (Appeal), JSR under section 246A (1) Of 
 the Income Tax Act,1961.
 
 (vii) Liability for price difference / other 
 claims net of counter claims, if any, arising            Not       Not
 on account of procurement of raw materials            ascer-    ascer-
 under a contract (since terminated) pending           tained    tained
 before an Arbitrator / High Court.
 
 (viii) (a) The company has received a show 
 cause notice to explain as to why the 
 production of Sponge Iron was low in comparison          Not       Not
 to iron ore consumed. The company has furnished       ascer-    ascer-
 its reply, justifying consumption of iron ore         tained    tained
 viz a viz Sponge iron production. The Matter is
 still pending.
 
 (b) Demand for recovery of irregular Cenvat 
 Credit for Service Tax and education cess for 
 F.Y. 2010-11 under Rule 15(4) of CCR 2004 read           123       123
 with section 78 of the Finance Act 1994 under 
 appeal before The Appellate Tribunal Central 
 Excise & Service Tax, Kolkata
 
 (ix) Disputed penalty recovered by SECL for 
 short lifting of Coal quantity as per Linkage. 
 The matter pending under Writ Petition filed           21528     21528
 by the Company before the Hon''ble High Court of
 Chattisgarh, Bilaspur.
 
 (x)  Liability on account of Bank Gurantees            96175     97675
 
 3.  COMMITMENTS :
 
 3.1 Capital Commitments:
 
 Estimated amount of contracts remaining to be executed on capital
 account and not provided for (net of advances) Rs. 4856 thousand
 (Previous Year Rs. 4856 thousand).
 
 3.2. Other Commitments: Rs. Nil (P.Y.Nil)
 
 4.  Rehabilitation Scheme:
 
 (I) The company was declared a Sick Industrial Company within the
 meaning of clause (0) of Sub-Section (1) of Section 3 of the Sick
 Industrial Companies (Special Provision) Act, 1985 by the Hon''ble BIFR
 vide its order dated 19.12.1996. The Hon''ble BIFR vide its order dated
 29th July, 2004 had sanctioned the Rehabilitation Scheme. The said
 scheme envisaged a total payment of Rs. 1350000 Thousands, Rs.650000
 Thousands was to be paid as upfront payment and the balance Rs.  700000
 Thousands was to be paid in 30 quarterly installments effective from
 15th July, 2004.
 
 (II) In the review hearing held on 3rd September, 2007 & 22nd
 September, 2010, the BIFR, by exercising powers under Section 18 (5)
 and 18 (9) of the SICA, clarified / directed that the Company shall
 make payment of the due installments to its foreign lenders in ''Euro''
 as per the amount reflected in Euro in the statement annexed to the
 sanctioned scheme along with the applicable interest i.e. LIBOR plus 1%
 per annum (LIBOR   3% in case of delay/ default in payment of
 installments).
 
 The Company has filed appeal before the Appellate Tribunal for
 Industrial and Financial Reconstruction (AAIFR) challenging the above
 said order. AAIFR in its order dated 23-12-2011 has dismissed the
 appeal. The above order of AAIFR was challenged by the Company by
 filling Writ Petition in Jharkhand High Court on 06.02.2012.  In the
 hearing held on 22nd February, 2012, the Appeal was dismissed.
 
 The Company has not recognized Rs.232381 Thousands (P.Y. 275409
 Thousands) the liability on account of foreign currency fluctuation in
 Euro on foreign currency loans installments and interest thereon as per
 the BIFR Scheme. The Company has filed a Letters Patent Appellate
 Jurisdiction (LPA) on 27th July, 2012 before the higher bench in the
 High Court of Jharkhand, Ranchi against the order of the Single Judge
 which is still pending.
 
 (III) The Net worth of the Company could not become positive during the
 implementation of BIFR Scheme till 30-09-2011. As per Order date 5th
 May 2012, BIFR directed to the company to submit Modified Draft
 Rehabilitation Scheme (MDRS) within four months for the rehabilitation
 of the Company.
 
 (IV) The Modified Draft Rehabilitation Scheme of the company was filed
 before the Hon''ble BIFR on 3rd December 2012. The modified scheme is
 under consideration of the BFIR for which last hearing was held on
 20.01.2014 in which the BIFR has made the following direction.
 
 (i) Ministry of Coal, Government of India, Central Coalfields Limited
 and Coal India Limited to extend regular supply of coal as per the
 existing coal linkage with CCL, as envisaged in the sanctioned scheme
 and submit its report to the Board with a copy to IFCI (MA), within a
 month.
 
 (ii) The Company to update the status of the writ petition /IA filed
 before the Hon,ble High Court of Jharkhand, Ranchi as and when the
 final decision is arrived at.
 
 The Company has made an interlocutor application for the withdrawal of
 the Writ Petition before the Hon''ble High Court of Jharkhand, Ranchi
 and it is expected that on withdrawal of the said Writ Petition the
 Fuel Supply Agreement (FSA) would be entered into for the regular
 supply of the Coal. This would expedite the process of finalization and
 sanction of the Draft Modified Rehabilitation Scheme with the grant of
 reliefs and concessions, the restructuring of the soft loan and other
 measures for the fresh induction of fund etc. for making the unit
 viable as a going concern.
 
 5.  The demand of water charges Rs. 250947 thousands (inclusive of
 interest on arrear of water bills of Rs.23103 thousands) as on
 31.03.2015 (P.Y. Rs.231494 thousands inclusive of interest of Rs.20528
 thousands as on 31.3.2014) raised by Chief Engineer, Subernarekha
 Multipurpose Project, Chandil has been disputed by the company under a
 Writ Petition with Jharkhand High Court, Ranchi. However, pending
 disposal of Writ Petition, the company based on its own estimate of
 liability has made total provision for Rs. 13869 thousands up to 31st
 March, 2015, (Rs.13869 thousands as on 31.3.2014.)
 
 6.  South Eastern Coalfield Ltd. has imposed a penalty of Rs.21528
 Thousands in 2011-12 on account of short lifting of coal quantity in
 terms of Fuel Supply Agreement (FSA) dated 02.05.2008 and recovered the
 same by encashment of the bank guarantee. The Company has taken up the
 matter with Coal India Limited/ South Eastern Coalfield Ltd. for refund
 of the said amount as settlement of dispute under clause 15.3 of the
 FSA. No provision has been made for penalty recovered since the matter
 is pending under writ petition filled by the Company before the Hon''ble
 High Court of Chattisgarh, Bilaspur.
 
 7.  The company was allocated for captive use a Coal Block in the
 Macherkunda Coal Block in the State of Jharkhand on 5th August 2008 by
 the Ministry of Coal, Government of India. The Ministry of Coal vide
 letter date 20.11.2012 deallocated the above coal block on the ground
 that the company has failed to develop the coal block allotted within
 the prescribed milestone/time frame.
 
 On being aggrieved with the above order, the company has filled a Writ
 Petition before the Jharkhand High Court, challenging the decision of
 the Ministry of Coal to de-allocate the Coal block. The matter was
 transferred to Hon''ble Supreme Court of India, and the said court vide
 its order dated 24.09.2014 has cancelled all coal blocks allotted on
 and after 2003. In view of the above Rs. 894 Thousands incurred by the
 company on this account appearing under CWIP Coal block has been
 written off during the year and shown under the head of exceptional
 item.
 
 8.  The Central Coalfield Limited has recovered a penalty of Rs 5468
 Thousands on account of short lifting of coal quantity in terms of fuel
 supply agreements (FSA) during the Financial Year 2012-13 and F.Y.
 2013-14(April 2013) and Rs.5263 Thousands for rate differences. These
 amounts has been shown as exceptional items.
 
 9.  In accordance with the Companies Act, 2013 the Company has revised
 the useful life of the fixed assets during the current year to comply
 with the useful / remaining useful life of assets as mentioned under
 Schedule II of the Act. As per the transitional provision the company
 has adjusted Rs. 126918 thousands net of deferred tax (including
 Rs.124981 thousands for depreciation on revaluation reserve) with the
 opening balance of retained earning (i.e., deficit in the statement of
 Profit and Loss on April 01,2014). Had the Company continued to follow
 the earlier life, the depreciation expense for the year ended on
 31.03.2015 would have been higher by 10438 Thousands(excluding
 depreciation on revaluation reserve), and the loss before tax increased
 with that amount.
 
 10.  (a) Shri Satish Kumar Gupta, has been appointed as Additional
 Director and then Whole Time Director w.e.f. 13.12.2013. During the
 F.Y. 2013-14 a sum of Rs. 325 Thousands has been provided as
 remuneration as a Whole time director which was subject to the approval
 of shareholders of the Company in the ensuing general meeting (32nd
 AGM) and the approval of the Central Govt. in terms of the provisions
 of section 198, 269,309 & Schedule XIII as amended from time to time &
 other applicable provisions, if any of the Companies Act, 1956. The
 Shareholders has approved the payment of aforesaid remuneration by way
 of special resolution in the said Annual General Meeting (AGM).
 
 Since, Shri S. K. Gupta vide letter dated 13.11.2014 has voluntarily
 waived off his entire remuneration for the period 13.12.2013 to
 12.12.2014, the provision for remuneration made in earlier year has
 been reversed & not paid to him and hence no Central Govt, approval has
 been sought.
 
 (b) The remuneration to the whole tine director has been paid /provided
 w.e.f. 13-12-2014 to 31-03-2015 is in compliance of Section 197 and
 Schedule V of the ACT.
 
 11.  Shut down of Plant and suspension of operations.
 
 Central Coalfields Ltd has stopped supply of linkage coal as per
 existing Fuel Supply Agreements to the Company w.e.f. 5th February 2013
 for reason stated at para 7 above. Due to non-supply of Coal by CCL,
 the operations of the company has been shutdown and operation suspended
 w.e.f. 9th August 2013. The aforesaid action of Coal India Ltd, Central
 Coalfields Ltd and the Ministry of Coal, GOI. has been challenged by
 the company by way of Writ Petition (C) vtde No. 1660 of 2013 before
 the Hon''ble Jharkhand High Court and the same is still pending.
 
 In view of the above, provision for the undernoted items of expense
 have not been made in the accounts for the period from 10th August,
 2013 to 31st March. 2015:
 
 (a) Interest on Unsecured Loans of Rs. 686001 thousands taken from
 Promoters and other Parties (amounts unascertained),
 
 (b) Interest on Soft Loan from Government of Jharkhand under Jharkhand
 Industrial Rehabilitation Scheme 2003 amounting to Rs. 81331 Thousands
 (Rs. 30526 thousands upto March 2014) which is subject to
 representations for waiver, and
 
 (c) Salaries, Wages and allowances, provident fund including as well as
 employee benefits expense (amount unascertained) except for KMP.
 
 12.  Related Party Transaction (RPT) in respect of renting of the
 office of the Company is Rs. 6146 thousands and the availing or
 rendering of services amounting to Rs.  6788 thousands as covered under
 section 188 (1) (c) and (d) respectively and Rules made thereunder and
 is within the overall limits of Rule 15 of the Companies (Meetings of
 Board and its Power) Rules, 2014.
 
 13.  Income Tax assessment of the Company for the Asstt. Year 2012-13
 has been completed under Section 143 (3) of the Act vide order
 dt.24.03.2015 by the Asstt.  Commissioner of Income Tax, JSR. The
 Assessing Officer has disallowed the Returned loss on the ground that
 the company has not furnished the required information, documents,
 books of accounts and records inspite of questionnaire & the various
 reminders show cause notice given to the assessee. Since the plant was
 under shut down and laborers did not allow the entry of staff and
 officer to factory premises and hence the information / documents /
 papers were produced to the extent possible. On being aggrieved with
 the said order, the Company has filed an appeal before the CIT
 (Appeal-3), Patna on 27.04.2015.
 
 14.  Credit/Debit balances of the Creditors, Lenders, Debtors and
 Advances are subject to reconciliation/confirmation at the year end.
 
 15.  Earning in Foreign Currency: Nil
 
 16.  Subsidiary Company:
 
 Chandil Power Limited (CPL) has become Subsidiary of the Company under
 Section 4(1)(a) of the Companies Act 1956 and Section 2 (87) of the
 Companies Act, 2013 w.e.f 17th August 2011 and ceased to be subsidiary
 from 29.09.2014 with the termination of Supplemental Agreement dated
 15.06.2010.
 
 17.  Previous year figures have been recast / restated to conform to
 the classification required by the Revised Schedule VI Notes 1 to 29
 and Annexure - I containing Accounting Policies and General Notes form
 part of the Financial Statements.
Source : Dion Global Solutions Limited
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