Power Mines Limited (PML) and Deep Minerals Limited (DML) are companies engaged in the extraction of coal and other minerals from coal fields owned…

Power Mines Limited (PML) and Deep Minerals Limited (DML) are companies engaged in the extraction of coal and other minerals from coal fields owned and operated independently by them. Each entity has its own ownership structure, management team, and operational processes, and undertakes mining activities such as exploration, extraction, processing, and sale of coal and minerals at its respective sites. Both companies independently bear the operational, environmental, and regulatory risks associated with their mining operations. While they operate within the same industry and are subject to similar statutory and environmental regulations, there is no operational or financial interdependence between PML and DML in respect of their standalone mining activities. In April 2025, PML and DML jointly acquired an underground coal mine named "Sigma", located in Korba, Chhattisgarh, in the ownership ratio of 55:45. Under this joint arrangement, both companies agreed to share services and related costs, and all key decisions relating to the Sigma coal mine require the unanimous consent of both parties. No separate legal entity was incorporated for this arrangement. Coal extraction at the Sigma mine is carried out using large-scale machinery capable of extracting up to 95% of the available coal reserves, with the remaining coal being irrecoverable and left in the mine until decommissioning. As per applicable laws, the mine is required to be decommissioned at the end of its useful life. The Sigma coal mine is expected to contribute at least 25% of PML's projected revenue and is therefore considered strategically important for the company's long-term growth. In July 2025, PML hired a few tipper lorries from M/s Heavy Movers for transporting coal and minerals from the mining pit head at the Sigma mine to the railway siding for a duration of three months. The vehicles were provided along with drivers; however, the fuel cost was to be borne by PML. When the bill was raised, M/s Heavy Movers treated the transaction as an exempt supply, contending that it fell within the exemption entry relating to transportation of goods by road except by a Goods Transport Agency (GTA) under the relevant exemption notification. However, Mr. Shambu Singh, the accountant at PML, disagreed with this position. He was of the view that the arrangement constituted a taxable supply under the GST law and was not covered under the exemption claimed by the supplier. In order to ensure full legal compliance and avoid future disputes, he insisted that PML obtain a revised invoice from M/s Heavy Movers charging applicable GST. Apart from the Sigma mine, PML also operates the Koyla coal mine in Chirmiri, Chhattisgarh, which it holds on lease from the State Government. The existing mining license for the Koyla mine is valid until November 2025, after which PML is required to obtain renewal approval to continue operations. At present, the Koyla coal mine contributes approximately 55% of PML's current revenue and is one of the company's key profit-generating mine. However, the license renewal process has been delayed, creating significant uncertainty regarding the continuity of operations. Mr. Ramdhar Paswan, the Chief Executive Officer of PML, is concerned that the prolonged delay in securing the license renewal is causing financial strain and adversely affecting the company's reputation. Further details are provided in Annexure 1. Amid these developments, the senior management of DML reached out to Mr. Paswan to gain a clearer understanding of the situation. While DML expressed concern regarding the issues surrounding the Koyla mine, it indicated that it was not unduly worried about the joint arrangement for the Sigma mine, given the dual-party oversight mechanism in place and the continuous compliance and due process followed at the Sigma site. However, DML sought assurance that the issues relating to the Koyla mine would not escalate or result in reputational damage that could adversely impact its association with PML. DML's management also indicated that, in the event of any adverse reputational spillover, it might reconsider and even rescind the joint arrangement for the Sigma mine. In the meantime, CA. Prakash Sarma of Sarma & Sarma Associates, the statutory auditor of PML for the financial year 2024-25, instructed his audit team to conduct a detailed examination of PML's financial records and internal control systems in light of the ongoing litigation relating to the Koyla coal mine. As part of this examination, the audit team carried out an extensive review of wage records, particularly in view of the labour unrest at the mine site. This review led to the identification of certain illegal practices, including the employment of children below the age of 14 years at the mine. These findings were formally communicated by CA. Prakash Sarma to PML's Legal and Compliance Officer, Ms. Nupur Taleti. For details refer Annexure 2. However, Ms. Taleti responded that the examination of labour law compliance fell outside the scope of a financial audit, a stance that was also adopted by Mr. Paswan and other members of senior management, without providing an adequate explanation to the auditor. As rumors surrounding the High Court's impending judgment in the Koyla mine case spread in the market, investor sentiment became highly uncertain. While some market experts expected a favourable outcome for PML, others anticipated an adverse ruling. Given the significant contribution of the Koyla mine to PML's revenue, these uncertainties resulted in high volatility in the company's share price. In order to protect his investment, Mr. Govind Kanti, an investor of PML, decided to hedge his exposure by purchasing both Call and Put Options for 100 shares of PML. Accordingly, on August 1, 2025, he purchased a three-month Call Option with a strike price of 84at a premium of 4 per share, and a three-month Put Option with a strike price of 80at a premium of 2 per share. Ahead of the High Court's decision, investor concerns intensified, and on Friday, October 31, 2025, PML's share price fell sharply to 70, reflecting market expectations of an unfavorable ruling. Subsequently, on November 3, 2025, the High Court passed an adverse order against PML, holding the company responsible for extensive environmental damage arising from illegal mining activities. Following this order, the State Government declined to renew the license to operate the Koyla coal mine, resulting in a significant loss of revenue for the company. Due to the resulting reputational damage, DML withdrew from the joint arrangement for the Sigma coal mine with effect from April 2026, leading to the suspension of operations at the Sigma site as well. These developments pushed PML to the brink of bankruptcy, as both mine sites that had been major contributors to its revenue ceased operations. From August 2026, the company's operations were permanently discontinued. Consequently, the secured creditors of PML filed a winding-up petition before the High Court, and in December 2026, the High Court passed a winding-up order against the company. The workers of PML opposed the winding-up petition and also filed an appeal against the winding-up order, expressing uncertainty as to whether their appeal would be considered during the winding-up proceedings. Annexure 1 City Times License on Hold: How Legal and Labour Unrest Threaten PML's Koyla Mine Raipur, 15th May 2025 – The Chhattisgarh State Government has put on hold the renewal of the mining licence for Power Mines Limited (PML) in respect of the "Koyla" coal mine. The existing licence remains valid until November 2025, after which PML will require fresh approval to continue operations at the mine. Environmental activists have alleged that PML has been illegally carrying out mining activities beyond the area allotted by the State Government. It is further alleged that these activities have, over the years, caused irreversible environmental damage to the surrounding hills and forest areas. Over the past month, the State High Court has been actively hearing the matter pursuant to a Public Interest Litigation (PIL) filed against the company. At the same time, the workers' union has protested against unsafe working conditions at the mine site. The mine shafts are old and reportedly prone to collapse, posing a serious risk of trapping workers underground. The workers' union is influential and has threatened strong action unless immediate remedial safety measures are implemented by the company. As news of the litigation and the workers' agitation spread, public anger escalated, resulting in day-long rallies across the town, which forced schools and businesses to remain closed. The issue has attracted widespread attention, particularly because nearly 30% of the town's local population is employed by the company. Consequently, the matter is being closely monitored by the public, environmental groups, and the government. According to a government source closely associated with the matter, the State Government is considering granting a fresh mining licence to one of PML's close competitors, instead of renewing the licence in favour of PML. Annexure 2 Prakash Sarma/ Partner / Sarma & Sarma Associates From: "Prakash Sarma" Sent: 25th May 2025 10:00 To: "Nupur Taleti" Cc: "Ramdhar Paswan" Subject: Critical Compliance Issue Identified During Audit Review Attachments: Dear Nupur, We have examined the wage records of your company across all mining sites. In view of the ongoing legal proceedings relating to the Koyla coal mine, we carried out an extensive review of labour records at that site. During this review, it came to our attention that the company is employing children below the age of 14 years in its mining operations. Upon inquiry with the site supervisor, Mr. Keshav Kumar, we were informed that these children are not deployed in underground mine shafts and are engaged only as casual labour for manual work above ground. Notwithstanding this explanation, our verification indicates that approximately 23% of the total workforce at the Koyla mine site comprises children under the age of 14 years. Similar violations have also been identified at other mining sites, particularly those where the company is the sole operator. These practices constitute clear violations of applicable labour laws, under which the employment of child labour is a punishable offence. In our capacity as the Legal and Compliance function of PML, we consider it necessary to bring this matter to your immediate attention. You are requested to respond to this notification at the earliest, providing your explanation for the employment of child labour and addressing the potential legal and regulatory consequences that such violations may have on the company's business operations. Regards, P Sarma CA. Prakash Sarma