UNETHICAL PRACTICES OF RELIANCE INDUSTRIES LTD

The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest private

sector enterprise, with businesses in the energy and materials value chain. Group's annual

revenues are in excess of US$ 66 billion. The flagship company, Reliance Industries Limited,

is a Fortune Global 500 company and is the largest private sector company in India.

However, the company has been involved in various unethical business practices like

corruption, scams, violation of laws, influence on government etc.

Below mentioned are details of the some unethical activities of Reliance Industries Ltd.

1) RIL’s 2000 crore stock market scam :

The following facts relate to violation under Fraudulent and Unfair Trade Practices

Regulations, relating to RIL.

• In November 2007, the company secured an illegal gain of Rs. 513 crores. Under

the law, RIL was liable for a penalty of three times the gain — that is, Rs. 1539 crores

– and the disgorgement of its profit of Rs 513 crores, taking the total amount to Rs.

2056 crores. Factoring in interest, this amount would increase by another Rs. 200 -

500 crores. More importantly, the violation could also entail criminal prosecution

under IPC punishable with seven years’ imprisonment as unsuspecting g investors

had been defrauded/cheated of Rs. 513 crores.

• A clean (or, more accurately, dirty) profit of Rs. 513 crores earned unlawfully in five

days by shorting the market on the basis of information not available to investors is

most impressive, even by the standards set by Reliance. It bears noting here that Rs.

7.85 crores shares were sold for Rs. 210 were the very same shares allotted for Rs.

10 a year back and that they earned a 20-fold profit (approximately Rs. 1400 crores)

to the promoters of RIL in less than a year. In addition, it is relevant to note that RIL

had the guts to indulge in this fraudulent practice in 2007, when SEBI had been

around for 15 years, speaks volumes of their complete confidence in the support of

the present political dispensation which, incidentally, is almost identical to that of

1983 when Fiasco and Crocodile Investment were used as benami foreign fronts by

Reliance to bring in money through Channel Islands.

2) Reliance KG Gas Scam :

The CAG (Comptroller and Auditor General) has shown that the Directorate General

of Hydrocarbons (DGH) allowed Reliance Industries and other private operators to

gold-plate the capital costs of the plant allowing them to make huge profits. The

Production Sharing Contract pegged the profit share of the private operators and the

Government to something called an Investment Multiplier, which meant that higher

the capital cost, the larger the share of the profits of the private parties.

The capital costs in the KG Basin D-6 Block went up from $2.4 billion in the initial

contract to $8.5 billion. This was the pattern followed in other gas and oil fields also,

involving Reliance, Cairn Energy and others. In all this, the modus operandi was to

submit a bid which shows a certain capital cost and during the operation of the

contract, inflate the capital cost by a huge amount with the connivance of DGH and

the Ministry of Petroleum. The Management Committee in which the Government

had 2 nominees out of 4 played no oversight role in such inflation of contracts.

For inflating the capital costs, the familiar route is of course over-invoice through

sweetheart deals from “friendly” sub-contractors, sometimes even a Reliance family

company. While the CAG has not computed the loss to the exchequer, it has held

that the Government has suffered large losses on this account. It has also held that

the Production Sharing Contact being followed by the Government of India has very

little controls on the investment costs, unlike for example, Bangladesh, where the

Management Committee which has 50% Government nominees as in India, has to

approve any expenditure above $500,000.

The CAG Draft Report has also brought out that while the contract envisaged that if

the company did not develop certain areas within the contracted area within the

stipulated time, it should have been relinquished. Instead, the DGH and the Ministry

of Petroleum allowed the whole area to be designated as “discovery area” in

violation of the contract.

As we shall show below, there are two sets of scams that have taken place, CAG

having looked at only one of them. One is of course various violations of the

Production Sharing Contract as pointed out by CAG; the second is the high price of

Reliance gas -- $4.2 per Million BTU (MBTU) -- set in 2007 by the Empowered Group

of Ministers headed by Pranab Mukherjee. Reliance itself admitted in the Court case

between it and NTPC/Anil Ambani Group that its production cost was $1.43 per

MBTU. Reliance Industries Ltd. (RIL) had initially agreed to supply gas at $2.34 to

both NTPC and Anil Ambani Group, which it subsequently reneged once the EGOM

set the price at $4.2. It might be noted that by its own calculations, RIL would have

made profits of 50% if it had supplied gas at $2.34.

Gold-plating Capital Costs in KG D6 Block and the role of DGH.

The Gas and oil field in question is known as KG-DWN-98/3 (Block D-6), and consists

of 8,100 sq. Km. of off-shore area in the Krishna Godavari basin. Block D-6 was

awarded to Reliance Industries (90%)and Niko Resources Ltd (10%) under New

Exploration Licensing Policy 1 (NELP-1) bidding round under a Production Sharing

Contract. Initially, the D6 was to produce 40 million MMSCD (Million Cubic meters

per day), which was subsequently revised to 80 MMSCD. The initial development

cost in the contract was $2.4 billion which was revised through an “addendum” in

2006 to $5.2 billion in the first phase and $3.3 billion in the second phase. CAG has

also observed that the $3.3 billion for the second phase has every possibility of being

hiked up in the same way as the first phase.

3) NICL SCAM:

RIL NICL Scam Rs. 273.12 crore CBI files charge sheet against Reliance Industries

Limited National Insurance Company Limited. The complaint alleged irregularities in

issuance of insurance policies - for coverage of default payments - by NICL to

RIL. Case or Investigation Started in year 2005 and CBI file charge sheet on December

9, 2011. CVC said that two MoUs were signed between the private telecom provider

and the NICL, where terms deviating from the standard policy and favourable to the

party were incorporated, "Deviating means departure from what is described or

expected: not following rules and laws. Different not as per law or policy. On the

basis of the MoUs, NICL issued two Special Contingency Policies (SCPs) from its

Kalyan office. CVC said officials of NICL's regional office in Mumbai and Kalyan branch

committed "serious illegalities in connivance with officials of telecom provider which

resulted into a wrongful loss of Rs 273.12 crore."

As per NICL circulars premium rates chargeable for laptops/mobile electronic

equipments was to be between 1% and 1.5% but NICL officials did not follow the

guidelines and fixed a low rate of 0.25%. NICL also surrendered the basic right of the

insurer to review and opt for cancellation the policy in case negative trends are

noticed.

CVC said that a majority of subscribers under the default insurance cover for telecom

services policy could not be located due of inaccurate addresses. NICL officials with

dishonest intention by abusing their official position, processed the bogus claims

amounting Rs 120.60 Crore lodged without proper verification. NICL officials abused

their official position and processed bogus claims amounting to Rs 26.81 Crore

lodged by the private telecom provider without proper verification, loss of Rs. 26.81

Crore. CBI found that the NICL officials violated internal circulars, no risk analysis was

done nor there was "application of mind made by the officers of NICL. According to a

status report from the Central Vigilance Commission (CVC).The Central Bureau of

Investigation (CBI) has filed a charge sheet in a Mumbai court against Reliance

Industries Limited (RIL) and four retired employees of National Insurance Company

Limited (NICL), including a former CMD, under provisions of the Prevention of

Corruption. Act for criminal conspiracy and other charges. The CBI has also sought

prosecution sanction against five serving NI CL employees. It caused wrongful loss

totalling Rs 147.41 crore to NICL and wrongful gain to the private telecom provider.

4) Violation of the Revenue Act :

Reliance Industries do not put Revenue Stamps on the bills receipts. This is in direct

violation of the Revenue Act. It’s estimated that by this Reliance earns a sum of Rs.

25 crores a year.

5) Illogical accounting pattern: The Company has an illogical accounting pattern. They

shift between Reliance InfoTech and Reliance Industries where payments are

concern. Well but then they do not debit or credit the company and thus their

accounting pattern is wrong too. That’s why in a 25 years the company has captured

most of Indian Industries

6) Unethical corporate practices of Insider Trading: It is of Public Knowledge that

Mukesh Ambani & Group, inherited Promoter of Reliance Industries Ltd involved in

one of the most unethical corporate practices of Insider Trading in his own company

shares prior to merger of Reliance Petroleum Ltd with the former. SEBI the stock

market watchdog did uncover the insider trading scam

Ethical and Unethical practices of Ranbaxy

Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company, is an

integrated, research based, international pharmaceutical company, producing a wide range

of quality, affordable generic medicines, trusted by healthcare professionals and patients

across geographies. Ranbaxy today has a presence in 23 of the top 25 pharmaceutical

markets of the world. The Company has a global footprint in 43 countries, world-class

manufacturing facilities in 8 countries and serves customers in over 125 countries. Ranbaxy

was incorporated in 1961 and went public in 1973.

For the year 2011, the Company recorded Global Sales of US $ 2.1 Bn. The Company has a

balanced mix of revenues from emerging and developed markets that contribute 47% and

46% respectively. In 2011, North America, the Company's largest market contributed sales

of US $ 791 Million, Europe contributing US $ 297 Million and Asia clocking sales of US $ 503

Million.

Ranbaxy stresses the fact that the company is a responsible corporate citizen. As a

responsible corporate citizen, Ranbaxy ensures transparency in their dealings with

enforcement agencies, and extends their co-operation to officers of statutory bodies for the

purpose of audits and inspections. The company also urges its employees to avoid action or

relationship that might conflict with their job responsibilities, or the interest of Ranbaxy. As

for the environment, it ensures responsible consumption of natural resources through

processes that are eco-friendly.

Ranbaxy has a compliance program that covers Ranbaxy Inc. and all of its U.S. subsidiaries.

This program was created to assist the board of directors in overseeing and responding to

compliance issues affecting the Company and is one of the mechanisms utilized by the

Company to receive information concerning compliance with laws and regulations

governing the Company's business. The Company has established a Compliance Committee

which reports to the Board of Directors of the Company, and will function to support:

(i) compliance by the Company with legal and regulatory requirements;

(ii) adherence by the Company with the highest ethical standards in all business

activities, including, without limitation, the Company's Code of Conduct;

(iii) assessment of the Company's compliance risks;

(iv) development of uniform disciplinary standards for compliance failures; and

(v) each of the Company's departments in preparing a compliance risk assessment.

In 2008, Federal prosecutors were investigating Ranbaxy for allegedly falsifying records that

resulted in the production and sale of generic medicines that didn’t meet FDA standards.

The FDA allege officials at Ranbaxy’s plant in northern India used raw chemicals from

unapproved sources, fabricated in-house test data to meet FDA standards and attempted to

conceal the ruse from FDA inspectors, according to court documents cited by the paper. The

Parexel consulting firm is also named in connection with its audits of Ranbaxy facilities,

some of which Ranbaxy refused to produce, claiming attorney-client privilege. The pattern

of systemic fraudulent conduct left an untold portion of tablets and capsules made by

Ranbaxy too weak, too potent or lacking the advertised shelf life, the government said in its

papers filed in US District Court in Maryland, the paper writes. In November, Ranbaxy

recalled 73 million doses of generic Neurontin, which is used to treat seizures and nerve

pain. Specific allegations under investigation include fabricating bioequivalence and

stability data to support…(HIV/AIDS) drugs to be paid for by the President’s Emergency

Plan for AIDS Relief program (PEPFAR) and distributed to foreign countries, according to

the court filing, which also states the government is also investigating whether Ranbaxy

committed contract fraud and caused the submission of false claims to Federal health

benefit programs under the False Claims Act.

FDA made its first damaging revelation. It has a long list of requirements, one of which is

that companies should store copious quantities of drugs they make and test them for

stability over long periods of time. In Ranbaxy’s case, it found that data for two drugs — a

common antibiotic and an antifungal drug were falsified. According to the FDA report,

Ranbaxy’s quality control scientists had chosen to take shortcuts on the stability tests for at

least two major drugs. They had conducted these tests on the same day or within a few days

of each other, not over nine months as claimed by the company. Ranbaxy had also falsified

data submitted as a part of its application to market new generic drugs in the US, apart from

keeping hundreds of improperly stored samples in its factories in Ponta Sahib and Dewas.

Ethical stance taken by the organization and the behavior of top managers strongly

influences the organizational culture. As the company received warnings for submitting

improper documents and falsification of documents it exposes lack of ethical culture in the

organization, in case of Ranbaxy, failure to come out with sufficient justification even after

receiving several warning letters exposes the fact that a ethical stance was not taken by the

organization, as FDA issued warning letters to Ranbaxy it led to the fall of reputation of the

company.

Ranbaxy had to then present a corrective plan in a month’s time where they had to mention

all the remedial process they would be undertaking to correct their wrong doings. After

presenting the plan finally the FDA approved it and after taking corrective actions the

injunction placed on them was finally lifted.

After facing a slew of troubles in the US market last year Ranbaxy Laboratories Ltd, was in

for some rude shock in Europe. The French unit of the Gurgaon-based drug firm was one of

the many pharmaceutical companies where European Commission officials carried out raids

on Tuesday. The officials launched anti-trust investigations against alleged ‘restrictive trade

practices’ by pharmaceutical companies.

The EU anti-trust regulator suspects that innovator pharmaceutical companies could be

colluding with their generic counterparts and indulging in unethical practices by deliberately

delaying the launch of affordable generic versions of medicines in the European market.

This, in turn, could be costing the European exchequers and healthcare systems a fortune,

may be to the tune of billions of dollars. According to a European Commission estimate,

such delays in generic medicine launches could have resulted in increasing consumers’ bills

by 20% between 2000 and 2007.

In 2011, Ranbaxy was able to put these behind by committing to the Consent Decree. It is

their remediation program to further strengthen procedures and policies. We will continue

to cooperate with the US FDA to re-establish the public trust in the company. Over the last

three years since the Application Integrity Policy (AIP) was invoked, Ranbaxy has

implemented significant changes and improvements in their systems and processes to

comply with good manufacturing practices.

After putting in place the Consent Decree, Ranbaxy seems to have put behind a troubled

past. During the year 2010-11, the company made significant progress with global sales of

over US $ 2 Billion, becoming the first pharmaceutical company of Indian origin to cross this

landmark. They launched a generic version of the world's largest drug, in the US, helping

millions of Americans manage healthy cholesterol levels. It is effective, affordable and

accessible which helps people get affordable drugs required for their treatment.

Strengthening their corporate governance standards, they introduced a Whistle Blower

Policy - an extension of Ranbaxy's existing ''Code of Conduct'' that aims to promote self-

governance at all levels. The Company has adopted Whistle Blower Policy and launched it

globally effective August 1, 2011. This policy was intended to govern reporting and

investigation of allegations on violations of the Code of Conduct of the Company, for which

a dedicated e-mail id ombudsperson.whistleblower@ranbaxy.com has been established.

Chairman of the Audit Committee of the Company had been nominated by the Board as

Ombudsperson for this purpose. No employee was denied access to the Audit Committee

during the year.

During the year 2010-11, 42 inspections across 18 Ranbaxy sites were successfully

conducted by 18 different regulatory inspection agencies with zero critical findings. We

finished the year 2011 with successful MHRA / IMB inspections. In addition to the successful

inspection of Ranbaxy’s global manufacturing sites during the year, we also took various

measures to expand and strengthen our quality compliance across the company.

In order to reinforce making a contribution to the cause of humanity, for Ranbaxy, that

moment came alive in 2011, with the approval of its first New Drug (New Chemical Entity for

the treatment of Malaria). Ranbaxy was the first pharmaceutical company from India to

successfully develop a New Drug. A core group of 93 persons including 33 Medical Officers,

37 Auxiliary Nurse Midwives and other Paramedics and 19 support staff enable the Ranbaxy

Community Healthcare Services (RCHS), their main delivery vehicle, to operate 18 mobile

healthcare vans and 1 Urban Family Welfare Centre, providing services to over to 650,000

people in the northern and central parts of India. In 2011, their targeted efforts delivered

the desired outcome in the new areas. The percentage of pregnant women who availed

antenatal care improved from 65.9% in 2010 to 78% in 2011. Their aim is to reduce child

mortality and improve maternal health. These mobile healthcare clinics provided greater

access to medical and primary healthcare and save many lives in compliance to the Global

Quality Policy and Pharmacovigilance requirements of the company.

Ranbaxy has an excellent corporate governance report. They comply with all the mandatory

as well as non-mandatory disclosures mentioned in the Clause 49 of the Listing agreement.

By doing this their responsibility towards their shareholders is fulfilled and by disclosing all

the non-mandatory details they prove to be ethical towards their shareholders.

After the turbulent times the second part of the last decade, Ranbaxy has finally got its act

together and doing business ethically and efficiently. Ranbaxy is back again on a high

trajectory growth rate and their profits have risen. So being ethical they have got back the

trust on the customers and the governments. The efforts undertaken will go a long way in

trying to undo the unethical practices of Ranbaxy.

Refrence:-Reliance

o www.Wikipedia.com o www. icrindia.wordpress.com o www.news4u.co.in

Ranbaxy

o www.indiacsr.in

o www. ranbaxy .com/aboutus/code-of-conduct-employee.pdf

o http://www.financialexpress.com/news/eu-antitrust-raid-on-ranbaxy-france-unit/

526352/

o : http://forbesindia.com/article/boardroom/ranbaxy-nowhere-to-hide/

932/2#ixzz1zmEhVw26

o 2010-2011 Annual Report

www.ranbaxy.com