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) RILs 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. Its 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. Thats 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) (iv) (v)

assessment of the Company's compliance risks; development of uniform disciplinary standards for compliance failures; and 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 didnt meet FDA standards. The FDA allege officials at Ranbaxys 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 Presidents 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 Ranbaxys case, it found that data for two drugs a common antibiotic and an antifungal drug were falsified. According to the FDA report, Ranbaxys 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 months 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 selfgovernance 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 Ranbaxys 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 o o www.Wikipedia.com www.icrindia.wordpress.com 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-franceunit/526352/ o : http://forbesindia.com/article/boardroom/ranbaxy-nowhere-tohide/932/2#ixzz1zmEhVw26 o 2010-2011 Annual Report

www.ranbaxy.com