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Dr Reddys Laboratories
BSE: 500124|NSE: DRREDDY|ISIN: INE089A01023|SECTOR: Pharmaceuticals
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« Mar 13
Notes to Accounts Year End : Mar '14
1.1: CONTINGENT LIABILITIES AND COMMITMENTS
 
 - PARTICULARS                                  AS AT         AS AT
                                                   31 MARCH 2013
 
 Contingent liabilities: Guarantees: 
 
 (a) Issued by the Company on behalf of
 subsidiaries, associates and
 Hoint ventures                                13,836        16,274
 
 Claims against the Company not 
 acknowledged as debts in respect of: -
 
 (a) Income tax matters, under dispute          1,264           446
 
 (b) Excise matters (including service tax),
 under dispute                                    633           301
 
 (c) Sales tax matters, under dispute             319           379 
 
 (d) DPCO matters
 
 The Company has received demands for payment to the credit of the Drug
 Prices Equalisation Account under Drugs (Price Control) Order, 1995 for
 few of its products which are being contested. Based on its best
 estimate, the Company has made a provision for the potential liability
 related to the overcharged amount including the interest thereon and
 believes that the possibility of any liability that may arise on
 account of penalty on this demand is not probable. In the event the
 Company is unsuccessful in its litigation in the Supreme Court, it will
 be required to remit the sale proceeds in excess of the noti ed selling
 prices to the Government of India with interest and including
 penalties, if any, which amounts are not readily ascertainable.
 
 (e) Fuel surcharge adjustment
 
 The Andhra Pradesh Electricity Regulatory Commission (the A PERC) has
 passed various orders approving the levy of Fuel Surcharge AdHustment
 (F SA) charges for the period from 1 April 2008 to 31 March 2013 by
 power distribution companies from all the consumers of electricity in
 the state of Andhra Pradesh, India. The Company led separate H rits of
 Mandamus before the H igh Court of Andhra Pradesh (the 0 igh Court)
 challenging and Buestioning the validity and legality of this levy of
 FSA charges by the APERC for various periods.
 
 The Company, after taking into account all of the available information
 and legal provisions, has recorded an amount of Rs. 215 as the potential
 liability towards FSA charges. The total amount approved by APERC for
 collection by the power distribution companies from the Company in
 respect of FSA charges for the period from 1BApriH2008 to 31EMarchH2013
 is approximately Rs. 473. As of 31HMarchH2014, the Company has paid,
 under protest, an amount of Rs. 267 demanded by the power distribution
 companies as part of monthly electricity bills. The Company remains
 exposed to additional nancial liability should the orders passed by the
 APERC be upheld by the Courts.
 
 (f) Land pollution
 
 The Indian Council for Environmental Legal Action led a writ in 1989
 under Article 32 of the Constitution of India against the En ion of
 India and others in the Supreme Court of India for the safety of people
 living in the Patancheru and Bollarum areas of Medak district of Andhra
 Pradesh. The Company has been named in the list of polluting
 industries. In 1996, the Andhra Pradesh District Judge proposed that
 the polluting industries compensate farmers in the Patancheru, Bollarum
 and Jeedimetla areas for discharging ef uents which damaged the
 farmers’ agricultural land. The compensation was xed at Rs. 0.0013 per
 acre for dry land and Rs. 0.0017 per acre for wet land. Accordingly, the
 Company has paid a total compensation of Rs. 3. The Company believes that
 the possibility of additional liability is remote. The Andhra Pradesh
 High Court disposed of the writ petition on 12 February 2013 and
 transferred the case to the National Green Tribunal (N GT) Chennai,
 India. The interim orders passed in the writ petitions will continue
 until the matter is decided by the NGT
 
 (g) Water pollution and air pollution
 
 During the three months ended 31 December 2011, the Company, along with
 14 other companies, received a notice from the Andhra Pradesh Pollution
 Control Board (A PP Control Board) to show cause as to why action
 should not be initiated against them for violations under the Indian H
 ater Pollution Act and the Indian Air Pollution Act. Furthermore, the
 APP Control Board issued orders to the Company to (i) stop production
 of all new products at the Company’s manufacturing facilities in
 Hyderabad, India without obtaining a C onsent for Establishment, (ii)
 cease manufacturing products at such facilities in excess of certain
 Buantities speci ed by the APP Control Board and (iii) furnish a bank
 guarantee (similar to a letter of credit) to assure compliance with the
 APP Control Board’s orders.  The Company appealed the APP Control Board
 orders to the Andhra Pradesh Pollution Appellate Board (t he APP
 Appellate Board). The APP Appellate Board on the basis of a report of a
 fact- nding advisory committee, recommended to the Andhra Pradesh
 Government to allow expansion of units fully equipped with Zero-LiBuid
 Discharge (Z LD) facilities and otherwise found no fault with the
 Company (on certain conditions). The APP Appellate Board’s decision was
 challenged by one of the petitioners in the National Green Tribunal and
 the matter is currently pending before it.
 
 Separately, the Andhra Pradesh Government, following recommendations of
 the APP Appellate Board, published a noti cation in July 2013 that
 allowed expansion of production of all types of existing bulk drug and
 bulk drug intermediate manufacturing units subEect to the installation
 of ZLD facilities and the outcome of cases pending in the National
 Green Tribunal. Importantly, the noti cation directed pollution load of
 industrial units to be assessed at the point of discharge (if any) as
 opposed to point of generation
 
 In September 2013, the Ministry of Environment and Forests, based on
 the revised Comprehensive Environment Pollution Index issued a noti
 cation that re- imposed a moratorium on expansion of industries in
 certain areas where some of the Company’s manufacturing facilities are
 located. This noti cation overrides the Andhra Pradesh Government’s
 noti cation that conditionally permitted expansion
 
 (h) Assessable value of products supplied by a vendor to the Company
 
 During the year ended 31 March 2003, the Central Excise Authorities of
 India (t he Central Excise Authorities) issued a demand notice to a
 vendor of the Company regarding the assessable value of products
 supplied by this vendor to the Company. The Company has been named as a
 co-defendant in this demand notice.  The Central Excise Authorities
 demanded payment of Rs. 176 from the vendor, including penalties of Rs. 90.
 Through the same notice, the Central Excise Authorities issued a
 penalty claim of Rs. 70 against the Company. During the year ended 31
 March 2005, the Central Excise Authorities issued an additional notice
 to this vendor demanding Rs. 226 from the vendor, including a penalty of
 Rs. 51. Through the same notice, the Central Excise Authorities issued a
 penalty claim of Rs. 7 against the Company. Furthermore, during the year
 ended 31 March 2006, the Central Excise Authorities issued an
 additional notice to this vendor demanding Rs. 34. The Company led
 appeals against these notices with the Customs, Excise and Service Tax
 Appellate Tribunal (the C ESTAT). In October 2006, the CESTAT passed an
 order in favour of the Company setting aside all of the above demand
 notices. In July 2007, the Central Excise Authorities appealed against
 CESTAT’s order in the Supreme Court of India, New Delhi. The matter is
 pending in the Supreme Court of India, New Delhi
 
 1.2: RELATED PARTY DISCLOSURES 
 
 1.  Dr. Reddy’s Laboratories Inc., BSA;
 
 2.  Dr. Reddy’s Laboratories International SA, Switzerland
 
 3.  Dr. Reddy’s Laboratories Lousiana LLC, BSA;
 
 4.  Dr. Reddy’s Laboratories Romania SRL, Romania;
 
 5.  Dr. Reddy’s Laboratories SA, Switzerland
 
 6.  Dr. Reddy’s New Zealand Limited, New Zealand
 
 7.  Dr. Reddy’s Pharma SEZ Limited, India;
 
 8.  Dr. Reddy’s Singapore PTE Limited, Singapore (from 22 October
 2013)
 
 9.  Dr. Reddy’s Srl, Italy (formerly Jet Generici Srl)
 
 10.  Dr. Reddy’s Laboratories New York, Inc., BSA;
 
 11.  Dr. Reddy’s Laboratories Canada Inc., Canada (from 29 August
 2013);
 
 12.  Dr. Reddy’s Laboratories (BH) Limited, ffl
 
 13.  Dr. Reddy’s Laboratories ILAC TICARET Limited SIRBETI, Turkey
 (till 04 December 2012);
 
 14.  Dr. Reddy’s Laboratories Tennessee LLC, BSA;
 
 15.  Dr. Reddy’s Laboratories LLC, Ukraine;
 
 16.  Dr. Reddy’s Venezuela C.A., Venezuela;
 
 17.  DRL Impex Limited, India;
 
 18.  Eurobridge Consulting B.V., Netherlands
 
 19.  Idea2Enterprises (India) Private Limited, India;
 
 20.  Industrias Bu imicas Falcon de Mexico S.A. de C.V, Mexico;
 
 21.  I-Ven Pharma Capital Limited, India (under liquidation);
 
 22.  Lacock Holdings Limited, Cyprus;
 
 23.  OctoPlus Development B.V, Netherlands (from 15 February 2013);
 
 24.  OctoPlus N.V, Netherlands (from 15 February 2013);
 
 25.  OctoPlus PolyActive Sciences B.V, Netherlands (from 15 February
 2013);
 
 26.  OctoPlus Sciences B.V, Netherlands (from 15 February 2013);
 
 27.  OctoPlus Technologies B.V, Netherlands (from 15 February 2013);
 
 28.  OctoShare B.V, Netherlands (from 15 February 2013);
 
 29.  OOO Alfa, Russia (till 16 July 2012);
 
 30.  OOO Dr. Reddy’s Laboratories Limited, Russia;
 
 31.  OOO DRS LLC, Russia;
 
 32.  Promius Pharma LLC, BSA;
 
 33.  Reddy Antilles N.V, Netherlands
 
 34.  Reddy Specialities GmbH, Germany (formerly Reddy beta GmbH);
 
 35.  Reddy Cheminor S.A., France (under liquidation);
 
 36.  Reddy Holding GmbH, Germany;
 
 37.  Reddy Netherlands B.V, Netherlands;
 
 38.  Reddy Pharma Iberia SA, Spain
 
 39.  Reddy Pharma Italia S.p.A, Italy;
 
 40.  Reddy Pharmaceuticals Hong Hong Limited, Hong Hong (till 19
 October 2012 );
 
 41.  Reddy BS Therapeutics Inc., BS A; (till 03 July 2013 ) and
 
 42.  Trigenesis Therapeutics Inc., HS A (till 04 December 2012).
 
 Joint ventures
 
 Bu nshan Rotam Reddy Pharmaceutical Company Limited (R eddy Bunshan),
 Enterprise over which the Company exercises Boint control with other
 Boint venture China partners and holds 51.33% of eBuity shares
 
 Enterprise over which the Company’s step down subsidiary exercises
 Boint control DRANBLLC, BSA (from 9 July 2012) with other Boint venture
 partner and holds 50% of eBuity shares
 
 b.  List of other related parties with whom transactions have taken
 place during the current and/or previous year:
 
 Dr. Reddy’s Research Foundation Enterprise over which the principal
 shareholders have signi cant in uence
 
 Dr. Reddys Institute of Life Sciences Enterprise over which principal
 shareholders have signi cant in uence
 
 Ecologic Chemicals Limited Enterprise controlled by principal
 shareholders
 
 Stamlo Bot els Private Limited Enterprise controlled by principal
 shareholders
 
 Green Park Bot els and Resorts Limited Enterprise controlled by
 relative of a director
 
 B S amraByam Mother of Vice Chairman and Managing Director
 
 G Anuradha Spouse of Chairman and Chief Executive Of cer
 
 Deepti Reddy Spouse of Vice Chairman and Managing Director
 
 G. Mallika Reddy Daughter of Chairman and Chief Executive Of cer
 
 G V SanBana Reddy Daughter of Chairman and Chief Executive Of cer
 
 Dr. Reddy’s Foundation Enterprise where principal shareholders are
 trustees
 
 Pudami Educational Society Enterprise where principal shareholders are
 trustees
 
 A. R. Life Sciences Private Limited* Enterprise in which relative of a
 director has signi cant in uence
 
 A.R. Life Sciences Private Limited (A RLS) was a related party of the
 Company only for the year ended 31 March 2013. Accordingly transactions
 with ARLS for the year ended 31 March 2014 are not considered for
 reporting in the related party transactions summary.
 
 c.  List of Bey Man agement Personnel of the Company G V Prasad
 (whole-time director);
 
 B Satish Reddy (whole-time director);
 
 AbhiBit MukherBe;
 
 Alok Sonig
 
 Dr. Amit Biswas;
 
 Dr. R Ananthanarayanan
 
 Dr. Cartikeya Reddy;
 
 Dr. Chandrasekhar Sripada;
 
 Dr. Raghav Chari;
 
 Dr. BVS Ram Rao;
 
 M V Ramana;
 
 Samiran Das;
 
 Saumen Chakraborty;
 
 Bman g Vohra; and
 
 Late Dr. B AnBi Reddy (whole-time director till 15 March 2013)
Source : Dion Global Solutions Limited
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