Is Reliance Industries A Scam?

Reliance Industries and its Progress over the years

Reliance Industries as we know it needs no introduction. It is one of the most important and profitable companies in India. It has given a boost to Industrialization in India. Believe it or not, but we are so dependent on reliance industries in our daily lives as it owns businesses across energy, petrochemicals, textiles, natural resources, retail, and telecommunications and many more other subsidiaries.

Let us firstly talk about how it started and get a brief knowledge of it becoming this successful as a business. It was co-founded by Dhirubai Ambani and Champaklal Damani in the 1960s as Reliance Commercial Corporation and in 1965, this partnership ended and the Polyester business of the firm was continued by Dhirubai Ambani. In 1975, the company expanded its business into textiles. In 1977, the Company launched their IPO(Initial public offering) which was subscribed over 7 times. In 1985, the name of the company was changed from Reliance Textiles Industries Ltd. to Reliance Industries Ltd. From the 1980s to 2000, the company entered businesses such as Petroleum, Telecom and gas. In this time only, The Jamnagar refinery was commissioned which is currently the largest refinery in the world for crude oil.

Here came a major turning point in reliance industries in the last 20 years. It grew so rapidly that reliance has its subsidiaries in almost every sector now. Some of the examples include-

• In 2001, it became one of the largest companies according to major financial parameters.

• In 2002, it introduced India’s biggest gas discovery(at the Krishna Godavari basin)

• RIL purchased a majority stake in Indian Petrochemicals Corporation Ltd.

• In 2005 and 2006, it entered power generation and distribution, financial services and telecommunication services. And also in an organised Retail market Chain named “ Reliance fresh”.

In this way , they expanded business in the Rubber industry, Oil industry(dealing with British oil and gas companies).

Some of the major Subsidiaries of RIL are as follows:

• Jio Platforms Limited, essentially a technology company, is a majority-owned subsidiary.

• Reliance retail for retail business.

• Reliance Life Sciences for medical and biochemical research

• Reliance Logistics

• Reliance Solar

• Reliance industrial infrastructure ltd.

• Network 18, a mass media company.

• Reliance Eros Productions LLP

So, by the above data we can see how big of an empire is Reliance industries. It is one of the largest traded companies in India by market capitalization.The company is ranked 96th on the Fortune Global 500 list of the world's biggest corporations as of 2020. In september 2020, it became the first company in India to cross $200 billion in market capitalization. Mukesh Dhirubhai Ambani is the present chairman, managing director, and largest shareholder of RIL. He is the face of Reliance Industries and is the richest person in India and 11th richest of the world as of 28th december 2020.

Scams of Reliance Industries

We should wonder how this big company is growing at such a rate. There must be something, which is definitely wrong with the working of the company to earn such profits at such a rate.

Let us try to understand various irregularities in the working of the company. The RIL is in a lot of controversies which link the company to various financial and political scams in the country. The Chairman of the company is alleged to be in touch with top politicians of the country. Such is the type of political power and manipulative practices are carried by RIL.

Let us discuss about some controversies where RIL is majorly involved:

In the early 1990s, Outlook Magazine published about the various controversies going on in RIL and the allegations were raised against Reliance on various occasions. Some of the allegations were:

• That RIL issued fake shares for their own benefit.

• That it has switched shares sent for transfer by buyers to make illegal profits.

• That it is indulged in Insider trading on various occasions

• It made an arrangement with the Unit Trust of India (UTI), to raise huge sums of money to the detriment of UTI subscribers.

• That it has, through shell companies and subsidiaries, attempted to monopolise the private telecom services market.

Insider Trading

Insider trading is simply defined as trading a company's stock by someone who has private, material sensitive information about that stock which has not yet been public . Some of the instances where RIL was indulged in Insider trading are as follows:

• On january 1st 2021, SEBI(securities and exchange board of India) imposed Rs.25 crore penalty on the company and 15 crore on Chairman of the company, Mukesh Ambani for violating trade rules and manipulating shares of Reliance Petroleum in 2007.

The facts of this case are as follows:

There were 12 agents appointed by RIL who took short positions in the RPL F&O segment. The short positions in the F&O Segment continuously exceeded the proposed sales of shares in the Cash Segment. Then RIL sold its 2.25 lakh shares which made the price of RIL shares to drop and RIL took advantage of this and RIL's entire outstanding position of 7.97 crores in the F&O Segment was cash settled at this depressed or lowered settlement price resulting in profits on the said short positions made by the Agents of RIL.

• In Jan 2011, Securities and exchange board of India (SEBI) barred Anil Ambani and four other officials of Reliance Group from investing in shares until December 2011.

• Other firms from the Reliance group named Reliance Infrastructure Ltd and Reliance Natural Resources Ltd were barred from making such trades until December 2012.

According to SEBI’s investigations, these two firms were responsible for misrepresenting the nature of investments in their annual reports for the years 2007, 2008 and 2009. It was also found to misuse FII(forein institutional investor) regulations. These companies had also violated overseas debt norms. These violations were observed by the Reserve Bank of India (RBI) regarding two ECB transactions—of $360 million and $150 million—by R-Infra.

• In june 2011,SEBI settled a dispute with Reliance Securities Ltd (RSL) with a consent order, under which the brokerage will spend ₹1 crore within six months on investor education and not add any new clients for 45 days starting 15 June.and the brokerage Reliance securities will pay Rs 25 lakh towards settlement charges.

This order followed an investigation by SEBI into these brokerage books and accounts for fiscal 2007 and fiscal 2008, which said that it had allegedly violated various clauses of SEBI regulations. The SEBI inquiry cited 20 irregularities, including the brokerage not informing clients about various charges at the time of opening accounts. RSL sought power of attorney in the name of Reliance Commodities Ltd from clients and used this to debit clients’ bank accounts, purchase and sell post office deposits and government of India bonds among other transactions.

NICL SCAM

In 2011, The CBI(central bureau of Investigation) filed a chargesheet against RIL and four retired employees of National Insurance company Ltd.(NICL) under provisions of the Prevention of corruption Act for criminal conspiracy and some other Charges. The complaint alleged that there were irregularities in issuance of insurance policies for coverage of default payments by NICL to RIL. THe Charge Sheet filed also mentioned criminal offences with dishonest intention and causing wrongful loss totalling ₹147.41 crore to National Insurance Company Ltd. The said transaction also provided RIL with wrongful gains.

Krishna Godavari (KG) Basin gas Controversy

This was a controversy relating to extraction of oil from the KG basin. RIL was to give up 25% of the total area outside the discoveries of Oil in the KG Basin in 2004 and 2005, as per the Production Sharing Contract with the government.

However, the entire block was declared as a discovery area and RIL was allowed to retain it.

In 2011, the Comptroller and Auditor General of India criticised the Ministry of OIL for this decision. The CAG also found that RIL was limiting the competition in contracts, stating that RIL awarded a $1.1 billion contract on a single-bid basis.

The Indian government imposed a fine of $1.55 billion on Reliance Industries Ltd (RIL) and its British partners , for extracting gas in the area belonging to state-run Oil and Natural Gas Corporation limited (ONGC’s) deepwater block in the KG basin for seven years.

However, the claim made by government was rejected by international arbitration and it was held that All the contentions of the Consortium [RIL and its partners] have been upheld by the majority with a finding that the Consortium was entitled to produce all gas from its contract area and all claims made by the GOI have been rejected.

Reliance Future- Amazon Deal

Future Retail, which is one of India’s top retailers, is in a dispute with Amazon over its $3.4 billion retail assets deal with Reliance Industries. RIL was to buy Future retail but Amazon being Future retail’s business partner prevented the sale from happening and argued that Future asset sale breached some of their pre-existing agreements made with Amazon.

Amazon had complained to stock exchanges, accusing Future of misleading the public by making incorrect market disclosures, which were denied by Future retail. The complaint came after Amazon on Oct. 25 won an injunction from an arbitrator (Singapore arbitration)to stop the Future-Reliance deal from happening.

The matter has now gone to Delhi High court. Future Retail has urged the court to stop Amazon from writing letters to regulators to block its Reliance deal, which is pending approvals from the market regulator and stock exchanges.

Amazon had separately asked India's market regulator to investigate Future for insider trading, saying it disclosed to Reliance price sensitive details of the arbitration order before its exchange filing in late October.

Amazon also said Mukesh Ambani being one of the Richest Asian is using his Political power to get this deal.

Reliance JIO controversy

The PIL in Supreme court through Advocate Prashant Bhushan, sought for quashing of the permission granted by the Government to Reliance for providing voice telephony on Broadband Wireless Access (BWA) spectrum and suggested for a court-monitored CBI investigation in the alleged ₹40,000-crore scam.

The petition said that the Centre’s decision to allow voice telephony has given undue benefit of about ₹22,842 crore to RJIL and corresponding loss to the Government and “is therefore arbitrary, unreasonable and discriminatory“.

Reliance and Farmer protest

The Indian farm reforms of 2020, which were passed in September 2020, brought a lot of changes in traditional grain markets and this led to protests in Certain parts of North India including Punjab, Delhi, UP, Haryana.

The farmers are worried that once these farm laws are implemented, it will bring private players in the traditional farming scheme. They will exploit farmers for their own benefits and these big corporations will have an upper hand in case of any disputes between farmers and the contractors as they have teams of legal experts. One such company which Farmers apprehend that will enter in contract farming is RIL.

There are certain proofs that RIL will enter contract farming and to avoid this farmers are damaging property belonging to RIL including Petrol pumps, Retail stores and other offices belonging to RIL.

Conclusion

From the above controversies and scams of RIL we can see how corrupt of a company RIL is in reality. These are only some instances which have come to the limelight by the media. There are various other controversies which we know RIL is in the wrong but there is no concrete proof of that, hence those were not discussed in this article. Mukesh Ambani, Chairperson and MD of the company and his family is also in a lot of controversies recently. It is alleged that he has a dominant position in forming economic policies in India. It is also alleged that the government makes only those rules which are beneficial to his company. The government acts as a puppet of the Ambani family.

An inquiry should be made into the business of the company by an Independent authority like The Central Bureau of Investigation to uncover all the scams or allegations in which RIL is indulged directly or indirectly.

---

Writtten By-

Arshdeep Singh