Cipla

1.  The previous year’s figures have been recast/regrouped wherever
 necessary in order to conform to current year’s presentation.
 
 2.  Estimated amount of contracts remaining to be executed on Capital
 Account and not provided for (net of advances) Rs.316.83 crore
 (Previous year Rs.433.67 crore).
 
 3.  Contingent Liabilities
 
 i.  Guarantees given by banks on behalf of the Company Rs.34.52 crore
 (Previous year Rs.52.64 crore).
 
 ii.  Letters of credit Rs.37.80 crore (Previous year Rs.52.82 crore).
 
 iii.  Technical know-how/fees Rs.44.05 crore (Previous year Rs.1.15
 crore) pending completion of certain obligations.
 
 iv.  Claims against the Company not acknowledged as debts:
 
 a.  Income Tax - Rs.Nil (Previous year Rs.73.57 crore).
 
 b.  Excise Duty/Service Tax Rs.44.90 crore (Previous year Rs.40.84
 crore).
 
 The above represents claims where, based on decisions in earlier years,
 the Company is of the opinion that the demand is not sustainable.
 
 c.  Sales Tax Rs.0.50 crore (Previous year Rs.Nil).
 
 d.  Others Rs.2.31 crore (Previous year Rs.2.02 crore).
 
 4.  The Government of India has served demand notices in March 1995 and
 May 1995 on the Company in respect of six bulk drugs, claiming that an
 amount of Rs.5.46 crore along with interest due thereon is payable into
 the DPEA under the Drugs (Prices Control) Order, 1979 on account of
 alleged unintended benefit enjoyed by the Company. The Company has
 filed its replies to the notices and has contended that no amount is
 payable into the DPEA under the Drugs (Prices Control) Order, 1979.
 
 5.  The Government of India (NPPA) has served show cause notices on the
 Company on account of overcharging in respect of Salbutamol,
 Theophylline, Ciprofloxacin, Cloxacillin, Norfloxacin, Cefadroxil,
 Trimethoprim and Sulphamethoxazole formulations under the Drugs (Prices
 Control ) Order, 1995. The aggregate demand of the show cause notices
 received upto July 2003 amounted to Rs.360.75 crore.
 
 In response to the writ petition filed by the Company against the
 aforesaid show cause notices, the Hon’ble High Court of B ombay had
 upheld the Company ’s contentions and held that the drugs Norfloxacin,
 Ciprofloxacin, Theophylline, Salbutamol and Cloxacillin cannot be
 included under price control and consequently had quashed the above
 show cause notices. The Government of India had filed an appeal in the
 Supreme Court of India. The Hon’ble Supreme Court of India by its order
 dated 1st August 2003 laid down the principles for interpretation of
 the Drug Policy and has remanded the matter to the Hon’ble High Court
 of Bombay where the petitions are now pending. The Hon’ble Supreme
 Court of India had also given liberty to the NPPA to recover 50 per
 cent of the allegedly overcharged amount. In addition, the Company’s
 writ petition has also challenged the wrongful withholding by the
 government of the exemption to Salbutamol manufactured by the Company
 on the grounds of Research and Development.  The said challenge is
 pending in the Hon’ble High Court of Bombay, which has granted
 interlocutory orders regarding the same.
 
 With regard to the other drugs in the show cause notices, the Company
 has also pointed out to the government that it does not manufacture
 formulations of Cloxacillin and Cefadroxil and has also pointed out
 that the Company is following the notified prices in respect of
 formulations of Trimethoprim and Sulphamethoxazole.
 
 The Company had not deposited the amount demanded, as in another
 petition challenging the Price Fixation notifications of formulations
 of Salbutamol, Norfloxacin, Ciprofloxacin and Theophylline, the
 Karnataka High Court had granted an interim stay against the
 government. Subsequently, in separate proceedings on the same basis as
 before the Karnataka High Court, the Allahabad High Court had ruled
 that the prices fixed by the government in respect of the said drugs
 were ultra vires, illegal and void. On an appeal filed by the
 government against this ruling, the Supreme Court stayed the judgment
 of the Allahabad High Court but directed that no prosecution should be
 launched or coercive action taken against the Company for recovery,
 till the appeal was finally decided. The Company has, subsequently, in
 April 2007 received demand notices for the entire 100 per cent of the
 aforesaid amount along with interest, aggregating Rs.748.27 crore -
 contrary to the orders of the Supreme Court. In addition, during the
 financial year 2007-08, the Company has received from the government
 further demand notices inclusive of interest for Rs.362.12 crore which
 according to them was allegedly overcharged by the Company for the
 period upto March 2007 in respect of the aforesaid drugs.  Further, the
 Company has in March 2008 received a demand notice from the government
 for an amount of Rs.0.32 crore inclusive of interest, allegedly
 overcharged in respect of the drug Doxycycline. In July 2009, the
 Company has received demand notices for an amount of Rs.64.39 crore
 including interest in respect of the drug Salbutamol upto June 2009 and
 an amount of Rs.2.19 crore (including interest of Rs.0.74 crore upto
 June 2009) in respect of the drug Norfloxacin for the period October
 2005 to March 2006. The Company has received legal advice that none of
 these demand notices of the government is tenable or sustainable.
 
 6.  The net difference in foreign exchange debited to the Profit and
 Loss Account is Rs.228.37 crore (Previous year credit Rs.67.08 crore).
 
 7.  Related Party Disclosures
 
 Related party disclosures, as required by AS-18, “Related Party
 Disclosures”, of the Institute of Chartered Accountants of India are
 given below:
 
 i.  The related parties are as under:
 
 a.  Key management personnel, namely – Dr. Y.K. Hamied, Mr. M.K. Hamied
 & Mr. Amar Lulla.
 
 b.  Subsidiary Company – Cipla FZE, U.A.E.
 
 c.  Five charitable trusts namely – Cipla Public Charitable Trust,
 Hamied Foundation, Dr. Y.K. Hamied Foundation, Yusuf & Farida
 Foundation and Cipla Cancer and AIDS Foundation.
 
 d.  Golden Temple Pharma Private Limited.
 
 ii.  Donation given to Cipla Public Charitable Trust Rs.0.43 crore
 (Previous year Rs.0.05 crore) and Cipla Cancer and AIDS Foundation
 Rs.0.04 crore (Previous year Rs.0.64 crore).
 
 iii.  Refer Note 19 for details of managerial remuneration.
 
 iv. During the year, Rs.38.00 crore was placed by Dr. Y.K. Hamied as
 deposit with the Company. Interest accrued on the said deposit till
 31st March 2009 is Rs.1.58 crore. The amount outstanding as on 31st
 March 2009 is Rs.39.04 crore (Net of TDS).
 
 v. During the year, the Company has given loans of Rs.Nil (Previous
 year Rs.12.83 crore) to its subsidiary, Cipla FZE, U.A.E. and has
 provided interest of Rs.0.73 crore (Previous year Rs.0.70 crore) for
 the same. The amount outstanding as on 31st March 2009 is Rs.17.76
 crore (Previous year Rs.13.53 crore).
 
 8.  Segment Information
 
 i.  Information about primary business segments:
 
 The Company is exclusively in the pharmaceutical business segment.
 
 9.  Employee Benefits
 
 The Company has with effect from 1st April 2007, adopted Accounting
 Standard 15, Employee Benefits (revised 2005), issued by the Institute
 of Chartered Accountants of India (the ‘revised AS-15’).
 
 i.  Short Term Employee Benefits
 
 All employee benefits payable wholly within twelve months of rendering
 the service are classified as short term employee benefits. Benefits
 such as salaries, wages, short term compensated absences, etc.  and the
 expected cost of bonus, ex-gratia are recognised in the period in which
 the employee renders the related service.
 
 ii.  Long Term Employee Benefits
 
 The disclosures as per the revised AS-15 are as under:
 
 a.  Brief description of the plans
 
 The Company’s defined contribution plan is Employees’ Pension Scheme
 (under the provisions of Employees’ Provident Funds and Miscellaneous
 Provisions Act, 1952) since the Company has no further obligation
 beyond making the contributions.
 
 The Company has two schemes for long term benefits namely, Provident
 Fund and Gratuity: - The Provident Fund plan, a funded scheme is
 operated by the Company’s Provident Fund Trust, which is recognised by
 the Income Tax authorities and administered through
 trustees/appropriate authorities. The Guidance note on implementing the
 revised AS-15, Employee Benefits (revised 2005) issued by Accounting
 Standards Board ( ) states benefit involving employer-established
 provident funds, which require interest shortfalls to be recompensed,
 are to be considered as defined benefit plans. Pending the issuance of
 the guidance note from the Actuarial Society of India, the Company’s
 actuary has expressed an inability to reliably measure provident fund
 liabilities. Accordingly, the Company is unable to present the related
 information.
 
 - The Company provides for gratuity, a defined benefit plan based on
 actuarial valuation as of the Balance Sheet date, based upon which, the
 Company contributes all the ascertained liabilities to the Insurer
 Managed Funds.
 
 The employees of the Company are also entitled to leave encashment and
 compensated absences as per the Company’s Policy.
 
 10. Basic and Diluted Earning per Share has been calculated by dividing
 net profit after tax for the year by 77,72,91,357 equity shares of
 nominal value of Rs.2 each, being the weighted average number of equity
 shares outstanding during the year.