Parle honchos Ramesh Chauhan and H.M. Golwala arrested on FERA violation charges

Parle's Chauhan: alleging persecutionAs arrests go, it was neither particularly dramatic nor entirely effective. Descending on a businessman's residence in a Bombay suburb in the early hours of July 27, officers of the Enforcement Directorate (Exchange Control) informed Ramesh Chauhan, managing director of Parle (Exports), that he was under arrest.Picking up H.M. Golwala, executive director of the soft drink manufacturing company, soon after, the enforcement officers brought the two before Chief Metropolitan Magistrate A.B. Velkar to ask that they be remanded to judicial custody.They were accused of violating the Foreign Exchange Regulation Act (FERA) on five counts covering sections 9, 14, 16 and 27 of the Act. Claiming that the company, which has in recent years gone in for export of soft drink concentrates to bottling plants around the world, had repeatedly flouted exchange control regulations. Chief Enforcement Officer W.S. Waingankar requested that the two full-time directors be detained by the court.All, however, did not go smoothly for the arresting officers. Promptly accepting their bail application, Velkar allowed the two to leave on personal bonds of Rs 20,000 each. No sooner was he free than Chauhan denounced their attempt at incarcerating him as a "tamasha" by the Enforcement Directorate aimed only at ruining his image and maligning the company. Insisting that the arrest was only the latest in a series of harassing incidents initiated by the Government for political reasons, Chauhan added that although his offices had been raided three times since April 1980 both the Central Bureau of Investigation (CBI) and the Enforcement branch had been unable to bring any charges to bear against him. "Their remand application is a mass of trumped-up charges and half-baked assumptions," said Chauhan heatedly, "they spent lakhs on trying to build up a case, people have been sent to Kuwait and Italy. Interpol was asked to help, but even now they have not established that a prima facie or ex facie offence has been committed."Careful Campaign: His arrest, claims Chauhan, comes as a climax to a long-running battle between his company and its rival - Pure Drinks, manufacturers of Campa and Campa-Cola, which is headed by Charanjit Singh, a Congress(I) MP from New Delhi. According to Chauhan, the campaign against him has been obliquely but carefully orchestrated in Parliament and in the media - at least 90 questions have been asked about Parle in both houses of Parliament in the last four years, mostly by a band of Congress(I) MPs. K. Lakkappa alone has asked 25; in fact Sanjay Gandhi during the few months he attended Parliament before his death last year, asked two, both of which were satisfactorily replied to by the finance minister.The barrage of questions relating to excise duties, foreign exchange remittances and seizure of "documents evidencing payment of a political nature" in Parle offices, were aimed at needling out information which according to Chauhan doesn't exist. Recently the heat of the attack had become so intense that a bewildered chairman of the Rajya Sabha, Vice-President M. Hidayatullah remarked: "I never thought these cold drinks had so much fire in them." Last month's charges refer to a payment of (Rs 15,000 to the United Arab Emirates (UAE) by Parle on behalf of its Sharjah franchise, Union Beverages, without Reserve Bank of India's (RBI) approval. The payment, which represented a two-year refundable security deposit for emigrant labour, is normally made by the foreign employer or the labour contractor who exports manpower to cover the Indian Government's liability in case the worker is stranded abroad.Denying that this payment even entered the purview of FERA, Parle officials state that it is a fully refundable temporary deposit which has nothing to do with foreign exchange earnings. Said Chauhan: "If you have a million-dollar a year customer who asks you to advance his labour contractor Rs 15,000 as a temporary loan, are you going to refuse? These are just baseless charges."Franchises: Other documents seized from Parle offices, stales Waingankar, reveal that the company has entered into franchise agreements in Kuwait and Sharjah without RBI clearance. According to him the company had also forfeited its right to receive a Rs 1 lakh security deposit from the franchise while signing the agreement. But enforcement officials had quite obviously failed to do their homework, since Parle had not only received RBI approval for the franchises but had also been allowed to remit large sums in foreign exchange abroad to pay for image-building publicity. Despite Waingankar's assertion about a "right to receive a deposit", no such right exists, since the company is operating an open-market situation in which the buyer is supreme. Argued Golwala indignantly: "We're competing with giant soft drink companies in these markets, and it is we who need buyers, not vice versa. Who the hell are we to demand a security deposit from potential customers?"The application goes on to list a case of "underinvoicing" in which Parle has reduced the sale price of its beverages to compensate its foreign bottlers for certain advertisement expenses borne by them. But what the enforcement whiz kids have chosen to overlook is that the soft drinks industry is unique in that the parent company supplies its name and a concentrate to the bottlers, who undertake actual manufacture and sales. For this reason, all image-building, and long-term advertising is invariably undertaken by the parent company.Although Parle had obtained permission to remit foreign exchange for advertising abroad, the company found that it grew increasingly difficult to coordinate foreign advertising from within India. Chauhan then renegotiated with the franchise buyers, lowering his selling price and passing on the advertising burden to the franchise. Ironically, the company has been netting more foreign exchange under the new agreement. While earlier Parle charged its buyers 51.472 (Rs 11,776) per case of concentrate and remitted $340 (Rs 2,720) for advertising, buyers now pay the company between $1,250 (Rs 10,000) and 51,300 (Rs 10.400) per case and handle advertising themselves.Repeated Raids: Enforcement officials refuse to comment on the merits of the case but they insist that it is "neither politically motivated nor mala fide." The repeated raids on Parle premises were only undertaken to tie up loose ends and build up a proper case, according to R. Sampath, deputy director of enforcement, who adds that his department had neither the time nor the manpower to indulge in political vendettas or fabricated cases. "We examine the documents quickly", he said, "and if contravention is noticed we process the papers and issue a show cause notice for departmental adjudication or prosecution in the courts."Singh : keeping quietAccording to Chauhan, however, the department continually harasses him with raids, but has been unable to find any charges against him to date. After a 1980 raid two prosecutions were initiated, but in these cases too specific charges are yet to be given to the court."Ever since the exit of Coca-Cola these people have been hounding me," said Chauhan. "They have all but crippled my business by walking off with all the files, documents and papers during the course of these raids." Before the American giant stopped operating from India in 1977, Parle was a relatively low profile company with two moderately successful soft drinks, Gold Spot and Limca.Thrust suddenly into prominence after Coca-Cola's departure, Parle rapidly shot to the top in the cola war that followed. Overtaking both Campa-Cola, and the state-owned soft drink Double Seven, Parle's Thums Up grabbed a massive lead in the western, southern, and eastern markets. While Campa-Cola remains the dominant drink in Delhi, and Double Seven in Uttar Pradesh and Bihar, the other northern states have fallen to Thums Up, Gold Spot and Limca. Four years after Indian soft drinks went indigenous, Parle products are manufactured in 36 bottling plants, of which 34 are franchised to independent bottlers. Pure Drinks has six plants and Double Seven 12.Discrimination: Pure Drinks bosses are reluctant to counter Chauhan's allegations. While Managing Director Charanjit Singh was unavailable for comment, his older brother Daljit Singh, chairman of Pure Drinks, laconically told India Today: "We don't want to enter the controversy which has been created by the media." But Chauhan goes so far as to allege that his competitors "probably want Parle shut-how else can they gain?" Others say that Charanjit Singh, always a close Congress(I) supporter and fund-raiser, simply wants to get his own back on Chauhan who, back in the Janata Party days, was instrumental in highlighting the discrimination his company faced in competition with Coca-Cola that eventually led to its departure. And Pure Drinks, who controlled the all-India franchise for Coca-Cola were naturally the worst hit till they came up with their indigenous substitute, Campa-Cola.Parle's major growth effort, however, has been in the foreign markets, where they had made a small beginning in 1973. Launching an ambitious export programme Chauhan signed up bottling plants in Kuwait, Sharjah and Salalah in the Gulf. Parle Singapore and a subsidiary in the United States. Parle America, were floated, and Chauhan's Bombay-based company began to export its technical knowhow in addition to concentrates. By 1980, Rs 75 lakh of the roughly Rs 3 crore Parle exports turnover came from the export markets. In an effort to break into the lucrative US market, the company began to market mango nectar, a new aerated apple drink, and other fruit juices, in which the established giants had no stake. Parle has recently signed agreements for 12 new bottling plants in Nigeria and two in Saudi Arabia, and is in the middle of negotiations with Perrier of France for a massive joint assault on the US market.Meanwhile, Chauhan is faced with the more immediate prospect of dealing with enforcement officials, court hearings in connection with his recent arrest and proposed remand, and follow-up action on the string of raids mounted by the Enforcement Directorate and CBI since last year. Angrily denying that there are any irregularities in his company's operations, he says, "From the way the Government is behaving one would think they don't want me to export anything, and if that's what they want I'll close down all exports from India. Parle (Exports) will become Parle (Domestic) and I'll route all exports through Parle Singapore, which is an independent company." More immediately, Chauhan plans to file a suit against officials of the Enforcement Directorate and Waingankar - for harassment and deprivation of his legal and fundamental rights.Published By: AtMigration Published On: Nov 12, 2013 10:28 IST--- ENDS ---

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Parle honchos Ramesh Chauhan and H.M. Golwala arrested on FERA violation charges

As arrests go, it was neither particularly dramatic nor entirely effective. Descending on a businessman's residence in a Bombay suburb, officers of the Enforcement Directorate informed Ramesh Chauhan, managing director of Parle (Exports), that he was under arrest.

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