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2. Parle (Exports) Pvt. Ltd. ("Parle") of Andheri, (West), Bombay, were negotiating with Union Beverages at Sharjah, and Mohd. Nazer Al-Sayer and Sons, Kuwait, and Dhofar Beverages Co., Salalah, for export of their concentrates with a view to enabling the foreign collaborators to bottle and sell their products in Kuwait and Sharjah. As Parle had to face razor-sharp competition from other entrenched international giants like Pepsi Cola, 7-UP, Canada Dry, etc., the collaborators advised Parle to follow the practice of the international companies in honing a blitz advertising compaign as a sale promotion strategy. Earlier, the Reserve Bank of India had permitted Parle to send publicity material free of cost to the tune of Rs. 3.33 lakhs, but Parle discovered to their dismay that a product cannot capture the market unless it is backed by a high profile and expensive publicity drive. The publicity material sent earlier proved to be extremely inadequate and Parle on February 1, 1977, wrote to the Reserve Bank of India requesting them to release foreign exchange of 25% of the f.o.b. value of the product, viz., concentrates supplied for preparation and exhibition of publicity material like films for cinema and T.V., huge neon signs, radio jingle in the local language, automatic vending machines, audio visual aids, transparencies printed on plastic, etc., to be manufactured in foreign countries. Parle assured the bank that the foreign exchange remittance would be decreased progressively to 15% and 10% in the succeeding and subsequent years.

3. On March 21, 1977, the Reserve Bank of India sought clarification from Parle on various points including whether Parle are entitled to a share in the profits of the foreign associates or whether the profit is confined to those realised on exports only. Parle replied on March 22, 1977, giving the break-up of the sale of concentrates, advertising expenses, etc., and made it clear that they are not entitled to share in the profit of any foreign associates. As regards the technical know-how, Parle clarified that they do not get any reimbursement for the same because it is an international business practice for companies supplying concentrates to render technical assistance to the bottling plaints as and when such service is needed. Simultaneously, on June 3, 1977, the Deputy Controller of the Reserve Bank of India wrote to the joint Controller of the Exchange Control Department recommending release of foreign exchange for advertising purposes. He also stipulated that Parle should forgo the cash incentives in full but this condition was later on withdrawn. The letter ends with the observation : "The case papers will be returned to you on receipt from Government" indicating that the Deputy Controller had also referred the matter to the Central Government. On June 21, 1977, Parle forwarded a copy of the franchise agreement with the foreign bottlers to the Joint Controller, Reserve Bank of India, and the noting on the letter shows that the agreement was scrutinised by the officers of the Reserve Bank of India and thereafter the foreign exchange required was released in favour of Parle.

5. The Joint Controller was asked to advise the company to apply for the approval of the Government under section 27 of the Act, which was accordingly done by the company. The matter stood there.

6. Parle (Exports) Pvt. Ltd., Mr. Ramesh J. Chauhan and Mr. H. M. Golwala, two director of Parle, are being prosecuted before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Bombay, for having committed an offence under section 27(1) read with section 56 of the Act. An application was made by the accused persons under section 245(2) of; the Criminal Procedure Code for their discharge which application having been dismissed by the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Bombay, the accused have preferred the present criminal writ petition.