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US courts rule in favour of ITC, dismiss Chitalias's claim

Tobacco giant ITC has won a protracted legal battle in the United States against its opponents, the Chitalias. A New Jersey district court has endorsed a lower court's order of awarding $ 12 million claim to ITC while dismissing the Chitalias' counter-claim for $ 55 million.

The case pertains to the alleged murky dealings between the Indian corporate major and the US-based brothers during early '90s. ITC was involved in rice exports and setting up of restaurants in the US in association with the Chitalias.

The deals were later found to be in contravention of the Foreign Exchange Regulation Act rules, leading to raids in ITC by the Enforcement Directorate. Two former chairmen of ITC, J N Sapru and K L Chugh, were among the senior executives detained for interrogation. ITC's corporate image took a severe beating, eventually leading to Chugh's exit and anointment of his protégé Yogi Deveshwar as chairman.

Details of the shady transactions surfaced when ITC's major shareholder BAT sought to take over control of the Indian company in 1994. The move met with stiff resistance from ITC's top Indian executives, sparking an acrimonious war of allegations and counter-allegations fought in the media.

The scene shifted to the US in October 1997, when ITC filed a claim of $ 12 million from the Chitalias for the infamous deals. The latter retaliated, slapping a counter-claim for $ 55 million for defamation and commission default. A US court dismissed a large part of the claim last year. The surviving claim for $ 14 million too has been dismissed now, making ITC's win doubly sweet.

According to media reports, the US courts felt that the Chitalias acted in bad faith during the lengthy legal battle, abused sources of information, tampered with factual evidence and withheld disclosure of vital documents to ITC. The Indian company submitted that this attitude hurt its interests and so should be compensated for to the tune of $ 12 million. ITC was also awarded the costs of the legal clash.

Corporate circles interpreted the judgement as vindication of ITC's stand and victory of sorts for the battle-scarred Deveshwar.