Chitalias Sue Itc For Over $55 Million

The Chitalias are demanding $ 15 million in punitive damages, $ 25 million for character defamation and the rest as unpaid accounts, fees and commissions for a slew of business ventures with ITC.

The soured agreements allegedly include commodity transactions, an attempt to market ITC cigarettes in the US, a cashew processing plant, psyllium husk and neem projects, a stake in Singapore-based Hup Hoon Traders Corporation, commission on ship breaking, a guarantee made on behalf of ITC in Sri Lanka, and a failed venture to establish Bukhara restaurants in New York and Chicago. The Chitalias are counter-suing their former partner, after denying ITC's claim for nearly $ 16 million in damages.

 

As part of their defence, the Chitalias have alleged that ITC was responsible for creating a string of overseas corporations to generate fictitious profits and bypass Reserve Bank of India regulations. The corporations allegedly created by ITC include New Jersey-based Sunny Trading, Vaam Impex, and Warehousing Inc, RS Commodities and Liechtenstein-based Lokman.

ITC had alleged that the Chitalias controlled all four corporations, besides owning EST Fibres. The Chitalias allege in their counterclaim that Sunny, R S Commodities, and Vaam Impex acted as conduits for ITC's sale of commodities and paid money received from third part buyers as directed by the Indian company.

ITC generated losses on the books of the corporations .... conversely increasing profits on its own books in India as the sale price to the corporations was always higher than the sale price established between ITC and third party buyers, says the counterclaim.

Subsequent transactions were conducted on a dollar-for-dollar basis to avoid reporting overseas receivables due beyond 180 days as required by RBI regulations, the Chitalias claim.

ITC had its subsidiary, Global, forward sums to the corporations and Lokman for the purpose of channelling those monies ... so that ITC could meet its obligations vis-a-vis the Reserve Bank of India and not have any receivables beyond 180 days, says the counterclaim.

The Chitalias alleged that ITC, despite being aware of the money flow, has undertaken a campaign of prosecution, in order to convince the RBI that it is making an effort to recoup its losses.

Among other claims, the Chitalias are asking for compensation for $500,000 allegedly paid by EST into a Swiss bank account designated by ITC.

The counterclaim, filed in the New Jersey district court last week, also claims that ITC Global owes EST about $340,000 and that it owes Sunny about $646,000 for goods sold and delivered.

It demands $177,853 from Global as commission on shipbreaking services, and $840,000 from ITC for using a Vaam guarantee in Sri Lanka.

The Chitalias also allege that ITC sources around the world funnelled money to them to buy out nominee shareholders in Buk of Chicago, an ITC-backed corporation that ran the Bukhara restaurant in Illinois.

Meanwhile, they claim that ITC also asked EST to help shut down a Bukhara restaurant in New York.

The Chitalias are asking for a million dollars for closing Buk of Chicago (a quarter of the total closure costs, which the Chitalias claim ITC promised), $ 421,912 to cover EST's efforts, and interest on both sums dating from 1990.

They are asking for $ 2 million as compensation for the marketing efforts in establishing ITC's Checkers brand in the US as a previously agreed fee.

Further, the Chitalias are claiming several hundred thousand dollars as compensation for failed joint ventures in cashew processing in the US, psyllium husk production and processing in India, and a neem project.

The reply asks for a million dollars as payment to Suresh Chitalia for handing over stock in Singapore-based Hup Hoon Traders to ITC.

Apart from the soured ventures, the Chitalias are also asking for compensation for their role as ITC's agents in the US. EST, they claim, was promised 4 per cent of the gross sales for setting up the other corporations as conduits for ITC.

With an estimated $80 million in sales, the Chitalias are claiming $ 3.2 million in compensation.

Suresh and Devang Chitalia, along with EST, are separately also claiming $ 1.8 million as compensation for time and services spent on behalf of ITC and ITC Global over six years.

The three also allege that they are yet to be reimbursed $ 2.5 million spent as the cost of maintaining ITC's operations in the US from 1990 to 1995.

Along with the counterclaim, the Chitalias' reply admits Devang Chitalia signed a statement on the Lokman letterhead, acknowledging a balance of $ 3.5 million. The document bears the signature M. Zindel.

The Chitalias, however, maintain that ITC specifically instructed Devang Chitalia to sign the document, assuring him that it would be utilised solely for internal audit purposes.

The statement of account was prepared at the request of, on the format of, and with the content provided by Global to reflect what it wished for its own purpose. The statement bears no relation to the actual events between the parties, the answer to the ITC complaint says.

Both the ITC and the Chitalias have asked for a trial by jury to decide the case,

The two sides are now engaged in a pre-trial process to garner evidence to buttress their cases. The trial itself is likely to be set for next year.