Unsigned Diary Of Ex-Itc Global Official: The Chitalias Retaliate

Alarm bells rang in ITC Global in May 1995 with the Chitalias announcing that they had wound up Lokman a company set up at the insistence of ITC managers which owed them $3.75 million. Considering the implication of writing off of the debts under Singapore laws and the possible allegations in India that such loans given to Lokman violated the Foreign Exchange Regulations Act, ITC Global had no option but to sue Lokman, especially when investigations revealed that the company had not been wound up. But action got delayed because of R K Kuttys attempt to reach a settlement with the Chitalias before taking the drastic step. But it became clear that the Chitalias had no intention to pay up.

 

Now...

It became clear in May 1995 that the Chitalias had no intention of paying back the money which was due from Lokman, ITC Global sent a demand note to recover the money. The Chitalias retaliated by issuing a veiled threat that ITC Global had awakened a sleeping giant. They made it clear that they were upset that while Lokman was set up at the insistence of the ITC executive, it was they (ITC) who were asking them to pay dues owed by Lokman.

The demand note also upset Kutty, who attacked the ITC Global executive for not even informing him of the matter. He decided to call off his meeting with the Chitalias and said his personal esteem had been compromised as a result of his being kept in the dark.

The ITC Global executive and Kutty also got into a scrap over his insistence to come to Calcutta for the special audit committee meeting of ITC. Kutty found no reason for him (the unnamed ex-ITC Global official) to come but considering that matters on ITC Global were being discussed he (the same official) insisted that he be present in Calcutta.

Meanwhile, news came that there was no money in the Swiss accounts of Lokman, but ITC Global went ahead and, despite a slight delay, was successful in getting an attachment order for the Lokman accounts.

Throughout the period, however, the ITC Global executive kept BAT Industries and its executives fully posted on the drama unfolding in the Lokman case.

July 20, 1995

The letter (a demand note to recover the money) sent to Lokman has apparently set the cat among the pigeons and the Chitalias are very upset on receiving the demand note. Mr Kutty is also apparently upset hat he was not kept advised on the action that I had taken on Lokman and he decided to call off the meeting with the Chitalias without further discussions. He also mentioned to Sriram that he would speak to the Chairman and ask him to relieve Mr Kutty from his responsibility.

Met Kutty and he was extremely upset and stated that while he was not questioning the logic for the decision to seek a freezing injunction, he said that personal position had been compromised very severely.

I was advised that the money (from the Lokman accounts) had now flown from the accounts and I advised Andrew Milne in consultation with Sunil Shahaney and Sriram Khattar that we would stop all action for the time being.

July 21, 1995

Spoke to M R Veviani and Mr Bhatia and briefed them on the developments. It appears that my action on the Lokman matters has upset Kutty sufficiently and am therefore flying to New Delhi to meet both of them. I will also fly to Calcutta to meet Mitter as well as S Misra to take them through the entire matter

... On route to the airport I stopped at Staines and advised Simon Smith of the developments. He took me to Philbeam and I took Philbeam through the matter and also advised him of my decision, logic for taking the action that I did.

I left for New Delhi this evening.

July 22, 1995

Met Fry and briefed him at the Taj Mansingh this evening. He has also assured me of complete support.

Met Bhatia and briefed him on the developments

July 23, 1995

Left for Calcutta. Spoke to Sriram who advised me that he had tried to speak to Devang but was unable to do so in view of a birthday party going on in his house. I have advised Sriram, to ensure that in his discussions with Devang he should ensure the following

1) Recovery of the excess $1 million through Lokman. If required, Shriram would fly to Switzerland to meet Devang along with a draft for $1 million and get it back through Lokman.

2) Shriram would carry the original HH transfer deal (transfer of Chitalias shares in Hup Hoon to ITC Global) and would also arrange to carry back the new transfer deed.

3) Steps on Magnolia Ace would be delayed in the immediate term and legal opinion will be sought to determine whether the vessel could be sold to another party.

July 24, 1995

Spoke to Suresh Chitalia and asked him if it would be OK with him if Shriram flew in to Zurich to meet Devang so as to resolve the matter of HH shares as well as the transfer of $1 million through Lokman. He advised me that Lokman had been set up at the insistence of ITC managers in 1989-90 and that Dr Zindel was very upset about the fact that ITC Global had written a letter asking for our dues to be repaid.

July 25, 1995

Shriram advised me that he had spoken to Suresh Chitalia who advised him that Bill Handler would get in touch with him. He also advised Shriram that ITC Global had awakened the sleeping giant and this was done in a veiled threat. Shriram has mentioned to me that he will make one last call to Suresh to request him to settle the various issues as well as to settle the dues.

July 26, 1995

Shriram advised me that he had left a number of messages on the answering machine and finally in the evening Suresh Chitalia agreed to speak to him. Chitalias only comment was that Devang along with their lawyer Handler were on their way back from Zurich and that Devang would speak to Shriram on 27th morning.

July 27, 1995

I have prepared the letter instructing Andrew to proceed with the legal action simultaneously in Liechtenstein as well as Zurich. Also spoke to Andrew in the evening who has confirmed to me that action has been taken as instructed.

July 28, 1995

Kutty spoke to Shriram and then to me regarding preparing papers for the audit committee meeting. I advised him that I was planning to visit Calcutta to be present in the time of the meetings and he advised me that there was no need for me to be present. When I mentioned that it was my believe that the matter was serious enough for me to be present, he got upset and suggested that I in case did not need his approval to travel.

Andrew called me ... confirming to me that the judge has granted an attachment order on the accounts in Zurich.

July 29, 1995

In view of the earlier reaction of Kutty and Sitaraman as well as the forthcoming audit meeting in Calcutta I decided to send the following letter to the board.

In accordance with the advise received from our lawyers ... and in continuation of my letter ... I am pleased to inform you that I have just been advised that based on further investigation on the Lokman account we have found some funds and we have successfully managed to obtain an attachment of the accounts of Lokman at Habib Bank Zurich. Kutty called me and congratulated me on obtaining the attachment order.