Enforcement directorate director M K Bezbarua told Business Standard: The question of giving them immunity will arise only after it is proved that all their disclosures are true and complete. This depends on the investigations and the conclusions drawn.
He said the directorate had made a counter-offer in response to Chitalias offer to turn approver on the condition that they are provided immunity against the Fera dragnet. The counter-offer is a set of conditions which have to be fulfilled before extending immunity to the approvers.
The grant of immunity to the Chitalias therefore may take some time as all their disclosures will be verified by the enforcement authorities.
Bezbarua however did not elaborate on the conditions that the ED has laid down.
Chitalias volume of business with the ITC grew phenomenally from Rs 10 crore in 1991-92 to about Rs 263 crore in 1995-96.
The directorate is probing why the ITC bent over backwards to accommodate them by taking a host of measures which amounted to a great deal of unsecured exposure such as non-issue of letters of credit in the trading of most agricultural commodities including coffee, which is a high-risk item.
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Almost 70 per cent of the deals with the Chitalias did not involve letters of credit, which was against the custom in agri-commodities trading.
Among other steps taken to accommodate the Chitalias was extension of the time limit for receipt of payments from them. (The Reserve Bank has refused to grant an extension of the period to recover outstanding dues worth $12 million from them).
These steps and documentary evidence and rec- orded statements of those interrogated, have convinced the directorate that ITC funded the Chitalias to buy their products at a higher cost, which was later brought back to India tax-free, shown as export proceeds. The Chitalias are expected to travel to India to testify against ITC in the last week of November and will be questioned by the Delhi-based special ED director M C Joshi.
Other deals between ITC and the Chitalias included an attempt to market ITC cigarettes in the US, a cashew processing plant, psyllium husk and neem processing projects, a stake in Singapore-based Hup Hoon Traders, a guarantee made on behalf of the ITC in Sri Lanka and a failed venture to establish Bukhara restaurants in New York and Chicago.
ITCs dangerous liaison with the Chitalias
Anuradha Himatsingka CALCUTTA
Suresh Chitalia, the US-based former trading partner of the ITC, was a director on the board of the tobacco majors subsidiary, Fortune Tobacco, long after his role in ITCs exports had been questioned and audit committee probes in the deals had started.
Chitalia was appointed a director of the New Jersey-based Fortune Tobacco on March 31, 1994, and resigned only in December 15, 1995. By then, the audit report by Lovelock & Lewes had been submitted and the internal audit committee report had already been taken up.
The companys losses due to the Chitalia-owned US firm EST Company in export deals came to light in February 1995. Fortune Tobacco provides marketing and consulting services for cigarette and tobacco products. It has a paid-up capital of $20,000.
According to the companys audited results for the year ended-March 31, 1996, the companys sales stood at $937,790 against $1,525,865 for the period from November 23, 1993, to March 31, 1995.