ITC Ltd's recent legal victory against the Chitalias may weaken the ongoing alleged Foreign Exchange Regulations Act contravention case which is pending with the enforcement directorate.
The issues and the loss of face of the Chitalias as reflected in the recent judgement of the New York Court, are likely to be taken up in the replies to the show cause notices that ITC will be providing to the ED, which would further strengthen the case for ITC.
According to senior government officials, this is because the ED show cause notices to ITC are based essentially on evidences provided by the Chitalias which have been disproved at the New York Court recently.
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The case becomes weak to the extent the show cause notices are based on statements and information provided by the Chitalias, the officials said.
The New York Court has delivered two important judgements ---one dismissing the entire surviving counter claim of $14 million the Chitalias had raised against ITC and the other which enables ITC to recover dues worth $12 million and costs and damages worth $200,000.
The fact that magistrate Judge Hedges had mentioned that the Chitalias had resisted production of books of accounts and other vital documents to ITC may make the case stronger for ITC if what the Chitalias had provided the ED is not commensurate with their actual books of accounts.
All these facts came to light during the discovery process in the US when both parties had to hand over documents to each other. According to sources, it is unlikely that the Chitalias will contest the court's judgement as they will be compelled to show their books of accounts which may not be commensurate with the information they have provided.
The case dates back to 1996 when companies owned by the Chitalias owed ITC Ltd $12.19 million against commodity trade. ITC Global, ITC's Singapore-based subsidiary had also filed a case against one of the companies belonging to Chitalias for recovery of a trade credit of $3.75 million. ITC watchers feel the Chitalias may have tried to take sides in the company's internal problems with its single largest stake holders BAT, two years back.