ITC is now in a position to claim vindication in a bitter battle against allegations of violations of foreign exchange regulation norms in the early 1990s, the shadow of which has forced it through the legal wringer of elaborate enforcement directorate proceedings and even temporary custodial detention of two former chairmen, Kishen Lal Chugh and Jagdish Narain Sapru.

ITC had filed a case in the US seeking $12 million in damages from the Chitalias for controversial trade deals. The Chitalia brothers had in turn filed a counter-claim for $55 million, alleging defamation and commission default by ITC. A US court last year had already thrown out Chitalias' demands to the extent of $41 million:now, claims a release from ITC, the demand for the remaining $14 million has also been shown the door.

In a greater triumph, the claim ITC had lodged on the brothers has been awarded to the tobacco major. ITC will get the $12 million it sought in damages in the first place.

According to the release, on July 2, Judge Katherine S Hayden of the New Jersey district court accepted the March 1998 recommendations of a lower court that a default judgment of $12 million be imposed on the Chitalias and their counterclaim of $14 million be dismissed.

The Chitalias had alleged, on the basis of the findings of the Enforcement Directorate, that ITC had not paid the brothers to the extent of $55 million for deals they had concluded.

The Chitalias have been vitally important figures in the recent history of India's largest tobacco company. The sordid affair that started with trade deals brokered by the brothers eventually led to the enforcement directorate getting involved in a protracted investigation into ITC'strade deals conducted in the early 1990s, and this in turn led even to the temporary detention in custody of some top executives, including former chairmen Kishan Lal Chugh and Jagdish Narain Sapru.

The problems began when in 1990, with the then chairman Chugh dreaming of matching Japanese multinationals, ITC got involved in murky rice export deals to West Asia. Even as the Gulf War broke, Britain-based single largest shareholder BAT told ITC to withdraw rice exports headed for Iraq. The resultant rice surplus with the tobacco company was a serious problem, and efforts to route them to Sri Lanka proved even more disastrous, leading to questions in the Colombo parliament on the quality of the rotting rice. Controversy thickened as the rice got exported back to India, something simply not allowed under Fera.

The trade deals became the centre of a heated tussle for control over the company between BAT and the Indian management, and BAT forced audit investigations into the rice deals. The losses were dulytotted up at Rs 20 crore.

Further, the US-based Chitalias appeared to have been involved in deals that involved setting up of restaurants and gaining from other murky export transactions with US-based parties.

The Enforcement Directorate muscled into the show as the mudslinging between the Indian management and BAT in the media, throwing up the above details in a series of sensational pink paper exposes, continued. Chugh had given way to younger Y C Deveshwar in the meantime at the apex.