U.S. court awards $281,000 damages to India Abroad

Indo-Asian News Service

A New York jury returned a verdict awarding $281,000 in damages to India Abroad weekly newspaper for a breach of conduct by the Ahmedabad-based Gujarat Samachar newspaper.

Gujarat Samachar had granted India Abroad exclusive rights under a 1983 agreement to publish a North American weekly edition in Gujarati language.

The suit was brought by Gujarat Samachar that claimed unspecified millions against India Abroad for alleged failures in the marketing of Gujarat Samachar's North American edition.

Gujarat Samachar would pay the damages for refusing to equally share with India Abroad advertising revenues from its North American edition.

India Abroad had claimed the damages saying that Gujarat Samachar failed to deliver on its earlier promise to give it 50 percent of all advertising revenue and 90 percent of subscription earnings from the paper's U.S. edition after mid-1999.

India Abroad was to promote, market and distribute the nascent weekly and bear all the printing, postage and distribution expenses.

Gujarat Samachar rebutted India Abroad's claim in the court, alleging that another agreement the two sides concluded in 1984 abrogated the previous agreement. The new pact, it said, removed the clause on sharing advertising revenues and gave India Abroad share (of 90 percent) only in the subscription revenue. But, India Abroad said the 1984 agreement merely dealt with dollar remittances to India and did not modify the earlier revenue-sharing arrangement.

India Abroad claimed it could not manage Gujarat Samachar only with subscription revenues, as newspaper profits in North America largely come from-advertising revenues. Many newspapers in the U.S. are even distributed free of cost. Subscription revenues barely meet printing and distribution expenses.

Evidence at the trial showed that India Abroad built up Gujarat Samachar's North American edition, losing money for many years. It sold advertisements for the North American edition until the late 1980s, paying half of these earnings to Gujarat Samachar.

India Abroad claimed that Gujarat Samachar repeated its promise to share half the advertising revenues after it was told that independent advertising agents it had appointed in the U.S. were undercutting the rates quoted by India Abroad.

India Abroad claimed the money was never paid. In 1996, Gujarat Samachar took charge of the newspaper's promotion and marketing under a new agreement, restricting India Abroad's role to printing and distributing. In return, India Abroad's share of the advertisement revenue was reduced to 15 percent.

In Dec. 1998, Gujarat Samachar denied the 1996 agreement with India Abroad and refused to share the advertising revenues, India Abroad responded by withholding payment of Gujarat Samachar's 10 percent share of the subscription.

Matters came to a head when Gujarat Samachar brought the suit in a Manhattan court in August 2000. The plaintiff said he elected to sue in the United States, although he had been also given the right to sue in India, because "I have more faith in the U.S. legal system."

When asked by the attorney for defense, "even than in India", the plaintiff replied, "yes".

Apart from claiming the withheld 10 percent of the subscription revenues, Gujarat Samachar also alleged that India Abroad neither properly marketed the Gujarati newsweekly, nor accounted for its newsstand sales. Besides, Gujarat Samachar claimed, India Abroad's publication of its own Gujarat-specific newspaper, Gujarat Times, in 1999 breached the contract. India Abroad filed a counterclaim against Gujarat Samachar, claiming half the advertisement revenues until September 1996 and 15 percent thereafter.

It said Gujarat Samachar had asked it to retain newsstand revenues in the U.S. Moreover, it said, it was under "no obligation" to market the paper after the latter opened its own advertising office in New Jersey.

Instead, it claimed, Gujarat Samachar had breached the contract by withholding all subscription revenues since mid-1999.

Gujarat Samachar denied the charge but blocked former top executive Shreyans Sha, who concluded their 1983 deal, from deposing before the court. Though Shah was present in the court throughout, he was not called due to a "language problem."

At the trial, Shah's son Nirman, who runs Gujarat Samachar, conceded that the company did not have any records on revenues of the weekly earlier than 1997.

India Abroad subpoenaed the company's bank account with Bank of Baroda, Ahmedabad, that showed six-figure dollar deposits totaling $18.9 million in 1994-96. Gujarat Samachar could not account for these remittances, even though Shah told the court that the weekly was the group's only source of dollar revenue.

Shah explained that the debits in his account were linked to the purchase of newsprint in the U.S.

But he admitted the group's advertising agents had collected thousands of dollars in the U.S. since 1988, but never paid taxes on it.

Although it had opened its New Jersey office and had employees since 1997, Gujarat Samachar never paid any payroll or other taxes to federal, state or local authorities. It did not obtain authority to do business in New Jersey until recently, and had never filed any tax returns with any authority in the U.S.

Of the $1,186,430.80 that Gujarat Samachar claimed from India Abroad in damages, India Abroad conceded its obligation to pay the withheld subscription revenues, but claimed $560,145 towards its share of the advertisement revenues since 1994 and subscription revenues withheld by Gujarat Samachar since 1999.

The jury deliberated for almost six hours on Dec. 7 and returned a verdict, which substantially vindicated India Abroad. It awarded $279,000 to Gujarat Samachar towards the withheld subscription revenues, which India Abroad had conceded, and $560,000 to India Abroad. This left India Abroad with a net award of $281,000.

Gujarat Samachar filed its case against India Abroad in August 2000, when Gopal Raju was President and CEO of India Abroad. Also, Raju was the person who negotiated with Shreyans Shah and signed the agreement with Gujarat Samachar in 1983 and '84. So, rediff.com., which purchased India Abroad subsequent to the filing of the suit by Gujarat Samachar, left the burden of defending India Abroad's case to Raju.

Gujarat Samachar was represented by Ralph Berman of the law firm of Davidoff & Malito of New York, and Steven Kern of Kern, Augustine of New Jersey. India Abroad was represented by Krishnan Chittur of New York.