The scandal was brought to light by a local journalist through a sting operation, who brought out in open the OHeraldO daily's involvement in publishing paid content as news instead of advertorial.
A complaint was submitted to the Press Council of India (PCI) by journalist Mayabhushan Nagvekar who sought action against the publication.
Nagvekar decided to conduct a sting operation himself after he got "suspicious" over the interviews of aspiring candidates published in the newspaper.
Posing himself as Bernad D'Costa, he called up the marketing manager of the newspaper, Tulshidas Desai in a bid to lay the trap. He bargained with Desai over a paid news deal and asked him to know the rates for publishing an interview to contest the polls.
A final deal was then made to publish the interview for Rs. 86,400 without giving it an advertorial tag after a series telephonic conversations, which was recorded by the scribe.
The fake candidate's interview was also scheduled to be aired by a local news channel-Herald Cable Network, owned by the same media group for an additional sum of Rs 50,000.
The allegations were however denied by Sujay Gupta, editor of the newspaper but Nagvekar submitted the tapes of his converstation and the e-mails exchanged between him and Desai to the PCI.
The scribe's sting operation has been backed by Goa union of journalists, who said that the issue of paid news was serious as it played with the ethics of journalism.
"As editor, my stated position both within and outside the organisation has been that paid content cannot be disguised as news," posted Nagvekar on the blog www.paidnewsingoa.blogspot.com.
"Whenever politicians have sent out messages, statements of their achievements and other such information, through a paid route, we have prominently stated that they are advertorials," he said.
He also called the allegations "hugely defamatory" adding that the Herald will react to them "in a proper forum". But the taped conversations contradict his claim.