I heard a story about Baba coughing and something about an 'evil eye'. Can you tell me what happened with Laxmichand?

Certainly. This incident, which deeply affected Laxmichand, is detailed in Chapter 28. During a night Chavadi procession, Laxmichand observed Sai Baba coughing. A thought arose in his mind that perhaps the cough was a result of someone's evil eye affecting Baba. This was merely a private, mental thought. The next morning, when Laxmichand went to the masjid, he was astonished to hear Baba say to Madhavrao, "Yesterday I had much coughing; is this the effect of an evil eye?" Baba had vocalized Laxmichand's exact internal speculation, causing Laxmichand to wonder how Baba could possibly know his thoughts, leading to his complete surrender.