National Herald case: Loan write-off, conflict of interest, benefiting takeover by family

The Congress Party claims to have supported the Associated Journals Limited to help initiate the process to bring the newspaper back to health.

Written by Sandeep Singh | New Delhi | Updated: December 9, 2015 12:30 pm
BJP leader Subramanian Swamy has accused Sonia Gandhi and Rahul Gandhi, along with four others, of cheating and breach of trust in the AJL-YIL case. BJP leader Subramanian Swamy has accused Sonia Gandhi and Rahul Gandhi, along with four others, of cheating and breach of trust in the AJL-YIL case.

The Delhi High Court’s scathing observation in the National Herald case that the conduct of Congress office-bearers “smacks of criminality” focuses attention on key questions that the party will have to address — legally and politically.

One, why should Young Indian, majority (76 per cent) owned by Sonia Gandhi and Rahul Gandhi, be assigned The Associated Journals Ltd’s (AJL’s) debt of Rs 90 crore that was written off by the Congress party. The AJL, which had 1,057 shareholders in March 2010, printed the National Herald newspaper besides a couple of other publications. In December 2010, Young Indian acquired almost the entire stake for Rs 50 lakh.

Watch Video: No Relief For Sonia, Rahul In National Herald Case; The Issue Paralyses Parliament 

Two, why didn’t AJL, which held real estate in several cities including Mumbai, Delhi and Lucknow, use a part of its prime assets to repay the debt? While it is unclear if AJL took approval from its 1,057 shareholders for the induction of Young Indian as its majority acquirer, it did not also undertake a fair valuation of its assets before handing over the equity for a consideration of just Rs 90 crore.

Had AJL paid off the debt, it could have adopted the same business model as the Young Indian management to turn around the company. In fact, from a loss-making company a year ago in 2010-11, AJL’s fortunes turned sharply with a net profit of Rs 27.4 crore in 2011-12 as per records filed with the Registrar of Companies.

The Congress may also need to explain the conflict of interest of its treasurer Motilal Vora, who loosened the party’s purse-strings to write off the debt of AJL, of which he himself was the Chairman and Managing Director in December 2010 when the deal materialised.

Actually, he is also one of the four shareholders in Young Indian with 12 per cent stake, the other being Congress leader Oscar Fernandes (12 per cent).

An email questionnaire sent to Congress spokesman R S Surjewala did not elicit any response.

On Monday the Delhi High Court dismissed the appeals filed by Congress president Sonia Gandhi, vice president Rahul Gandhi and five others against summons to face trial and today the trial court fixed a date of December 19 for their appearance.

The Gandhis and five others – Suman Dubey, Moti Lal Vohra, Oscar Fernandes, Sam Pitroda and Young India Ltd (YI) – had challenged the summons on a complaint by BJP’s Subramanian Swamy against them for alleged cheating and misappropriation of funds in taking control of the now-defunct National Herald.

Records show that while AICC provided funds to the ailing AJL in a bid to, ostensibly, revive its fortunes, the debt kept mounting in the years till FY’11 and in the financial year 2010-11 the unsecured interest free loans rose to a high of Rs 89.6 crore.

At the heart of the controversy involving Associated Journals Ltd (AJL), a company founded by Jawaharlal Nehru in 1937 that published National Herald, is the real estate owned by the company

AJL was founded on November 20, 1937 and was subsequently categorised as a Section 25 company under the Companies Act of 1956. Section 25 companies are typically formed for promoting commerce, art, science, religion or charity and the government grants such companies a licence and are generally not-for-profit entities.

While, Young Indian was also incorporated as a Section 25 company on Novermber 23, 2010, in less than a month after its incorporation, on December 21, 2010, AJL’s board approved the allocation of Rs 90.21 crore in accumulated loans taken from the All India Congress Committee to Young Indian.

This debt was then retired for a consideration of Rs 50 lakh, an amount paid by Young Indian to the AICC. On AJL’s books, this amount was converted into equity and it became a wholly-owned subsidiary of Young Indian.

The Congress Party claims to have supported the Associated Journals Limited to help initiate the process to bring the newspaper back to health.

BJP leader Subramanian Swamy had filed a complaint before the trial court in 2012, alleging that Congress leaders were involved in cheating and breach of trust in the acquisition of AJL by Young Indian, as assets worth crores of rupees had been transferred to YIL.

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  1. gordon kramer
    Dec 9, 2015 at 1:48 pm
    1. P
      Dec 9, 2015 at 7:40 am
      The congress (read the first family - Rahul and Sonia) was after MODI for 10 long years when he was the CM of Gujarat - they used Teesta Salvad, Sanjiv Bhatt, and such elements to the core to defame MODI in an effort to stall his political career. We now know the personal integrity of Teesta and Sanjiv. When Arnab asked, Cong openely admitted on TIMESNOW that they were in touch with Sanjiv at some point (this was after Sanjiv was caught exchanging emails with Guj. cong. leaders where he was asking about "parcel" and also received a Blackberry cellphone as a quid pro quo). This Sanjiv is missing now - he was the most sought after by media at one point - "the hindu" has written several articles on 2002 Gujarat riots quoting Sanjiv). Coming to MODI, Congi's knew well that he had the potential to become a big political leader in India and can stall Congress from coming to Power. The SIT, which was investigating 2002 Gujarat riots, was overseen by the Supreme court directly and SIT gave a clean chit to MODI. The leftist, congi's, the so called secularists, the media went all out and attacked MODI - they even pronounced the judgement even before SIT were to come up with the investigation report. When all this was happening, BJP did not stall the Parliament proceedings and MODI bravely faced the investigation process. Clearly Sonia and Rahul do not want anything going against them - they will do anything to bend the law - it was a court summon but they are stalling parliament proceedings - they do not care about the fact that MODI was elected with a majority to rule for 5 years and the people voted for his development atude and clean governance. with just 45 seats in LS, congress wrecks havoc. They deserved a 0 (zero) in Loksabha!
      1. T
        Dec 9, 2015 at 4:30 am
        Sonia should fight it out all those who try to tarnish Nehru-hi legacy, at the same time bar entry of Rober Vadra into her home. Yes Congress should fight it out Feku56 because he is trying Gujrat model on India. It is fact in Gujrat during Feku56 regime maximum number of IAS and IPS officers had to spend time in jail because it was seen state used facade of fighting terrorists to silence opposition
        1. V
          Dec 9, 2015 at 12:33 am
          BUNTI AUR BABLI.. Rahul and Sonia
          1. A
            Dec 9, 2015 at 2:28 am
            Have some logic and sense while writing and commenting, if both companies belongs to congress and of same nature, no profit organizations and no individuals can be benefited or the 3000 crore OR 30000000 crore properties , so what's point of discussion and uniqueness in this case that none of the share holders complained but Swamy what a genius person in BJP but BJP doesn't not respect his abilities, neither he is a finance minister nor law minister but indirectly appointed as anti Ghandi family minister... Indian judicial system, lower court, HC, SC various judgments and comments..leads to doubt on unbiased approach..
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