Jawaharlal Nehru established The National Herald newspaper in 1938. It was published by The Associated Journals Limited, a “Section 25” company, which are typically formed to promote commerce, art, science, religion, or for charity, and are generally not-for-profit entities. AJL also published the Qaumi Awaz in Urdu and Navjeevan in Hindi. The company owns prime real estate in various cities, including Delhi and Mumbai. Plagued by overstaffing and a lack of revenues, AJL ran into losses, and stopped publishing in April 2008.
The Congress Bailout
In a bid to keep AJL afloat, the Congress party gave the company unsecured, interest-free loans for a few years up to 2010. At the end of March 2009, AJL’s unsecured debt stood at Rs 78.2 crore; by the end of March 2010, it had risen to Rs 89.67 crore. Despite owning real estate that is learnt to be valued much higher than the quantum of its debt, the management of AJL appears to have made no concrete effort to repay the AICC. Veteran Congress leader Motilal Vora has been the chairman and managing director of AJL since March 22, 2002. He has been the treasurer of the All India Congress Committee (AICC) from well before that.
Formation of Young Indian
Young Indian Pvt Ltd was incorporated as a Section 25 company on November 23, 2010, with Gandhi family loyalists Suman Dubey and Satyan Gangaram (Sam) Pitroda as directors. On December 13, 2010, Rahul Gandhi was appointed a director of Young Indian.
Sonia Gandhi and Rahul Gandhi have individual shareholdings of 38 per cent each in the company. Vora and Fernandes hold the remaining 24 per cent in equal parts.
The AJL-YIL-AICC deal
In 2010, the AICC decided to assign AJL’s nearly Rs 90 crore debt to Young Indian. Thus, Young Indian became the new owner of the debt on the books of AJL, that was originally due to AICC.
Soon afterward, in December 2010, AJL decided to transfer its entire equity to Young Indian in lieu of YIL owning its Rs 90 crore debt. Young Indian paid Rs 50 lakh for this acquisition.
By virtue of this decision and transaction, AJL, which originally owed Rs 90 crore to the Congress party, became a fully-owned subsidiary of Young Indian, which was owned by four individuals — Rahul Gandhi, Sonia Gandhi, Motilal Vora and Oscar Fernandes.
The acquisition of AJL by Young Indian has been questioned in court. Sonia Gandhi and Rahul Gandhi have been summoned to appear before a trial court at 3 pm on December 19. Some of the key questions that have arisen are:
> Why was YIL, 76 per cent of whose stake was owned by Sonia Gandhi and Rahul Gandhi, assigned AJL’s debt of Rs 90 crore to the Congress party? Within a month of Young Indian being incorporated, AJL became YIL’s fully-owned subsidiary, and YIL became the owner of AJL’s real estate assets across the country.
> Why didn’t AJL utilise a part of its assets to repay the debt? It is also unclear if AJL took approval from its 1,057 shareholders for the induction of Young Indian as its majority acquirer, and whether a fair valuation of its assets was carried out before handing over the equity for a consideration of just Rs 90 crore (debt), and an additional payment of Rs 50 lakh.
> Is there a conflict of interest in Motilal Vora holding important positions in all the three entities involved — as AICC treasurer, AJL CMD, and a 12 per cent shareholder and director at Young Indian?
> The Representation of the People Act, 1950, does not allow a political party to give a loan, so how did the Congress party offer a loan to AJL?