Updated: December 9, 2015 12:30:54 pm
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.
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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