Cong admits it gave loan to help revive defunct paper

“In furtherance of its objective and its political activities,it is a matter of pride for the Indian National Congress that it has supported The Associated Journals Limited,publisher of the National Herald… founded by Pandit Jawaharlal Nehru… The Congress has done its duty in supporting The Associated Journals Limited to help initiate a process to bring the newspaper back to health… This support was extended… in the form of interest free loans from which no commercial profit has accrued to the Congress,” the party’s media department chairman Janardan Dwivedi said in the statement.

Janata Party chief Swamy alleged on Thursday that the Congress had given unsecured loans to the tune of Rs 90 crore to The Associated Journals,which he said was illegal under the Income-Tax Act. Swamy had also alleged that Young Indian wrote off the loan due to the Congress for just Rs 50 lakh,and that by a board resolution,Associated Journals was sold by a transfer of shares to Young Indian.

Speaking in Shimla earlier,senior BJP leader Arun Jaitley asked the Congress for a straight answer to questions raised by Swamy,instead of merely repeating that the charges were “baseless” and “untrue”.

For,Jaitley said,if Swamy’s allegations were true,they amounted to the “gravest violation (by the Congress) of income-tax exemptions to political parties,and also electoral laws”.

Jaitley said political parties and donors were exempt from income-tax,subject to the condition that the donations were used only for political purposes,not business or commercial operations. However,the board of directors of Associated Journals had passed a resolution on Feburary 26,2011,saying the AICC had given a loan of Rs 90 crore to the company floated by Sonia and Rahul,which had acquired Associated Journals.

“Transfer of money like this by any political party to a company is in violation of the exemptions and electoral law,” Jaitley said. “The Congress must tell whether this loan was actually given or not… Instead of using adjectives like ‘baseless’ and ‘untrue’ it should give a specific reply to the public as the whole issue is about gross impropriety and illegality,” Jaitley said.

The Companies Act of 1956 lists the types of entities from whom a private or public listed company may take a loan. Under section 58A of the Act,a company can accept money only from another company or from the public through an advertisement. Any sum accepted in violation of these terms must be returned within thirty days,failing which a jail term of up to five years and a fine may follow.

Political party is not in the list of eligible lenders to a company. Adjustment of loans like a write-off,unless cleared by shareholders,is frowned upon by courts. The practice is known as accommodating transaction,and courts ask for “lifting the corporate veil” to inquire into such cases.

Speaking to The Indian Express on Friday evening,a senior Congress leader insisted that the party had done no wrong.

“Can the BJP or Swamy define a political purpose? We did not violate any law because there is nothing wrong in giving a loan to newspapers that contributed so much to the freedom movement,” the leader said.

A day after Rahul’s office wrote to Swamy threatening to pursue “legal actions”,the Congress appeared,however,more circumspect about committing to that option.

“If Swamy has the guts,he should sue Rahul Gandhi and Sonia Gandhi. It is for those to prove charges who make allegations. If there is a violation,let them take it to court,” spokesman P C Chacko said.

External Affairs Minister Salman Khurshid said,“I am surprised to see the allegations. Constantly,companies make amendments in their constitution — in this case,it is a non-profit company formed under Section 25. Absolutely there is no basis for any allegation. Rather it should be seen as an example of good governance.”

Both Chacko and Khurshid spoke before Dwivedi’s press statement was issued.

At the core of the Congress’s defence is the argument that the objective of a Section 25 company is only to promote commerce,art,science,religion,charity or any other useful object. Such a company applies its profits or other incomes only in promoting these objects.

“Whether Swamy will sue or not,we want to see… They (Swamy) have been doing that consistently. He is holding a press conference and running away to make the next allegation the next day. They are making blind allegations. They have nothing to substantiate. No newspaper’s property is valued in real estate terms,” Chacko said.

He was evasive on whether the Congress would sue: “Future course is open to us. All options are open to us.”