LIVE Course on Transfer Property Law | Price Hike in 4 days | Grab it now!
LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More


Political vendetta used as a reason to cover money laundering and evasion from cases.

Key takeaways

  • The once renowned national magazine lost its popularity when Congress used it as its mouthpiece.
  • Rajiv Gandhi and Sonia Gandhi acquire AJL through their so acclaimed non-profit organization, Youth Indian Ltd.
  • Subramanian Swamy fileda case for money laundering and embezzlement, which was defended as a “political vendetta” by the Congress Party.
  • Enforcement Directorate (ED) questions the Gandhis on the case and protests ensue.

The Emergence of National Herald

National Herald was a daily Indian newspaper print established by the former Prime Minister Jawaharlal Nehru in 1938 along with other freedom fighters, at Lucknow. It was published by “The Associated Journals Ltd” [AJL] which is currently owned by a non-profit organisation Young Indian Limited, with Sonia Gandhi and Rahul Gandhi as its board members [ ]. It recognized itself with the freedom struggles and the Indian independence movement and amassed widespread popularity among the nation as a reputable editorial. What was once molded by the great national leaders as an instrument to propagate independence, slowly transformed into a representation of the ideologies of Congress and to promote its agendas.

The newspaper was renowned for its raw, bold and fierce statements, which met in conflict with the British government, ultimately leading to its shutdown for three years between 1942 and 1945 during the Quit India Movement. However, it was resurrected in 1945 and with the help of its Managing Director, Feroz Gandhi it regained some fiscal health. Jawaharlal Nehru served as Chairman of the Board of Directors before he was assigned as the Prime Minister.

Congress party played a huge role in influencing the paper thereon. In 1963, Nehru admitted that the paper was "generally favouring Congress policy" while maintaining "an independent outlook", during the silver jubilee of the National Herald[ ]. Even when the paper was funded and managed by Congress, it had some of the finest journalists on the panel who contributed hugely to its success as a leading English daily. The paper met a catastrophe again when it ceased operations, shutting down in 2008 due to financial reasons from lack of advertising revenues and over-staffing but was relaunched in 2016 as a digital publication. Allegations of corruption and favoritism were placed against the newspaper during 2008 itself. This was just the beginning of a debacle that was to ensue for the party and the Gandhis.

What is the National Herald case about

The case revolves around the Gandhis from the Congress Party, Young Indian Limited and AJL. AJL was a public limited company incorporated in 1937 for publishing newspapers including National Herald. Congress was providing AJL with unsecured and interest-free loans till 2010 for its upliftment after shutting down the physical prints of the National Herald Newspaper, which amounted to INR 90.2 crores. Young Indian Ltd is a non-profit, charitable organisation incorporated in 2010 which has its board members comprising Sonia Gandhi and Rahul Gandhi, who also happen to be its major shareholders. The company being a charitable organisation is fully exempted from tax payments. This company acquires all of ALJ’s debts from Congress when Congress had apparently claimed that AJL was unable to pay back loans.

A loan worth INR 90 crore was bought for Rs. 50 lakh, which became the debt payable by AJL to the company[ ]. It is to be noted that this transaction of 90 crore debt to Young Indian happened 2months prior to when Congress received 50lakhs. AJL converted the 50 lakhs debt into equity shares and subsequently Young Indian acquired AJL as its fully owned subsidiary. This meant that Young Indian had full control over AJL and its assets for 50lakhs, on 90lakhs debts written off by Congress.Many shareholders, including former law minister Shanti Bhushan and former chief justice of the Allahabad and Madras High Courts Markandey Katju, stated that they were not given any notice of the acquisition of AJL by Young Indian Limited and that the shares held by their fathers were transferred to AJL without their consent in 2010[ ].

The Gandhi family becomes the owner of 99.9% of ALJ’s shares through Young Indian. Rahul Gandhi and his sister Priyanka Gandhi Vadra bought additional shares through Ratan Deep Trust and Janhit Nidhi Trust, in furtherance of acquiring 100% of AJL, in violation of the Companies Act[ ]. This was challenged by Subramanian Swamy in 2013 as a case of money laundering and embezzlement. He claimed that the assets were acquired in a malicious way.

Income Tax questions Congress

  1. The most intriguing question was that why AJL failed to repay loans to Congress directly when they had a sufficient amount of 2000 crore rupees in assets which could have been used to set off the 90crore debt by liquidation.
  2. Given the above situation, why did Young Indian offer to buy the loan for a cheaper rate and why were assets worth a thousand crores agreed to be transferred to Young Indian for a trivial amount?
  3. Young India was held under a financial inquiry in another case. The question here was, why did Young Indian company provide 50 lakhs rupees to Congress to acquire the debt, when it itself had already borrowed INR 1 crore loan from a Kolkata-basedcompany called Dotex. This transaction was flagged as ‘suspicious’ by the Financial Intelligence Unit.
  4. The tax exemption for Young Indian company under section 25 of the Companies Act was revoked by the ITAT in 2017 on the grounds that there has been no record of any charitable activities undertaken by the company[ ].The AJL acquisition benefitted Young Indian ltd. This benefit qualifies as business profits and gains under Section 28(iv) of the IT Act and hence Young Indianwill be liable to pay tax as the benefit was for fair market value[ ].
  5. One of the accused people in the case was the late, Motilal Vora who played chief roles in Congress, AJL and Young Indian. He was also the treasurer of AICC. Being a key person, it was quite an inadmissible fact that Motilal did not know about the 2000 crore assets that could be used to discharge the 90 crore loans with Congress by AGL.
  6. Why was the consent of shareholders of AJL not taken into consideration while the acquisition of Young Indian Ltd?

Congress denies all the allegations placed against them and terms them “political vendetta”. It claimed that the accusations of money laundering are used as a smoke screen against the prevailing issues like inflation and social unrest. Congress further claims that it was merely helping out AJL from a financial crisis owing to the long-standing relationship with AJL from the National Herald newspaper times and there was no commercial interest involved. They acclaimed that AJL, like any other company, converted its loan into equity shares to become debt-free. Young Indian Ltd, the acquiring company was a non-profit organisation and it could not pay any dividends to its shareholders or directors, indirectly meaning that there was no transfer of property and AJL holds most of its property. Hence, Congress called it to be a strange case of money laundering without any money.

The Income Tax Department and Enforcement Directorate (ED)of the Prevention of Money Laundering Act, took matters into their hands to investigate the complaint filed by Swamy.

Petition filed by Subramanian Swamy, a political vendetta or not

On 1 November 2012, BJP’s Subramanian Swamy filed a case against Rahul Gandhi, Sonia Gandhi and other members of the Congress party before the Trial court in Delhi for cheating, embezzlement and misappropriation of funds in acquisition of AJL through Young Indian Company. Swamy alleged that the Gandhis illegally acquired properties and profits worth INR 2000 crores under the guise of acquisition. He claimed that there were huge sums of money laundering associated with the Gandhis from their acquisition of AJL, through their privately owned company Young Indian Ltd. the case was filed under various sections of IPC including Sections 403 (Dishonest Misappropriation of Property), 406 (Criminal Breach of Trust), and 420 (Cheating) read with 120B (Criminal Conspiracy) [ ].

Subramanian Swamy contested that according to sections 29 A to C of the Representation of the People Act, 1951 and per section 13 A of the Income Tax Act, 1961, it was illegal for a political party to lend any kind of money for commercial purposes to a third party[ ]. He requested an investigation by the Central Bureau of Investigation and demanded de-recognition of the Congress party for misappropriating public funds. In June 2014, the magistrate ordered for the summoning of Sonia Gandhi, Rahul Gandhi, Motilal Vora, Oscar Fernandes, Suman Dubey and Sam Pitroda to defend themselves as it found that there was sufficient evidence to support the allegation placed by Swamy. The Metropolitan judge observed that the creation of the Young Indian ltd. was itself a sham to convert public money for the personal use of the Congress party and to illegally acquire assets of AJL. The court further noted that the accused persons have acted “in consortium with each other to achieve the said nefarious purpose/design” [ ].

  • APPEALS TO THE HON’BLE HIGH COURT AND THE HON’BLE SUPREME COURT OF DELHI

The defendants appealed against the summons to Delhi High Court. The case was redirected to an appropriate bench for a hearing in January 2015. The Enforcement Directorate (ED) initiated investigations in the meanwhile during August 2014 for money laundering which was reopened again in 2015. The High Court noted “criminal intent” in its judgment and dismissed the appeal, ordering the parties to be present before the trial court. In December 2016 the Supreme Court exempted from personal appearance but not from the entire proceedings.

In December 2015, the Gandhis were granted unconditional bail by the Patiala High Court. In July 2016 the High Court reversed the Trial Court judgment that granted permission to examine balance sheets of AJL, Young Indian Ltd and other relevant documents of Congress. Swamy’s claim in 2018 to verify materials was also denied. In 2018, a 56-year perpetual lease ended, to evict AJL from Herald House on the grounds that it was not used for publishing but for commercial purposes.

The Supreme Court has later allowed the Income Tax Department (IT) to re-assess the filings made by the Gandhis in 2011-12 financial year, however restricted the powers to detain the parties. In May, 2019 the ED attached properties worth INR 64 crores permanently.

Current status of the case

After the trial court took cognizance of an Income Tax Department investigation against Young Indian Pvt Ltd on the basis on the complaint submitted by Subramanian Swamy in 2013, the investigation agency filed a new case under the Prevention of Money Laundering Act (PMLA)[ ].

As part of the ongoing money laundering probe, Enforcement Directorate has raided various locations in Delhi associated with the case to gather additional evidence for financial irregularity.

The Enforcement Directorate summoned Sonia Gandhi and Rahul Gandhi to question money laundering in the National Herald case. The decade-long case involves the misappropriation of assets in the course of the transformation of debts into equity shares. During the investigation, Rahul, Sonia, Mallikarjuna Kharge and Pawan Kumar told the officials that the transactions were handled by Motilal Vora but all of them failed to produce any document supporting the claim. ED has now temporarily sealed the Young Indian office. Following this additional police forces were deployed at the residence of Congress leaders and their headquarters for security purposes. Subramanian Swamy says that the ED raids should be conducted in the Congress office and Sonia Gandhi’s house. According to ED, assets worth INR 800 crores are owned by AJL and it seeks to inquire about the fact that Young Indian being a non-profit company manages to undertake commercial activities [ ].

Protests and Dharnas following the investigations

The National Herald case has caused a stir in the political arena leading to riots across the country. The Gandhis are embroiled in criminal investigations of ED based on the complaints filed by BJP member Subramanian Swamy. Both Sonia Gandhi and Rahul Gandhi were questioned by ED for the fraudulent acquisition of AJL by Young Indian Ltd. in which they own 38% shares each. The interrogations were recorded as per section 50 of the Prevention of Money Laundering Act [ ]. Following the ED investigations, Rahul Gandhi has claimed that the Central government is suppressing the opposition parties and is trying to deviate the attention of people from the actual realities like inflation. He added that his party members are not afraid of them and will not be intimidated by their actions. His reaction comes after the ED sealed the Young Indian office, and barricaded his house and the Congress office. He stated that his party will continue to protest against injustice and that “truth cannot be barricaded”.

In the recent nationwide protests on 5 August, Priyanka Gandhi was participating against inflation, unemployment and a hike in GST rates. The “anti-inflation protests” [Halla Bol] across the nation were organized by Congress amidst the questioning of members of Congress by ED in the National Herald case [ ]. The members have been tweeting that there will be a ‘Hakka Bol’ against the ‘Modi-made disaster’.

The ED is still investigating the shareholdings, and functioning of AJL and Young Indian ltd as well as the financial transactions that took place in the presence of chief personnel.

Conclusion

National Herald newspaper was a brainchild of Nehru and little did anyone expect that it will cause a downfall in the history of the Congress Party. When the publishing company AJL was acquired by the Gandhis under the disguise of Youth Indian Ltd., a non-profit organization, BJP member Subramanian Swamy filed a case for money laundering against the party members. The case was inquired before the courts and now ED has taken over the same. While the Congress party claims it to be a political vendetta, Swamy states it to be a clear case of misappropriation of funds. The members of the party are still being interrogated to gather further evidence to support or deny the allegations.


"Loved reading this piece by Kavya Sri?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"






Tags :


Category Others, Other Articles by - Kavya Sri 



Comments


update
Post a Suggestion for LCI Team
Post a Legal Query