What is the National Herald case?
On November 1, 2010, economist and politician Subramanian Swamy filed a case against Congress leaders Sonia and Rahul Gandhi in Delhi’s magistrate court alleging the mother-son duo had committed fraud and grabbed land worth billions by acquiring a publicly limited company called Associated Journals Limited (AJL) through their owned private company, Young Indian.
According to the complaint, the Congress party had granted an interest-free loan of Rs 90.25 crore to Associalted Journals Ltd (AJL), the owners of the National Herald newspaper. He alleged the loan had either not been repaid or repaid in cash, both of which are in violation of the Income Tax Act.
A closely held company, Young Indian, was incorporated in November 2010 with a capital of Rs 5 lakh and it acquired shares of AJL. Swamy alleged “criminal misappropriation” by Sonia and Rahul.
History of Associated Journals Limited:
AJL is an unlisted public company incorporated on November 20, 1937, with its registered office at Herald House, Bahadur Shah Zafar Marg, New Delhi. It was the brainchild of Jawaharlal Nehru and started with the support of many freedom fighters, who became shareholders of AJL.
Apart from Nehru, AJL’s memorandum of association was signed by prominent leaders such as Purushottam Das tendon, Acharya Narendra Dev, Rafi Ahmed Kidwai and Govind Ballabh Pant among others. The company did not belong to any particular person and was to be only in the news business.
Motilal Vohra has been the chairman and managing director of AJL since March 22, 2002. The company was making a loss before its holdings were transferred to Young India in 2011.
AJL published the National Herald in English, the Quami Awaz in Urdu and Navjeevan in Hindi. All publications shut shop in April, 2008. AJL also owned considerable real estate in various cities. The value estimated is Rs 50 billion.
The Congress bailout of AJL:
To keep AJL afloat, the Congress gave the company unsecured, interest-free loans for a few years up to 2010, according to the case. By March, 2010, AJL owed Rs 90 crore to the Congress. Though the company owned expensive real estate, it is alleged it made no effort to repay that loan to the Congress. Chairman and managing director of AJL since 2002, Motilal Vohra was also the treasurer of the Congress party for many years before that.
Formation of Young Indian and the takeover:
Young Indian is a private company incorporated on November 23, 2010 with a capital of Rs 5 lakh. Its office too is Herald House in Delhi. The board of directors were Gandhi family loyalists Suman Dubey and Sam Pitroda. On December 13, 2010, Rahul Gandhi was appointed director of Young India. Sonia joined the board on January 22, 2011. The Gandhis own 76 per cent of the company while the rest are held by Congress leaders Motilal Vohra and Oscar Fernandes (12 per cent each).
In 2010, the Congress decided to assign the AJL’s nearly 90-crore loan to Young Indian. Young Indian became the new owner of the debts that was originally owed to the AICC.
Soon after, in December 2010, AJL transferred its equity to Young Indian for owning its debts. The Young Indian paid an additional Rs 50 lakh for this acquisition.
Therefore, AJL became a wholly-owned subsidiary of Young Indian which was owned by four individuals.
Recently, many AJL shareholders alleged that no notice was served on them by AJL for any meeting of shareholders. They also said their consent was not taken when shares held by their fathers and grandfathers were transferred to Young Indian.
The case:
Swamy has alleged that by acquiring a public-limited company through a private company, Sonia and Rahul Gandhi had committed a fraud. They got publication rights of the papers as well as rights over the real estate, he has said. He said the six-storey office in Delhi was given by the government only for newspaper purposes, but now houses a passport office which pays rent.
Swamy demanded a CBI inquiry and said the Congress should be derecognised for using public money.
On November 2, 2012, Congress responded by saying the loan was given only to revive the newspaper and that the party had no commercial interest.
The magistrate court finally observed there was evidence against all accused. On June 26, 2014, Metropolitan Magistrate Gomati Manocha summoned Sonia Gandhi, Rahul Gandhi, Suman Dubey, Sam Pitroda, Motilal Vohra and Oscar Fernandes to appear in court on August 7, 2014.
She said according to evidence, "it appears that YIL was in fact created as a sham or a cloak to convert public money to personal use" to acquire control over Rs 20 billion worth of AJL assets.
On appeal by Congress leaders, the Delhi High Court issued a temporary injunction for a week. On August 28, 2014, the metropolitan court fixed December 9 for the next hearing.
On January 12, 2015, the judge of the Delhi High Court recused himself from hearing the case.
Swamy appealed to the Supreme Court for a speedy trial. On January 27, the top court asked him to make out a case for this in the Delhi High Court which was hearing the appeal of Sonia Gandhi and others against summons issued to them by the trial court. The case was assigned to Justice Sunil Gaur.
On August 1, 2014, the Enforcement Directorate started a probe if there was any money-laundering in the case. It reportedly reopened investigation in September, 2015.
On December 7, 2015, the Delhi High Court dismissed the appeals of Sonia Gandhi, Rahul Gandhi and the others and ordered them to appear in person before the trial court on December 9.
However, they did not appear in the trial court on December 9 and their lawyers requested the court to defer hearing. The trial court then ordered them to appear in person on December 19, 2015.
