President of Indian National Congress Sonia Gandhi and her son Rahul Gandhi were questioned for several hours by the Enforcement Directorate over the National Herald case.
The Supreme Court dismissed over 240 pleas, filed mostly by Congress activists, questioning the powers of the Enforcement Directorate (ED). The apex court upheld the ED's powers relating to arrest, attach property, search and seizure under the Prevention of Money Laundering Act (PMLA). With this, every step the ED had executed during the probe of the National Herald case received legal approval.
The National Herald corruption case was first brought to the limelight in 2012 when BJP leader and lawyer Subramanian Swamy filed a complaint against some Congress leaders in a Delhi court. The complaint alleged that Young Indian Ltd (YIL) -- a charitable company owned by Sonia, Rahul, Motilal Vora and Oscar Fernandes -- has taken over the assets of the National Herald newspaper owned by Associated Journals Limited (AJL) in a 'malicious' way.
Sonia Gandhi, Congress MP Rahul Gandhi, Congress treasurer Motilal Vora, general secretary Oscar Fernandes, journalist Suman Dubey and technocrat Sam Pitroda were named as accused in the case.
National Herald and AJL
The National Herald newspaper, which was founded by Jawaharlal Nehru and a few other freedom fighters in 1938, was published by the AJL. The AJL also published Qaumi Awaz in Urdu and Navjeevan in Hindi.
The National Herald began as an echo of the liberal faction of the Indian National Congress to eventually graduate as the mouthpiece of the party after Independence.
The AJL, which was started by Nehru, had over 5,000 freedom fighters as its shareholders. The AJL was an unlisted public company which began with a capital of Rs 5 lakh. The capital was divided into 30,000 equity shares of Rs 10 each and 2,000 preferential shares of Rs 100 each.
The publication of the newspapers under AJL was suspended from time to time due to financial difficulties and labour issues and it finally shut shop on April 2, 2008.
The AJL, which had 1,057 shareholders and an outstanding loan of Rs 88 crore in March 2010, was acquired for Rs 50 lakh by Young Indian Ltd in December 2010.
Inception of Young Indian
Young Indian was a private entity incorporated in November 2010 by Sonia Gandhi, Oscar Fernandes and others. The company, which came into being with just Rs 5 lakh share capital, allegedly obtained a loan of Rs 1 crore from a Kolkata-based shell company to facilitate the acquisition of AJL.
Out of the total shares of the company, 76 per cent are jointly held by Sonia Gandhi and Rahul Gandhi, and the remaining 24 per cent by Congress leaders Motilal Vora and Oscar Fernandes (12 per cent each). Rahul Gandhi was appointed director of the firm in December 2010 and Sonia Gandhi joined the board of directors in 2011.
The firm was initially registered in the address of senior journalist Suman Dubey in N-125, Panchsheel Park, New Delhi, and later shifted to 5 A Herald House, headquarter of AJL, in January 2011.
It was registered as a Section 25 company, exempted from tax as a charitable non-profit organisation. Section 25 companies are for promoting commerce, art, science, religion or charity.
According to the Enforcement Directorate, the company which started with Rs 5 lakh capital owns around Rs 800 crore worth of assets today.
Misappropriation case
Subramanian Swamy in his petition alleged that the All India Congress Committee (AICC) loaned Rs 90 crore to the AJL. AJL board had approved the allocation of Rs 90 crore accumulated loan to Young Indian in December 2010.
The debt was retired* for a consideration Rs 50 lakh. The amount was paid by Young Indian to the AICC. (*Debt retirement occurs when a borrower repays the principal associated with a bond or note.) Since AJL was unable to pay the loan, the company and its assets were transferred to YIL. The Rs 50 lakh was converted to equity shares of AJL, thus making it a fully owned subsidiary of Young Indian Limited.
The points of contention in this case are two.
One, how can a political party bound by the provisions of the Representation of the People Act, 1951 loan money at zero interest rate for commercial purposes? The Congress insisted that its loan to AJL did not violate the provisions of the Act as the loan was to revive the newspaper with no commercial interest.
Two, why did the AJL fail to pay off its debts by selling off some of its priced properties?
Now, going by the most conservative estimate AJL owned around Rs 2,000 crore worth of assets. Some of the real estate properties of the AJL worth millions are scattered in Delhi, Mumbai, Patna, Lucknow, Indore, Bhopal and other places across the country. The natural question is why the firm failed to dispose of its debt by liquidating these assets. Why were assets worth crores transferred to YIL for a paltry sum?
Incidentally, Congress leader Motilal Vora, who served as the chairman and managing director of AJL from March 2002, agreed to transfer the company and its assets to YIL as AJL was unable to repay the loan amount from AICC. Vora was also the Congress party's treasurer then.
Another important point is that the consent of the shareholders were not taken before the acquisition of AJL by Young India.
Also, those who were involved in the decision making were office-bearers of the Congress and majority shareholders in YIL.
Legal proceedings
After considering the above points, a trial court summoned the accused in 2014. While summoning them, the court said that from the complaint and the evidence so far, “it appears that YI was in fact created as a sham or a cloak to convert public money to personal use” in order to acquire control over Rs 2,000 crore worth of assets of AJL.
The court noted that all accused persons had allegedly acted “in consortium with each other to achieve the said nefarious purpose/design”.
Later, the High Court dismissed the appeals filed by the Congress leaders against the summons, observing that prima facie the case “evidenced criminality”.
The ED began a probe into Swamy's complaint in 2014 to see if there was a case of money laundering involved. The case was closed citing technical reasons. However, Swamy wrote to Prime Minister Modi expressing doubts about ED Director Ranjan Katoch. In 2015, Katoch was removed and the case was reopened.
The five accused in the case -- Sonia, Rahul, Motilal Vora, Oscar Fernandes and Suman Dubey -- were granted bail by the Patiala court in December 2015.
In October 2018, the Centre ended a 56-year-old perpetual lease to evict AJL from Herald House citing that it was used for commercial activities and not publishing.
On May 2019, the ED permanently attached National Herald properties worth Rs 64 crore in Gurugram under the PMLA. A Rs 16.38 crore property in Mumbai was also attached in 2020.
In 2022, the agency began questioning the accused in the case as part of the probe.
Though the ED has concluded the questioning of Congress leaders Rahul Gandhi and Sonia Gandhi for the time being, this is just the beginning. A lengthy legal battle is likely to haunt the Congress leaders for a long time.