The National Herald Story, Explained

National Herald was a white elephant from the outset. When the newspaper remained closed for three years, less than a decade after its launch in 1938, Jawaharlal Nehru declared at a gathering of its employees in Lucknow, “Humein banyagiri nahi aayi (We do not know how to do business)”. At another event, just years away from being India’s first prime minister, he said, “I will not let the National Herald close down even if I have to sell Anand Bhavan (his family home in Allahabad)”. But little did Nehru know that, instead of using its own resources to save the iconic newspaper and preserve it as part of India’s independence movement, his family will usurp the assets of National Herald.

Background

Despite attempts by Indira Gandhi and Rajiv Gandhi to revive it, the circulation and finances of the National Herald dropped over the decades, resulting in it being shut in 2008 with a debt of Rs 90 crore. As a result, the Associated Journals Limited (AJL) — which published the newspaper — in effect became a real estate firm with properties worth thousands of crore in Delhi, Indore, Lucknow and Mumbai.

The debt, which was owed to the Congress party, had resulted from interest-free loans worth Rs 90.25 crore given by the party to the ailing company. In 2010, the Congress transferred the loan to a newly-floated company called Young Indian (YI) for a partly payment of Rs 50 lakh. While 76 per cent of the shareholding of Young Indian is with Sonia Gandhi and Rahul Gandhi, the remaining 24 per cent vests in Congress leaders Motilal Vora, Oscar Fernandes, Sam Pitroda and Suman Dubey.

After the loan was transferred, AJL owed the debt to Young Indian. In lieu of the debt, AJL allotted a large number of its shares, nearly 99 per cent, to Young Indian. With this, Young Indian, in which the Gandhis hold a majority stake, ended up owning AJL and its prime real estate. The deal left the Gandhis in control of properties belonging to AJL and its shareholders spread across the country.

Swamy’s Case Against The Gandhis

In 2013, Subramanian Swamy filed a complaint against the Gandhis, accusing them of conspiring to cheat and misappropriate funds. He has alleged that the Gandhis have “fraudulently acquired properties of the AJL in Delhi, Uttar Pradesh and other places”. The properties, he says, are worth Rs 2,000 crore.

Apart from the Gandhis, Swamy has also named Congress treasurer Motilal Vora, general secretary Oscar Fernandes, journalist Suman Dubey and technocrat Sam Pitroda in the case. Swamy has argued that AJL’s Rs 90 crore loan could have been easily paid through AJL’s assets, but no effort was made to do that. His line: against properties worth Rs 2,000 crore, AJL has a limited liability of just Rs 90 crore.

He has said that the AJL was given an interest-free loan by the Congress, which was not repaid, which is a violation of Section 269T of Income Tax Act 1961. Moreover, he says, a political party cannot engage in commercial financial transactions, including giving or receiving loans, as it is a non-profit entity.

He argues that the loan given to AJL was “illegal” as it had been taken from party funds. Swamy has also accused the Gandhis of criminal breach of trust in the acquisition. Over 1,050 shareholders of AJL, he says, were not consulted before the move. He has also objected to the use of properties belonging to AJL for commercial purposes, citing the example of Herald House in Delhi, which used to serve as the National Herald’s office, having been rented out.

What has the court said?

In June 2014, a magistrate’s court in Delhi ordered the Gandhis and the other senior Congress leaders named in the complaint to appear before it to answer allegations that they had illegally used party funds for the newspaper. However, the Congress leaders, through an appeal in the Delhi High Court, se-cured a stay on the lower court’s summon until all parties in the case had been heard.

After a series of hearings, the Delhi High Court in December 2015 rejected the appeal filed by the Gandhis seeking quashing of the charges. The court summoned the Congress leaders to answer the allegations against them. On appearing, Sonia Gandhi, Rahul Gandhi, Vora, Fernandes and Dubey were granted bail by the court.

The Metropolitan Magistrate, while summoning the Gandhis, had 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”.

If this was not damaging enough for the Congress, the Delhi High Court, during the hearing in the case, observed it has “no hesitation” in saying that the “modus operandi adopted by petitioners (Gandhis and other Congress leaders) in taking control of AJL via the special purpose vehicle, particularly when the main persons in the Congress, AJL and YI are the same, evidences a criminal intent”.

How is the Congress defending itself?

In their defence, the Gandhis have said that Young Indian is a not-for-profit entity, created for charity. Therefore, it can’t be charged for illegal profiteering. The Congress has also claimed that no shareholder has been defrauded. Moreover, it has said that it had informed or consulted the shareholders about the transfer of equity to Young Indian, who “approved” the move “unanimously”.

However, this claim fell flat when former law minister Shanti Bhushan claimed — as a shareholder in AJL — that the takeover by Young Indian was “wholly illegal”. The facts that AJL was incorporated as a public company and was not a personal property of Nehru, who started it with the support of about 5,000 freedom fighters, complicates the situation for the Congress. The Gandhis are yet to come up with a convincing explanation.