Controversy

Politics of a case

Print edition : January 22, 2016

Congress president Sonia Gandhi and her son and vice-president Rahul Gandhi arriving at the Patiala House court on December 19. Photo: Sushil Kumar Verma

September 9, 1988: Prime Minister Rajiv Gandhi speaking at the Golden Jubilee celebration of National Herald. Photo: PTI

The Congress has apparently won the first round in the National Herald case with Sonia and Rahul securing bail and the party recording some electoral victories over the BJP in Madhya Pradesh.

Debt takeover, debt-equity swap, takeover in lieu of debt. These are terms used frequently in the corporate world, and they hardly attract national attention. However, the National Herald debt-equity swap case captured the public attention since Congress president Sonia Gandhi and her son and party vice-president Rahul Gandhi were asked to appear in the trial court in Patiala House, Delhi, in connection with it in December. The mere fact of the Gandhis being asked to appear in a court in person as accused was enough to fuel a political controversy, and when the charges were cheating, breach of trust and misappropriation of funds, it was natural that a hype began to build up.

The Bharatiya Janata Party-led (BJP) National Democratic Alliance (NDA) government may have intended to use the National Herald case to embarrass the Congress, but the opposite seems to have happened, forcing it to go on the defensive. The Congress has managed to turn the situation around into a political issue, making the charges against its leaders seem like political vendetta.

The case involves Associated Journals Limited (AJL), which was established by Jawaharlal Nehru in 1938 as a public company to publish the English daily National Herald, which was the mouthpiece of Indian National Congress then, and the Hindi and Urdu dailies Navjeevan and Qaumi Awaz. AJL suffered huge losses and shut down in 2008 owing to fund crunch and the printing of the newspapers stopped. The Congress, which patronised the company, extended funds to the tune of Rs.90 crore as interest-free loan with a view to restarting publication of the English newspaper, but that project did not take off. In November 2010, a private company called Young Indian was formed. Sonia Gandhi and Rahul Gandhi hold 38 per cent stake each in it. The other stakeholders are party veterans Motilal Vora and Oscar Fernandes and party loyalists Sam Pitroda and Suman Dubey. Shortly after coming into existence, Young Indian offered to take over the Rs.90-crore debt of AJL from the Congress. AJL chairman (Motilal Vora in this case) and the board agreed to this proposition. Subsequently, AJL allotted a large number of shares to Young Indian in lieu of the debt owed to the Congress. Following this, Young Indian acquired AJL, including its real estate, estimated to be worth thousands of crores of rupees.

The BJP’s Subramanian Swamy, whose legal spats with the Gandhi family date back a long time, filed a complaint in a Delhi court in January 2013, accusing the Gandhis of cheating, breach of trust and misappropriation of funds. He said the Gandhis used their position to grab a public company and then used its properties for commercial purposes. He cited the example of Herald House on Delhi’s Bahadur Shah Zafar Marg, which used to house the National Herald office, as having been rented out to serve as a passport office, to earn crores of rupees. He also said the modus operandi adopted by the Gandhis to capture AJL assets had an inbuilt criminal intent as the transfer of debt, the debt-equity swap and then the complete takeover of AJL by Young Indian had been done by flouting rules.

The Delhi court summoned the Gandhis in June 2013. The Gandhis appealed in the High Court seeking the quashing of the charges. The High Court rejected the appeal on December 7, 2015. The Gandhis were asked to appear in the trial court in person. Sonia Gandhi and Rahul Gandhi appeared in the Patiala House court on December 19. The court granted them unconditional bail. They are to appear in court again on February 20, 2016. Subramanian Swamy opposed the grant of bail saying the accused were influential people who could run away from the country, but the court rejected his contention and granted them bail on a personal bond of Rs.50,000 each.

While the Congress has tried to make political capital out of the whole issue, saying it smacked of political vendetta, the fact remains that both the trial court and the High Court refused to quash the charges and grant Sonia Gandhi and Rahul Gandhi exemption from personal appearance. The courts said there was prima facie evidence of wrong-doing in the entire deal. While the seriousness of the matter may have got buried in the din created by Congressmen, it is worthwhile to mention that the Metropolitan Magistrate Gomati Manocha, who summoned Sonia Gandhi, Rahul Gandhi and others to appear before the court on August 7, 2014, had said in her judgment on June 26, 2014, that according to the evidence available, it appeared that Young Indian Limited was in fact created as a sham or a cloak to convert public money for personal use, to acquire control over AJL assets worth thousands of crores of rupees. She also noted that all the accused had allegedly acted together to achieve the said nefarious purpose/design.

The observations made by the High Court on December 7 are equally damning. Dismissing the appeals of Sonia Gandhi, Rahul Gandhi and others for quashing the charges against them, the court said: “After having considered the entire case in its proper perspective, this court finds no hesitation to put it on record that the modus operandi adopted by petitioners in taking control of AJL via Special Purpose Vehicle, i.e., Y.I., particularly, when the main persons in Congress party, AJL and Y.I. are the same, evidences a criminal intent. Whether it is cheating, criminal misappropriation or criminal breach of trust is not required to be spelt out at this nascent stage. In any case, by no stretch of imagination, it can be said that no case for summoning petitioners as accused in the complaint in question is made out. Questionable conduct of petitioners needs to be properly examined at the charge stage to find out the truth and so these criminal proceedings cannot be thwarted at this initial stage.”

With such observations, the seriousness of the matter gets compounded by the historical fact that AJL was incorporated as a public company and its takeover by a private company appears wrong. AJL was the brainchild of Nehru but it was never his personal property as it was started with the support of about 5,000 freedom fighters who became its shareholders. Hence the question is whether AJL’s equity could have been transferred to Young Indian, a private company, at all. AJL’s capital was Rs.5 lakh, divided into 2,000 preferential shares worth Rs.100 each and 30,000 ordinary (equity) shares worth Rs.10 each. Its Memorandum of Association was signed by stalwarts such as Purushottam Das Tandon, Acharya Narendra Dev, Kailash Nath Katju, Rafi Ahmad Kidwai and Govind Ballabh Pant, apart from Nehru. If even a single shareholder approached the court, as Shanti Bhushan, the noted Supreme Court lawyer and former Union Minister, has done, claiming he was not informed or consulted about the transfer of equity to Young Indian, then it can prove embarrassing for the Congress, which has maintained that due process was followed in transferring AJL equity to Young Indian.

All this will come into the public domain when the hearing in the case begins and charges are framed. At the moment, the Congress has succeeded in turning the tables on the BJP, painting a picture of victimhood, with Congress workers all over the country staging protests against the NDA government and Congress MPs stalling the winter session of Parliament on some pretext or the other.

The cry of political vendetta has been led by none other than the Gandhis themselves with Sonia Gandhi invoking the spirit of Indira Gandhi, saying like her mother-in-law she too was not scared of anyone. Rahul Gandhi blamed the Prime Minister, saying the witch-hunt was emanating from the Prime Minister’s Office. The basis of the Congress’ belligerence is the contention that not a single penny has changed hands during the transaction and no benefit has accrued to anyone in the process since both the companies, AJL and Young Indian, are non-profit companies and any earning by either of them goes towards the promotion and development of the objectives mentioned in their charter.

Senior Congress leaders are unanimous in their opinion that the court case will not harm the party in any way and the premise behind the charges, of criminal intent and cheating, will not hold because no financial transaction has taken place. M. Veerappa Moily, Congress leader who has held senior Cabinet positions in the United Progressive Alliance (UPA) regime, including that of Law and Justice, said: “Now that Soniaji and Rahul will appear in the court as ordinary citizens, this will reinforce people’s perception of political victimisation because no give and take of money is involved. This perception is further strengthened by the fact that twice before the case had been examined by the Enforcement Directorate, one of them during the UPA government, and then again during the NDA government but no violation was found. Then the ED was changed after Swamy complained and the case was reopened. What is this if not witch-hunt?”

According to Moily, this episode will only boomerang on the NDA as people will see through its lies. “Besides, this has galvanised our workers across the country. There is nothing in the case that can harm us,” he said.

Manish Tiwari, another Congress leader and former Information and Broadcasting Minister, said: “Whenever political vendetta is unleashed workers get galvanised. This time, too, it has happened. The NDA has unwittingly mobilised our workers who had become demoralised after the party’s May 2014 electoral defeat. We have nothing to fear because now the case is in the judicial arena and we have full faith that the judiciary will vindicate our position.”

Senior Congress leaders cite the example of the persecution of Indira Gandhi by the Janata Party government during 1977-79 and how she emerged victorious, registering a landslide victory in 1980. Sonia Gandhi invoked the name of Indira Gandhi to draw a comparison.

One leader said: “This was merely a consolidation of assets. No money has changed hands. If the Congress gave a loan to AJL it was to revive the newspaper and save the livelihood of thousands of its employees. When Young Indian took over AJL, due process was followed.” The leaders pointed out that Young Indian was a non-profit company and any earning that it made would only go towards the promotion of its objective, which is the promotion of “commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object”. Shareholders of a non-profit company are not entitled to receive any dividend. Given the nature of both the companies, and the circumstances under which the AJL-YI transaction happened, Congress leaders are confident that the court process will prove their leaders are clean.

Congress workers across the country were in a frenzy during the days preceding December 19. Sonia Gandhi sternly told them “not to create any drama” and the din then subsided a little.

Although it may be purely coincidental, shortly after a good show in the Bihar Assembly elections the Congress registered two victories over the BJP in Madhya Pradesh, a State where the party has been out of power since 2003. The Congress defeated the BJP in the Ratlam Lok Sabha byelection and captured power in five of the State’s eight civic bodies in the elections held on December 22. The BJP had controlled seven of the eight civic bodies earlier. Congress leaders are optimistic that the party is on a comeback trail as people have started seeing through the NDA government’s falsehoods.

The BJP has denied any role in the cases that have been reopened but the fact remains that Subramanian Swamy is a BJP leader and a day before the Congress leaders were to appear in the Delhi court, he was allotted a ministerial bungalow in Lutyens Zone, which he is not entitled to.

So it would be politically naive to assume that Subramanian Swamy is acting independently, as he sought to explain to the media after the court proceedings on December 19.

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