Congress Party president Sonia Gandhi and vice president Rahul Gandhi are in a blue funk, unable to explain their illegal takeover of the assets of the National Herald Group in 2012, by transferring its shares to a company, Young India, in which they control 76 per cent stake.
Some persons who held shares from the time Jawaharlal Nehru launched National Herald in 1937, with funds from the public, were aghast at the development and blew the whistle, discreetly.
Briefly, the rigmarole involved the party loaning Rs 90-plus crore ($12.5 million) to Associated Journals Pvt. Ltd. (AJL), owner and publisher of National Herald (English daily), Navjivan (Hindi daily), Qaumi Awaz (Urdu daily), and National Herald International Weekly, to wipe out its debts and settle employee dues after publication formally ceased in 2008. Thereafter, on April 26, 2012, Young India ‘extinguished’ this Rs 90 crore debt for a paltry Rs 50 lakhs while transferring AJL shares to itself. The mathematics has never been explained to this day!
The transactions were conducted in utmost secrecy, with Motilal Vora as party treasurer transferring the money to Motilal Vora as chairman cum managing director of AJL, and select family loyalists in the know. Vora and party general secretary Oscar Fernandes are also shareholders in Young Indian, with 12 per cent stake each. Other Directors include family friends Suman Dubey and Sam Pitroda.
Some persons who held shares from the time Jawaharlal Nehru launched National Herald in 1937, with funds from the public, were aghast at the development and blew the whistle, discreetly. That is how this writer came to be the first journalist to touch the story [Niticentral, 29 October 2012] at a time when it seemed that the Gandhi family could never be held accountable for any misdeed. Now, thanks to the doggedness of BJP leader, Dr Subramanian Swamy, who took the case to court, struggled to get it admitted and followed it through, this is one act for which they will be held legally liable.
It bears stating that Union Finance Finister Arun Jaitley’s assertion to a news channel (Aug 5, 2014) that the Congress could “simply return the loan and the matter could end,” is incorrect. First, Congress did not take any loan. Rather, it was Congress that loaned a staggering Rs 90 crores ($12.5 million) to AJL, which is a commercial enterprise (even if non-viable), and this is illegal for a political party. It is shameful that the Election Commission has failed to take cognisance of this breach.
Young Indian (Registration no. 55-210686) is a private company registered under section 25 of the Companies Act, 1956.
Second, AJL was set up with around 5000 shareholders. By purchasing its debt of Rs 90 crore from the Congress party, for a paltry sum of Rs 50 lakh($78,000), without informing any of the original shareholders or their heirs, Sonia Gandhi and Rahul Gandhi indulged in an illegal activity that gave them control of real estate worth around Rs 5000 crores ($779 million). Since the story broke, many questionable property deals in the name of National Herald have come to light.
On Friday, 12 May 2017, the Delhi High Court rejected Young Indian Private Ltd’s petition to quash Income Tax Department proceedings against it, and directed the company to first approach the Income Tax assessing officer and submit all required documents.
Young Indian (Registration no. 55-210686) is a private company registered under section 25 of the Companies Act, 1956. Its stated aim is to inculcate “in the mind of India’s youth, commitment to the ideal of a democratic and secular society for its entire populace without any distinction as to religion, caste or creed and to awaken India’s youth to participate in activities that promote the foregoing objective.” As this has nothing to do with journalism, it is inexplicable why Young Indian acquired the assets of a media company for its activities. Moreover, the National Herald building on Bahadur Shah Zafar Marg has been rented to the Ministry of External Affairs for its Passport Division at a reported sum of Rs 60 lakhs ($94,000) per month. Young India has never explained what it does with the money.
The takeover was executed systematically. AJL was formally closed and printing of all publications terminated in 2008, leaving an unpaid debt of Rs 90 crores approximately. On November 23, 2010, Young Indian Pvt. Ltd. was incorporated with a paid up capital of just Rs 5 lakh u/s 25 of the Companies Act, in which Sonia Gandhi and Rahul Gandhi owned 38 per cent shares each (jointly 76 per cent).
The AJL Balance Sheet shows that it had real estate assets possibly worth Rs. 5000 crore, in Delhi, Lucknow, Bhopal, Indore, Mumbai, Panchkula, Patna and other yet identified places.
In December 2010, the Board of Directors of Young Indian passed a resolution to “own” the outstanding debt of the AJL, and obtained an unsecured zero interest loan from the Congress for equivalent amount to liquidate the said debt. Sonia Gandhi was the then Congress president, Rahul Gandhi general secretary, and Motilal Vora party treasurer and CMD of AJL.
The AJL held a Board meeting and declared that it could not discharge the debt to Congress. It resolved without reference to and approval of the shareholders that Young Indian would own its debt, and for Rs. 50 lakhs its entire share equity would be transferred to Young Indian. Thus AJL became a wholly owned company of Young Indian. The loan obtained from the party was written off as irrecoverable.
The AJL Balance Sheet shows that it had real estate assets possibly worth Rs. 5000 crore, in Delhi, Lucknow, Bhopal, Indore, Mumbai, Panchkula, Patna and other yet identified places. These were provided by various Central and State Governments after 1947 for facilitating newspaper printing, and publishing.
After taken possession of this vast real estate, Young Indian declared that according to its objectives submitted for obtaining registration under section 25 of the Companies Act, 1956 it will not engage in publishing a newspaper including the National Herald. The Herald House in New Delhi has been rented and Young Indian receives the remuneration.
That there was deep planning behind these moves can be seen from the fact that in AJL’s List of Shareholders and Debenture Holders 2008, the name of Rahul Gandhi has been inserted by hand at Page 49, with no shares or debentures allotted, and no other particulars given. In the List for 2011, Young Indian figures as the last entry, with the address N-125 Panchsheel Park, New Delhi-110017, and the shares allotted are 9,02,16,898. Moti Lal Vora signed this document in his capacity as Managing Director.
Swamy pointed out that National Herald Group was not owned by the Nehru family, but by persons who joined the freedom movement and contributed most of the share capital.
The 2011 list of shareholders submitted to the Registrar of Companies included names of mostly deceased persons (about 80 per cent) and firms long defunct. Names that stand out include Jawaharlal Nehru of Anand Bhawan, Allahabad (died 1964); Rafi Ahmad Kidwai (d 1954); Feroze Gandhi (d 1960); Indira Nehru Gandhi (d 1984); Ghanshyam Das Birla (d 1983); NS Pandit and Vijay Lakshmi Pandit (she died 1990); Kailash Nath Katju (d 1968); Dr Radha Kumud Mukherji; former Chief Justice of India Mirza Hameedullah Beg (d 1985); Yagya Dutt Sharma (d 1996); Sucheta Kripalani (d 1974); Yashpal Kapoor; Mohammed Yunus (d 2001); BRCC president Rajni Patel; Jitendra Prasad (d 2001); H.Y. Sharda Prasad (d 2008); Lalit Suri (d 2006).
When any shareholder died, AJL did not pass on the shares to their legal heirs. However, members of the Nehru-Gandhi family and their close associates entered the shareholder list: hence Indira Gandhi and Feroze Gandhi and later their grandchildren. Some trusts like Rattan Deep Trust controlled by RD Pradhan and Rahul Gandhi, and Janhit Nidhi controlled by Rahul Gandhi, Rameshwar Thakur and Priyanka Gandhi Vadera (spelling as per list), were involved in this business.
In February 2013, Subramanian Swamy succeeded in having a criminal complaint for misappropriation of the Herald Group registered against Sonia Gandhi, Rahul Gandhi, Motilal Vora, Oscar Fernandes, Suman Dubey, Sam Pitroda, and the private firm Young Indian, at Patiala House Courts, New Delhi. Swamy pointed out that National Herald Group was not owned by the Nehru family, but by persons who joined the freedom movement and contributed most of the share capital. Hence, Young Indian had no right to appropriate 99 per cent of AJL shares with funds from the Congress party.
In fact, as AJL held valuable properties and owed only Rs 90 crores to the Congress party and had little other liability, it could have used this real estate to return the loan and give huge benefits to its surviving 1000-plus shareholders who had contributed roughly Rs 89 lakhs ($89,000) to AJL’s capital at various times.
As AJL never paid dividend since 1937, all preferential shareholders (or heirs) may be deemed as shareholders.
Since the filing of the case, it has emerged that a commercial building on prime land (3,478 sq m) in Bandra, Mumbai, worth around Rs 200 crores ($31 million), was allotted for a Nehru memorial library and research centre nearly three decades ago. Another commercial building has come up on a plot of land taken at Panchkula (Chandigarh) in 2005, for newspapers that were already defunct.
Under pressure, in January 2016, an extraordinary general body meeting (EGM) of AJL was held at Lucknow to help the Gandhis counter the accusation that they had usurped AJL’s real estate worth thousands of crores by seizing its equity via Young Indian.
But there are many problems. The first relates to preferential shareholders. Senior advocate Shanti Bhushan claims that his late father, Vishwamitra, held preferential shares, which do not carry voting rights. But if dividend is not paid for three years, the shareholders become voting members. As AJL never paid dividend since 1937, all preferential shareholders (or heirs) may be deemed as shareholders.
The EGM invitees included Motilal Vora, Ghulam Nabi Azad, Syed Sibtey Razi, Sam Pitroda, Oscar Fernandes, Sheila Dikshit, Sandeep Dikshit, Salim Sherwani, Ratna Singh, and Jitin Prasada. While the first three figured as shareholders in 2008, it is unclear when the others became shareholders.
Some shareholders who turned up at the venue were denied entry and told that they would be informed about the decisions. Though more than a year has passed, they have not been recognised and listed.
Now Nemesis is knocking at the door. With real estate deals of daughter Priyanka Vadra and her husband, Robert Vadra, also coming under scrutiny, the Gandhi Parivar suddenly finds itself between a rock and hard place.
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3. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.