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National Herald Scam: Everything You Need To Know

A real life 'hera-pheri' done by top politicians of the Indian National Congress, as alleged by Subramanian Swamy

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National Herald was a newspaper, it's publishing rights were with AJL before Young Indian took over.
National Herald was a newspaper, it's publishing rights were with AJL before Young Indian took over.

BY SHANTAM SAHAI

  • Indian National Congress lends Rs 90 crores to AJL, with no interest
  • AJL transfers all the shares with the Rs 90 crores debt to Young Indian, in return for Rs 50 lakhs
  • Subramanian Swamy files a private complaint in a court in Delhi, to uncover what is being investigated as the ‘National Herald Scam’

National Herald scam is a case that put the Indian National Congress under the public scanner, with Sonia Gandhi and Rahul Gandhi being in the spotlight, it involves other names such as Motilal Vora. All of it started on 1st November 2012 when BJP’s Subramanian Swamy filed a private complaint (a crusade against corruption) in a court in Delhi. He alleged criminal misappropriation by the Gandhis. According to Swamy, the Gandhis had committed fraud by illegally acquiring a public limited company, Associated Journals Limited (AJL) through Young Indian, a private limited owned by them.

The case came out as a conspiracy to amass wealth by exerting influence in the Indian National Congress and fooling the shareholders of AJL. Even though Rahul Gandhi called it a ‘political vendetta’, he surely didn’t expect Swamy would be able to connect all the dots and reach a conclusion of ‘why would the Congress party lend a loan of Rs 90 crore (with no interest) to AJL?’

ALSO READ: National Herald case: Sonia, Rahul may seek bail if needed

What is Associated Journals Limited (AJL)?

It is an unlisted public limited, incorporated on 20th November 1937. Its registered office is Herald House, 5-A, Bahadur Shah Zafar Marg, New Delhi. Even though it was an idea of Jawaharlal Nehru, he never owned AJL. It was started with the support of 5000 freedom fighters who became shareholders. AJL’s initial capital was Rs 5 lakh, which was divided into 2,000 preferential shares each worth Rs 100 and 30,000 equity shares worth Rs 10 each.

Motilal Vora (also the treasurer of the Indian National Congress) was the chairman and managing director of the company since 2002.  The company commanded publishing rights of the National Herald newspaper. It also owned various real estate properties which were estimated to be around Rs 5000 crore. AJL had incurred huge losses before it was transferred to Young Indian in 2011.

What is Young Indian?

It is a private limited which was incorporated on 23rd November 2010 with a capital of Rs 5 lakh. Its registered office too, was 5-A, Herald House, Bahadur Shah Zafar Marg, New Delhi. The company’s 76% shares are held by Sonia Gandhi and Rahul Gandhi (who are also in the board of directors), whereas the rest are held by Motilal Vora and Oscar Fernandes, another Congress leader.

The judicial process and investigation are still going on regarding the National Herald Scam. Pixabay
The judicial process and investigation are still going on regarding the National Herald Scam. Pixabay

How was AJL transferred to Young Indian?

  1. The Indian National Congress provided AJL with an unsecured zero interest loan of Rs 90 crores. Remember, the treasurer of INA and chairman of AJL are both the same person, Motilal Vora.
  2. In December 2010, the Board of Directors of Young Indian formally passed a resolution offering to own the outstanding debt of AJL of Rs 90 crores. This offer was accepted by the Chairman and Board of AJL.
  3. The AJL thereafter held a meeting of their Board and without reference to the Shareholders resolved that in lieu of Young Indian owing the debt and for a further consideration of Rs 50 Lakhs, the entire share equity of AJL would be transferred to Young Indian. Thus, AJL became a wholly owned company of Young Indian.
  4. The Indian National Congress wrote off the loan as irrecoverable by falsely holding that the Net Worth of the Company is negative.

Important Points

  • The Memorandum of Association of the AJL bars the Company from entering into any transaction which is not for furthering its objective to publish newspapers.
  • National Herald House is a prime property in Bahadur Shah Zafar Marg and was given by the Government for the purpose of publishing a newspaper at concessional rates. However, the Young Indian, now the owner of the National Herald House, has opened this property for commercial renting such as to Multinational Companies and to the Ministry of External Affairs for its Passport Seva Kendra on rent.

Important Questions

  • Why should Young Indian, which is majorly owned by the Gandhis, be assigned the AJL’s debt of Rs 90 crore that was gonna be written off by the INA?
  • Why didn’t AJL, which owns several real estate properties, use a part of its prime assets to repay the debt?

ALSO READ: Ruckus in Rajya Sabha over National Herald case

What do the shareholders say?

A number of shareholders have claimed that AJL’s chairman, Motilal Vora, and its directors did not inform them or obtain their approval while deciding to transfer its entire equity to Young Indian in December 2010.

“This is the first time I am hearing about such a company in which my grandfather had shared. I have no idea what kind of deal was struck. Had a letter or a notice for approval been sent to any of my siblings or at our Allahabad address, I would have been informed,” said former Supreme Court Judge Markandey Katju, whose grandfather Kailash Nath Katju held 131 shares in AJL.

Legality

As alleged by Subramanian Swamy, it is illegal for a political party to lend money for commercial purposes as per Section 29A to C of the Representation of the People Act, and Section 13A of Income-tax Act.

“According to the evidence so far, 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 ₹20 billion worth of AJL assets,” said Metropolitan Magistrate Ms Gomati Manocha in 2014. The court had noted that all the accused, allegedly, had acted “in consortium with each other to achieve the said nefarious purpose/design”.

The National Herald case is currently an ongoing one, with the accused being charged under Sections 403, 406 and 420 read with Section 120-B of IPC.

Next Story

Will Congress Party be Able to Survive in Future in Face of Modi Onslaught?

It was India’s “Grand Old Party.” The Congress Party ruled the country for 55 out of 71 years since independence

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From left, Congress party leader Sonia Gandhi, her son and party President Rahul Gandhi, and former Indian Prime Minister Manmohan Singh attend a Congress Working Committee meeting in New Delhi, May 25, 2019. VOA

It was India’s “Grand Old Party.” The Congress Party ruled the country for 55 out of 71 years since independence. But following the party’s crushing electoral debacle for a second time, there are questions about its future as the Nehru-Gandhi political dynasty at its helm is unable to counter the most powerful leader India has produced in decades: Prime Minister Narendra Modi.

Contrary to expectations, India’s mammoth general election turned out to be virtually a no-contest between Modi and Congress Party president Rahul Gandhi as it became a presidential-style battle.

“It is not what went wrong with the Congress, it is more of a story of what went right for Prime Minister Modi. He stood as a tall leader, as an achiever, as somebody who understood people’s aspirations,” says political commentator Rasheed Kidwai, who has authored a biography of Rahul Gandhi’s mother, Sonia Gandhi. On the other hand, “Rahul Gandhi is temperamentally not a power wielder. He is a trustee of power.”

The sixth member of the Nehru Gandhi family to lead the party, Rahul is often seen as a “reluctant politician”, despite his spirited campaign to revive the party and challenge Modi after its rout in 2014.

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India’s Prime Minister Narendra Modi waves toward his supporters during an election campaign rally in New Delhi, May 8, 2019. VOA

Gandhi’s rallies drew crowds, but his efforts to project Modi and his Bharatiya Janata Party as a threat to India’s secular traditions or to highlight issues of economic distress failed to resonate. His attempts to nail him for corruption in a deal to buy Rafale French fighter jets fell flat. His promise of a minimum wage for India’s poorest families was met with skepticism, even among the poor.

On the other hand, Modi, successfully wooed voters with his message of strident nationalism and subtle appeal to the majority Hindu community. Along with it, there was another theme: he projected himself as the humble son of a tea seller, a self made man who fought all odds to reach the top post in contrast to what he called the “entitled” Gandhi who had inherited the mantle of leadership of the Congress Party. It drew cheers from the country’s emerging middle and lower-middle classes, exhausted with dynastic politics.

The Congress Party’s tally of 52 seats in parliament was only a notch higher than the 44 seats it won in 2014 in the 545-member parliament. The party’s candidates returned empty-handed in half the Indian states and in several others the party only mustered a single digit tally.Modi’s BJP won 303 seats.

The scale of its losses not just crushed hopes the Congress Party would either lead a credible challenge to Modi or return as invigorated opposition – it once again raised questions over the leadership of the Gandhi family.

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The sixth member of the Nehru Gandhi family to lead the party, Rahul is often seen as a “reluctant politician”, despite his spirited campaign to revive the party and challenge Modi after its rout in 2014. VOA

Rahul Gandhi has offered to resign, but expectedly the party that has no second rung of leadership has turned it down. “The party will fulfill its role as a strong opposition. We need Rahul Gandhi to lead us in these challenging times,” Congress Party spokesman Randeep Surjewala said after a meeting of the party’s senior leaders on the weekend.

Rahul Gandhi also lost the Amethi constituency the party had held for 50 years in Uttar Pradesh state. In another humiliating blow for the Gandhi family, his sister Priyanka Gandhi Vadra, who was appointed in a senior post to revive the party, failed to make an impact. Rahul’s mother, Sonia Gandhi, won her party’s only seat in the state.

Rahul Gandhi’s victory in another constituency in South India means he will continue to be a lawmaker. Dynastic politics is not limited to the Congress Party: lawmakers from political families are a routine feature of Indian politics. But political commentators say in an era showing a preference for strong, populist leaders, Modi was the clear victor.

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here are questions about its future as the Nehru-Gandhi political dynasty at its helm is unable to counter the most powerful leader India has produced in decades: Prime Minister Narendra Modi. Wikimedia Commons

“There is a new sense of nationalism sweeping across many conventional democracies. There is a yearning for a strong leader that captures the public imagination,” according to political analyst Ajoy Bose. “I don’t really see the conventional Congress Party or the conventional leadership mounting a challenge to Modi. He has completely taken the country by storm.”

ALSO READ: India’s President ‘Ram Nath Kovind’ Designates ‘Narendra Modi’ as PM for Second Term

Gandhi tried to give a positive message after the party’s rout. “We have a different vision of India [from Modi]”, said the head of the party that has long projected itself as a defender of India’s minorities, such as Muslims who worry about religious polarization and a rise in hate crimes since Modi came to power. “There is no need to be afraid. We will continue to work hard and we will eventually win.”

But it may be difficult to reinvent what analysts call a “fading party.” They say Modi’s BJP now occupies the dominant political space that the Congress party did for decades. “Congress is going to get reduced to, you know, like the Liberals did in Britain,” says Rasheed Kidwai. (VOA)