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Congress leader Rahul Gandhi on Monday, June 20 appeared before the Enforcement Directorate (ED) for the fourth day of questioning in the National Herald money laundering case. Party president Sonia Gandhi has been summoned by the agency for questioning in the case on June 23.
But what is the case? The Wire explains.
The National Herald is an English newspaper which was started by Prime Minister Jawaharlal Nehru, along with a company called the Associated Journals Limited (AJL). The company published newspapers in two languages – Qaumi Awaz in Urdu and Navjeevan in Hindi. Post independence, the National Herald was known for supporting the Congress party.
What is the National Herald case?
The AJL was founded in 1937 with 5,000 shareholders, including Jawaharlal Nehru and some freedom fighters. In 2010, the company’s shareholders came down to around 1,000.
The company published the newspapers until 2008, when it had to shut down as it got into debt. The Congress party then granted it a Rs 90-crore interest-free loan.
Later, the party assigned the recovery of this debt to Young India Ltd (YIL), a charitable company created in late 2010 through Section 25 of the Companies Act, 1956. This Section has been replaced with Section 8 of the Companies Act, 2013, according to which a company is solely created for the promotion of commerce, charity, social welfare, art, etc. This company can no longer promote its goals and cannot pay dividends to its shareholders. On the other hand, a private-listed company is formed for profit.
To understand this better, some examples of Section 8 companies are Azim Premji Foundation, Reliance Foundation, Reliance Research Institute, Coca Cola India Foundation and Amazon Academic Foundation. These companies can get tax benefits if they get registration under section 80G and 12AA of IT Act, according to Business Standard.
Rahul and Sonia Gandhi – who are also the board of directors of Young India Ltd – own 38% of its shares each, or 76% of the whole company. The rest of 24% shares were held by former Congress leader Motilal Vora and Oscar Fernandes.
Young India Ltd paid Rs 50 lakh to the Congress party in consideration for transferring the Rs 90 crore debt to itself.
Due to the losses incurred by the AJL, a huge share of equity was transferred to Young India Ltd in lieu of the debt. Due to this, AJL eventually ended up becoming a an ‘entirely owned’ company under Young India Ltd. This further meant that the Congress-promoted Young India Ltd ended up owning all assets of the AJL, which included real estate assets in Delhi, Bhopal, Mumbai, Indore, Panchkula, etc.
In November 1, 2012, Bharatiya Janata Party (BJP) leader Subramanian Swamy filed a case against the Gandhi family alleging that they have used party funds to purchase the company that published the National Herald newspaper. In his complaint before a trial court in Delhi, he said that the Gandhi family has committed fraud and grabbed land of about thousands of crores. He further claimed that the Gandhis “fraudulently acquired properties of Associated Journals Ltd (AJL) in Delhi, UP, and other places worth Rs 1,600 crore” through the private company Young Indian Ltd, which they owned.
The BJP MP had also alleged in his complaint how the loans of AJL could be written off for only Rs 50 lakh. It was further alleged that there was a misappropriation of assets in an equity transaction.
In his complaint, he had accused Rahul Gandhi, Sonia Gandhi, Sam Pitroda, Motilal Vora, Suman Dubey, Oscar Fernandes and the Young India Ltd of cheating, criminal breach of trust, criminal conspiracy and misappropriation of funds.
What are the ED summons for?
The ED summons are in relation to a case registered nine months ago to interrogate alleged financial irregularities at Young India Ltd under the Prevention of the Money Laundering Act (PMLA). This came as a result of a trial court taking cognisance of an income tax department probe against Young India Ltd on the basis of the complaint made by Swamy in 2013.
The ED now wants to record statements of Rahul Gandhi and Sonia Gandhi under the provisions of the PMLA.
According to the income tax department, Rahul Gandhi had allegedly concealed his position as the director of Young India Ltd at the time of tax assessment in 2011-2012, which prevented the department from knowing his real earnings from shares and corresponding tax liability. These summons are a part of the ED investigation to allegedly better understand the shareholding pattern and the role of promoters of the Young India Ltd and AJL.
The ED has been grilling Gandhi for hours since the last few days.
Media reports have cited ED “sources” as saying that Gandhi has put the onus of the transaction of the AJL takeover on the late Motilal Vora, the former Congress treasurer. Gandhi has alleged that Vora was responsible for all the transactions related to Young India Ltd’s acquisition of AJL’s assets worth crores from the party, these reports say. Vora, who died in 2020, was also questioned by the ED in this case.
However, speaking to The Wire, senior Congress leader K.C. Venugopal has denied these claims, saying Gandhi would not blame somebody else just to “escape”.
The Congress party also sent a legal notice to the Union government alleging that the media has been given incorrect information about how he is handling his questioning.
In the notice sent to home minister Amit Shah and finance minister Nirmala Sitaraman, it has been alleged that the government is using the ED for political agenda, and that leaks are being made with intentions of furthering the government’s agenda.
The court hearings
Before summoning the Gandhis, the Delhi court examined the witnesses, including Swamy. After the pre-summoning stage was closed, the court heard the arguments of the complainant as to why the accused should be summoned.
After hearing the arguments, metropolitan magistrate Gomati Manocha summoned the accused based on the perusal of evidence, stating that it appeared Young India Ltd was a cover to convert public money to personal use and to acquire AJL.
The judge, however, had remarked that the case is only at the summoning stage and the accused can refute the claims against them, present evidence in their favour and conduct cross-examination of the complainants’ witnesses.
In July 2014, the Delhi high court had granted a stay on summons by the trial court to the Gandhis. However, the case still proceeded in the trial court and the investigation in this matter was opened by the ED in August 2014.
However, the ED re-opened it in September that year. The court took cognisance of a probe conducted into the matter by the income tax department.
In December 2015, the Patiala House court in Delhi granted unconditional bail to the Gandhis and all others accused in the matter.
The Gandhis had approached Delhi high court in 2014 seeking quashing of the trial court summons, along with the entire trial court proceedings. However, the high court in 2015 held that the National Herald case shows no political vendetta, and dismissed their petitions.
Last year, Swamy had filed a plea in Delhi high court seeking to bring on record additional evidence in the National Herald case before the trial court.
Last year, Swamy had challenged an order passed by the trial court that rejected his application to bring on record some documents, including RTI documents, Young India’s Income Tax Assessment Order of December 2017 and Sonia Gandhi’s Special Leave Petition (2016), etc. that are essential for the matter.
His petition stated: “The Ld. ACMM failed to appreciate that under Section 244 CrPC, the petitioner is entitled to apply to the Magistrate to summon witness(s) at any stage to produce the instant document(s).”
Swamy had stated that allowing the plea at this stage would help save valuable time of the trial court. It was stated in the plea that Section 244 has wide enough scope to give power to a court to accept a supplemental or additional list of witnesses and to issue summons to them and record evidence.
The Delhi high court had issued notice on the plea and sought response from all the above named persons, along with Young India.