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Thursday, December 10, 2015

What is National Herald Case all About?

Its a long post ... have patience to read it completely...

I'll divide my answer into points and it might be long.
So, lets start with some History.
  • Its the pre-independence era. There was a company formed and named Associate Journals Limited (AJL). This was a publishing house which published newspapers in Hindi and Urdu portraying views about the importance of freedom, etc.
  • The National Herald was the English newspaper which was published by AJL. Jawaharlal Nehru was the chairperson of AJL at the time it was established.
  • During the Emergency, this paper stopped its publication. It revived itself in 1986 but fully stopped its publication again in 2008 with a debt of about 90 crores.

Now, let's come to what the "scam" here is.
  • So, AJL is running in loss. The Indian National Congress(INC) decides to give it a loan of about 90 crores to cover its losses and pay it debts.
  • In November of 2010, a new company called The Young Indian Limited (YIL) was floated. Sonia Gandhi and Rahul Gandhi were owning 76% of the equity in YIL and the remaining were owned by Congressman Mothilal Vora, Oscar Fernandez, Sam Pitroda and Suman Dubey
  • It is alleged that YIL paid 50 Lakhs to INC take over the process of collection of the 90 crore loan given to AJL.
  • Just a month after YIL being formed, in December 2010, the directors of AJL (one of whom was Mothilal Vora - A Congressman AND Treasurer of INC AND A part owner in YIL) decided that the 90 crore debt was not payable.
  • So Basically, Vora the Chariman and MD of AJL, told Vora the treasurer of INC that he will not be able to repay the loan of 90 crores to Vora the stakeholder of YIL. (wut)
  • This debt of 90 crores, which was given interest-free to AJL by INC who later transferred the loan recollection to YIL for a mere sum of 50 lakhs was declared not payable by AJL which had properties worth 2000 crores for its assets.
  • Now, AJL unable to repay the 90 crore loan to YIL, decides to transfer all its ownership (and hence assets) to YIL. So now, YIL has paid 50 lakhs to recover a loan of 90 crores and in return recovered(gained) assets worth 2,000 crores. This doesn't make sense to me and you, but it makes total sense to the Congress Party.

Now, What are the issues?
  • AJL was catagorized under the Section 25 of the Companies Act,1956 which means it was a typically non-profit organization used for promoting commerce, art, science, religion or charity. But AJL, now under YIL was not doing that at all.
  • It is Alleged that Nehru used his then powers to get properties in the name of AJL at a subsidized rate from the government. Today, this property is worth about 600-2000 crores and it goes to YIL.
  • YIL is also registered as a non-profit company. But the building in argument which consists of eleven stories, is rented out to companies and passport seva kendra with an alleged earning of 30-60 lakhs a month, which makes YIL not a non-profit organization.
  • INC was first of all not authorized to grant the 90 crore loan. According to Income Tax Act, no political party can hand out loans.
  • Why did AJL (with assets worth wayy more than 90 crores) decide to grant its ownership to YIL to pay a mere 90 crore loan when it could have liquefied the assets, paid not only the debt but also its shareholders?
  • AJL had 1,057 shareholders at the time it granted ownership to YIL. Were the shareholders approached for their opinion still remains a mystery.

 If there are any faults or corrections, please let me know! Any additions are welcome. This is what I understood from the numerous articles I read about this.