Though the mills of God grind slowly; Yet they grind exceeding small;

Though with patience He stands waiting; With exactness grinds He all.

This poetic aphorism from the early Greek philosophers captures the unveiling of the deceitful transactions behind the transfer of the National Herald group assets worth Rs. 2,000 crore to the control of former Congress president Sonia Gandhi and current president Rahul Gandhi.

Briefly, in 2008, when United Progressive Alliance chairperson Sonia Gandhi was reigning diva of Indian politics, the Congress party which did not own but controlled Associated Journals Ltd (AJL), decided to stop publication of National Herald daily newspaper, Navjivan (Hindi), and Qaumi Awaz (Urdu). The AJL was founded in 1937 by Jawaharlal Nehru under the Indian Companies Act 1913, as a business venture. As it never made a profit and share-owning firms became defunct, individual shareholders allowed Congress run it as an affiliate. But once media activity stopped, AJL focused on lucrative real estate business.

AJL had acquired property in Delhi, Patna, Panchkula, Mumbai, and Lucknow, from Central and State Governments, for media purposes. Outright acquisition of these properties would mean paying hundreds of crores to AJL, which would have to pay huge capital gains tax. Hence, a plan was hatched to grab AJL assets by allotting 99 per cent of its shares to Young Indian, a company controlled by the Gandhis, without disturbing AJL’s legal ownership over the assets and without paying taxes on income derived therefrom.

Young Indian was incorporated as a Section 25 company (trust) on Nov. 23, 2010 with an authorised share capital of 5,000 shares of Rs. 100/- each and paid-up capital of Rs. Five lakh, under the Companies Act 1956. From inception, it gave its address as Herald House (5A, Bahadur Shah Zafar Marg, New Delhi, and treated the property as its own, paying no rent). Its objective was to inculcate youth with “the ideal of a democratic and secular society…”.

Founder members Suman Dubey and Sam Pitroda left after transferring their shares to Oscar Fernandes and Motilal Vora (both office-bearers of Congress and AJL). Later, in annual report for FY 2010-11 and in application for tax exemption, Young Indian claimed Sonia Gandhi and Rahul Gandhi as founder members, though Dubey and Pitroda were founder members per Memorandum of Association. This means they were only “name-lenders” and Sonia and Rahul Gandhi were the real founders.

Thereafter, Rahul Gandhi on Dec. 13, 2010 (38 per cent share), and on Jan. 22, 2011 Sonia Gandhi (38 per cent), Moti Lal Vora and Oscar Fernandes (12 per cent each) became directors of Young Indian; all are members of the All India Congress Committee. Pitroda, Dubey, and Fernandes became directors of AJL in 2010; Motilal Vora was chairman; they passed a resolution on Sept. 1 to shift AJL’s registered office from Lucknow to Delhi.

In 2010, the AICC claimed to have given AJL a cumulative loan of Rs 90.21 crore. On Dec. 16, 2010, the loan was sold to Young Indian for just Rs. 50 lakh, by assignment deed dated Dec. 28 (amateur work; AJL did not acknowledge). At this time, Young Indian lacked funds to pay even Rs. 50 lakh to AICC. It took a loan of Rs. one crore from Kolkata-based hawala entry operator, M/s Dotex Merchandise Pvt. Ltd. (an RPG Group Company) on Feb. 15, 2011; this was flagged under Suspicious Transaction Reports by Financial Intelligence Unit as there was no evidence of creditors’ source of income to advance said loan. Anyway, Young Indian paid AICC only on March 1, 2011.

Just before this, AJL increased its authorized capital from one crore ordinary share having face value of Rs. 10 to ten crore ordinary share, and allotted 9.021 crore shares (99 per cent) to Young Indian vide an incomplete and undated share application form, on Feb. 26, 2011.

Young Indian gained control over the rental-cum-business income of AJL, around Rs. 50 lakh in assessment year 2011-12. It did not disclose the deal in its Profit & Loss account, but disguised it as expenditure on objectives and sought tax exemption. The tax department asserted that takeover of a real estate firm is not a stated objective, cancelled the tax exemption on Oct. 26, 2017, and initiated penalty proceedings. Young Indian was told to pay Rs 413.40 crore during financial year 2010-11. It claimed that the objectives of AJL were being recast to match those of Young Indian, but this was not done even in 2017.

Interestingly, there is no evidence of AICC giving AJL loans of Rs. 88.87 crore from 2002-3 to March 31, 2010, and Rs. 1.35 crore in 2010 (total Rs. 90.21 cr) before selling loan to Young Indian in December 2010. It is a settled law that mere book entry without corroborative evidence has no evidentiary value.

Further, AJL’s 72nd Annual Report 2010 does not show any loan from AICC. The unsecured loan of Rs. 87-odd crore in its accounts as on March 31, 2010 was advance, security deposits and receipts relating to construction activities at Mumbai and Lucknow. The AICC claims to have lent Rs. 1.35 crore between April 2008 and December 2010, but AJL had closed its newspaper publications from April 2008 and thereafter engaged in real estate business. Hence, Congress claims merit scrutiny under the Income Tax Act 1961 and Representation of the People Act 1951, as a political party receiving donations from public can utilise the funds only for party purposes.

Actually, the alleged loan is a book entry made to transfer 99 per cent shares of AJL to Young Indian. The loan of Rs. one crore and commission of Rs. one lakh are “accommodation entries” and deemed-to-be income. Further, to acquire almost 100 per cent shares of AJL (above 99 per cent), Rahul Gandhi and Priyanka Gandhi Vadhera bought 47,513 and 2,62,411 additional shares through Rattan Deep Trust and Janhit Nidhi Trust respectively.

Despite umpteen opportunities over 30 months, Young Indian refused to cooperate with the authorities to determine the Fair Market Value of AJL properties as on Feb. 26, 2011; the AICC was equally obstructive. It took the indefatigable Subramanian Swamy to present the herculean efforts of income tax officers – a fine of Rs. 413.40 crore vide a 105-page assessment order – to the metropolitan court on Dec. 27, 2017.

Justice remains to be done. Investigations must also expose the role of Rattan Deep Trust and Janhit Nidhi Trust in muscling the heirs of hundreds of individual shareholders out of their inheritance in the hugely profitable AJL. 

(The writer is Senior Fellow, Nehru Memorial Museum and Library. The views expressed here are personal)