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05 November 2012

The Bohemian Versus The Syndicate

Subramanian Swamy's allegation of Sonia-Rahul Gandhi indulging in a Rs 1,600 crore fraud contains questions more credible than the points of defence put up by the Congress, notwithstanding the fact that every allegation by the Janata Party president is viewed by his detractors through the lenses of his past record of frequently changing alliances, communal diatribes and intemperate attacks on the person of his target at a given point of time

“Since when has it become legal for a political party to extend a loan?” Subramanian Swamy asks, questioning what appears a dubious business transaction between a dysfunctional media house, whose newspaper was launched by the first prime minister of the country, and a purported non-profit company, the majority stakes of which are held by the Indian National Congress's first family. The question is valid.

Attacking his decade-long pet hate

Seeking an explanation as to why a general body meeting of shareholders of Associated Journals Pvt Ltd (AJ) was held at 10 Janpath, as reported to the RoC, is in place if indeed this allegation of Swamy, no matter a turncoat of whatever order he is, holds some water.

If AJ is now a defunct company but it continues to occupy (expensive) real estate in Delhi — 5A Herald House, Bahadur Shah Zafar Marg, New Delhi 110 002 — and Uttar Pradesh, the allegation acquires serious proportions especially if the Nehru-Gandhis floated a company called Young Indian (YI), formed on 23 November 2010 under Section 25 of the Companies Act (making it a non-profit organisation), and subsequently acquired the media house and its immobile property. A media house started with public donations on turning defunct should have returned the land and the rooms of the building that stands on it acquired for the purpose. It is alleged that YI acquired this property at an unbelievably throwaway price of Rs 50 lakh and is now earning revenue from it by renting it out.

Even if “the Associated Journals was a companion organisation of the Congress, and it is the party’s duty to revive the institution and the newspapers under it.” as Sandeep Dikshit has clarified, owing to the fact that AJ’s National Herald was a paper started by Jawaharlal Nehru in 1938, the alleged monetary transactions that enabled the acquisition cannot be legally sound.

Sonia Gandhi and Rahul Gandhi hold 38% stake each in YI. The other shareholders of the venture are Congress treasurer Motilal Vora (12%), also the chairman-cum-managing director of AJ, and party general secretary Oscar Fernandes (12%). Journalist Suman Dubey is the managing committee member and National Knowledge Commission Chairman Sam Pitroda is a member, too. This raises another valid question: Why should Congress party office-bearers own what should be a party asset created through a loan given by the party?

Interestingly, while a press release issued by Janardan Dwivedi sought pride in doing its “duty” by supporting AJ to “help initiate a process to bring the newspaper back to health in compliance with the laws of the land,” Rahul Gandhi’s office had clarified in an e-mail message that YI had no intention to relaunch any newspaper! Furthermore, notes to accounts of YI states the objective of Young Indian that does not include publishing a newspaper.

His defences have always been dodgy
It is up to the Election Commission of India to ascertain whether the Rs 89.5 crore loan — AICC accepted compromise for loan at Rs 50 lakh against the Rs 90 crore given — that Congress has admitted it lent to AJ violated any section of the Representation of the People Act. And if Rahul Gandhi indeed failed to disclose the details of his shareholdings in YI when he filed his election affidavit in 2009, was it a breach of election laws or, at least, the model code of conduct? On 12 December 2010, AJ’s board approved assignment of the loan given by AICC. Its shareholders approved it on 21 January 2011, simultaneously approving allotment of 90.2 million shares at Rs 10 per share, too. This allotment was sanctioned by AJ’s board on 26 February that year.

Back to the note, the Congress did not het back even Rs 50 lakh cash from YI as the venture officially has capital of Rs 5 lakh and loans of Rs 1 crore. Now, who is this benevolent donor of Rs 1 crore? Or, did AICC give loan to YI to help pay off its own loan? Fishy! The notes to accounts for the year ended March 31, 2012, filed by Young Indian auditor Pradeep Shah and signed by directors Suman Dubey and Motilal Vora this April, give some clues on the actual structure of the transaction. “In pursuit of its objects, the company has acquired loan owed of Rs 90,21,68,980 by the Associated Journals, presently engaged in achieving a recast of its activities so as to have its main object congruent to the main object of the company, for a consideration of Rs 50 lakh,” the note said.

Besides, the books of YI do not show any value against the 90.2 million shares it owns in AJ under the investments column, explaining the blank field with sophistry: “Since the said acquisition is treated as application on the objects of the company(and accordingly, treated in the financial statements of the company), the same has not been as an investment in shares... even if these shares were to be treated as an asset (investment), having regard to the fact that the net worth of the said company is negative, recognising the entire cost as diminution in value would result in an equivalent charge in income and expenditure account... Any outflow designed to fulfil the objects of the company, whether or not represented by an asset, is treated as application on the objects of the company.” if AJ owns assets worth greater than Rs 90 crore, it implies that the Congress has donated its first family free ownership of assets in excess of Rs 90 crore, even if it is held in a non-profit company. That’s yet another instance of ethically unacceptable transaction. Legally unacceptable as well.

Swamy appears more credible than Dwivedi on another count. The claim of the Congress general secretary that 700 employees had got their pay arrears due to the loan will have less buyers than the Janata Party president’s estimate that even a firesale of AJ’s real estate assets would cover the Rs 90 crore liability in the books several times over, settle all employees’ dues and still give the shareholders of AJ handsome returns. If the assets are valued at Rs 1,600 crore, it beats reason how a non-profit company could legally acquire property worth that much with a Rs 90 crore loan from a political party?

Sources: The Hindu, The Business Standard, The Economic Times

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Surajit Dasgupta treats no individual, organisation or institution as a holy cow.