The story so far: The Enforcement Directorate (ED) has summoned Congress president Sonia Gandhi and former party chief Rahul Gandhi for questioning in a money laundering case involving the National Herald newspaper. While Ms. Gandhi has been called to appear on June 8, her son Mr. Gandhi has been asked to depose on June 13.
The Congress alleged that the summons reeked of “vendetta, pettiness and cheap politics”. Informing that the Gandhis will appear before the ED, Congress spokesperson Abhishek Singhvi and chief spokesperson Randeep Surjewala, said at a press conference: “This is truly a very weird case, an alleged money laundering case on which summons are issued with no money involved.”
What is the National Herald case?
In 2013, BJP MP Subramanian Swamy filed a private complaint in a Delhi trial court, accusing the Gandhis and others of conspiring to cheat and misappropriate funds of shareholders of The Associated Journals Limited (the publishing company of the National Herald newspaper). He alleged that the scam happened when the Congress-promoted company Young Indian Ltd. (YIL) acquired AJL and its real estate assets worth at least ₹2,000 crore also got transferred to YIL. He also accused the Gandhis and other Congress leaders close to them of defrauding the Congress party
The National Herald is an English-language newspaper started by the first Prime Minister of the country Jawaharlal Nehru in 1938, along with the establishment of its Public Limited publishing company The Associated Journals Limited (AJL). The company also published two newspapers in Hindi and Urdu languages — Navjivan and Qaumi Awaz, respectively. After independence, the National Herald was considered a mouthpiece of the Congress party.
In April 2008, suffering losses and unable to sustain publication, AJL formally closed printing and publication of newspapers including the National Herald . At the time of its establishment, AJL had 5,000 shareholders including Nehru and other freedom fighters. The company’s shareholders was down to a little over 1,000 in 2010.
After nearly eight years, AJL decided to relaunch the three newspapers in a digital format in 2016.
According to court records, at the time of shuttering publication in 2008, AJL owed the Congress an accumulated debt of ₹90 crore that the party had loaned it on an interest-free basis from time to time. In 2010, the party assigned the recovery of this debt owed to a private charitable company called Young Indian (YIL), created in late 2010 as a Section 25 company.
A company incorporated under Section 25 of the Companies Act, 1956, now replaced by Section 8 of the Companies Act, 2013, is a not-for-profit charitable company, created solely for the promotion of commerce, art, charity, sports, or social welfare, among other things. It can only use its profits to further promote its goals and cannot pay any dividends to its shareholders.
Notably, Ms. Gandhi and Mr. Rahul, who are on the board of directors of YIL, each own 38% each of its shares, or 76% of the whole Company. The rest 24% of the shares were held by Congress leaders Motilal Vora and Oscar Fernandes.
YIL paid just ₹50 lakh to the Congress as consideration for transferring the ₹90 crore debt to itself. Owing to its losses, AJL was unable to pay the debt and a large chunk of its share equity was transferred to YIL in lieu of the debt. AJL eventually ended up becoming a wholly-owned company under the Young Indian.
This also meant that AJL’s assets, which included real estate assets of at least ₹2,000 crore in prime areas of New Delhi, Lucknow, Bhopal, Mumbai, Indore, Patna, Panchkula, and other places were now owned by Congress-promoted YIL.
Mr. Swamy also accused the Gandhis and other close Congress leaders of defrauding the Congress party by using donations to lend interest-free loans to AJL and then writing them off for just ₹50 lakh. He had also said that the extending of the loan by the political party for “commercial” purposes was illegal in itself.
The accused in the trial court case included Sonia Gandhi and Rahul Gandhi (both directors at YIL), and Motilal Vora and Oscar Fernandes, both deceased, who were directors at both AJL and YIL. The other accused are former journalist Suman Dubey and entrepreneur Sam Pitroda, who are both directors of Young Indian and AJL. The last accused is the company, Young Indian.
What are the Enforcement Directorate’s fresh summons about?
According to an ED official, the summons are in connection to a case registered about nine months ago to investigate alleged financial irregularities at Congress-promoted YIL under the Prevention of Money Laundering Act (PMLA).
The ED’s decision to register the case was based on a trial court taking cognisance of an Income Tax Department probe against Young Indian on the basis of a private criminal complaint filed by Mr. Swamy in 2013. The agency now wants to record the statements of the Gandhis under criminal Sections of the PMLA.
In 2018, the Income Tax department had claimed that Mr. Gandhi had concealed his position as a director of YIL at the time of an I-T assessment in 2011-12, which had prevented the department from knowing his earnings from the shares and the corresponding tax liability.
The ED’s summons to the Gandhis are part of their investigation to understand the share-holding pattern, financial transactions, and the role of the promoters of the Young Indian and AJL. Last month, the Central agency had recorded the statement of the veteran Congress leader Mallikarjun Kharge, who is an office-bearer of AJL. The agency also questioned Congress treasurer Pawan Kumar Bansal, who is the managing director of AJL and an additional director in Young Indian.
What has happened in the legal proceedings and investigation so far?
Delhi trial court
After Mr. Swamy filed his 2013 complaint at the trial court in Delhi, the court examined the complainant’s witnesses, including Mr. Swamy at the pre-summoning stage. After closing pre-summoning evidence, the court heard arguments of the complainants as to why the accused persons should be summoned.
Metropolitan Magistrate Gomati Manocha decided to summon the accused based on the evidence saying that it appeared that Young Indian was indeed a cover to convert public money to personal use to acquire the huge assets of AJL. The judge had stated that those named in the complaint had allegedly acted “in consortium with each other to achieve the said nefarious purpose/design”. The court made out a prima facie case against the accused for misappropriation of property, criminal breach of trust, cheating and criminal conspiracy. The judge had said, however, that this was only the summoning stage and the accused would be able to refute the claims against them, present evidence and cross-examine the complainant’s witnesses.
In July 2014, when the accused were summoned by the trial court, the Gandhis were granted a stay on the summons by the Delhi High Court. However, the case in the trial court proceeded and an ED investigation was opened into the matter in August 2014. While closing the case owing to a technical problem in early 2015, the ED reopened the probe in September that year. The court also 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 in the alleged misappropriation case to the Gandhis and all the other accused parties.
Delhi High Court
The Gandhis had moved the Delhi High Court in 2014 and were granted a stay on the trial court summons. They had also asked for a quashing of the trial court proceedings altogether but the High Court ruled in December 2015 that the National Herald case revealed no political vendetta, dismissing the petitions of the Congress leaders.
The court had said that the case was “one of its kind” where the probity of a party of Congress's national stature was under scrutiny. It had explained that it is too early to go into what “species of criminal offence” was made out. But it added that it would be “preposterous” to deny criminality in transactions that, it felt, “had left lakhs of citizens who donated to the party cheated”.
The Gandhis had submitted in court that YIL was a charitable company with no aim of seeking profit and that the complaint filed by Mr. Swamy was “politically motivated”.
In late 2020, Mr. Swamy had approached the Delhi court seeking summoning of various documents and witnesses in the National Herald case, including a Supreme Court official, a Deputy Land and Development Officer, and a Deputy Commissioner of Income Tax. The BJP MP had moved the High Court against a trial court order declining his plea to lead evidence.
The High Court then issued notices to the accused persons last year to reply to Mr. Swamy’s plea, while staying the trial court’s proceedings.
Supreme Court
After the Delhi High Court refused to quash the proceeding, the Gandhis moved the Supreme Court, which, in 2016, directed all the accused persons to face criminal proceedings so that there could be “a free trial”.
