Congress leader Rahul Gandhi on Monday appeared before the Enforcement Directorate (ED) in a case of money laundering related to the National Herald newspaper.
The ED issued summons to Rahul and Congress President and his mother Sonia Gandhi on June 1. Officials said ED wants to record their statements under criminal sections of the Prevention of Money Laundering Act (PMLA).
While the first complaint in the case was filed in 2012 and the ED began investigating the case in 2014, the ED registered a fresh case under the criminal provisions of the PMLA after a trial court in Delhi took cognisance of an Income Tax Department probe on the basis of a private criminal complaint by BJP MP Subramanian Swamy first filed in 2012.
Here we explain what's the National Herald case, what are the various entities involved, the allegations so far, and what the courts have said on the accused.
What is National Herald?
The National Herald newspaper was started by India's first Prime Minister Pandit Jawaharlal Nehru in 1938 from Lucknow. It was part of the independence movement against the British.
Associated Journals Limited (AJL), which published National Herald along with Qaumi Awaz in Urdu and Navjeevan in Hindi, did not belong to any one person but was founded in 1937 with 5,000 other freedom fighters as its shareholders, as per Business Standard. There were 1,057 shareholders in 2010.
What's Subramanian Swamy's complaint?
Subramanian Swamy in 2012 filed a complaint alleging some Congress leaders, including the Gandhis, were involved in cheating and breach of trust in the acquisition of Associated Journals Ltd (AJL) by Young Indian Ltd (YIL) in 2011, as per the Business Standard report.
Sonia and Rahul Gandhi owned 76 per cent of YIL and the remaining 24 per cent was owned by Congress leaders Motilal Vora and Oscar Fernandes.
AJL published the National Herald newspaper in English, Qaumi Awaz in Urdu, and Navjeevan in Hindi until 2008, when it was shut down after running into losses.
The Congress party granted a Rs 90 crore interest-free loan to the AJL to help it, but it could not be revived, and AJL failed to repay the loan to the Congress, according to The Financial Express.
Under the Income Tax Act, no political organisation can have financial transactions with a third party, notes a Rediff News report.
In 2010, AJL declared the loan cannot be paid and transferred the loan to YIL. In lieu of it, AJL also issued its shares to YIL, giving YIL control of 99 per cent of AJL and its real estate assets, as per Rediff News. YIL paid a further consideration of Rs 50 lakh to AJL.
The report added that the Congress party wrote off the loan given to AJL as unrecoverable.
This meant, as per the complaint, that YIL ended up having the control of AJL and its real-estate assets for Rs 50 lakh on a Rs 90 lakh loan that Congress party wrote off.
Swami alleged that YIL had "taken over" the assets of the National Herald in a "malicious" way.
Some AJL shareholders, such as former law minister Shanti Bhushan and former Allahabad High Court Chief Justice Markanday Katju, said their shares in AJL were transferred to YIL without their knowledge.
Case goes beyond the newspaper
The real estate, pegged at around Rs 2,000 crore, owned by AJL in cities such as Delhi, Mumbai, Patna, and Panchkula, is at the centre of the case.
By acquiring AJL, the Gandhis-owned YIL also acquired this real estate. The acquisition is controversial as they inherited such massive real estate in lieu of loan of 90 crore at a payment of Rs 50 lakh, as per Swamy's complaint.
The Mint newspaper explains: In 2010, AJL’s board approved the assignment of Rs 90.21 crore in accumulated loans taken from the All India Congress Committee to YIL. This debt was then retired for a consideration of Rs 50 lakh, which YIL paid to AICC. On AJL’s books it was converted into equity.
The Mint quoted an accounting expert as saying: "What inference can be drawn [from this exercise]? Was this [new company YIL] established to transfer loan? Why did AICC need to transfer loan to YIL? What benefit did it expect? If it was a bad loan with AJL and was bad with YIL as well, what was the need [for doing all this]?"
What the courts have said on the case
A Delhi court in 2014 said YIL indeed appeard to be a "sham or a cloak" to convert public money to personal use, as per The Financial Express.
A case was made against the accused under Sections 403 (Dishonest Misappropriation of Property), 406 (Criminal Breach of Trust), and 420 (Cheating) read with 120B (Criminal Conspiracy) of the Indian Penal Code.
Sonia and Rahul are out on bail granted by Patiala House Court in 2015.
The ED opened a case after it took cognisance of a Central Bureau of Investigation (CBI) case since it cannot act on its own, according to Hindustan Times.
The Delhi High Court said in 2015 that the accused did appear to have "criminal intent".
Rediff News quoted the Delhi HC as saying, "After having considered the entire case in its proper perspective, this court finds no hesitation in putting it on record that the modus operandi adopted by petitioners in taking control of AJL via the special purpose vehicle (YIL), particularly when the main persons in the Congress, AJL and YI are the same, evidences a criminal intent."
The Rediff report added that the HC said the Congress transactions with AJL via YIL were not mere commercial transactions, as they legitimately attracted the allegations of cheating, fraud, breach of trust and misappropriation.