THE LOWDOWN: Are Sonia Gandhi, Rahul in trouble in the National Herald case?

India Today

21-05-2025

News: The Enforcement Directorate has told a Delhi court that a prima facie case of money laundering was made out against senior Congress leaders Sonia Gandhi and Rahul Gandhi in the National Herald case. On May 2, notices were issued to the accused, including Young Indian.The National Herald case is an ongoing investigation involving allegations of financial irregularities, money laundering, and related offences against Sonia Gandhi, her son Rahul Gandhi, and other Congress leaders. The case originated from a private complaint filed in 2012 by BJP leader Subramanian Swamy in a Delhi court.advertisementSwamy accused Sonia and Rahul Gandhi of cheating, criminal misappropriation, and breach of trust in the acquisition of Associated Journals Limited (AJL) by Young Indian Limited (YIL).The Enforcement Directorate (ED) intensified its money laundering probe in November 2023, attaching assets worth Rs 751.9 crore linked to AJL and YIL.
What is the National Herald?The National Herald newspaper was founded in 1938 by Jawaharlal Nehru and others to support India's independence movement.The newspaper was published by Associated Journals Limited (AJL), a not-for-profit company incorporated in 1937, which also published Qaumi Awaz (Urdu) and Navjeevan (Hindi).In 2008, AJL ceased publication of the National Herald and its sister publications due to financial difficulties, including significant debt.What are the roles of Sonia and Rahul Gandhi?In November 2010, Young Indian Limited (YIL), a not-for-profit company, was incorporated with Sonia Gandhi and Rahul Gandhi as majority shareholders, each holding 38% of the shares (totalling 76%). The paid-up capital of YIL was Rs 5 lakh.advertisementAJL owed Rs 90.25 crore to the All India Congress Committee (AICC) as an interest-free loan to sustain its operations.In 2010, the AICC assigned this loan to YIL for Rs 50 lakh. AJL issued 9.02 crore equity shares (face value Rs 10 each) to YIL, making YIL the majority shareholder with 99% ownership of AJL. While AJL legally remained an independent entity, YIL effectively controlled it.Why did the AICC transfer the loan for Rs 50 lakh?The AICC stated that AJL was unable to repay the Rs 90.25 crore loan. The AICC agreed to write off the loan after receiving Rs 50 lakh from YIL, treating it as a settlement due to AJL's financial distress.Is such a transfer of debt and conversion to equity a normal practice?Debt assignment or conversion to equity is a common practice in corporate restructurings. However, such transactions typically occur under regulatory oversight, such as by the National Company Law Tribunal (NCLT) in India. The AICC's transfer of the loan to YIL was not supervised by any regulatory body.Did the Congress lose money in the deal?The Congress claims the AICC did not incur a financial loss, as the loan to AJL was interest-free and intended to support a not-for-profit venture aligned with the National Herald's ideological goals, not to generate profit.advertisementDid Young Indian pay Rs 50 lakh for a bankrupt company?AJL was not bankrupt but had significant debt and ceased newspaper publication in 2008. AJL owned high-value real estate assets in cities like Delhi, Mumbai, Lucknow, and others. By acquiring 99% of AJL's shares, YIL gained control over these assets, which can generate revenue through leasing or other means.Subramanian Swamy alleged in his 2012 complaint that AJL's assets were worth over Rs 2,000 crore.Are the asset valuations accurate?In November 2023, the ED attached AJL assets valued at Rs 751.9 crore, including immovable properties (Rs 661.69 crore).Herald House, Delhi: A multi-story building on Bahadur Shah Zafar Marg.Bandra Property, Mumbai: A nine-story building with two basements, approximately 15,000 square meters.Lucknow Building: A property on Bisheshwar Nath Road.Panchkula Plot, Haryana: A 3,360-square-meter plot allotted in 1982 and re-allotted in 2005.Additional properties exist in cities like Patna and Indore.Separately, the ED has attached equity shares worth Rs 90.2 crore.The Congress disputes the ED's valuation, claiming the assets are worth approximately Rs 350 crore.What are the allegations against the Gandhis?advertisementThe ED, in its 2023 attachment order and April 2025 chargesheet, alleges that the loan transfer and equity conversion constituted a money-laundering scheme.The agency claims AICC funds (including public donations) were used to fraudulently transfer control of AJL's assets to YIL, beneficially owned by Sonia and Rahul Gandhi.The ED further alleges that AJL, YIL, and AICC cheated AJL's original shareholders and Congress donors by transferring assets to YIL.Do Young Indian Ltd and the Gandhis own these assets?The Congress maintains that AJL retains ownership of its assets, and YIL, as a not-for-profit company, was created to revive the National Herald, not to acquire assets for financial gain. YIL cannot pay dividends, and the Gandhis derive no direct financial benefit.What happens if the charges are proven?If convicted under the Prevention of Money Laundering Act (PMLA), the accused could face imprisonment of up to seven years.Are the Gandhis in trouble?The acquisition of AJL's shares by YIL for Rs 50 lakh raises questions about the transaction's propriety, including the lack of regulatory oversight.The Congress has to explain why the ownership of AJL was given to a company in which the Gandhis have a 76 per cent stake.advertisementThere are many other questions: What was the process for selecting Young India Ltd for the debt buy-out? Why was the approval of the original shareholders of AJL not taken?But, does this qualify as a case of money laundering? The ED's case relies on circumstantial evidence, such as shareholding patterns and loan conversions, rather than direct proof of the Gandhis siphoning funds. Courts often require concrete evidence of intent and personal gain in cases of alleged money laundering. The Gandhis' defense that they derived no financial benefit could test the prosecution's case.Tune InMust Watch