Will Congress snatch victory from jaws of defeat (even when it is wrong)?
Sonia Gandhi and Rahul Gandhi, along with four other individuals and a representative of Young Indian Ltd., will appear before the metropolitan magistrate at Patiala House court on Saturday, December 19, accompanied by a battery of lawyers and throngs of baying Congress supporters. In a symbolic gesture, they may offer themselves for arrest.
Meanwhile, after defending their disruption of parliament over the National Herald case, Congress leaders have, without a trace of embarrassment, reversed course. So now disruption of the Rajya Sabha is not over National Herald but a carryover of the protest against Madhya Pradesh chief minister Shivraj Singh Chouhan (over the Vyapam scam), Rajasthan chief minister Vasundhara Raje (over Lalit Modi), External Affairs Minister Sushma Swaraj (also over Lalit Modi) and a host of unrelated issues in Punjab, Assam and Arunachal Pradesh.
The National Herald case, Congress lawyers say loftily, will be dealt with by the trial court. The matter will in fact be decided on three key legal questions:
One, can a political party collect tax-exempt public donations (meant specifically to be used for political purposes) to, in effect, transfer real estate worth over Rs. 2,000 crore to a private company?
Two, can the subsidiary (Associated Journals Ltd.) of such a private company (Young Indian Pvt. Ltd., 76 per cent of whose shares are owned by Sonia and Rahul) rent its property rather than use it to publish a newspaper which was the express condition on which the property (Herald House and other buildings around the country) was given to it, virtually free, in the 1930s?
Three, does a private complainant like Subramanian Swamy have locus standi in the matter?
The third question is easiest to answer. Over ten shareholders of Associated Journals Ltd. (AJL), now a subsidiary of Young Indian Pvt. Ltd. (YIL), have already said they were not consulted when the share transfer took place. At least one of them, former Union Law Minister Shanti Bhushan, whose family owned 300 shares in AJL, has said he will implead himself in the case.
The Indian Express reported: "A number of shareholders of Associated Journals Ltd. (AJL) have claimed that the company's chairman, Motilal Vora, and its directors did not inform them or obtain their approval while deciding to transfer its entire equity to Young Indian Pvt. Ltd. (YIL) in December 2010. At least 10 shareholders that the Indian Express spoke to said their approval had not been sought by the management. Vora is also the treasurer of the Congress party."
The question of "locus" is thus settled.
Turn now to the other two questions. First, whether tax-exempt public donations can be used to, in effect, transfer over Rs. 2,000 crore of property to YIL? Second, whether buildings given or leased virtually free to AJL decades ago for the specific purpose of publishing a newspaper can be used to earn rental income?
An analysis of AJL's balance sheet reveals that its fortunes soared after the Gandhis closed the National Herald in 2008 and rented out its properties once AJL became a subsidiary of YIL. In 2008-09, AJL made a loss of Rs. 33.78 crore. In 2013-14, it made a net profit of Rs. 7.95 crore. Its rental income in that year stood at Rs. 9.40 crore.
Assuming only 20 per cent of AJL's property across India is currently rented out (there are several unoccupied buildings) and further assuming that rental yields are on average 4 per cent per year, the value of AJL's properties can be easily computed: Rs. 15 crore (estimated rental income in 2014-15) x 5 (20 per cent of space rented out) x 25 (4 per cent rental yield) = Rs. 1,875 crore.
This is roughly in line with the Rs. 2,000 crore estimated valuation of Herald House and other AJL properties - although their current valuation could be significantly higher.
Kapil Sibal and P Chidambaram have argued that a Section 25 (non-profit) company can't benefit its owners commercially. That's not strictly true. Owners of a Section 25 company cannot receive dividends or profits but they can certainly debit expenditure to the comapny.
Besides, a Section 25 company could under the old Companies Act have changed its structure to a for-profit company at a later date with shareholder approval. Given that Sonia and Rahul own 76 per cent of YIL's shares (24 per cent are held by their close associates), such permission would have been a formality. The value of its real estate assets and their rental potential would meanwhile have risen considerably. The new Companies Act blocks this change. Hence the Gandhis' consternation and anger.
A FAQ statement issued by the Congress (and published by, among others, Business Standard) claims that Rahul and Sonia haven't gained from YIL. It states: "Does YIL today own the property owned by AJL? No, both YIL and AJL are separate entities. All assets and properties of AJL continue to remain with AJL."
This is, to put it kindly, disingenuous. AJL is a wholly owned subsidiary of YIL. Thus the rental income and assets on AJL's balance sheet should form part of the consolidated accounts of YIL. This will come under particular scrutiny during the court trial.
More incendiary material
Meanwhile, NCP leader Sharad Pawar's newly released book, On My Terms, reveals that Sonia Gandhi "chose" Narasimha Rao as prime minister in 1991 after Rajiv Gandhi's assassination because she did not want an "independent-minded" PM. His book further reveals that Sonia has made it clear that she regards the Congress as a "personal fiefdom."
Sonia runs her fief with ruthless efficiency. Whenever there is a crisis like National Herald, she and Rahul immediately field a battery of lawyers who descend on television studios with spin interlaced with bluster. For example, P Chidambaram, Kapil Sibal and Abhishek Manu Singhvi have been omnipresent on TV over the past week defending the Gandhis over National Herald while major domo MPs like Anand Sharma and Ahmed Patel deftly turn the narrative in parliament back towards Vyapam, Arunachal Pradesh and the CBI's raid on Delhi chief minister Arvind Kejriwal's principal secretary Rajendra Kumar even as other Congress MPs shout slogans in the well of the House.
This three-tiered tactic is classically subversive - and effective. In perception terms, the Congress, with its vast treasure chest, highly-paid lawyers, a well-oiled political machinery and in-house media, often snatches victory from the jaws of defeat even when it is patently in the wrong. In sharp contrast, the BJP often snatches defeat from the jaws of victory even when it is patently in the right.
The obvious question the BJP should have long asked the Congress is this: if it can disrupt parliament over Vasundhara Raje's and Sushma Swaraj's alleged wrongdoing, why has the Congress's battery of formidable lawyers not filed a single court complaint against them as Subramanian Swamy did against Sonia and Rahul over National Herald in 2012?
As Sonia and Rahul prepare to appear as "accused" at Patiala House court on Saturday, Swamy has upped the ante. This is what he told the Indian Express: "Now the government should move forward and immediately attach the National Herald building (in New Delhi). The building was built with help from the then government, which gave land, almost for free, to National Herald. Young Indian had no business, as a charitable company under Section 25 to acquire controlling shares of the commercial company. They should reverse the deal. I have written a letter to Union Finance Minister Arun Jaitley about it."
Swamy is not likely to get a reply in a hurry.