What you need to know about the National Herald case

A Delhi HC order asking I-T Dept to probe the case comes as a huge setback to Sonia and Rahul Gandhi

In what is being termed as a huge setback to Sonia Gandhi and Rahul Gandhi, the Delhi High Court on Tuesday asked the Income Tax Department to investigate the National Herald case. The court asked the defendants to not be “arrogant” and added that Young India Private Limited must submit its tax documents.

Background of the case:

The National Herald was a newspaper founded by Jawaharlal Nehru along with other freedom fighters in 1938. It was meant to voice the concerns of the liberal brigade in the Indian National Congress, which largely had a conservative outlook. Published by Associated Journals Limited (AJL), the paper became a mouthpiece of the Congress party post-independence. AJL also published two more newspapers, one each in Hindi and Urdu.

The National Herald was mired in deep financial problems owing to lost readership by the turn of the millennium. In 2008, the paper closed with a debt of over Rs 90 crore.

Enter Subramanian Swamy:

Swamy filed a case in 2012 alleging that the shareholders of Young India Limited, including Sonia and Rahul Gandhi, were involved in cheating and misappropriation of funds. The three issues that formed the backbone of his petition are:

1.    The Indian National Congress had allegedly lent the AJL an amount close to Rs 100 crore. Under law, party funds can’t be utilised to lend money to third parties.

2.    The National Herald owns properties worth several thousand crores across India. Herald House, the headquarters of the paper, is under lease to big companies, Tata Consultancy Services being one. So, the paper could have easily serviced its debt by liquidating some of its assets.

3.    Young India Limited was incorporated as a company in 2010 with a capital guarantee of Rs 50 lakh. This amount was paid by YIL to the AICC and converted into equity in AJL’s books. Consequently, the Gandhi duo ended up owning 76 per cent of the shares in AJL, while the remaining went to Congress office-bearers Oscar Fernandes and Motilal Vohra.

Sub Judice:

A trial court asked the Gandhis to appear before it in 2014. The Congress created a ruckus in Parliament following the order.

Kapil Sibal, appearing for the defendants said that it was a “mere commercial transaction”. However, according to the presiding Delhi High Court Judge, "It’s not a mere commercial transaction. It has wider ramifications. How a political party behaves is everyone's concern. It is precisely an act of a political party which is under scanner here."

In a February 2016 order, the Supreme Court granted exemption to all the five accused in the case from personal appearances while refusing to quash proceedings against them.