A little clarity about the National Herald case might enable readers to better follow developments in the courts. So, here goes.
After winning the first-ever general elections of 1937, the Congress and in particular Jawaharlal Nehru felt the need for a party organ to promote and propagate the party view on matters of national import. Accordingly, a body of 761 Congresspersons including luminaries like Sardar Patel subscribed to the shareholding of a company called Associated Journals Ltd (AJL) to start and run such a paper, the
National Herald, and its Urdu counterpart,
Qaumi Azad.
Both papers were quite a hit, so much so that when the Congress launched the Quit India movement in 1942, the British colonial authority felt it necessary to ban the publication of both the journals. It was not till 1945, and the commencement of the final negotiations that led to Independence and Partition, that the ban was lifted.
Publication was continued even after the country became Independent. AJL availed of its presence in a large number of cities to acquire real estate including Herald House on Bahadur Shah Zafar Marg in New Delhi. When acquired, the properties were valued at relatively modest prices but, over time, real estate has boomed and the assets of AJL also increased exponentially.
But while assets increased, circulation dropped and finally plummeted to virtually nil in the early years of the millennium. Advertising dried up. It proved no longer viable to continue publication. During its period of decline, the Congress, whose mouthpiece it was, extended large loans to AJL, amounting eventually to some Rs. 90 crore.
Revival of the journals, or, in the alternative, launching different media outlets more in keeping with the digital age, led to the Congress deciding to set up a holding company, Young Indian. The holding company was registered under Section 25 of the Companies Act as a charitable enterprise legally obliged to keep all revenues (including rents from property) and profits entirely within the company. None of the directors had any right to any dividend income, perks or salaries. None of them could draw or divert any sum to personal or other purpose. None of them could access the assets of AJl and, in the event of any disposal of AJL properties, the entire proceeds would belong to the company, not a
khota paisa going to the directors of Young Indian. Indeed, if they were ever to decide to sell off Young Indian, they could only do so to another Section 25 company, and the assets of Young Indian/AJL would continue to be with the new section 25 company, none of whose shareholders or directors could have any access to its assets or revenues.
The need for making this arrangement grew out of two requirements. First, with a debt of Rs. 90 crore on its books, there was no way AJL could access bank funding or the open market to raise the moneys required for revival. Some way had to be found of writing off the bad loans without the Congress losing control of AJL if the
National Herald or its replacement were to continue playing the role for which AJL had been founded in 1938, namely, providing the media organs for the party.
The second was the frank recognition that the underlying reason for AJL floundering and dragging down both its media organs was that the Congress as a political party does not have the management experience or expertise to run a commercial enterprise, specifically a media enterprise. Professionalization was the need of the hour.
Both problems - wiping the debt off AJL's books and inducting professionals into the running of the business enterprise - could simultaneously be solved if AJL were to be taken over by a holding company that was like a trust. First, the holding company could convert AJL's debt into equity by getting the AJL's debts assigned to a new entity that would convert the debt into equity held by the directors of the new holding company. Second, professionalism could be ensured by professional business management and proven editorial expertise being co-opted to the board of the holding company, indeed, being made equity holders on par with other directors drawn from the party.
To this end, Young Indian was set up as a Section 25 company to which was assigned the Rs. 90 crore AJL debt and converted into equity held by the directors, seven of whom would be senior, trusted party functionaries and two of whom would be professionals, one a millionaire entrepreneur who had made his name, fame and money in a telecom company in the United States, and the other who had earned his reputation as a renowned journalist and editor.
These arrangements have been challenged by a member of the Central Committee of the BJP - hence the charge of "political vendetta" - on three principal grounds: cheating; breach of trust; and misappropriation. The claims will be examined in the courts and a verdict given. Meanwhile, certain key considerations deserve to be borne in mind.
First, "cheating": who has been cheated? Certainly not the complainant, whose very locus in the matter is in dispute. No one has come forward to say he or she has been cheated. No shareholder in AJl says he or she has been cheated. No stakeholder in the erstwhile
National Herald/Qaumi Awaz says he or she has been cheated. No participant in the new Section 25 company, Young Indian, has said he or she has been cheated. No Congress party member says he or she has been cheated. If no one has been cheated, how can the complainant sustain his charge of "cheating"?
Second, "breach of trust": someone's trust has to be breached. No one says his or her trust has been beached. Indeed, no one's trust can be breached because all financial transactions of the section 25 company are "in-house" in the sense that not a rupee of the revenues, profits or other financial transactions of Young Indian can in law be siphoned off for any non-company use, and certainly not for any personal use.
Third, "misappropriation": except in the fevered imagination of the complainant - who is, I repeat, without locus in this matter and whose sole purpose is political vendetta on behalf of the party of which he is a member of the Central Committee - no one has complained of any misappropriation. Once again, it needs to be stressed that misappropriation with a view to personal gain is ruled out by the very nature of a section 25 company.
This is not an attempt to pre-empt judicial proceedings in the matter but with a view to educating a confused public, an attempt to place before readers the outlines of the defense so that readers might be better able to follow matters in the courts with informed understanding.
(Mani Shankar Aiyar is a Congress MP in the Rajya Sabha.)Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.