Swamy’s petition in the National Herald case raises two important issues. The first relates to the political developments in the coming months. The second has to do with the way parties spend their money
The drama that was played out outside the premises of the Patiala courts in New Delhi last week may send a political message to the supporters of the Congress that the party is fighting fit, but the issues raised by Mr Subramanian Swamy have grave implications for our democratic well-being and the working of political parties.
Mr Swamy’s case is related to the assets of Associated Journals ltd, the company that published National Herald. It got prime Government land at concessional rates on Bahadur Shah Zafar Marg in New Delhi. This was given to it specifically for the purpose of publishing a newspaper. It also acquired properties in prime locations in other cities to build its offices. AJl published National Herald and several other publications but it closed the printing and publication of these newspapers in the year 2008. But by then, the total assets of AJl stood at over Rs2,000 crore.
However, this company owed a debt of Rs90 crore to the Congress, as a result of interest-free loans given by the party to AJl from time to time. The party, subsequently assigned the huge debt to a Section 25 (Companies Act) Company called Young Indian (YI). This it did on receipt of paltry sum of Rs50 lakh.
Further, and here comes the twist, Congress president Sonia Gandhi and vice president Rahul Gandhi each own 38 per cent of the shares of Young Indian (a total 76 per cent between them).
Flowing from these facts, some questions arise: Why did AJl, which had assets totaling over Rs2,000 crore, not dispose off some asset and wipe out the liabilityIJ Further, why did the Congress, which had loaned out Rs90 crore to AJl, assign the debt to the company called Young Indian in return for just Rs50 lakhIJ Why did the Congress advance money to a public limited company and indulge in the above mentioned commercial transactionsIJ Is it a fact that at the end of this rigmarole, a company —Young Indian — in which Ms Gandhi and Mr Rahul Gandhi have 76 per cent control, has come to acquire real estate assets worth thousands of crores, including assets in prime locations in Delhi, lucknow, Bhopal, Mumbai, Patna, Panchkula and other placesIJ
These transactions have many disturbing implications. The Memorandum of Association of AJl barred the company from entering into any transaction which is not for furthering its objective of publishing newspapers; the land for the Herald House was given by the Government at concessional rates, specifically for publishing a newspaper. However, the Herald House is now owned by Young Indian, which has decided not to publish the newspaper and has instead rented it out to multinational companies. All this happened during the tenure of Manmohan Singh’s Government.
Following Mr Swamy’s petition, the Metropolitan Magistrate said it appeared that Young Indian had been created “as a sham or a cloak to convert public money to personal use...” and that, therefore, there was sufficient grounds for proceeding against it. Accordingly, the accused persons were summoned by this court. However, Ms Gandhi and others approached the Delhi High Court against the order of the Magistrate. But the High Court dismissed the petitions. Its observations are worthy of notice: It said that “probity of a legendary national political party is under scanner in these petitions. This case is one of its own kind”.
Ab initio, the top lawyers of the Congress tried to ward of trouble by raising the issue of locus standi. They said Mr Swamy had no locus standi as he was not an aggrieved party. He had not been cheated or deprived of his rights as a shareholder of AJl. Justice Sunil Gaur of the High Court brushed aside these objections and said the question of locus standi “pales into insignificance” because of the Supreme Court’s observation that freedom of a private citizen to proceed against the corrupt cannot be restricted. The court held that “it will not be fair to say that a private citizen is free to proceed against corrupt public servants but not against a political party, when it is accused of serious offences of cheating, misappropriation etc” such as in this case, “where the office-bearers of a political party having criminal overtones is under scrutiny”.
The judge made a series of significant observations, which are worthy of reproduction, in view of the gravity of the charges Mr Swamy has levelled against Ms Sonia Gandhi, Mr Rahul Gandhi and others, and also because of the implications that his case has for our democracy.
The court significantly observed that the allegation against the office-bearers of the party was that they siphoned off funds of the party “in a clandestine manner”. The impropriety of extending interest-free loans to a public limited company by the Congress in a democratic set-up, “particularly when the source of the Congress’s fund is largely from donations given by public” was the issue at hand, and so, any citizen could legitimately question the siphoning of funds by the political party.
The court further said, “What crops up in the mind of a prudent person is as to where was the need for extending interest-free loans to a public limited company engaged in a commercial venture of publishing newspapers.”
It also said that writing off such a huge debt “can legitimately attract allegations of cheating, fraud etc”. The court noted that the assigning of the loan to YI “is certainly questionable and justifiably attracts the allegations of cheating, misappropriation, criminal breach of trust etc”. Further, why were genuine shareholders marginalised in an extraordinary general meeting of AJl, which was attended by just seven shareholders. Also, when lakhs of citizens give donations to a party, is it not criminal misappropriation of Congress’s fundsIJ
As regards the grave questions raised by the judges, Ms Gandhi, Mr Gandhi and other accused need to answer each of these allegations to the satisfaction of the court. They cannot be brushed aside by political drama and television camera-oriented street atmospherics.
Mr Swamy’s accusations raise the larger question of where and how political parties should be allowed to spend their money. Can they enter into business activities or enable companies owned by their office-bearers to acquire properties or businessesIJ In recent years, national political parties have been receiving donations running into thousands of crores of rupees. Can they start commercial activity, loan out monies to corporate entities, buy and sell corporate assets etcIJ What will happen to our democratic process if tax-free funds held by political parties enter the balance-sheets of companies or even the stock marketIJ