Mother and son own 76% of company which got Associated Journal's shares worth Rs 90 cr for Rs 50 lakh

N Sundaresha Subramanian & Kavita Chowdhury / New Delhi Nov 05, 2012, 00:37 IST

Did Congress pay Rs 89.5 cr to Sonia and Rahul through Young Indian?

N Sundaresha Subramanian & Kavita Chowdhury / New Delhi Nov 05, 2012, 00:37 IST



The All India Congress Committee (AICC) has, in effect, paid Rs 89.5 crore to Young Indian, a Section 25 company (meaning a not-for-profit one) controlled by party president Sonia Gandhi and her son, party general secretary Rahul Gandhi.

From the notes of accounts, it appears this sum has effectively given the mother-son duo control over real estate assets running into several hundred crores of rupees.

Sonia and Rahul own 38 per cent each in Young Indian; party seniors Motilal Vora and Oscar Fernandes own 12 per cent each.

FAMILY PARTY 
*Associated Journals is a limited company, having shareholders. Motilal Vora, treasurer of the All India Congress Committee, is chairman;
*Firm is formally in the business of publishing newspapers; 
*AICC had loaned Rs 90 crore to Associated, without interest. When it did so isn’t clear; 
*Young Indian was established as Sec 25 firm on November 23, 2010. Motilal Vora is also a board member of Young Indian, holding 12% 
*Associated’s board approved assignment of loan given by AICC on December 12, less than a month after Young Indian was registered, and by shareholders on January 21, 2011, a month after board approval and two months after Young India was incorporated; 
*It appears the shareholders, at the same EGM (Jan 21, 2011) had approved allottment of 90.2 million shares at Rs 10/share; 
*Board of AJ allotted 90.2 million shares to Young Indian on Feb 26, 2011. Resolution dated Feb 26 shows shareholders approved transfer of loan, as also issue of shares by extinguishment of loan, on same day; 
*Notes to accounts of Young Indian states objective of Young Indian. This does not include publishing a newspaper. Also, it says AJ is in the process of altering its object to align with the objects of Young Indian; 
*Shares worth Rs 5 lakh issued by Young Indian in 2011-12; 
*AICC accepted compromise for loan at Rs 50 lakh against the Rs 90 crore given, an effective writeoff of Rs 89.5 crore, but it seems AICC was not lucky even to get Rs 50 lakh cash from Young Indian, as latter is shown as having capital of Rs 5 lakh and loans of Rs 1 crore. Was there some benefactor who gave loan of Rs 1 crore or did AICC give loan to Young Indian to help pay off its own loan?

The notes to accounts for the year ended March 31, 2012, filed by Young Indian auditor Pradeep Shah and signed by directors Suman Dubey and Motilal Vora this April, give some clues on the actual structure of the transaction. “In pursuit of its objects, the company has acquired loan owed of Rs 90,21,68,980 by the Associated Journals, presently engaged in achieving a recast of its activities so as to have its main object congruent to the main object of the company, for a consideration of Rs 50 lakh,” the note said.

Thus, this transaction effectively has the effect of cleaning up the books of The Associated Journals (publishers of the now defunct National Herald daily, founded by Jawaharlal Nehru), wherein the entire liability is taken over by Young Indian.

Explanations
When asked, party general secretary Janardan Dwivedi (also the party spokesman) said, “Congress gave a loan to revive National Herald; it was launched in the fight against the British. It was the nation’s paper. The loan was not given to earn profit. Reviving the paper was an emotional issue for the Congress.”

Explaining the second and crucial leg of the transaction, the note added, “As part of the restructuring exercise of the said company (Associated Journals), the said loan was converted into 9,02,16,898 ordinary shares of Rs 10 each, fully paid up.”

Thus, effectively, Young Indian got shares worth Rs 90.2 crore by paying a meagre Rs 50 lakh.

By virtue of this shareholding, Associated Journals becomes a subsidiary of Young Indian.

The liabilities were paid out as an “interest-free loan” from the AICC.

On Sunday, Dwivedi claimed 700 employees had got their pay arrears due to the loan. By Janata Party president Subramanian Swamy’s estimates, even a firesale of Associated’s real estate assets would have covered the Rs 90 crore liability in the books several times over, settled all employees and still have given the shareholders of Associated handsome returns.

But, the directors of Associated thought it fit to use these resources for development of the objects of Young Indian.

Dwivedi’s reiterated defence on the “interest-free loan” to Associated Journals was: “It is an emotional issue for us...only Congress will decide what is political activity for it and no other party.”

While helping employees and getting emotional is permissible, the accounting treatment of the transactions is a little unusual, said experts. Ideally, both the liability acquired and the value of the shares would reflect in the books of Young Indian. This treatment is a bit different.

The books of Young Indian show the 90.2 million shares it owns in Associated Journals under the investments column. But it does not show any value against this. There is just a dash in the value column.

The notes to accounts explains this treatment as follows: “Since the said acquisition is treated as application on the objects of the company(and accordingly, treated in the financial statements of the company), the same has not been as an investment in shares.”

The note goes on to add: “Besides, even if these shares were to be treated as an asset (investment), having regard to the fact that the net worth of the said company is negative, recognising the entire cost as diminution in value would result in an equivalent charge in income and expenditure account.”

Elsewhere, the note says, “Any outflow designed to fulfill the objects of the company, whether or not represented by an asset, is treated as application on the objects of the company.”

Issues
What are these “objects” of Young Indian that the notes refers to again and again? There is an answer to this, too.

“The company is engaged in activities to inculcate in the mind of India’s youth commitment to the ideal of a democratic and secular society and provides for application of its profits or income in pursuit thereof.”

But somehow the objects skips the original object of Associated Journals — that of publishing newspapers. Was that intentional? Or was it just an emotional slip?

What’s a Section 25 company?
A Section 25 company is a not-for-profit entity registered with a specific objective. These are companies formed with the only purpose of promoting commerce, art, science, religion, charity or any other useful objective.

The ministry of corporate affairs’ website maintains a list of Section 25 companies, which at present are estimated at 3,350.

A Section 25 company has to be granted a licence by the Registrar of Companies. It does not have to pay any dividend to its shareholders. Any surplus from its operations is ploughed back into the company and deployed towards achievement of stated objectives.

Some of the common Section 25 companies are non-government organisations (NGOs) and entities engaged in CSR activities.

Section 25 companies cannot be listed on exchanges, as there is no profit or dividend.

Section 25 companies also enjoy several exemptions. Unlike the minimum capital requirement of Rs 1 lakh for private companies and Rs 5 lakh for public companies, a Section 25 company does not have to meet any minimum capital requirement. It also pays lower registration fees. Nor does it pay stamp duty and a company can be a member of a Section 25 company.

Section 25 companies are also exempted either fully or partially from the requirement of voting methods for resolutions, retirement of directors by rotation and government approval for increasing the number of directors beyond12.

Such companies cannot obtain foreign contributions without seeking a certificate of registration under the Foreign Contribution (Regulation) Act (FCRA) from the Home Ministry. They are required to use foreign contributions only for the purpose for which they are received. Norms for foreign investment in Section 25 companies are governed under the Foreign Exchange Management Act and FCRA.

The income of a Section 25 company is taxable and it generally enjoys all the advantages of a limited company under the Companies Act.

http://www.business-standard.com/india/news/did-congress-pay-rs-895-cr-to-soniarahul-through-young-indian/491697/

excerpts from ‘YOUNG INDIAN’ Balance Sheet as at 31st March, 2012, as filed with ROC on 26th April, 2012 counter signed by Suman Dubey & Motilal Vora, Directors & Pradeep S Shah, Partner, Chandrakant & Sevantilal Firm Regd. No.101675W, Chartered Accountant Membership No.030632.

Balance Sheet SCHEDULE Remarks
1st Page INVESTMENTS 4 BLANK
NO FIGURE/AMOUNT GIVEN

2nd Page
YOUNG INDIAN
SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2012

AMOUNT Rs.
SCHEDULE-2 
CAPITAL FUND
Entrance Fees
Received during the period - 10,000
10,000
SCHEDULE-3
UNSECURED LOAN
Inter Corporate Loan - 10,000,000 NO MENTION OF LOAN
(Repayable within a year Rs.1 Crore) 10,000,000 FROM AICC 


SCHEDULE- 4 NO VALUE SHOWN
902,16,898 Ordinary shares of the Associated THERE IS NO SCHEDULE 7
Journals Limited of Rs.10 each fully paid (See
Note 1 in Schedule 7)


National Herald has 22,000 sq. ft. property in Indore 

Local authorities said the 22,000sqft plot in the prime Palasia area was obtained by Associated Journals at a concessional rate from the Indore Development Authority in the early nineties when P.V. Narasimha Rao was Prime Minister.

At present, the makeshift office occupies barely 5 per cent of the total plot. According to city property agents, the commercial value of the land will be between Rs 3 crore and Rs 5 crore if one goes by a conservative estimate.

Patidar, the additional district magistrate, said the land was under “some kind of dispute”. “We will look into the matter if any complaint is filed,” he said.

http://nationalherald.org/index.html

http://nationalherald.org/contact.html
All but over for a Nehru child: 2008 report

All but over for a Nehru child: 2008 report
Rasheed Kidwai
Saturday, 03 November 2012 16:51
New Delhi: National Herald, Jawaharlal Nehru’s dream project and the Congress’s voice, will soon fall silent.

The employees’ union and AICC treasurer Motilal Vora are set to sign an agreement on Friday declaring the newspaper’s death. Its publication could stop by March.

The paper has suffered massive losses for years, the problems blamed on poor management, lack of resources, surplus staff and drying up of advertisements.

So attached was Nehru to the paper since he founded it in 1938 that he had declared: “I will not let the National Herald close down even if I have to sell Anand Bhavan (the family home in Allahabad).”

Even today, over four decades after his death, the paper carries his stamp. The masthead reads: “Founded by Jawaharlal Nehru.”

The countdown to the closure began with the visit of Vora to 5-A Herald House in Bahadurshah Zafar Marg, Delhi’s Fleet Street, to close the deal.

He met Saud Akhtar, president of the National Herald and Qaumi Awaz Employees’ Union, and conveyed Sonia Gandhi’s decision. Petroleum minister Murli Deora assisted Vora in closing the protracted negotiations at the Congress chief’s behest.

“Yes, it is true that everything (the closure terms) has been finalised. It has been a good deal. I am glad to note that the employees have got a good deal, a bonanza of sorts,” Akhtar, recovering at home from an accident, said.

Vora had told this correspondent recently that the Congress high command wanted the Herald, particularly its Urdu edition, Qaumi Awaz, to be re-launched from Lucknow. The Lucknow editions were suspended over a decade back.

Under the arrangement Vora reached with the union, over 250 employees, including around 40 journalists of the English and the Urdu editions published from Delhi, will get compensation. A source said a Rs

40-crore package had been finalised to pay them.

According to Akhtar, the employees, tired of waiting for things to turn around for years, had agreed reluctantly to the idea of closure.

“Nobody wanted it this way but all of us were tired of its slow death. A general body meeting on January 16 led to a mutual agreement,” he added.

Akhtar said he had also heard Vora reassure senior employees that here could be a publication later.

“Maybe the Congress will get its act together, get state-of-the-art machinery and new staff and start afresh after a few months.”

In 1998, Lucknow’s Nehru Manzil, from where the papers were published, witnessed the sad spectacle of government officials auctioning the

Herald’s properties as a huge portrait of Nehru brooded over the sorry turn of events.

(The Telegraph, Calcutta carried this report on January 22, 2008)

September 11, 2009


Land Heralds paper rebirth
RASHEED KIDWAI

The National Herald office in Indore
Sept. 10: When land is precious, what is the best way to preserve it? Revive a newspaper, better still if it has a nationalistic past.

National Herald, Jawaharlal Nehru’s dream project founded in 1938 and the Congress’s voice for many years, has resumed publication from Indore, but nobody in the party seems to be aware of it.

The newspaper, which had suffered massive losses for years, had shut down in March 2008 when the employees’ union and Congress treasurer Motilal Vora signed an agreement to declare its death. The employees of the Delhi-based newspaper were paid a total compensation of over Rs 40 crore.

But suddenly this month, the paper has resurfaced from Indore, where it never had an edition but owned a sprawling plot of prime land on lease, with its trademark masthead saying “Founded by Jawaharlal Nehru.”

Behind the revival is Vishnu Goyal, a one-time stockbroker and chit fund operator who has assumed the role of “chief editor”.

Speaking to The Telegraph, Vora, a former Madhya Pradesh chief minister, sounded a tad perplexed. “I have to examine the records of the ownership of the Indore land,” he said.

Asked if he had assigned any franchisee or authorised its publication, the Congress treasurer said: “You are well aware that we announced suspension of the publication last year.”

Documents with the office of Indore additional district magistrate Narayan Patidar, who is empowered to sanction publications from the city, include a letter from The Associated Journals Ltd, New Delhi, National Herald’s parent company, authorising the newspaper’s publication and use of the “National Herald” title.

What is intriguing is that the letter is dated June 5, 2008, two months after Vora asked all National Herald employees to opt for a compulsory retirement scheme.

Saud Akhtar, former president of the National Herald Employees’ Union, said he “would not like to believe” such details. “It is baffling how the management could even think of starting the paper when it was giving a burial to the existing one,” he said.

Akhtar said the union had no idea the paper had resumed publication. “This was never discussed or told to us. Is Soniaji aware of it?” he asked. “We were always told that whenever the paper is revived, it will be in Delhi and that we will be taken into confidence.”

Sunil Salve, the editor of the paper, said they were utilising the land allotted to the organisation. “Land had been allotted to the paper and so we have revived it. A copy of the paper was given to Voraji and to Madhya Pradesh governor Rameshwar Thakur.”

Thakur had served as chairman of the publication during the early 1990s. He, however, refused to say anything on the Herald’s revival. “I do not wish to comment as I am no longer part of it. As governor, I meet many persons and receive books, magazines, papers, etc.,” he said.

The paper is being published from a tract at Indore’s Press Complex, surrounded by several newspaper offices. Local authorities said the 22,000sqft plot in the prime Palasia area was obtained by Associated Journals at a concessional rate from the Indore Development Authority in the early nineties when P.V. Narasimha Rao was Prime Minister.

At present, the makeshift office occupies barely 5 per cent of the total plot. According to city property agents, the commercial value of the land will be between Rs 3 crore and Rs 5 crore if one goes by a conservative estimate.

Patidar, the additional district magistrate, said the land was under “some kind of dispute”. “We will look into the matter if any complaint is filed,” he said.



National Herald, founded by Nehru, to close down
Submitted by admin4 on 22 January 2008 - 1:56pm
India News
By Ranjana Narayan, IANS

New Delhi : The National Herald, the newspaper started by India's first prime minister Jawaharlal Nehru before World War II and being financed by the Congress party for the past several years, is likely to close down.

According to sources in the newspaper, talks between the National Herald and Quami Awaz Employees Union and Congress leaders on modalities towards a final settlement for the 265 employees, including about 40 journalists of the English and the Urdu editions published from New Delhi, have been on for the past few months.

Overstaffing, mainly of the press and non-journalists and also lack of advertisements, are said to be the main cause for the newspaper running into major losses. The Congress has reportedly decided to discontinue publication of the daily that was started in Lucknow Sep 9, 1938 by Nehru.

The Lucknow edition of the National Herald and Quami Awaz were closed down about 10 years ago. The paper also had a Hindi edition Navjivan - a name given by Mahatma Gandhi - that was closed down several years ago.

According to the sources, chairperson of the newspaper Motilal Vora, MP and treasurer of the Congress party, and some other Congress leaders have reportedly finalised a Rs.380 million compensation package for the workers.

Confirming that the paper was being closed, Saud Akhtar, senior journalist with the Quami Awaz and president of the National Herald and Quami Awaz Employees Union, told IANS: "Yes, everything has been finalised. The final agreement is likely to be signed by the end of this week or maybe a little later."

According to Akhtar, the employees have agreed to the closure.

"The employees were told about the closure at the general body meeting held on Jan 16 and earlier on Nov 15. They have all agreed; it was a mutual agreement from both sides," he said. The employees are getting a "handsome compensation".

"Five to six rounds of talks have been held between the employees union and the Congress over the last two months," he said, declining to disclose the final settlement amount for the workers till everything "was settled" with Vora, most likely by Wednesday.

The newspaper, which officially claims a circulation of around 40,000 copies, has "never had a history of making profits".

It is not yet clear what publication the Congress party plans to bring out in lieu of the paper, but Vora is reported to have told senior editors: "We'll have some publication later."

Asked by IANS Monday evening, Vora said: "We are only discussing a VRS (Voluntary Retirement Scheme) for the excess employees."

He denied that the National Herald was headed for closure. Asked what publication the Congress would bring out in its place, he dismissed it as a "hypothetical question".

But Akhtar said: "On Jan 1, Vora came to Herald House (on Bahadur Shah Zafar Marg) and categorically told the employees union that the paper is going to be closed down."

T.V. Venkitachalam, editor in chief of the National Herald, said: "In my 20 years association with the newspaper, and nine years as editor, there has never been any interference from the Congress party in presenting the news. We have always tried to keep a fine balance in our news, especially the editorials, and never tried to make it sound like a party publication.

"The newspaper has been part of the country's freedom movement and has been an upholder of national values like secularism and non-alignment and we have strived to run it in a professional manner," said Venkitachalam, 79, who joined the paper in 1987 when then prime minister Rajiv Gandhi revived it.

The paper had closed down for a few months at the time due to various reasons, including financial constraints.

During the paper's golden jubilee in 1988, Rameshwar Thakur, who was chairperson of the board of directors of the publication and is now the Karnataka governor, had written in the special issue: "The freedom movement (was) at its peak, Gandhiji leading the nation through blood and sweat. His lieutenant and our great founder Pandit Jawaharlal Nehru, wanting to give a new meaning to the freedom that was yet to come so that all its fruits could reach the poor and the humble...

"It was in these stirring times that the National Herald was born at the initiative of its founder, Pandit Jawaharlal Nehru."

http://twocircles.net/node/40319

Did Cong tell us full truth on Rs 90-cr loan to Sonia-Rahul firm?

by Raman Kirpal Nov 6, 2012

On 3 November, Congress General Secretary Janardhan Dwivedi claimed that the Rs 90 crore loan given to Associated Journals Ltd (AJL) — now a subsidiary of a non-profit company owned by Sonia Gandhi and her son Rahul — was to enable AJL to pay off its liabilities and revive its defunct newspapers, including National Herald and Qaumi Awaaz.

Last Friday, Dwivedi said in a signed statement: “The Indian National Congress has done its duty in supporting the Associated Journals to help initiate a process to bring the newspaper back to health in compliance with the laws of the land.”

The next day, PTI quoted him as explaining what the money was used for. “400 people working in the Associated Journals had become homeless while 300 workers in its Lucknow office had lost their jobs. We are proud that not only the salary dues of these 700 employees were paid off but even the VRS was given with all the benefits to those who opted for it and their provident funds were also paid.”

The evidence on record, however, suggests that the money could not really have gone to pay workers’ dues, or even to revive the newspapers. The money was simply given indirectly to Young Indian, the section 25 (non-profit) company 76 percent owned by Sonia and son, to enable them to take over Associated Journals (as Firstpost noted yesterday).

On 26 February 2011, the All India Congress Committee’s Rs 90-and-odd crore gift to Associated Journals was essentially handed over to Young Indian to acquire Associated Journals — which had lots of prime property assets.

Contrary to Dwivedi’s claim that the Rs 90 crore was meant to help revive National Herald and Qaumi Awaaz and pay pending dues to 700 employees, the loan was given to AJL and then converted to equity shares which were then acquired by Young Indian for Rs 50 lakh.

This how it happened. Once the loan was given, Motilal Vora, AICC Treasurer and one of the three directors of Associated Journals, got it converted to equity. The loan then went into Young Indian’s books.

Seeking the board of directors’ approval for issuance of 9.02 crore shares to Young Indian, Motilal Vora said: “9,02,16,898 equity shares of Rs 10 each be allotted to Young Indian in consideration of the extinguishment of the amount of Rs 90,21,68,980 due to Young Indian under loan facility available by the company from All India Congress Committee which loan facility and all the benefits thereunder was subsequently transferred by the All India Congress Committee in favour of Young Indian which was approved by the board in the board meeting held on 21.12.2010 and by the shareholders by a special resolution in the extraordinary general meeting of the members held on 21.01.2011.’’

Young Indian obliged and readily took over the loan of Rs 90 crore from Associated Journals in order to acquire it. This money is unlikely to have been used to pay the dues to employees of National Herald and Qaumi Awaaz.

Reason: their dues were largely settled much earlier.

Delhi Union of Journalists (DUJ) President SK Pande told Firstpost: “I remember that we had the last demonstration in support of National Herald and Qaumi Awaaz about four or five years ago. The Associated Journals management had then begun the negotiations.’’

Nearly 70 percent of National Herald and Qaumi Awaaz employees had already taken voluntary retirement by then. The Young Indian deal was clinched in February 2011. It is highly unlikely that Associated Journals had even 100 employees on its rolls in 2008.

However, the DUJ President said he would meet the labour ministers of Delhi and the Union government to find out the status of Associated Journals’ employees.

Noted lawyer Shanti Bhushan told Firstpost that AICC would not have done anything wrong if it had given Rs 90 crore to acquire Associated Journals. “But here the money is given to a private company where Sonia Gandhi and her son Rahul Gandhi hold 38 percent shares each (76 percent together). This gives the Gandhi family the virtual power to have perpetual control over the utilisation of Associated Journals’ properties.’’

Motilal Vora, who was instrumental in the deal, had a mere 0.001 percent shares in Associated Journals. In Young Indian, however, he and his Congress colleague Oscar Fernandes have 12 percent shares each.

According to a 2011 list of shareholders, Associated Journals had a total of 9.11 crore ordinary shares. Young Indian has a little over nine crore shares of Associated Journals.

Even in the remaining 11 lakh shares, the Gandhi family owns over three lakh shares in their individual capacities. Priyanka Vadra and Rahul Gandhi own 2,62,411 and 47,513 shares respectively as trustees and authorised attorneys of Janhit Nidhi (Regd) Public Trust.

Strangely, Young Indian maintains that the acquisition of Associated Journals should not be treated as an investment. “…Even if shares were to be treated as an asset (investment), having regard to the fact that the net worth of the said company (Associated Journals) is negative, recognising the entire cost as diminution in value would result in an equivalent charge to the income and expenditure account’’, argues Young Indian in its annual disclosure.

The only defence that Sonia Gandhi and Rahul for their acquisitive manoeuvres with Associated Journals is that even as directors of Young Indian, they are not entitled, directly or indirectly, to any commercial gains.

But Associated Journals now owns prime properties in several Congress-ruled states and Sonia and Rahul have full control over the utilisation of these properties.

http://www.firstpost.com/india/did-cong-tell-us-full-truth-on-rs-90-cr-loan-to-sonia-rahul-firm-516100.html