National Herald case: What you should know

Congress leaders call it political vendetta while the government dismisses it as rule of law -- the National Herald case against the Gandhis has taken a crucial turn with a Delhi court directing Congress president Sonia Gandhi and her son Rahul Gandhi to appear before it on December 19.

So what is the National Herald case all about? Here's a ready reckoner.

>> Who is the petitioner in the case?

Bharatiya Janata Party leader Subramanian Swamy.

>> What's the background story to this case?

The National Herald newspaper was set up by Jawaharlal Nehru in 1938. It shut down briefly in the 1940s and 1970s. Over the decades circulation and finances dropped. The newspaper finally ceased operations in 2008 with a debt of Rs 90 crore.

The Associated Journals Limited -- which published the National Herald, then became in effect a real estate firm with properties in Delhi, Lucknow and Mumbai. In November 2010, the AJL was taken over by a newly-floated company called Young India Limited in which Congress president Sonia Gandhi and her son Rahul hold over three-fourths equity. The remaining shares are held by Congressmen Motilal Vora, Oscar Fernandes, Sam Pitroda and Suman Dubey.

>> All seems fine till now. What is Swamy alleging?

In the month after it was set up, the Young Indian board of directors passed a resolution to 'own' National Herald's outstanding debt.

Swamy alleges that Young India had acquired AJL with a Rs 90.25 crore interest-free loan from the Congress party. Under the Income Tax Act, no political organisation can have financial transactions with a third party.

Then, in December 2010, the Board of Directors of AJL declared that the loan cannot be repaid and accordingly, decided and transferred the loan to YI. In lieu thereof, it also decided and issued shares of AJL to YI thereby giving YI control of 99 per cent of AJL and its assets. On its part, YI paid a further consideration of Rs 50 lakh to AJL.

In the meantime, the Congress party wrote off the loan given to AJL as unrecoverable.

Swamy claims that this was done without making any efforts of recovery though AJL had assets worth Rs 2,000 crore. The write off paved the way for issue of 99 per cent shares of AJL to YI.

Swamy alleges that the Rs 90.25 crore loan given by the Congress could have been repaid by AJL out of its assets. The balance of Rs 1,900 crore would have remained for the existing shareholders.

The deal, Swamy alleged, was to grab prime property like Herald House in Delhi and other properties of the AJL in Delhi and Uttar Pradesh.

>> How has the case progressed so far?

In June last year, a magistrate's court in Delhi ordered Sonia, Rahul and other senior leaders to appear before it in August to answer allegations they had wrongly used party funds for the newspaper.

However, the Congress leaders appealed against the lower court summons in the Delhi high court and secured a stay until all parties had been heard.

After a series of back-and-forth appeals over the past year, Delhi high court on Monday cleared the way for the Congress leaders to answer the allegations against them. They will now appear before a district court on December 19.

>> What did the court say while issuing summons to the Gandhis?

"After having considered the entire case in its proper perspective, this court finds no hesitation in putting it on record that the modus operandi adopted by petitioners in taking control of AJL via the special purpose vehicle (YIL), particularly when the main persons in the Congress, AJL and YI are the same, evidences a criminal intent," the court said in its 27-page judgment.

The Bench of Justice Sunil Gaur said the Congress's transactions with AJL via YI were not mere commercial transactions, as they legitimately attracted the allegations of cheating, fraud, breach of trust and misappropriation.

>> What does the Congress party have to say in its defence?

The Congress justified that YIL was created for charity and not for profit. The party claimed that there was "no illegality" in the transaction as it was "merely a commercial transaction for transferring shares of the company."

It also calls Swamy's complaint 'politically motivated.' Going on the offensive against the Bharatiya Janata Party government for alleged political vendetta in the National Herald case, senior Congress leader Kapil Sibal said that apart from "persecuting" the party's leadership, it was covertly "targeting" people because they had challenged its "dictatorial" attitude.

>> What is the government's take on the Congress party's allegation?

Rejecting the charge, Finance Minister Arun Jaitley said: "No political vendetta. A private complaint was lodged. The government had nothing to do with it. The high court has dismissed their case and asked them to go and face trial. Nobody in this country has immunity from law. They can challenge the orders in a higher court or face proceedings."