NEW DELHI: On May 13, 2017, Young India (YI) approached the Delhi High Court to stay the income tax notices issued against it with regard to the National Herald case.
YI was issued notices regarding the assessment of the year 2011-12. The challenge in YI’s petition was to the IT department arbitrarily initiating proceedings of 6-year-old tax assessments. Opening of assessments has to be done keeping in view certain statutory pre-requirements.
The High Court of Delhi stated that YI could take up this issue, and the question of jurisdiction of the assessing officer regarding various notices to YI, with the IT Directorate directly. In view of this observation of the Court, YI withdrew the petition. Now they either can take up the issue with the authorities or move the Supreme Court to stay the IT proceedings.
Let us briefly understand the facts of the case beyond the political noise created by the Government.
Two public-spirited persons Subramanian Swamy and M.R Venkatesh (often seen as a neutral commentator on a popular channel) filed a private complaint against several persons including Congress president Sonia Gandhi and Vice President Rahul Gandhi.
The complaint was filed in Court arguing that sections 403 (dishonest misappropriation of property), 406 (criminal breach of trust), 420 (cheating and dishonestly inducing delivery of property) and 120-B of the Indian Penal Code (Criminal Conspiracy), 1860 have been attracted by the accused through certain transactions.
The first logical question is what is the illegality that this complaint has tried to bring to light? Is it a case of the citizens suffering corrupt governance? Is it that the public exchequer has been cheated of income? Have the accused breached the trust of the people by unlawfully accumulating wealth?
The facts appear to suggest otherwise. The Associated Journals Ltd (AJL) a public listed company incorporated in 1937 was in the business of publishing several papers and magazines including the newspaper National Herald (NH) founded and edited by Jawaharlal Nehru for 20 years. Over time AJL faced serious challenge as a commercially viable publishing entity (briefly had even shut down in the 1940s and 1970s).
The Indian National Congress (INC) that has had and continues to share a historical and ideological connection with the company as per law gave an interest free loan up to Rs 90 crores over a set period of time. The INC did not recover the loan amount due by AJL, as the company was not in a financial position to return such an amount easily.
Subsequently a Company was formed by the name of Young Indian (YI). The majority shareholding of the Company was in the name of the President and Vice President of the INC, while other members of the INC and AJL were also shareholders. The INC on the basis of Rs 50 lacs assigned the debt of AJC to Young Indian Company. Further shares were issued by AJL to YI in lieu of the remaining debt.
Now, YI is a Section 25 company under the Companies Act 1956, which legally mandates that such a company is strictly for the object of promoting commerce, art, science, charity and that profits or income shall only be for promotion of these objects. Further such a company cannot give salary, remunerations, benefit or dividend to its shareholders. And in case of winding up of such a company the assets shall vest in another section 25 company having similar objects (as per companies regulation 1956 and ministry of corporate affairs guidelines). That is the assets cannot be distributed amongst the shareholders of such a company.
The central complaints against the accused are: (a) the giving of interest free loans to AJL by the INC, and (b) that this loan was assigned to YI who now, with majority shareholding of the president and vice president of INC, have control of AJL and this therefore forms a case of cheating and misappropriation.
Interestingly Subramanian Swamy justified the locus of his private complaint as being in the interest of shareholders of AJL (none of whom have complained in 80 years, also if someone is to raise grievance as a shareholder that will draw provisions of Company law and not the Indian Penal Code) and the supporters / donators of the INC. (Para 24 of the order).
The High Court (HC) order of December 7,2015 decided on whether the complaint should be quashed under section 482 of the Code of Criminal Procedure, 1973 or whether the contentions in the complaint should be dealt at the charge stage where on cross examination of the complainant full facts of the case would emerge (para 36 of the order). Subramanian Swamy had strongly contended in the High Court that at this stage under section 482 the truthfulness or otherwise of the allegations cannot be gone into and must happen at a later stage. (Para 23 of the order.)
The HC held that the court without casting any reflection on the merits of the case or the larger questions involved (Para 40 of order) would allow them to be considered at the charge stage in the Trial Court (TC). Hence, The Court did not quash the complaint and further held that the accused would have to appear in court as per the TC summons so as to examine the accusations in the complaint at the charge stage (stage where alleged offences leveled in the complaint are substantively examined by the Court so as to subsequently frame the possible legal charges for the trial.)
The charges are yet to be framed and as the High Court has stated in its order “this is not the stage to even prima –facie opine that the ingredients of any of the alleged offences exist to justify putting petitioners on trial or not” (Para 36 of the order). The trial is yet to occur and not an order of any court has held beyond the fact that prima facie the complaint must be examined, as per procedure laid down by law.
Clearly this case has gained a great amount of significance for reasons political and not legal in nature. The complainant apart from being a public spirited individual is also a member of the Bharatiya Janata Party. The accused are all members of the INC and the entities in question are closely linked to INC.
AJL is deeply connected with the legacy of Jawaharlal Nehru and the Congress Party via the National Herald and other publications. YI again is a company that is maintains a close and proud philosophical connection with AJL and INC. While it is the judicial establishment that will have the final say, the political nature of the case perhaps warrants political response.