With the commencement of the winter session of the Parliament, it appeared that the stage was set for smooth passage of various pending bills including the historic 122nd Constitutional amendment bill on Goods and Services Tax [GST]. The first couple of days even went off smoothly with both houses conducting business.
Then, came a decision of Delhi High Court [DHC] rejecting the application of Sonia/Rahul duo [and other leaders of Congress] to quash the summons issued by a lower court in the infamous National Herald [NH] case. DHC concurred with lower court that prima facie there was merit in questioning the top brass of grand old party.
The matter is strictly within the domain of the judiciary which acted on a complaint from a private citizen. The present government is not even remotely connected with it. Neither, it is a party to the case nor, any of its wings viz., income tax department or enforcement directorate has issued any notice to the duo [finance minister Arun Jaitely clarified in an interactive with a news channel that it has not even addressed a letter in this regard].
Yet, the grand old party perceived this to be an act of vendetta by Modi – government alleging that the court was acting under the diktat of Prime Minister’s Office [PMO] and all actions of private citizen [read Subramanian Swamy] were instigated by BJP; that he was acting at the behest of ruling establishment.
From the very moment DHC ruling came, Congress MPs have not allowed the Parliament to function. And, it is most unlikely that they will remove the blockade till the end of the session. Hence, the chances of GST bill which has the potential to lift India’s GDP by 1.5-2% being passed by Rajya Sabha [it was passed by Lok Sabha in May, 2015] look very dim. The economy will pay a heavy price solely due to irresponsible actions of Congress.
Even as Congress has commissioned a contingent of legal luminaries to defend the duo in the court [the case is slated for hearing in lower albeit Patiala court, Delhi on December 19] and one has to wait for conclusion of the due process of law, a cursory look at the facts reveals a brazen attempt to appropriate the assets/properties that belong to Associated Journals Limited [AJL] by its top brass.
First, the very act of Congress giving an interest free loan of Rs 90 crores to AJL out of its funds pool [created out of contribution from public] raises many eyebrows. How can money garnered for an exempt activity be given to an entity which is not exempt? Even granted that publishing a newspaper is a no-profit/exempt activity [which it is not], no attempt has been made to revive NH till date – 5 years after the loan was given in 2010.
Second, in November 2010, a closely held company Young Indian Limited [YIL] with over ¾ th shareholding by Sonia/Rahul duo [balance with other Congress leaders] was created and within a month of its incorporation, Congress relinquished ownership of this loan in favour of YIL for a paltry sum of Rs 50 lakhs. How can the funds that belong to public be allowed to be appropriated by a few individuals [read shareholders of YIL]?
There would have been some semblance of fairness if only YIL had paid to Congress the full amount of Rs 90 crores to take over the loan. But, to swap this for a mere Rs 50 lakh smacks of malafide intent to let this closely held company derive undue advantage. The ball did not stop here. Leveraging its overriding control over AJL, Congress made yet another move to put YIL in a commanding position.
So, in a third step, the General Body [AGM in corporate parlance] of AJL passed a resolution transferring its ownership whole hog to YIL. The most bewildering aspect of this decision was that YIL got complete ownership and control over AJL in exchange for Rs 90 crores debt on latter’s balance sheet [then] outstanding in its name. As a result, the assets/properties of AJL – estimated at about Rs 5000 crores – are now owned by YIL.
In short, we have a bizarre scenario whereby an investment of mere ½ crore puts a company in command of assets of value that is 10,000 times [5000/0.5]. One will have to look at the whole world of business and finance with a microscope to find out whether such returns are possible at all. Perhaps, this could be thought through only in dreamland; certainly not in real world.
In their retort, party leaders have argued that Sonia/Rahul have not not taken even a single rupee from AJL and no assets have been transferred to YIL. They have gone that far to argue that being a Section 25 company, YIL is prohibited from benefitting financially either by way of asset transfer [these will continue to be with AJL] or deriving profits or dividend etc.
In times to come, we will see a lot of hair splitting over the interpretation of Section 25 with Congress men raising their pitch to give shelter to the duo under the aforementioned argument, no law on earth can ever defy robust logic that ‘shareholding’ in a company and ‘ownership’ of assets are inextricably linked; they go hand-in-hand. The very foundation of any company rests on this principle.
Thus, when we say a promoter of a company has 51% shareholding, it implies that he owns 51% of its assets. In an event, these shares are divested, the proceeds will accrue to him/her. If, its assets are sold [when it ceases to be operational] then, the proceeds after meeting liabilities if any, will go to him/her in proportion to its holding i.e. 51% in this example.
Therefore, irrespective of what colour you give under the relevant sections of the Companies Act, this over-arching fundamental cannot be violated. In the instant case, since AJL is 100% owned by YIL, any profit that former makes whether distributed or not belongs to the latter. The same logic applies to assets i.e. all assets of AJL are owned by YIL. That these have not been transferred [or will not be transferred] cannot alter this basic.
Let us look it from another angle. Assume for a moment what Congress says is correct i.e. YIL does not own assets of AJL. Now, think through a scenario wherein all assets/properties are sold fetching Rs 5000 crores. Going by party’s interpretation, this money cannot go to YIL; then where will it go?
Will the shareholders of YIL [read Sonia/Rahul et al] give it back to all those who contributed to Congress fund pool? Will they give it to government? Will they give it to some trust involved in social welfare or nation building activity? Will they donate it to a disaster relief fund or for any other natural calamity?
All these are ‘theoretical’ possibilities to say the least. Clearly, none of these are under contemplation of party’s think tank. The only logical and plausible scenario is any proceeds from AJL – be it profits or from asset sale – will inevitably go to its shareholders i.e. YIL who is the owner of all its assets.
But, for court’s intervention, the above flawed transactions would have passed muster. Now that the judiciary has taken notice and in public eyes too, the grand old party is facing embarrassment, it is coming out with very peculiar [unheard of] interpretation only as a face saver and somehow get over present turbulence it faces.
As finance minister, Arun Jaitely has observed – rightly so – Congress has fallen in to a trap [chakravuyhu, to use his phraseology] of its own creation and does not know the way out. So, it is leveraging its strength in RS to stymie all institutions of democracy. One can only wait and see how things will pan out. The only certain thing about future in the near-term is more challenges and stress for Modi – government which it will have to handle deftly.