National Herald Narrative

18 Tue, 15 Dec 2015

National Herald Narrative

History of INC & AJL Ties 


National Herald was a newspaper started by Pandit Jawaharlal Nehru and the leaders of the independence struggle in 1937 to give voice to the freedom movement in the country. It was banned by the British from 1942 to 1945, which Mahatma Gandhi described as “a tragedy for the National Movement.”In addition to Pandit Nehru, freedom fighters like Purshottam Das Tandon, Acharya Narendra Dev, and India’s first Minister for Communications Rafi Ahmad Kidwai were among the first subscribers and signatories to the Memorandum of Association of The Associated Journals Limited (AJL)– the company that published National Herald and later Quami Awaaz & Navjeevan. 

However, the AJL was in poor financial health from its early days. This was evident from Pandit Nehru’s statement that “I will not let the National Herald close down even if I have to sell Anand Bhawan.”Over the years, the company often did not have enough money to pay the salaries of its employees, or pay its taxes and other dues. Therefore, from time to time, whenever asked, the Congress Party would extend a loan by cheque, to help AJL tide over its immediate financial crisis. The Congress Party supported AJL over these years because it believed that National Herald, a part of the rich and vibrant legacy of the freedom struggle, had to be preserved. The Congress Party and AJL were also inextricably linked to one another since the founding of AJL in 1937. The Memorandum of Association of AJL states in Object “(t)”: "The policy of any newspaper, periodical, magazine or journal issued by the Company shall generally be in accordance with the policy and principles of the Indian National Congress.

"Therefore supporting AJL fulfilled the political object and purpose of the Congress Party. 

Glory of National Herald 

Some of the leading lights of journalism in India served as Editors of the National Herald from time to time, including K. Rama Rao, jailed in 1942 for his editorial “Jail or Jungle”, a member of the first Parliament of India and christened by Atal Bihari Vajpayeeas “the Dronacharya of Indian journalism”, 

M. Chalapathi Rau the legendary Editor who helmed NH for over 30 years, and was part of the underground press movement during the freedom struggle and later author-journalist Khushwant Singh. Also some of the prominent contributors to the National Herald occasionally included Maulana Azad, Sardar Patel, and Khan Abdul Ghaffar Khan. 

Continuing Financial Distress of AJL 

Despite the editorial excellence of the paper the financial and business management of AJL continued to be poor. AJL continued to bleed financially and ran into losses year after year. Over approximately a decade, AJL received multiple loans adding up to Rs 90 crore from the Congress Party. A time came when AJL could not pay the salaries of its employees at the end of the month. In the financial year ending March 2008 it booked a loss of approximately Rs 6 crores. This was followed by more losses, approximately Rs 34 crore in 2008-09 and Rs 2 crore in 2009-10. No bank would sanction AJL a loan because of the Rs 90 crore debt on its balance sheet. 

Finally, the financial burden could no longer be borne by the AJL itself or by its benefactor the Congress Party. Young Indian, a Section 25 Company is Formed to Revive AJL It became clear that a revival plan was needed or else the company may have to close down. The Congress Party, conscious of Jawaharlal Nehru’s commitment to the National Herald, consulted some of the most eminent experts in the country on a revival plan. Their considered advice was to form a Section 25 not-for-profit company, Young Indian. Further, in order to bail out AJL and free it from the burden of its backbreaking debt burden of Rs.90 crore, this loan could be assigned to the not-for-profit company by the Congress Party. Thereafter, with the consent of AJL’s shareholders this debt could be extinguished by issuing new equity to Young Indian, the not-for-profit company. In doing so the Congress Party would rescue and revive Nehruji’s paper, AJL would come out of its financial distress and all of this would be achieved through a not-for-profit entity much like a Trust or Society, without even the possibility of any personal benefit. 

Conversion of debt into equity is a normal business practice to restore financial health of companies that are over burdened with debt. The advice of the experts was approved unanimously by all the shareholders of AJL, present and voting in the EGM on 21st January 2011. The loan of 90 crores was removed from AJL’s books in perpetuity in February 2011. As a result, for the first time in decades the net worth of AJL became positive and the company took its first steps on the path to recovery.AJL was able to declare its first profit in several years in 2011-12 and came into the black from the red, with the major shareholder now being Young Indian, a not-forprofit company. Making a not-for-profit company as the major share holder ensured that no shareholder or director could receive any benefit from the properties or income of AJL. Meanwhile AJL, now able to borrow money for the first time in years, renovated its Delhi building. Old tenants, paying nominal below market rents gradually vacated the space. A new tenant at a market rate came to occupy a portion of the building. 

The rental incomes of the company enabled it to service and pay interest on the new bank debt. And the new bank debt, opened avenues for the company to undertake the long and arduous process of constructing buildings on its vacant leased land. In the coming years as the process of constructing the buildings concludes and new avenues of income accrue to AJL, the profits so made by the company will fund the prohibitively expensive endeavour of relaunching the National Herald in the extremely crowded Indian newspaper market. 

BJP’s Politically Motivated Attacks 

However, since 2012 Mr. Subramanian Swamy and the BJP have launched a false, politically motivated, and vicious campaign to attack the Congress Party and its leadership and destroy the National Herald. In addition to the criminal litigation initiated by Mr. Swamy, the AJL & YI have been subjected to a witch-hunt by the Enforcement Directorate. 

Notably in August 2015 the Enforcement Directorate had closed the National Herald case because there was no evidence of any wrongdoing. But the then Director of the Enforcement Directorate was sacked and just a month later in September 2015 the case was reopened. Senior BJP leaders, including the Finance Minister, no less, have shown undue interest in this case and made frequent and partisan public pronouncements in the media – a clear attempt to influence public opinion and tarnish the reputation of the Congress Party and its leadership on a false pretext. 

NATIONAL HERALD FAQ's

1. Have Smt. Sonia Gandhi or Shri Rahul Gandhi benefited financially from Young Indian? 

No. As directors or shareholders of Young Indian, a non-profit, Section 25 company, they are prohibited by law from drawing (and have not drawn) any financial benefits from the company. 

2. Have any assets been transferred from The Associated Journals Ltd. (AJL) to Young Indian (YI)? 

No. All the assets and the income of AJL remain with the company. Not a single paisa has gone to YI, YI Directors or YI Shareholders.

3. Does YI today own the property owned by AJL? 

No, both YI and AJL are separate entities. All assets and properties of AJL continue to remain with AJL. This allegation is akin to falsely alleging that a shareholder in Indian Hotels Ltd. has rights on hotel properties of the Taj Group and owns a particular hotel or can move into it! 

4. Young Indian was created to usurp the property owned by The Associated Journals Ltd.? 

False. On the contrary, Young Indian, being a non-profit Section 25 company, as the major shareholder AJL, in fact, enhances the safeguards on the properties of the AJL. 

5. Why did the Congress Party give loans of Rs 90 crore to AJL? 

The Congress Party financially supported AJL over several decades through the financial ill health of the company. This reflected the Party’s commitment to support AJL, the voice of the freedom movement. The founding document of AJL from 1937, i.e. the company’s Memorandum of Association, states in Object (t): "The policy of any newspaper, periodical, magazine or journal issued by the Company shall generally be in accordance with the policy and principles of the Indian National Congress." This demonstrates the inextricable link between AJL and the Congress Party from AJL’s inception. The Congress Party sought to fulfill its own objects by supporting AJL. 

6. Arun Jaitley called Young Indian a real estate company. Is this true? 

Absolutely false. YI does not own a single real estate asset or immoveable property. AJL continues to own all its assets. The allegation is, therefore, completely baseless. 

7. Why did AJL not go to a bank in 2010 to repay its Rs. 90 crore debt? 

There was a Rs. 90 crore loan from the Congress Party on AJL’s balance sheet. No commercial bank was willing to lend a single rupee to AJL due to the negative worth of the company, its meager income and its over-levered balance sheet. 

8. Are political parties allowed to give loans? 

Yes. There is no restriction in law on political parties giving loans. In fact, the Election Commission of India issued a clear order in this regard in November 2012. Shri Subramanian Swamy had sought the de-recognition of the Congress on this ground but his complaint was dismissed by a full bench order of the Election Commission. 

9. How bad was AJL's financial position? 

Details of profit and loss (in Rs. Lacs) are below. Please note that after AJL’s debt of Rs. 90 crores was extinguished in February 2011, AJL was able to declare its first profit in several years in 2011-12 and came into the black from the red. This was only as a result of the financial revival plan of AJL as conceived by the Congress Party. Chart-1 

10. What did AJL do with the financial support given by the Congress Party? 

The money was used to pay unpaid salaries, VRS, taxes, dues to civic agencies and statutory and other liabilities/payables. 

11. Why were the assets of AJL not liquidated? 

The majority of AJL’s properties were government leases, which prohibited sale of land. 

12. Were the shareholders of AJL cheated, as some have alleged? 

All the shareholders present and voting at the Extraordinary General meeting in 2011 unanimously approved issuance of fresh equity to YI to extinguish debt of AJL. The question of cheating shareholders does not arise. 

13. Will the National Herald be revived? 

AJL has every intention of reviving the National Herald newspaper and restoring the media voice that Pandit Jawaharlal Nehru had founded. 

14. Why should a political party have anything to do with a newspaper? 

Every political party needs to effectively communicate its ideology and its policies to the public at large. A newspaper provides a channel through which to do this.