National Herald: Key questions raised by Delhi court on ED probe against Sonia Gandhi, Rahul Gandhi

A Delhi court on Wednesday began hearing arguments on whether to take cognizance of the Enforcement Directorate (ED) complaint under the Prevention of Laundering Act (PMLA) against Congress leaders Sonia Gandhi, Rahul Gandhi and five others in the National Herald case..According to ED, there was laundering of 'proceeds of crime' derived from the alleged fraudulent takeover of the properties of Associated Journals Limited (AJL) - worth more than ₹2,000 crore - by a company called Young Indian, in which the Gandhis are stated to be the majority shareholders.It is ED's case that the shares of AJL were transferred to Young Indian under a criminal conspiracy to illegally obtain the assets of AJL. The value of shares, the immovable properties of AJL and the rent generated from them are the alleged proceeds of crime in the ED case.The money laundering case itself is based on a private complaint moved by former Union minister Subramanian Swamy before a Delhi court..Questions around AJL shareholding.Hearing the ED complaint today, Additional Sessions Judge of the Rouse Avenue Court Vishal Gogne asked pertinent questions about the exact nature of PMLA offences in the case."Do you have a forensic auditor with the ED and is he present or somebody who can fill those shoes? Because even if it is only a legal proposition, the court will have to deal with the issue of how companies work, how companies can or cannot increase their paid-up capital, what are the modalities permissible for issuing shares. Companies issue different shares, they follow many processes. So for the ED to portray criminality in point 1 [issuance of shares] it must be articulated for the court to understand," the judge said. In response, ED counsel Zoheb Hossain said that the issuance of shares in favour of Young Indian amounted to an offence of cheating, which is the alleged predicate offence."Today, what we are concerned is only with the property derived and how that has been dealt with. Today we are not concerned with whether the issuance of shares in favour of Young Indian was correctly done or not, that will be in the realm of predicate offence.".However, the Court asked whether the shares are only the derivatives of the scheduled offence. In response, Hossain said,"There may be factual overlaps, they will not be neat line drawn between the scheduled offence and PMLA. Conspiracy to commit scheduled offence may have overlaps...".The Court did not appear to be convinced with the response and said,"Are the shares not the soul of the scheduled offence? Why should the shares be seen as an overlapping?... the issuance of shares itself is the crux of the scheduled offence."Hossain replied that that the agency will be able to show how the conspiracy was hatched in the matter."To see this entire thing from the narrow perspective of issuance of some shares may not be...it is not just some shares have been issued and that is the narrow aspect," he added.However, the Court observed that the proceeds of crime will have to identified for the purpose of alleging an offence of money laundering. It further remarked that not every activity of a company may be money laundering."Scheduled offence is the trigger, the condition precedent for money laundering. But there is no equivalence so that once there is the scheduled offence, you superimpose that on Section 4 [money laundering] and everything that goes under the scheduled offence must necessarily be proceeds of crime. Not every activity of the company which may have committed a scheduled offence will be money laundering."The Court then asked the counsel to answer the query on next date."You can come back on it. The hurdle of proceeds of crime will have to be addressed," the judge told Hossain..Congress party not guilty?.The entire case is stated to have originated from loans advanced by the Indian National Congress to AJL. In 2008, when AJL had closed the printing and publication of newspapers like National Herald, it owed over ₹90 crore to Congress. In 2011, AJL is alleged to have allotted issue shares worth ₹90.21 crore to Young Indian, a company incorporated in 2008, in lieu of assignment of the alleged loan of ₹90.21 crore, for ₹50 Lakh. Young Indian is then stated to have received a loan of ₹1 crore from Kolkata-based Dotex Merchandise to make a payment of ₹50 lakh to the Congress towards the loan recoverable to AJIL.The allegation essentially is that the Gandhis had hatched a criminal conspiracy with their loyalists to defraud the Congress party and AJL by "dubiously forming Young Indian" to misappropriate the assets of AJL..Today, the Court observed that in the ED's complaint, wrongful acts have been ascribed to individuals and not the Congress."The Congress party finds mention at many places but not as accused...or is the party a victim?...The Court is just confirming that it is not the line that you have proceeded on," the judge queried.Hossain conceded that the party has not been made an accused as yet. He added that donors of the political party were victims in the case."We have certainly mentioned that donors and members of AICC have been cheated," the counsel said..Who owns the properties?.The Court also asked whether the assets are owned by the company or the individual shareholders."The underlying allegation is that ownership of X 1000 crore rupees of assets was implicitly transferred to at least the first few accused... who owns the properties as on date, Young Indian or AJL? Or who can own it in law?"It added,"In simpler words, because the court intends to put matching queries to both parties on this aspect. In very simple words, if the property A is usurped by B, does the property become tainted, does it become proceeds of crime in the hands of B when it was clean in the hands of A?".The matter is now listed for next hearing on July 2. The Court said it will hear the matter on a daily basis till July 8. .Additional Solicitor General SV Raju with Special Counsel Zoheb Hossain represented the ED.Senior Advocates Abhishek Manu Singhvi and RS Cheema with advocate Tarannum Cheema represented Gandhis. Senior Advocate Pramod Kumar Dubey represents Dotex Merchandise.Senior Advocate Madhav Khurana and Advocate Nakul Gandhi represented Young Indian..[Read Order]