Home Editor's picks When Indira Gandhi forced a nationalised bank to give unsecured loan to party owned entity, defaulted

When Indira Gandhi forced a nationalised bank to give unsecured loan to party owned entity, defaulted

It is not clear whether the overdraft of Rs. 10 lakh was ever repaid by the Associate Journals Limited at all. However, we do know that when the Shah Commission began its inquiry into the matter, the AJL had definitely not repaid the money.

The Associate Journals Limited (AJL) is the company that is at the heart of the alleged National Herald scam. Congress President Rahul Gandhi and his mother, Sonia Gandhi, are accused to have been involved in massive ‘cheating and breach of trust’ along with their aides in the acquisition of AJL by Young Indian Pvt Ltd (YIL), as assets worth crores of rupees had been allegedly transferred for purposes other than originally intended for a paltry sum.

Incidentally, the AJL was involved in another case of apparent financial misconduct by the Congress party. During the Emergency, the Punjab National Bank (PNB) had provided the company with an overdraft of Rs. 10 lakh disregarding all norms and procedure. The Shah Commission, which was constituted to look into the excesses committed by the Indira Gandhi government during the Emergency, made some several damning observations.

Firstly, T.R. Tuli was appointed the Chairman and Managing Director (CMD) of PNB after sidelining another person who was chosen for the job by the Finance Minister and the Home Minister in consultation with the RBI. The appointment was done after Indira Gandhi insisted on it. The Commission noted that well-established conventions were violated to ensure Tuli’s appointment and dubbed it ‘abuse of authority’.

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“…the Commission is of the view this is yet another instance where the then Finance Minister Shri C Subramaniam was virtually compelled to fall in line with the suggestion made by then Prime Minister, Smt. Gandhi and that such compulsion amounted to the abuse of authority by the former Prime Minister. It clearly resulted in a subversion of well-established conventions,” the Commission observed.

It is important to note that until the overdraft was sought, AJL didn’t even have an account at PNB’s Parliament Street branch. An overdraft is normally issued to an esteemed and trusted customer who has an impeccable record. AJL opened an account on the 20th of March, 1976 and two days later, a cheque of Rs. 10 lakh was issued to the company. And all of this happened after Tuli gave the manager his verbal approval.

Under the original agreement, AJL was supposed to mortgage Herald House for a term loan of Rs. 15 lakh to repay the original Rs. 10 lakh overdraft. However, when the Manager of the PNB Branch approached AJL for the same, the latter claimed that Herald House could not be mortgaged due to ‘technical difficulties’.

The Commission observed, “It would appear that thereafter Associated Journals were making efforts to raise the sums required to pay the clean overdraft from the Punjab National Bank by offering ‘herald House’ as a security by way of a second mortgage to the Syndicate Bank and for some reason or the other they did not, in fact, succeed in raising the requisite funds and in repaying the Punjab National Bank.”

And so it happened that when the Shah Commission started its inquiry into the matter, AJL had still not repaid the overdraft. The Commission observed that Tuli’s decision was influenced by Indira Gandhi’s connections to AJL. It said, “since National Herald-publisher Associated Journals Limited was connected with the then Prime Minister Indira Gandhi, it must have weighed a little in his mind to deal with the case on a priority basis expeditiously.”

Tuli’s testimony, however, was the most damning aspect of the whole fracas. When he was asked by the Commission about whether his decision was motivated by the ‘advice’ of a Minister, he replied, “Yes Sir, that is a big consideration for me.” Furthermore, he revealed that he had not even checked the balance sheet of the company before issuing the overdraft without any security at all.

The Minister being referred to here is P.C. Sethi, Minister for Chemicals and Fertilizers, who had called Tuli to his residence and asked him to help AJL with money to enable it to take delivery of imported machinery in Bombay.

The Commission’s concluding remarks on the matter were damning. It stated, “The Commission is of the view that Shri Tuli had subverted established procedure in permitting this overdraft without security to M/s. Associate Journals Limited.”

In short, Tuli was appointed as the CMD of PNB at the insistence of Indira Gandhi after disregarding well-established norms and procedures. Then, he “abused his authority” and disregarded well-established procedures to issue the AJL an overdraft of Rs. 10 lakh without any security due to the company’s association with the then Prime Minister. Furthermore, a Minister had called him to his house and ‘advised’ him to help the AJL. And to our knowledge, it is not clear whether the overdraft of Rs. 10 lakh was ever repaid at all.

The Punjab National Bank has also been in news recently for the Nirav Modi-Mehul Choksi financial fraud. The fraud was being perpetuated since 2011. When a whistleblower, the former Director of Allahabad Bank, raised his voice on the matter in 2013, he was threatened and forced to resign after only 11 months. Then Finance Secretary, Rajiv Takru, himself had created pressure on the whistleblower. Allegations also surfaced that former Finance Minister P. Chidambaram had himself signed the termination letter.

It was also alleged by Union Defence Minister Nirmala Sitharaman that one of Nirav Modi’s companies named Fire star diamond international Pvt Ltd was acquired from Advait Holdings, one of whose shareholders since 2002 is Anita Singhvi, the wife of Abhishek Singhvi.

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