Author: K Bhattacharjee
Publication: Opindia.com
Date: December 28, 2018
URL: https://www.opindia.com/2018/12/shah-commission-report-associate-journals-limited-national-herald-indira-gandhi-punjab-national-bank/
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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7.58 No reason whatsoever has been given for departing from the recommendation of the Reserve Bank which has intimate knowledge of the working of all the Banks in the country and is, therefore, in a position to judge the comparative merits of the various officers for top positions in the Banking Sector. This becomes even more striking since Reserve Bank's recommendation had been found acceptable by the Finance Minister himself and by the Home Minister. If the then Prime Minister had any serious difference of opinion in this regard, there is no reason why the matter could not have been discussed by her with the two other members of the Appointments Committee or in the alternative why she could not record her views in this regard on the file submitted to her, instead of virtually directing Shri Subramaniam to submit .a revised proposal in favour of a person of her choice.
7.59 Under the circumstances, the Commission is of the view that 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 the then Prime Minister, Smt. Gandhi and that such compulsion amounted to abuse of authority by the former Prime Minister. It clearly resulted in subversion of well-established conventions.
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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.
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In the course of his first testimony before the Commission on November 17, 19 /7, Shri Tuli was asked whether the loan was granted at his instance by the Parliament Street Branch of his Bank, contrary to normal loan granting practice followed by the Bank, Shri Tuli replied that there was a "reason" for doing so as he had already stated in his written statement which had just been read out ; the reason being Associated Journals Limited were in urgent need of money and further that ultimately they were to get a term loan against the mortgage of a building. In response to a further query as to whether he looked at the balance sheet of the company, he replied "No Sir, not at that time". When asked why he did not look at the balance sheet, which was certainly his duty as a Banker, he replied "that was my omission". When further questioned as to why he insisted upon advancing this sum of money without any security, which he was required to take immediately, he replied that it was just by looking at the urgent requirements. When asked whether his action was because a Minister had advised him to help the company, he replied, "Yes Sir, that is a big consideration for me". And added that "naturally when a Minister says some consideration has got to be given to that and that is why the whole thing was expedited", The Commission reminded Shri Tuli of a portion in his written statement wherein he has stated that he had given his verbal approval to Shri Adlakha and that since National Herald published by Associated Journals was connected with the then Prime Minister, it must have weighed a "little in his mind to deal with the case on a priority basis expeditiously". When Mr. Tuli was reminded that it was without any security, Shri Tuli replied "of course it was without security".
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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.”
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7.157 For these reasons, the Commission is firmly of the view that Shri Tuli who had permitted the over-draft and was responsible for the decision in this regard had taken it without making the minimum necessary examination of the facts of the case and without exercising a modicum of care or caution and that this conduct on his part is attributable to the fact that he was swayed by collateral considerations. Thus, this transaction was not a normal one in the ordinary course of the Bank's business. The Commission is of the view that Shri Tuli had subverted established procedure in permitting this overdraft without security to M/s. Associated Journals Limited. He has also misused his powers and abused his authority so doing.
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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. |