National Herald case: Where are the 296 missing shareholders of AJL?

There is a curious mismatch between the number of shareholders reported by The Associated Journals in its filings to the ministry of corporate affairs (MCA) and the number of shareholders as claimed by senior Congress leaders in recent interviews.

Business Standard has reviewed annual returns of The Associated Journals for six years starting September 2009. In each of those years the number of shareholders was in four digits. Annual returns report the number of shareholders as on a specific date, usually the date of the company’s annual general meeting.

On September 30, 2009, the company reported 1,062 shareholders. A year later, as of September 29, 2010, it fell to 1,057. The number of shareholders reported rose to 1,089 in 2011 and stood unchanged in subsequent years through 2014. This also means 31 new shareholders were added to AJL's shareholders list, apart from Young Indian in the year 2011. The company is yet to file numbers for 2015.

Of these, the critical number was 1,057, reported at the annual general meeting of 2010. This was the number immediately preceding the crucial extraordinary general meeting called by the company to approve the changes that allowed non-profit company Young Indian to take a majority stake.

Business Standard had on Thursday reported this number in the article titled “Let us go beyond the colourful adjectives, Dr Swamy’ and that the largest minority shareholders among these including the Delhi hotelier Suri family and Abhim Investments, an entity operating out of Amitabh Bachchan’s bungalow in Mumbai.

In an interview published in the Indian Express on Saturday, where this number of 1,057 shareholders was put to him, senior Congress leader and supreme court advocate Kapil Sibal said, “There were 761 shareholders of AJL, including former Union Home and Law Minister Kailash Nath Katju (grandfather of former Supreme Court judge Markandey Katju). We sent a notice to every shareholder and we have all the records.”

This 761 number is no fluke. It was also mentioned by P Chidambaram, also a senior lawyer and Congress leader, in television interviews.

So, if the company reported over 1,000 shareholders regularly and 1057 shareholders just before the EGM approving restructure, and if these leaders say there were only 761 AJL shareholders and notices were sent to them, what happened to the remaining 296? Are these leaders looking at a different list? Where did they get the 761 number from?

As it is, some progeny of original shareholders such as retired judge Markandey Katju have claimed they have not received any notice, while others like Shanti Bhushan said they will get consent of other heirs to initiate legal proceedings.

One option for such shareholders could be to implead themselves in the case filed by BJP leader Subramanian Swamy and strengthen it. It is up to the trial judge to decide whether to allow them to do so. Another option is to explore remedies under company law.

Corporate law experts say general meetings of companies require a quorum of just five members to be considered valid. Further, the responsibility of the company rests in sending the notices, under certificate of posting, to the given addresses of all shareholders.

A senior company secretary said there was even a provision in the Companies Act, 1956, which was in force at the time of AJL’s restructuring, which said that accidental omissions in sending a notice cannot invalidate a meeting.

However, the matter has gone beyond company law, he added, pointing out the Delhi High Court judgment which mentioned ‘questionable conduct’ and ‘criminal intent’.

“After having considered the entire case in its proper perspective, this Court finds no hesitation to put it on record that the modus operandi adopted by petitioners in taking control of AJL via Special Purpose Vehicle i.e. Y.I., particularly, when the main persons in Congress Party, AJL and Y.I. are the same, evidences a criminal intent. Whether it is cheating, criminal misappropriation or criminal breach of trust is not required to be spelt out at this nascent stage. In any case, by no stretch of imagination, it can be said that no case for summoning petitioners as accused in the complaint in question is made out. Questionable conduct of petitioners needs to be properly examined at the charge stage to find out the truth and so, these criminal proceedings cannot be thwarted at this initial stage,” the Delhi High Court said in its December 7 judgment.

But while dismissing the petition of Sonia and Rahul Gandhi, the judge added that he was not taking a call on the merits of the case. “Without casting any reflection on the merits of this case and while leaving the larger questions raised in these petitions open, to be considered at the charge-stage, these petitions and the pending applications are dismissed with afore-noted clarification,” he said.

The question of 296 missing shareholders might now join those larger questions, which are fairly open at this stage.