Delhi: Delhi High Court Quashes FIR and ED Money Laundering Case Against NewsClick, Prabir Purkayastha Over Foreign Funding Allegations.
The Delhi High Court has quashed the FIR registered by the Economic Offences Wing (EOW) as well as the Enforcement Directorate’s (ED) money laundering case (ECIR) against news portal NewsClick and its Editor-in-Chief Prabir Purkayastha, both of which stemmed from allegations of irregularities in foreign direct investment received by the platform.
Justice Neena Bansal Krishna, while delivering the verdict, termed the continuation of the proceedings a “gross abuse of the process of law” and held that none of the essential ingredients of the criminal offences alleged were made out, even if the FIR’s allegations were taken at face value.
Here is what the Delhi High Court said while quashing the case:
1. The Court ruled that since the predicate offence FIR has been quashed, the ECIR registered by the ED automatically stands quashed as well, noting that once the ECIR is quashed, the request for a copy of the ECIR becomes infructuous.
2. On the foreign investment itself, the Court noted it was an admitted fact that US-based Worldwide Media Holdings LLC had agreed to invest a total of USD 4.5 million in three tranches of USD 1.5 million each, in exchange for a 23.07% stake in NewsClick’s parent company, PPK Newsclick Studio Pvt. Ltd. The first tranche of USD 1.5 million was received on April 11, 2018.
3. The Court noted that NewsClick had earlier written to the Ministry of Information and Broadcasting in 2017 seeking clarity on FDI norms for online news publications, and that when the investment was actually received in April 2018, there was no cap on FDI in digital news media — a position the Court said was supported by a clarification issued by the Ministry in January 2018.
4. Based on this, the Court held that the investment agreement dated March 20, 2018, and the receipt of the first tranche could not be said to violate any law or disclose any criminal offence.
5. On the question of share valuation — a key part of the allegations — the Court held that the valuation was carried out in accordance with FEMA regulations using the internationally accepted Discounted Cash Flow method, and that the price was arrived at through mutual negotiation between NewsClick and the investor. The Court described this as an economic decision that does not amount to a criminal offence.
6. Even on the allegation that there were over payments or excessive expenditure by the news platform, the Court held that this still would not constitute a criminal offence, and therefore the allegation of siphoning of funds was not tenable.
7. The Court also pointed to an earlier EOW status report which recorded that the Reserve Bank of India had informed investigators that the foreign inward remittance came through the automatic route, with no delay in issuance of shares or in reporting under FEMA regulations.
8. Examining the charge of cheating under Section 420 IPC, the Court held that there was no complainant who claimed to have been cheated, and that the foreign investor, Worldwide Media Holdings LLC, never alleged it had been deceived or induced into investing. The Court observed that nothing emerged during the investigation to show any person was aggrieved or cheated.
9. The Court held that the offence of criminal breach of trust under Section 406 IPC was also absent, as there was no entrustment of property and no allegation of misappropriation.
10. On the criminal conspiracy charge under Section 120B IPC — which the ED had relied on to sustain the money laundering probe — the Court held that merely entering into an investment agreement cannot amount to conspiracy in the absence of any illegal objective or unlawful means.
11. While quashing the ECIR, the Court observed that apart from bald assertions of a criminal conspiracy, there was not a “whisper” of any incriminating allegation that would even remotely suggest commission of an offence under Section 4 of the Prevention of Money Laundering Act (PMLA).
Background of the case
The FIR was registered in August 2020 based on a complaint forwarded by the Ministry of Information and Broadcasting, alleging that NewsClick had received Rs 9.59 crore in FDI from Worldwide Media Holdings LLC through an overvalued share transaction designed to bypass FDI restrictions, and that a substantial portion of these funds was siphoned off through salaries, consultancy fees and other expenses. The case was later forwarded to the ED, which registered the ECIR and conducted search and seizure operations at NewsClick’s premises and the residences of its editors in February 2021. Purkayastha had been granted interim protection from arrest in June 2021, which was extended periodically. The case was titled M/s PPK Newsclick Studio Pvt. Ltd. v. State (NCT of Delhi) & Ors. and connected matters.
M/s PPK Newsclick Studio Pvt. Ltd. v. State (NCT of Delhi) & Others:
