The Delhi High Court has quashed an FIR registered by the Economic Offences Wing (EOW) against digital media platform NewsClick and its founder-editor, Prabir Purkayastha, along with the consequential Enforcement Directorate (ED) proceedings under the Prevention of Money Laundering Act, 2002 (PMLA). The judgment was delivered by Justice Neena Bansal Krishna.
The case arose from allegations that NewsClick had received foreign direct investment (FDI) from US-based Worldwide Media Holdings LLC by allegedly overvaluing its shares and thereby circumventing applicable foreign investment restrictions. Investigating agencies further alleged that a substantial portion of the investment was subsequently diverted through salaries, consultancy fees, and other operational expenditures. The ED’s proceedings were founded upon the FIR registered by the EOW.
Examining the material placed on record, the Court found that the allegations failed to disclose the essential ingredients of offences under Sections 406 and 420 of the Indian Penal Code. The Court noted that there was no material demonstrating either a criminal breach of trust or cheating, nor was there any complainant alleging that they had been deceived into investing. The foreign investor itself had never asserted that it had been cheated or induced to invest by misrepresentation. “There is nothing which has emerged even during the investigations … that there was any person who was aggrieved or who was cheated by the Petitioner,” the Court noted.
The Court further observed that NewsClick had sought clarification from the Ministry of Information and Broadcasting regarding the applicable FDI regime and that, at the time the investment was received in 2018, no cap existed on foreign investment in online news publications. It also accepted the petitioners’ contention that the valuation of shares had been undertaken through recognised methods in accordance with FEMA regulations. Consequently, the Court held that the transaction could not be characterised as criminal merely because the investigating agency disagreed with the valuation adopted by the parties.
Having concluded that the predicate offences were not made out, the Court held that the FIR itself could not survive judicial scrutiny. The Court observed: “The continuation of such FIR was nothing but a gross abuse of the process of law.”
On ED proceedings, the court observed that the money laundering investigation rested entirely upon the existence of a valid scheduled offence. Once the FIR was found to be unsustainable, the ECIR and all consequential proceedings necessarily fell with it. The judgment reiterated the settled principle that PMLA proceedings cannot survive independently where the underlying scheduled offence is quashed.
In some of its strongest observations, the Court criticised the manner in which investigative powers had been exercised against the media organisation. Noting that extensive investigations had failed to uncover incriminating material despite repeated examinations of the petitioners and their employees, the Court questioned the very basis of the proceedings. The court observed:
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“Not only are the present proceedings only mala fide, but also an arbitrary attack and abuse of powers on the free and impartial journalism of the petitioners.”
