New Delhi: Observing that allowing the Delhi Police’s Economic Offences Wing (EOW) to continue with its FIR would amount to gross abuse of the law, the Delhi High Court has quashed the criminal case against PPK Newsclick Studio and its promoter, Prabir Purkayastha. A single-judge Bench of the court also quashed the money laundering probe by the Enforcement Directorate, adding that the agency had levelled only “bald and baseless” allegations.
PPK Newsclick Studio is the parent company of news website NewsClick. The EOW had booked the company and Purkayastha under Sections 406 (criminal breach of trust), 420 (cheating), and 120-B (criminal conspiracy) of the Indian Penal Code in August 2020, based on a complaint that the company had allegedly received Foreign Direct Investment of Rs 9.59 crore at grossly inflated valuations in April 2018. Based on the FIR, the ED had also opened an Enforcement Case Information Report (ECIR) to probe the money laundering aspect.
Before going into the merits of the case, the high court pulled up the EOW for lodging an FIR directly on the basis of a complaint from one Sohan Singh, without any preliminary enquiry into the claims, or verification of his association with the firm or his knowledge of the alleged violations.
The FIR had claimed that there was overvaluation of the firm’s shares—from Rs 10 to Rs 11,510 per share—to incorporate FDI from Worldwide Media Holdings LLC amounting to Rs 9.59 crore. The transaction, carried out in April 2018, was the first tranche of three equal instalments for an overall stake of 23.07 percent in the NewsClick promoter firm.
The court, however, observed that the firm was initially controlled by a trust, which was later converted into a private limited company to facilitate FDI inflows via established measures. On allegations of overvaluation of shares to circumvent FDI cap, the court noted that the company had already sought clarification from the Ministry of Information and Broadcasting, which had confirmed that companies engaged in online news publishing were not covered by FDI restriction regime.
Moreover, the court observed that FEMA (Foreign Exchange Management Act) rules prohibit transfer of shares at a price lower than original book value, and that the price reached by NewsClick management and the foreign funder was reached by Discounted Cash Flow (DCF) accepted worldwide.
“The said price was worked out between M/s Worldwide Media Holdings LLC and the Petitioner after due negotiations and their mutual decisions. On the assessment of day-to-day market and the prospects of growth of the Company, the price was mutually agreed by the Petitioner and M/s Worldwide Media Holdings LLC. It is an economic decision which does not spell out any criminal offence,” Justice Neena Bansal Krishna ruled.
She also rejected the other allegations about siphoning of funds received through FDI in the form of payment of salary, consultation fee, rent and other expenses of the promoters, journalists, and employees, noting that such expenses are regular and bound to be carried out by a digital print media firm.
“Even if it is accepted that there were overpayments and excessive expenditure incurred by the Petitioner, then too it does not disclose any criminal offence. The allegation of siphoning is, therefore, not tenable,” the judge said.
She further emphasised that for a case of cheating to be established, there has to be an aggrieved person who complains of being cheated out of their valuable property. In this case, she observed, Worldwide Media Holdings—which invested $1.5 million in NewsClick—has no grievances whatsoever.
“Pertinently, the Complaint had been made by one Sohan Singh, who was merely an informant and was not the aggrieved person. There is nothing that has emerged even during the investigations, as reflected in the Status Report, indicating that any person was aggrieved or cheated by the Petitioner. The offence of cheating even if all the allegations made are admitted, is not established,” Justice Krishna said.
Based on the same reasoning, she added, Worldwide Media Holdings has not complained about any misappropriation by NewsClick and its promoter, and hence, IPC Section 406 did not apply.
“Even if all the allegations are accepted, no offence under 406 or 420 IPC is disclosed in the FIR and in the subsequent investigations that have been undertaken. The continuation of such FIR is nothing but a gross abuse of the process of law and is hereby quashed,” she ruled.
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‘Bald & baseless allegations’
Based on the EOW’s FIR, the ED had opened an ECIR on 2 September, 2020 to probe the money laundering aspect, and carried out searches and scrutiny of documents related to NewsClick.
Purkayastha had moved the high court seeking a copy of the ECIR—ED’s equivalent of FIR, which it maintains is an internal document generated for administrative purposes before formally initiating a money laundering probe.
In the order made public Wednesday, the high court came down heavily on the agency, observing that it had almost misinterpreted the Supreme Court’s judgement in the Vijay Madan Lal Chaudhary case (July 2022), in which it was held that denying any accused person a copy of the ECIR would not amount to a violation of the accused’s fundamental rights. The high court said that the top court’s ruling did not explicitly state that the ED can—in each and every case, as a matter of right—deny the ECIR copy.
Justice Krishna further observed, “The ED has claimed that the mala fide of the Complainant is immaterial in the investigations after the registration of ECIR, but this contention is also misconceived and untenable in law. The Petitioners have a constitutional right to a free and fair investigation, and mala fide registration of the impugned ECIR and mala fide investigation being conducted by ED hampers the investigations.”
She added, “Not only are the present proceedings mala fide, but also an arbitrary attack and abuse of powers on the free and impartial journalism of the Petitioners.”
On the merits of ED’s probe, the judge compared the investigation to a “fishing and roving exercise in the financial affairs of the Petitioners without the existence of any offence”. She added that the money laundering case does not stand in the wake of no offences being made out for cheating and criminal misappropriation, and that ED itself has been unable to substantiate its claim that there is a predicate offence under criminal conspiracy.
“The response of the ED itself reflects that even if the entire allegations against the Petitioners are admitted, no offence is disclosed in the FIR. Pertinently, extensive investigations have been carried out by ED for about a year and a half and Petitioners as well as its employees have been summoned and examined many a times, but nothing incriminating till date has been found or placed on record,” the judge further noted.
“Aside from bald assertions of there being a criminal conspiracy, there is not a whisper of any incriminating allegation, which would even remotely suggest the commission of the offence punishable under Section 4 PMLA (Prevention of Money Laundering Act).”
(Edited by Mannat Chugh)
Severe judicial strictures. Should the matter rest, or is further action merited.