New Delhi: The Enforcement Directorate (ED) has approached the Supreme Court challenging a Delhi High Court order that quashed a money laundering case against news portal NewsClick and its editor-in-chief, Prabir Purkayastha, over alleged violations of foreign direct investment (FDI) rules.
In its plea, the agency has argued that the High Court quashed its Enforcement Case Information Report (ECIR) without examining the money laundering allegations under the Prevention of Money Laundering Act (PMLA). The ED has also raised concerns over the delay of around five months between the conclusion of proceedings and the pronouncement of the judgment.
The matter has not yet been listed for hearing before the Supreme Court.
Why Did The Delhi High Court Quash The Case?
In its May 29 judgment, Justice Neena Bansal Krishna of the Delhi High Court held that the money laundering proceedings could not continue after the underlying criminal case registered by the Delhi Police’s Economic Offences Wing (EOW) was quashed.
The court described the continuation of the EOW’s FIR as a “gross abuse of the process of law” and ruled that the ED’s ECIR was also liable to be closed once the predicate offence had been quashed.
The case originated from an FIR registered in 2020 against PPK Newsclick Studio Pvt Ltd, the parent company of NewsClick. The FIR alleged that the company received Rs 9.59 crore in FDI from US-based Worldwide Media Holdings LLC during the financial year 2018-19 in violation of foreign investment rules.
Investigators alleged that the investment was structured by substantially overvaluing the company’s shares to circumvent the reported 26% FDI cap applicable to digital news websites at the time.
The FIR further alleged that more than 45% of the investment was diverted through payments described as salaries, consultancy fees and rent. The ED subsequently registered a money laundering case against NewsClick, Purkayastha and others.
What Did The Court Say About FDI And Alleged Diversion Of Funds?
NewsClick’s parent company had sought the quashing of the FIR, arguing that the allegations were vague.
In its judgment, the High Court observed that the investment was an economic decision and did not, by itself, establish a criminal offence. It also referred to a response from the Union Ministry of Information and Broadcasting indicating that there was no cap or restriction on the receipt of FDI in digital media at the relevant time.
The court held that the allegations did not establish the offences of cheating or criminal breach of trust, even if the claims in the FIR were taken at face value.
On the cheating allegation, it noted that Worldwide Media Holdings LLC, the entity that made the investment, had not filed a complaint claiming that it had been cheated. The complaint had instead been made by an informant.
The court also rejected the allegation that payments towards salaries, consultancy fees and rent necessarily demonstrated the siphoning of funds, observing that such expenses were part of running a digital media business.
Why Did The Court Reject The ED’s Money Laundering Case?
The High Court also considered the ED’s reliance on an alleged criminal conspiracy to sustain the proceedings. It said the agency needed to establish the illegal objective or means allegedly adopted by the accused.
The judgment noted that the ED had conducted an investigation lasting around 18 months and had repeatedly summoned and examined the petitioners and their employees. According to the court, the material placed on record did not establish the required connection between the allegations and an offence under Section 4 of the PMLA.
The court consequently quashed both the EOW’s FIR, registered as FIR No. 0116/2020, and the ED’s ECIR, numbered ECIR/14/HIU/2020.
What Happens Next In The NewsClick Case?
The ED’s appeal places the High Court’s ruling before the Supreme Court. The agency is challenging the reasoning behind the quashing of its ECIR, including the court’s treatment of the underlying FIR and the alleged delay in delivering the judgment.
The Supreme Court has yet to list the matter for hearing. Until the challenge is taken up, the ED’s objections remain arguments in its plea, while the Delhi High Court’s May 29 order remains the ruling under challenge.
