ED challenges Delhi HC order quashing NewsClick PMLA case

New Delhi: The Enforcement Directorate has approached the Supreme Court challenging a Delhi High Court order that quashed the money laundering case against NewsClick, the news portal, and its editor-in-chief Prabir Purkayastha, over alleged violations of FDI norms. In its petition before the apex court, the agency argued that the high court had quashed the enforcement case information report without examining the PMLA case. It also claimed there was an inordinate delay of five months in delivering the judgment.

The matter is yet to be listed for hearing. In its May 29 ruling, Justice Neena Bansal Krishna of the high court observed that the continuation of the FIR registered by the Delhi Police’s Economic Offences Wing was “nothing but a gross abuse of the process of law,” and said that once the FIR in the predicate offence was set aside, the ED’s ECIR in the matter was also liable to be closed. The EOW’s 2020 FIR had alleged that PPK Newsclick Studio Pvt Ltd, the parent company of NewsClick, received foreign direct investment of Rs 9.59 crore from Worldwide Media Holdings LLC, USA, during the 2018-19 financial year in violation of foreign investment laws, causing a loss to the government exchequer.

It further alleged that the investment was made by significantly overvaluing the company’s shares in order to bypass the 26 per cent FDI cap for digital news websites, and that more than 45 per cent of the amount was diverted or siphoned off as salary, consultation fees, rent and similar expenses for ulterior motives. Based on these allegations, the ED later registered a money laundering case against NewsClick, Purkayastha and others. PPK Newsclick Studio had sought quashing of the FIR, arguing that it was filled with vague and unsupported allegations.

In its judgment, the high court said the investment was a business decision that “did not spell out any criminal offence.” It also noted that, according to the Union Ministry of Information and Broadcasting’s reply to a letter from the news outlet, there was no cap or restriction on receiving FDI in digital media at the relevant time. The court held that the investment was in line with accepted practices, and even if all the allegations were taken at face value, offences of cheating or criminal breach of trust were not made out. It further observed that for cheating to be established, there must be a person who was “cheated” — in this case, M/s Worldwide Media Holdings LLC — but no such complaint had been made.

Instead, the complaint had been filed by “merely an informant.” The court also noted that a company engaged in digital print media would naturally incur expenses on salaries, consultation fees, rent and the like, and therefore the allegation of siphoning was not sustainable. The high court also rejected the ED’s effort to continue its money laundering case on the basis of conspiracy under the IPC, saying the investigating agency had to show the “illegal objective” or the “means” allegedly adopted by NewsClick and others. “Pertinently, extensive investigations were carried out by the ED for about a year and a half, and the petitioners as well as their employees have been summoned and examined many a times, but nothing incriminating till date has been found or placed on record,” the court said.

“Aside from bald assertions of 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 of the PMLA,” it added. “The FIR No. 0116/2020 and the ECIR bearing ECIR/14/HIU/2020 are, hereby, quashed,” the court concluded.

It also said that once the ECIR was quashed, the request for a copy of it had become infructuous.