Quashing the FIR against NewsClick editor-in-chief Prabir Purkayastha, the Delhi High Court held that the investigations conducted by the Economic Offences Wing (EOW) and the Enforcement Directorate (ED) amounted to a “fishing and roving exercise in the financial affairs of the petitioners without the existence of any offence.”
The Court found that neither the EOW nor the ED had been able to establish the existence of a criminal conspiracy. It noted that the allegation of conspiracy rested primarily on the fact that Jason Pfetcher had entered into an agreement with the organisation. Pfetcher is the US-based lawyer who negotiated the agreement between Worldwide Media Holdings LLC (WMH) and NewsClick.
“Merely because the parties entered into an agreement is not sufficient to constitute criminal conspiracy, unless the ED is able to show what is the illegal objective or the means which have been adopted by the Petitioners and the other persons which can be termed as criminal conspiracy,” Justice Neena Bansal Krishna observed.
THe FIR was registered in August 2020 against Prabir following a complaint forwarded by the Ministry of Information and Broadcasting. It alleged that the news organisation had received Rs 9.59 crore in foreign direct investment (FDI) from US-based Worldwide Media Holdings LLC through an allegedly overvalued share transaction designed to circumvent FDI restrictions.
The EOW initially registered an FIR on August 26, 2020, charging Prabir with criminal breach of trust, cheating, and criminal conspiracy. A month later, in September 2020, the ED initiated proceedings against him under the Prevention of Money Laundering Act (PMLA).
The court noted that NewsClick had sought clarification from the Ministry of Information and Broadcasting regarding the FDI policy before accepting the investment. On December 20, 2017, it wrote to the ministry seeking clarification, and on January 5, 2018, the ministry responded that “online publications on website/web portal do not fall under the ambit of print media.” Print media is subject to restrictions on foreign funding.
Following the Ministry’s response, NewsClick entered into an agreement with WMH.
In February 2021, however, the ED conducted multiple search and seizure operations under Section 17 of the PMLA at the offices of NewsClick, as well as the residences and premises of its editor-in-chief, employees, directors, shareholders, and contractors. The petitioners alleged that they were not provided copies of either the FIR or the Enforcement Case Information Report (ECIR).
“The facts revealed a pattern of evasiveness and opacity being adopted by the Investigating Agency, in their approach during the investigations against the Petitioner,” the court said.
It further held that the FIR was “totally vague, baseless and contains frivolous allegations” and that even if the allegations were accepted at face value, they did not disclose any cognisable offence.
Rejecting the allegation of cheating, the court observed that the offence requires an identifiable aggrieved person who has been deceived and deprived of property.
“In this case, M/s Worldwide Media Holdings LLC is the entity which had forwarded 1.5 Million USD to the Petitioner. However, there is no Complaint whatsoever, by the Company about having been cheated by the Petitioner,” the court said. It noted that the complainant, Shoban Singh, was merely an informant and was not the aggrieved person.
The court also found that the FIR did not indicate whether the EOW had conducted any inquiry into Singh’s antecedents, his source of information, or his connection to the complaint. It further criticised the agency for what it described as executive overreach.
“There is nothing which has emerged even during the investigations as reflected in the Status Report, that there was any person who was aggrieved or who was cheated by the Petitioner. The offence of cheating, even if all the allegations made are admitted, is not established,” the court held.
On the charge of criminal breach of trust, the court observed that no person had claimed to have entrusted any property to the petitioner or alleged that such property had been misappropriated.
“There may have been a business transaction of investment and purchase of shares by M/s Worldwide Media Holdings LLC on payment of 1.5 Million USD, but by no stretch of interpretation can it be said to be an entrustment by M/s Worldwide Media Holdings LLC or misappropriation by the Petitioner.”
The court said that no offence under IPC sections 406 (criminal breach of trust) or 420 (cheating) is disclosed in the FIR.
“The continuation of such FIR is nothing but a gross abuse of the process of law and is hereby quashed,” it held.
Addressing the ED’s ECIR, the court noted that there was no cap on FDI applicable to the transaction in 2018. It further observed that even if a violation had occurred, it would at most amount to an offence under the Foreign Exchange Management Act (FEMA), which is not a scheduled offence under the PMLA.
The court also referred to a status report filed by the ED in August 2021 in a bail proceeding, which stated that the Reserve Bank of India had found no violation of FDI guidelines by the petitioners.
“The FDI infusion in the Petitioners Company was in full compliance with the FDI guidelines. From the reply of ED, it is evident that the allegation that there is a clear-cut existence of a scheduled offence, is totally misconceived and baseless,” the court said.
It further noted that although the impugned ECIR had remained pending for nearly two years, and despite Purkayastha and NewsClick employees repeatedly joining the investigation in 2021, they were not summoned even once between September 2021 and June 2022.
“The manner in which the investigations have been conducted clearly show that the same is a fishing and roving exercise in the financial affairs of the Petitioners without the existence of any offence,” the court observed.
The court also highlighted the absence of any incriminating material despite extensive investigations over more than a year and a half.
“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 judgment 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.”
Justice Neena Bansal Krishna ultimately held that, even accepting the allegations in their entirety, no offence was made out against the petitioners. Accordingly, the case was quashed as being without legal basis.