Delhi HC Quashes FIR and ED's ECIR Against Newsclick, Finds No Cognisable Offence in FDI Transactions

Justice Neena Bansal Krishna quashed the EOW's FIR and the Enforcement Directorate's ECIR against PPK Newsclick Studio, holding that the FDI transactions disclosed no criminal offence under IPC or PMLA.

The Delhi High Court on 29 May 2026 quashed FIR No. 0116/2020 registered by the Economic Offences Wing of Delhi Police and the Enforcement Directorate's Enforcement Case Information Report bearing ECIR/14/HIU/2020, both directed against digital news platform PPK Newsclick Studio Pvt. Ltd. and its promoter-director Prabir Purkayastha. Justice Neena Bansal Krishna, sitting singly, held that even if every allegation in the FIR were accepted at face value, the essential ingredients of cheating under Section 420 IPC and criminal breach of trust under Section 406 IPC were absent. Because the predicate FIR was quashed, the ECIR registered under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA) could not survive independently. A third petition seeking supply of the ECIR copy was disposed of as infructuous.

The FIR, the ECIR, and the Three Petitions

FIR No. 0116/2020 was registered on 26 August 2020 at Police Station Economic Offences Wing under Sections 406, 420 and 120B IPC on a complaint by one Sobhan Singh, forwarded by an Under Secretary in the Ministry of Information and Broadcasting. The core allegation was that Newsclick had received foreign direct investment of USD 1.5 million (Rs. 9.59 crore) from M/s Worldwide Media Holdings LLC (WWMH), a Delaware-incorporated entity, on 11 April 2018, at a share price of Rs. 11,510 per share against a face value of Rs. 10, and that this overvaluation was designed to circumvent the 26% FDI cap on digital news media and to siphon funds through salary, consultancy and rent payments.

Within seven days of the FIR, the ED registered ECIR/14/HIU/2020 on 2 September 2020 under Sections 3 and 4 PMLA, treating the scheduled offences in the FIR as the predicate. In February 2021, the ED conducted search and seizure operations at Newsclick's offices and at premises of employees, directors, shareholders and contractors between 9 and 13 February 2021 under Section 17 PMLA.

Three writ petitions under Article 226 of the Constitution read with Section 482 Cr.P.C. were filed: W.P.(CRL.) No. 1130/2021 for quashing the FIR; W.P.(CRL.) No. 1146/2021 for quashing the ECIR investigation; and W.P.(CRL.) No. 1129/2021 for a direction to the ED to supply a copy of the ECIR. The three petitions were heard together and decided by a common judgment.

Newsclick's Corporate History and the FDI Transaction

Newsclick was founded in 2009 and initially operated through Newsclick India Trust. In 2015 it became M/s PP Newsclick Studio LLP. In May 2017, the LLP engaged M/s BGJC Associates LLP to value the entity with a view to attracting investment. The LLP was converted into a private limited company pursuant to a board resolution dated 3 June 2017, and PPK Newsclick Studio Pvt. Ltd. came into existence on 11 January 2018.

Before entering into any investment agreement, Newsclick wrote to the Ministry of Information and Broadcasting on 20 December 2017 seeking clarification on whether online publication of news fell within the FDI restrictions applicable to print media. The Ministry replied on 5 January 2018 that “online publications on website/web portal do not fall under the ambit of print media.” Acting on that clarification, the company proceeded with the FDI.

M/s BGJC Associates LLP certified the fair value of Newsclick's equity shares at Rs. 9,188 per share on 5 March 2018. After negotiations, WWMH and Newsclick agreed on a price of Rs. 11,510 per share. An Investment Agreement dated 20 March 2018 provided for WWMH to invest USD 4.5 million in three tranches of USD 1.5 million each in exchange for 23.07% of the company's shares. Only the first tranche of USD 1.5 million was remitted on 11 April 2018, giving WWMH 7.69% of the shares. The remaining two tranches were never remitted. All disclosures required under FEMA were made and the remittance was reported to the Reserve Bank of India.

The EOW's status report noted that WWMH had been incorporated on 29 November 2017 but alleged that a company of the same name had been voided in Delaware on 1 June 2017. The court accepted Newsclick's explanation that under Delaware law, a voided company's name may be reused by a new incorporator, and that the WWMH with which Newsclick dealt was the entity incorporated on 29 November 2017 — a distinct company with no connection to the earlier voided entity.

The Vanishing RBI Reply and the Two Status Reports

A significant procedural episode shaped the court's assessment. The EOW emailed an advance copy of its status report to Newsclick's counsel on 26 July 2021. That report, signed by ACP Anil Kumar of EOW, recorded that the RBI had confirmed in response to a Form FCGPR inquiry that the foreign inward remittance was under the automatic route and that there was no delay in the issue of shares or in reporting, in compliance with extant FEMA regulations.

When the State formally placed its status report on record on 4 October 2021, the reference to the RBI's reply had been entirely removed and replaced with fresh allegations. No explanation was offered for the deletion. The court found this significant: the first report, though not formally placed on record, was sufficient to show that no FEMA violation had been established by the investigating agency's own inquiries.

Why the FIR Disclosed No Offence

Justice Neena Bansal Krishna examined each allegation methodically.

Overvaluation to circumvent the FDI cap. The 26% cap on FDI in digital news media was introduced only by Press Note No. 04/2019 dated 18 September 2019. The investment agreement was executed on 20 March 2018 and the remittance received on 11 April 2018 — more than a year before the cap existed. There was no law to circumvent at the time of the transaction.

Share premium as evidence of wrongdoing. The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 under Notification No. FEMA 20(R)/2017-RB mandated that shares transferred to a foreign entity must be priced at or above the fair value determined by an internationally accepted methodology. Issuing shares to WWMH at Rs. 10 face value would itself have violated FEMA. The price of Rs. 11,510 per share, arrived at through the Discounted Cash Flow method certified by a chartered accountant, was lawful. The court held that the purchase of shares at a premium above nominal face value is not an offence.

Siphoning through salary, consultancy and rent. The EOW alleged that more than 45% of the FDI was diverted to pay salaries, consultancy fees and rent even though the company's revenue was far below its expenditure. The court held that a media company paying journalists and operational expenses is doing precisely what such companies do. Even accepting that expenditure exceeded revenue, no criminal offence was disclosed. The court observed that if a loss-making company paying its employees could be charged with siphoning, any such company would be exposed to criminal prosecution — an interpretation it declined to accept.

Section 420 IPC — cheating. For cheating, there must be a person who was deceived and induced to part with property. WWMH, the entity that remitted USD 1.5 million, had raised no complaint of having been cheated. The complainant Sobhan Singh was an informant, not an aggrieved party. Nothing in the investigations or the status reports identified any person who had been cheated. The court held that the offence of cheating was not established even on the admitted facts.

Section 406 IPC — criminal breach of trust. The offence requires entrustment of property followed by misappropriation. The court found that the investment by WWMH was a commercial purchase of shares, not an entrustment. No person had claimed to have entrusted property to Newsclick that was then misappropriated.

Section 120B IPC — criminal conspiracy. The ED argued that even if Sections 406 and 420 IPC were not made out, the conspiracy charge survived because Prabir Purkayastha had entered into an agreement with Jason Pfetcher and Neville Roy Singham. The court held that merely entering into an agreement is not sufficient to constitute criminal conspiracy unless the illegal objective or the illegal means can be identified. The ED's response did not explain what illegal act or illegal means the alleged conspirators had agreed upon. After extensive investigations spanning over a year and a half, with Newsclick's personnel summoned and examined multiple times, nothing incriminating had been placed on record beyond bald assertions.

The ECIR Cannot Survive the Quashing of the FIR

On the ECIR, the court applied the principle that PMLA proceedings require a subsisting scheduled offence as their substratum. It relied on the Supreme Court's ruling in Vijay Madanlal Choudhary v. Union of India (2023) 12 SCC 1, which held that authorities under the PMLA cannot act against a person for money laundering on the assumption that a scheduled offence has been committed unless it is registered with the jurisdictional police or pending inquiry before a competent forum, and that if the scheduled offence is quashed, no action for money laundering can follow.

The court also relied on a Division Bench ruling of the Delhi High Court in Harish Fabiani & Ors. v. Enforcement Directorate & Ors. 2022:DHC:3892-DB, which held that if the FIR of the predicate offence is quashed, the ECIR automatically becomes unsustainable. Since FIR No. 0116/2020 was quashed, ECIR/14/HIU/2020 was quashed as a consequence.

The ED had argued that the ECIR is an internal document and that the accused has no right to its copy, relying on Vijay Madanlal Chaudhary v. Union of India, SLP (Crl.) No. 4634/2014. The court noted that the Supreme Court in that case had not held that the ED could as a matter of right refuse to supply the ECIR — only that non-supply would not in every case constitute a constitutional violation. In any event, with the ECIR itself quashed, the prayer for its supply became infructuous.

Order

Justice Neena Bansal Krishna allowed all three writ petitions. FIR No. 0116/2020 dated 26 August 2020 registered at P.S. Economic Offences Wing under Sections 406, 420 and 120B IPC is quashed. ECIR/14/HIU/2020 dated 2 September 2020 registered by the Directorate of Enforcement under Sections 3 and 4 PMLA is quashed. W.P.(CRL.) No. 1129/2021, seeking supply of the ECIR copy, is disposed of as infructuous. The judgment was reserved on 3 December 2025 and pronounced on 29 May 2026.