‘Abuse of powers’: What Delhi HC said while quashing NewsClick FIR and ED case over FDI allegations

Delhi High Court Dismisses FIR Against NewsClick and ED Case on FDI Allegations, Citing Abuse of Legal Process

Abuse of powers – The Delhi High Court has dismissed a First Information Report (FIR) filed by the Enforcement Directorate (ED) against NewsClick and its founder-editor, Prabir Purkayastha, over accusations tied to foreign direct investment (FDI). The court ruled that the essential elements of cheating, criminal breach of trust, or criminal conspiracy were not proven, even if the allegations in the FIR were taken at face value.

Legal Ruling and Quashing of ECIR

The bench highlighted that the continued existence of the FIR amounted to a “gross abuse of the process of law.” Justice Neena Bansal Krishna stated,

“It has been held that if the FIR under predicate offence is quashed, the ECIR automatically is liable to be quashed. Consequently, the complete ECIR is also quashed. Once the ECIR itself is quashed, the prayer for supply of the copy of the ECIR has become infructuous.”

An Enforcement Case Information Report (ECIR) is an internal document used by the ED to formally begin a money laundering investigation under the Prevention of Money Laundering Act (PMLA). It mirrors the role of a police FIR but operates within the ED’s procedural framework.

Facts of the FIR and FDI Allegations

The FIR, registered in August 2020 based on a complaint from the Ministry of Information and Broadcasting, alleged that NewsClick had received approximately Rs 9.59 crore in FDI from US-based Worldwide Media Holdings LLC. This was claimed to have occurred through an overvalued share transaction intended to bypass FDI restrictions. The complaint argued that the shares were issued at an inflated rate of Rs 11,510 each, with a significant portion of the funds directed toward salaries, consultancy, and rent.

NewsClick contested the FIR, asserting that the investment was a legitimate FDI made via authorized banking channels and backed by a valuation report from an independent chartered accountant. The company also pointed out that it had sought clarification from the Ministry of Information and Broadcasting in December 2017 regarding FDI in online news platforms. In January 2018, the ministry confirmed that online publications were not considered “print media” for FDI purposes.

Interim Measures and ED Raids

Prabir Purkayastha was granted temporary protection from arrest in June 2021. The orders were later extended. The ED had conducted raids on NewsClick’s offices and the residences of its editors in February 2021 as part of the money laundering case. The court noted that the USD 1.5 million investment was received in April 2018, a period when no FDI limits applied to digital news media. The 26% cap on foreign investment in digital news was introduced only in 2019, making it inapplicable to the 2018 transaction.

Valuation and Criminal Liability

Justice Krishna emphasized that the share valuation was carried out by professionals following FEMA guidelines and internationally accepted methods. The court recorded that the fair value of shares was assessed at Rs 9,188 per share, while the final price of Rs 11,510 per share resulted from negotiations between the investor and the company.

“The said price was worked out between M/s Worldwide Media Holdings LLC and the Petitioner after due negotiations and their mutual decisions… It is an economic decision which does not spell out any criminal offence,”

the court stated, as reported by ANI.

The ruling also rejected the claim that FDI was diverted to cover operational costs. The court clarified that such expenditures are routine for digital media organizations, and even if they were excessive, they do not inherently indicate criminal activity. The case underscores the court’s scrutiny of whether legal procedures were misused to target legitimate business decisions.