ED Moves Supreme Court Against Order Quashing FIR, ED Case Against NewsClick, Prabir Purkayastha

The Enforcement Directorate (ED) has moved the Supreme Court challenging the Delhi High Court's decision to quash the FIR against digital news platform NewsClick and its founder, Prabir Purkayastha.

The High Court had also quashed the money laundering proceedings arising from allegations of irregularities in foreign funding.

The special leave petition filed by ED on October 8 is yet to be listed before the Supreme Court.

The challenge is against the High Court order by Justice Neena Bansal Krishna that held the allegations did not disclose the offences of cheating or criminal breach of trust under Sections 420 and 406 of the Indian Penal Code.

The High Court observed, “Even if all the allegations are accepted, no offence under 406 or 420 IPC is disclosed in the FIR and in the subsequent investigations that have been undertaken.”

The case arose from allegations that NewsClick received foreign direct investment of approximately ₹9.59 crore from Delaware based Worldwide Media Holdings LLC in April 2018 by issuing shares at ₹11,510 per share.

The authorities alleged that the shares were overvalued to circumvent restrictions on foreign investment in digital news media and that over 45% of the funds were spent on salaries, consultancy fees, rent and related expenses. The ED initiated its money laundering investigation based on an FIR registered by the Economic Offences Wing.

Before the High Court, NewsClick and Purkayastha had argued that no cap on foreign investment in digital news media existed when the investment was received. They also relied on an independent chartered accountant's valuation and an RBI communication indicating that the remittance was under the automatic route, with no delay in share issuance or regulatory reporting.

Rejecting the allegations, the High Court held that the mutually agreed share price was an economic decision that did not, by itself, establish criminality. It also observed that routine business expenditure could not be treated as siphoning of funds and that the alleged offence of cheating was not made out in the absence of an identifiable victim.

The Court further held, “The continuation of such FIR is nothing but a gross abuse of the process of law and is hereby, quashed.” Having found that the alleged offences were not disclosed, it also quashed the ED's Enforcement Case Information Report (ECIR) and allowed the petitions.

The ED's challenge before the Supreme Court seeks to contest the High Court's decision to terminate the proceedings.