The Delhi High Court quashed an FIR registered against digital news platform Newsclickand its founder Prabir Purkayastha, holding that the allegations relating to foreign direct investment (FDI), share valuation and expenditure of funds did not disclose offences of cheating or criminal breach of trust.
In a judgment delivered on May 29, Justice Neena Bansal Krishna quashed the FIR registered by the Economic Offences Wing (EOW) on August 26, 2020, observing that even if all allegations in the complaint were accepted at face value, the essential ingredients of the offences were not made out.
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The court also quashed the Enforcement Directorate’s ECIR registered on September 2, 2020, under the Prevention of Money Laundering Act (PMLA), noting that the money laundering case was founded on the same allegations forming the basis of the FIR.
The Delhi Police’s FIR in the case alleged that PPK Newsclick Studio Private Limited received foreign direct investment (FDI) of ₹9.59 crore from Worldwide Media Holdings LLC, U.S, during the financial year 2018-19 in exchange of 7.69% shares of the company. The FIR claimed that the investment was made by greatly overvaluing the shares of the petitioner company to avoid the alleged cap of 26% FDI in a digital news website.
It further alleged that over 45% of this investment was diverted or siphoned off towards the payment of salary/consultancy fees, rent, and other expenses, which are alleged to have been made for ulterior motives. The ED initiated its probe on the basis of the Delhi Police’s FIR.
No cap on FDI at the time: Court
The court, however, noted that at the time the investment was made there was no cap on FDI in digital news media. It pointed to a clarification issued by the Ministry of Information and Broadcasting in January 2018 stating that online news publications did not fall within the ambit of print media.
The court further stated that FEMA regulations required shares issued to foreign investors to be priced at not less than their fair value and that the fair value of the equity shares have been determined by an independent valuer as ₹9,188 per share. It said the eventual issue price of ₹11,510 per share to Worldwide Media was the result of negotiations between the investor and the company.
“It is an economic decision which does not spell out any criminal offence,” the judge remarked.
On the allegation of 45% of the investment was directed towards payment of salary/consultancy fees, rent and other expenses, the court said, “when a Company is functioning especially in the business of digital print media, such expenses are bound to occur”.
“Even if it is accepted that there were over payments and excessive expenditure incurred by the Petitioner (Newsclick), then too it does not disclose any criminal offence,” it added.
Cheating allegation
The petitioners have been charged with the offence under Section 420 IPC which deals with cheating and dishonestly inducing delivery of property.
Justice Krishna remarked that for the offence of cheating, it is necessary that there must be an aggrieved person who has been cheated out of his valuable property. It said there was no complaint whatsoever, by Worldwide Media about having been cheated by Newsclick.
“Pertinently, the complaint had been made by one Shoban Singh, who was merely an informant and was not the aggrieved person,” it highlighted.
Similarly, the court found that the offence of criminal breach of trust under Section 406 IPC was also absent because there was no entrustment of property that could have been misappropriated. The transaction was merely one of investment and purchase of shares, it said.
The ED had argued that the offence of criminal conspiracy is made out in the facts of the case as the amount of ₹9.59 crore has been brought into India in the garb of investment in digital media under automatic route. The ED had argued this investment transaction was carried out by Mr. Purkayastha in connivance with Jason Pfetcher and Neville Roy Singham.
“From the response of the ED also, it is evident that they are trying to claim that the offence under Section 120B IPC, is still made out. However, on what basis the criminal conspiracy is being alleged is not explained, except that Prabir Purkayastha and Jason Pfetcher, had entered into an agreement,” the court said.
“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,” the court added.
Published - June 11, 2026 06:11 am IST
