New Delhi Jun 11: Observing that allowing the Delhi Police’s Economic Offences Wing (EOW) to continue with its FIR would amount to gross abuse of the law, the Delhi High Court has quashed the criminal case against PPK Newsclick Studio and its promoter, Prabir Purkayastha. A single-judge Bench of the court also quashed the money laundering probe by the Enforcement Directorate, adding that the agency had levelled only “bald and baseless” allegations.
PPK Newsclick Studio is the parent company of news website NewsClick.
The EOW had booked the company and Purkayastha under Sections 406 (criminal breach of trust), 420 (cheating), and 120-B (criminal conspiracy) of the Indian Penal Code in August 2020, based on a complaint that the company had allegedly received Foreign Direct Investment of Rs 9.59 crore at grossly inflated valuations in April 2018. Based on the FIR, the ED had also opened an Enforcement Case Information Report (ECIR) to probe the money laundering aspect.
Before going into the merits of the case, the high court pulled up the EOW for lodging an FIR directly on the basis of a complaint from one Sohan Singh, without any preliminary enquiry into the claims, or verification of his association with the firm or his knowledge of the alleged violations.
The FIR had claimed that there was overvaluation of the firm’s shares—from Rs 10 to Rs 11,510 per share—to incorporate FDI from Worldwide Media Holdings LLC amounting to Rs 9.59 crore.
The transaction, carried out in April 2018, was the first tranche of three equal instalments for an overall stake of 23.07 percent in the NewsClick promoter firm.
The court, however, observed that the firm was initially controlled by a trust, which was later converted into a private limited company to facilitate FDI inflows via established measures.
On allegations of overvaluation of shares to circumvent FDI cap, the court noted that the company had already sought clarification from the Ministry of Information and Broadcasting, which had confirmed that companies engaged in online news publishing were not covered by FDI restriction regime.
Moreover, the court observed that FEMA (Foreign Exchange Management Act) rules prohibit transfer of shares at a price lower than original book value, and that the price reached by NewsClick management and the foreign funder was reached by Discounted Cash Flow (DCF) accepted worldwide.
“The said price was worked out between M/s Worldwide Media Holdings LLC and the Petitioner after due negotiations and their mutual decisions. On the assessment of day-to-day market and the prospects of growth of the Company, the price was mutually agreed by the Petitioner and M/s Worldwide Media Holdings LLC. It is an economic decision which does not spell out any criminal offence,” Justice Neena Bansal Krishna ruled.
She also rejected the other allegations about siphoning of funds received through FDI in the form of payment of salary, consultation fee, rent and other expenses of the promoters, journalists, and employees, noting that such expenses are regular and bound to be carried out by a digital print media firm.
“Even if it is accepted that there were overpayments and excessive expenditure incurred by the Petitioner, then too it does not disclose any criminal offence. The allegation of siphoning is, therefore, not tenable,” the judge said.
She further emphasised that for a case of cheating to be established, there has to be an aggrieved person who complains of being cheated out of their valuable property. In this case, she observed, Worldwide Media Holdings—which invested $1.5 million in NewsClick—has no grievances whatsoever.
