Explained: Why did Delhi High Court quash charges against NewsClick?
The story so far: The Delhi High Court has quashed the first information report (FIR) registered by the Economic Offences Wing (EOW) of the Delhi
The story so far: The Delhi High Court has quashed the first information report (FIR) registered by the Economic Offences Wing (EOW) of the Delhi Police and the consequent money laundering proceedings initiated by the Enforcement Directorate (ED) against news portal NewsClick and its editor-in-chief, Prabir Purkayastha, over allegations of foreign funding. Holding the action to be a “mala fide and arbitrary” exercise of power, Justice Neena Bansal Krishna said it amounted to an abuse of the legal process and posed a threat to free and independent journalism. What were the allegations against NewsClick? The proceedings stemmed from two cases registered in 2020 by the EOW of the Delhi Police and the ED. The EOW case originated from a letter dated June 26, 2020, written by Sobhan Singh, who was an informant and not an aggrieved party, to the Ministry of Information and Broadcasting, alleging that PPK NewsClick Studios Pvt. Ltd. had misappropriated funds and violated foreign direct investment (FDI) norms. The communication was subsequently forwarded by Vijay Kaushik, Under Secretary in the Ministry, following which the EOW registered an FIR. The FIR alleged that NewsClick had received an investment of $1.5 million from Worldwide Media Holdings LLC, a Delaware-based entity in the United States, at an inflated share valuation. The investigating agency claimed that the premium at which the shares were issued was intended to circumvent the 26% cap on foreign investment in digital news media. However, the investment agreement had been signed in March 2018, and the funds received in April 2018, more than a year before the 26% cap was introduced through a government press note on September 18, 2019. The allegation that NewsClick had manipulated its share valuation also formed the basis of the alleged violations under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 (FEMA). The regulations require that shares issued by an Indian entity to a foreign investor be valued in accordance with an internationally accepted pricing methodology and not be transferred below fair value. The record also showed that, before receiving the investment, NewsClick had written to the Information and Broadcasting Ministry in December 2017 seeking clarification on whether online news portals were subject to the FDI restrictions applicable to print media.
In January 2018, the Ministry responded that “online publications on website/web portal do not fall under the ambit of print media”. During the proceedings, reference was made to a status report dated July 26, 2021, signed by Assistant Commissioner of Police Anil Kumar of the EOW and supplied to NewsClick’s counsel. The report incorporated a response from the Reserve Bank of India (RBI) stating that the foreign remittance had come through the automatic route and that no FEMA violation was disclosed. However, on July 29, 2021, the state sought to distance itself from the report and requested permission from the court to file a fresh status report. When a revised report was eventually filed on October 4, 2021, the RBI’s observations were omitted. The EOW nevertheless maintained that NewsClick, despite being a loss-making entity, had received FDI at inflated valuations and alleged that the share valuation mechanism had been used to bypass regulatory restrictions. It further claimed that 45% of the foreign investment had been diverted. Within a week of the FIR being registered, the ED initiated proceedings under the Prevention of Money Laundering Act (PMLA) by registering an Enforcement Case Information Report (ECIR), similar to an FIR, on the basis of the same allegations. The predicate offences cited in the FIR included criminal breach of trust, cheating and criminal conspiracy. How did the UAPA case against NewsClick unfold? Apart from the proceedings under FEMA and the PMLA, Mr. Purkayastha and NewsClick’s head of human resources, Amit Chakravarty, also faced prosecution under the Unlawful Activities (Prevention) Act (UAPA). In October 2023, the Special Cell of the Delhi Police arrested the duo following a report published by The New York Times alleging links between NewsClick’s funding and Chinese state-backed propaganda efforts. Mr. Chakravarty subsequently turned approver and was released from custody. Purkayastha remained in Tihar Jail for nearly seven months before the Supreme Court, in May 2024, declared his arrest illegal and set aside the remand order. The court found that neither he nor his counsel had been furnished with the written grounds of arrest before he was remanded to custody. A Bench comprising Justices B.R. Gavai and Sandeep Mehta held that communication of the grounds of arrest in writing by the investigating agency was “sacrosanct and cannot be breached under any situation”.
The BriefWire