In a significant judgment reaffirming the limits of criminal investigation and the necessity of a legally sustainable foundation for the exercise of coercive state power, the Delhi High Court has quashed both the Economic Offences Wing (EOW) FIR and the Enforcement Directorate’s (ED) money laundering proceedings against digital news platform NewsClick and its founder-editor Prabir Purkayastha.
The judgment, delivered by Justice Neena Bansal Krishna on May 29, 2026, represents a comprehensive rejection of the allegations that formed the basis of nearly six years of investigation into the news portal’s foreign investment transactions. The Court not only found that the allegations failed to disclose the commission of any cognisable offence but went considerably further, characterising the proceedings as mala fide, arbitrary and an abuse of investigative powers directed against independent journalism.
The Court observed:
“Not only are the present proceedings only mala fide, but also an arbitrary attack and abuse of powers on the free and impartial journalism of the Petitioners.” (Para 121)
The finding is remarkable both for its breadth and for the language employed by the Court. While courts frequently examine the legality of investigations, it is comparatively rare for a constitutional court to explicitly connect the exercise of investigative powers with concerns regarding press freedom and the functioning of independent media.
The Background: Foreign investment, criminal allegations and ED action
The case arose out of an investment received by PPK Newsclick Studio Pvt. Ltd., the company operating NewsClick, from US-based Worldwide Media Holdings LLC.
According to the allegations, NewsClick received approximately USD 1.5 million, amounting to around ₹9.59 crore, in April 2018 through a share subscription arrangement. The EOW alleged that the shares had been deliberately overvalued in order to circumvent restrictions governing foreign direct investment in news media entities. It was further alleged that the funds received through the investment were siphoned away through salaries, consultancy fees, rent and other operational expenditures.
Based on these allegations, an FIR was registered in August 2020 under Sections 406, 420 and 120B of the Indian Penal Code. Shortly thereafter, the Enforcement Directorate registered an Enforcement Case Information Report (ECIR) under the Prevention of Money Laundering Act (PMLA), treating the offences alleged in the FIR as scheduled offences capable of triggering a money laundering investigation.
The ED subsequently conducted extensive searches and seizures, raided NewsClick’s offices and the residences of journalists associated with the platform, and repeatedly summoned Purkayastha and other employees for questioning.
However, after examining the factual and legal basis of the allegations, the High Court concluded that the prosecution’s case suffered from fundamental defects at every stage.
No FDI restriction existed in 2018
The central allegation underlying the prosecution’s case was that NewsClick had received foreign investment in violation of restrictions applicable to news media organisations.
The Court found that this allegation was fundamentally misconceived. The judgment records that before receiving the investment, NewsClick had sought clarification from the Ministry of Information and Broadcasting regarding the applicability of foreign investment restrictions to online news platforms. In response, the Ministry clarified on January 5, 2018 that online publication through websites and web portals did not fall within the ambit of print media.
Relying on this clarification, the Court observed that there was no cap on foreign investment in digital news platforms at the time the investment was received.
The Court held:
” From the response received from the Ministry in respect of FDI Policy, it was clearly evident that there was no cap on the online publication of news and thus, the Agreement between the Petitioner and M/s Worldwide Media Holdings LLC and, therefore, the Investment Agreement dated 20.03.2018 cannot be said to be in violation of any law or disclosing any criminal offence. The receiving of 1.5Million USD that were remitted on 11.04.2018 in exchange of 7.69% shares of the Petitioner Company.” (Para 70)
Consequently, the Investment Agreement dated March 20, 2018 and the remittance received on April 11, 2018 could not be said to violate any law or disclose any criminal offence. This finding strikes at the heart of the prosecution’s case. The allegation that NewsClick structured the investment to evade foreign investment restrictions necessarily depended on the existence of such restrictions. Once the Court concluded that no cap existed at the relevant time, the principal basis of the investigation effectively collapsed.
The Court rejects the share overvaluation theory
The investigating agencies also alleged that NewsClick had deliberately overvalued its shares in order to facilitate the foreign investment transaction. The Court found no substance in this allegation.
The judgment records that the company had obtained a valuation certificate from BGJC Associates LLP, which assessed the fair value of the shares at ₹9,188 per share in accordance with FEMA requirements. The Court noted that there was no allegation of manipulation or illegality in the valuation exercise itself.
The final investment was made at a higher value after negotiations between the investor and the company. The Court observed that the share price was mutually agreed upon after considering the prospects and growth potential of the company. Significantly, the Court refused to criminalise what was essentially a commercial decision.
Justice Krishna observed:
“It is an economic decision which does not spell out any criminal offence.” (Para 73)
The Court further accepted the company’s explanation that the valuation had been undertaken through the Discounted Cash Flow method, an internationally recognised valuation methodology accepted under Indian regulatory frameworks.
The judgment therefore draws a clear distinction between commercial valuation disputes and criminal wrongdoing, holding that the former cannot automatically be transformed into the latter in the absence of evidence of fraud or deception.
The allegation of siphoning funds was found untenable
Another major plank of the prosecution’s case was the allegation that foreign investment received by NewsClick had been siphoned away through salaries, consultancy fees, rent and other operational expenditures. The Court rejected this allegation outright.
Justice Krishna observed that these expenditures were entirely consistent with the functioning of a digital media organisation and represented ordinary business expenses incurred in the course of running the company. The Court held that even if one were to assume that excessive expenditure had been incurred, that fact alone would not disclose the commission of a criminal offence.
The judgment states:
“Even if it is accepted that there were over payments and excessive expenditure incurred by the Petitioner, then too it does not disclose any criminal offence. The allegation of siphoning is, therefore, not tenable.” (Para 76)
This finding effectively dismantled the prosecution’s attempt to portray routine operational expenditure as evidence of criminal activity.
The RBI’s findings undermined the investigation
One of the more significant aspects of the judgment concerns the Court’s treatment of material received from the Reserve Bank of India. The Court noted that an earlier status report prepared during the investigation recorded that the RBI had informed investigators that the foreign remittance had been received through the automatic route and that there had been no delay in the issuance of shares or compliance with reporting requirements under FEMA.
According to the judgment, the RBI had stated that:
” Significantly, one Status Report dated 26.07.2021, copy of which was forwarded to the Petitioner as an advance copy, though not placed on record, clearly stated that during the course of investigation a Reply from RBI had been received wherein it was mentioned that as per the Form FCGPR, the foreign inward remittance was under automatic route and there was no delay in issue of shares as well as reporting, as per the extant FEMA regulations in case of the Petitioner.” (Para 77)
The Court noted that this material was subsequently withdrawn from later status reports. Nevertheless, it held that the correspondence was sufficient to indicate that no FEMA violations had been established against the company. The observation significantly weakened the prosecution’s attempt to portray the investment as unlawful.
The allegation that the investor was non-existent failed
The State had also alleged that Worldwide Media Holdings LLC did not legally exist and that the transaction was therefore fraudulent. The Court found that the allegation was unsupported by the material on record.
The company explained that although an earlier entity bearing the same name had been dissolved under Delaware law, a new company with the same name had subsequently been incorporated. The Court noted that nothing had emerged during the investigation to establish that the entity which invested in NewsClick was non-existent. Indeed, the status reports filed by the investigating agencies were largely silent on this aspect. The allegation therefore failed to withstand judicial scrutiny.
No offence of cheating was made out
Having examined the factual allegations, the Court proceeded to analyse whether the offences alleged in the FIR were legally sustainable. With respect to Section 420 IPC, the Court observed that the offence of cheating requires the existence of a person who has been deceived and dishonestly induced to part with property.
In the present case, the investor itself had never alleged that it had been cheated. Worldwide Media Holdings LLC had not lodged any complaint against NewsClick and no material emerged during the investigation suggesting that any person had been deceived.
The Court observed:
” For the offence of cheating, it is necessary that there must be an aggrieved person who has been cheated out of his valuable property. In this case, M/s Worldwide Media Holdings LLC is the entity which had forwarded 1.5 Million USD to the Petitioner. However, there is no Complaint whatsoever, by the Company about having been cheated by the Petitioner. Pertinently, the Complaint had been made by one Shoban Singh, who was merely an informant and was not the aggrieved person. There is nothing which has emerged even during the investigations as reflected in the Status Report, that there was any person who was aggrieved or who was cheated by the Petitioner. The offence of cheating even if all the allegations made are admitted, is not established.” (Para 83)
Accordingly, the essential ingredients of cheating were absent.
No criminal breach of trust either
The Court reached a similar conclusion regarding the allegation under Section 406 IPC. Justice Krishna observed that criminal breach of trust requires entrustment of property and its subsequent misappropriation. Neither requirement was satisfied in the present case.
The transaction between NewsClick and Worldwide Media Holdings LLC was an investment in exchange for shares. The Court held that such a transaction could not, “by no stretch of interpretation,” be characterised as entrustment or misappropriation. Consequently, the offence under Section 406 IPC was also found to be absent.
The Court concluded:
” 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.” (Para 85)
The Court rejects the ED’s conspiracy argument
Recognising the weakness of the allegations under Sections 406 and 420 IPC, the Enforcement Directorate sought to rely on Section 120B IPC, arguing that the investment transaction itself constituted a criminal conspiracy involving Purkayastha and the foreign investors.
The Court was unconvinced. It noted that criminal conspiracy requires an agreement to commit an illegal act or a legal act through illegal means. The material placed before the Court disclosed neither. The allegations of conspiracy were unsupported by evidence and amounted to little more than assertions.
Justice Krishna therefore held:
“ From the reply of ED, it is evident that the allegation that there is a clear-cut existence of a scheduled offence, is totally misconceived and baseless.” (Para 117)
This finding proved fatal to the ED’s case because the existence of a scheduled offence is a jurisdictional prerequisite for invoking the PMLA.
A “fishing and roving exercise” without any offence
Perhaps the most severe criticism in the judgment should be directed at the manner in which the investigation was conducted. The Court noted that years had passed since the registration of the ECIR. Numerous summons had been issued. Purkayastha and various employees had repeatedly joined the investigation. Searches had been conducted and extensive inquiries had been undertaken. Yet no material establishing the commission of a criminal offence had emerged.
The Court concluded:
“ Two years have passed since the registration of impugned ECIR in 2022. The Petitioner No. 2 and various employees of Petitioner number one have joined investigations on numerous occasions in 2021, after which they have not been summoned even once between September 2021 to June 2022. The manner in which the investigations have been conducted clearly show that the same is a fishing and roving exercise in the financial affairs of the Petitioners without the existence of any offence.” (Para 119)
The observation goes beyond a criticism of investigative shortcomings. It reflects the Court’s conclusion that the investigation itself lacked a legally sustainable foundation.
Quashing the FIR and the ECIR
Having found that the FIR disclosed no offence under Sections 406, 420 or 120B IPC, the Court held that its continuation amounted to a “gross abuse of the process of law.” The FIR was accordingly quashed.
Once the FIR fell, the ECIR could not survive. The Court reiterated the settled principle that where the predicate offence is quashed, the corresponding money laundering proceedings must also fall. The ECIR registered by the Enforcement Directorate was therefore quashed in its entirety.
Why the judgment matters
The significance of the judgment extends well beyond the immediate relief granted to NewsClick and Prabir Purkayastha. The Court did not merely find gaps in the evidence. It found that the allegations themselves failed to disclose criminal offences. It rejected the factual premises underlying the investigation, dismantled the legal basis for the offences invoked, and questioned the very foundation of the ED’s exercise of jurisdiction under the PMLA.
Most significantly, the Court linked the proceedings to broader concerns regarding press freedom, concluding that the case represented not only a legally unsustainable prosecution but also a misuse of investigative powers against independent journalism.
In doing so, the judgment stands as a significant reaffirmation of a basic constitutional principle: that criminal law cannot be invoked merely on suspicion, and that the extraordinary powers of investigation available to the State must remain anchored to an identifiable offence supported by law and evidence.
The complete judgment may be read here.
Detailed reports on cases against Prabir Purkayastha may be read here and here.
Related:
J & K: Attempt to muzzle FoE, Media? Police summons to media, journalists