TaxTMI 
TaxTMI 
2026 (6) TMI 644
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....Kanishk Maurya, Mr. Kartik Sabharwal and Mr. Paranjal Tripathi, Advocates for ED. JUDGMENT PER NEENA BANSAL KRISHNA, J. The aforesaid three Petitions are interconnected and are decided together. W.P. (CRL.) NO.1130/2021: For Quashing of FIR No.116/2020 dated 26.08.2020 under Section 406, 420 and 120B IPC P.s. Economic Offences Wing. 1. Writ Petition No.1130/2021 under Article 226 Constitution of India read with Section 482 Cr.P.C. has been filed on behalf of the Petitioner for quashing of FIR No.116/2020 dated 26.08.2020 under Section 406, 420 and 120B IPC P.s. Economic Offences Wing. 2. It is stated in the Petition that the Petitioner, PPK Newsclick is a law-abiding corporate entity, incorporated under the Companies Act, 2013. It owns and operates "newsclick.in," a well-known independent digital news media Company in India dedicated to covering news from India and elsewhere with a focus on progressive movements. It has become one of India's most consistent chroniclers of diverse people's movements and struggles across the country. It hosts the work of critical and progressive voices, from across the country. It also focuses extensively on science and technology a....
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....gap of more than 1 year, from the date of earlier Company being voided. WWMH is the different Company incorporated on 29.11.2017, though it has the same name of an earlier Company, which got voided. 9. The Petitioner discussed the possibility of investment by WWMH. In order to confirm the regulatory regime in the digital media business and to ensure its compliance, the Petitioner wrote a letter dated 20.12.2017 to Ministry of Information and Broadcasting requesting a clarification to the FDI Policy, in the following terms: "1. Does the term "print media" as used in FEMA regulations cover online publication of news (in form of videos/written articles) on a website? 2. Is FDI in a company engaged in the business of online publication of news (in form of videos/written articles) on a website subject to sectoral caps/conditions for FDI prescribed under the FEMA Regulation?" 10. The Ministry of Information and Broadcasting gave a Reply dated 05.01.2018 with the clarification that "online publications on website/web portal do not fall under the ambit of print media." 11. In the light of the above response, Petitioner was advised that there was no regulatory hin....
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....IR and ECIR, and also filed an Application dated 23.04.2021 before the learned Adjudicating Authority. However, ED neither responded to the Letter dated 20.04.2021 nor to the Application dated 23.04.2021. The Petitioner states that he believes that similar requests were made by the other persons arraigned as Respondents, before the learned Authority, but their request have not been consented to, by the ED. 17. Similarly, the Petitioner aggrieved by the non-supply of the requisite documents, wrote Letters dated 26.04.2021 and 15.05.2021 to the Respondent for these documents, as the same have not been uploaded on the website of the Delhi Police, as per the mandate of law. However, no response has been received by the Petitioner. 18. An Application dated 05.06.2021 before learned CMM, New Delhi with a similar request, had also been preferred. On 06.06.2021, the Respondent supplied the copy of the FIR to the Petitioner. Consequently, the Petitioner withdrew his Application on 07.06.2021. However, learned CMM, South-East District took suo moto cognizance of the violation of law by the Respondent, in not uploading and supplying the FIR to the Petitioner. 19. The Petitioner also ....
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....ement (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 which requires that shares and securities to be transferred to entities abroad, must be at a price above the fair value. In the instant case, the fair value of the equity shares have been determined by an independent valuer, as Rs. 9188/- per share. Therefore, transfer of shares at Rs. 11510/- per share was lawful, which cannot be assailed on any ground. 26. Fourthly, as regard to the allegation that overvaluation was necessary to avoid the FDI cap of 26% on digital news media, it is submitted that it is completely untenable. The Petitioner had sought clarification from Ministry of Information and Broadcasting which had confirmed that there was no restrictions on FDI in Digital News Media, in 2018. The restrictions of 26% got introduced by the Government Press Note No. 04/2019 dated 18.09.2019 as "new clauses". Therefore, the allegation that the Petitioner was attempting to circumvent FDI laws is absurd, as there was no law then in existence restricting the FDI. 27. Fifthly, the allegations of "siphoning" are also baseless, as they pertained to expenses incurred by the Company such as p....
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....d to avoid the alleged 26% cap on FDI, ignores that when the said investment was made, there was no restriction on the amount of FDI that could be invested in digital media Organization. Therefore, there was no question of avoiding or attempting to avoid the laws. 32. It is further submitted that the allegations in the FIR that the payments to various persons were being made, despite the revenue of the Company not matching the payments. However, it is only a bald allegation, a practice that is widely prevalent across sectors and industries, both private and public; in the absence of any material to show any wrongdoing, it cannot hold up to any serious scrutiny. 33. If the case of the Complainant was to be accepted, then any loss-making Company which pays its employees, would be charged with "siphoning". Such an absurd interpretation of the law cannot be countenanced. 34. Moreover, the FIR does not show that any enquiry was conducted by the Respondent to ascertain the antecedents of the alleged Complainant, one Sobhan Singh and what was his relation to the allegations made in the Complaint and his source of information. No preliminary enquiry has been conducted and the FIR ....
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....dia Holdings LLC, USA was incorporated in the State of Delaware, USA giving the address of the Chartered Accountant. This Company was reported as cancelled due to non-payment of tax as on 01.06.2017. It shows that this Company had received FDI of Rs.9.59 crore from M/s Worldwide Media Holdings LLC, USA, after a gap of more than one year from the date when the Company was cancelled. 40. The reason for incurring such huge losses was excessive payment of consultancy, salary and rent. For example, salary/ consultancy fee of Rs.3.82 crore and Rs.1.12 crore respectively was paid during FY 2018-19, even when the total revenue of the Company was Rs.1.10 crore. More than 45% of FDI, was actually diverted/siphoned off for the payment of salary/ consultation fees, rent and other such expenses of the promoters/journalists/ employees associated with the Company. Prima facie these facts suggest that the FDI was actually intended to make the payments for ulterior motives, clandestinely. The above news portal has violated the FDI law and other laws of the country and caused loss of exchequer resulting in the registration of the present FIR. 41. During the investigations, on perusal of the re....
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....n of Equity shares of the Company PPK Newsclick Studio Pvt. Ltd. 45. Mr. Rachit Choudhary, Partner RCPL who had conducted the Valuation Report of the Company was summoned, but he did not join the investigations on account of ill health and requested for some time to join the investigations. 46. Mr. Amit Chakraborty, shareholder of the Petitioner Company who remained associated with Mr. Prabir Purkaystha, was also examined who stated that the Company was formed to receive the FDI and foreign fund and he remained associated in the process, as per instructions of Mr. Prabir Purkaystha. 47. Mr. Prabir Purkaystha and Mr. Pranjal Pandey, both the Directors of the Petitioner Company have applied for Anticipatory Bail, wherein protection had been granted by this Court. 48. The details of the shareholder/Directors of the Petitioner Company are as follows: Name and Address of Alleged Shareholders/Directors Detail of Shareholding Date of joining as Director Sh. Prabir Parkayastha R/o D-132, 2^nd Floor, Saket, New Delhi-110017. 99000 Shareholder Director 11-01-2018 Sh. Pranjal Pandey R/o D-26, 2^nd Floor, Block-D, Saket, New Delhi-17. - Director 12-03-202....
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....ugned FIR which is alleged wrongful foreign direct investment (FDI) received by the Petitioner No.1, has been refuted by RBI itself, which it appears to have written to EOW that the investment was under the automatic remittance, and there was no violation of FEMA regulations. From the perusal of the FIR, it is evident that no cognizable offence has been made out against the Petitioners and the FIR is liable to be quashed. The copy of the emailed Status Report dated 26.07.2021 has been placed on record. 55. It is further submitted that the State during the hearing on 29.07.2021, disassociated itself from the first Status Report and in fact, sought time to file a Status Report, though the First Status Report had already been supplied to the Petitioners. While liberty was granted by this court to the Respondent to file a fresh Report, liberty was also granted to the Petitioners to point out discrepancies, if any, between the two Report. 56. The second Status Report was served on the Petitioners on 03.10.2025 and was filed before this Court on 04.10.2021. On perusal of this Report, the Petitioners were shocked to find that the reference to the Reply of RBI had been completely rem....
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....the receipt of FDI, on 11.04.2018. Notably, it was affirmed by RBI in their Reply, as extracted in the First Report. There was no cap of 26% in Digital Media, which got introduced vide Press Note 4/2019 dated 18.09.2019. The relevant FEMA guidelines also mandated that where a transfer of shares and securities is made by an Indian entity to a foreign investor, the same must be issued at a price not less than the fair value worked out as per internationally accepted pricing methodology. 63. The Chartered Accountants, had duly issued the Certificate dated 05.03.2018 giving the fair value of the shares of Petitioner at Rs.9,188 per share. The Petitioner could not have issued the shares to World Wide Media Holdings LLC, at Rs. 10/-, as the same would be in violation of the extant FEMA guidelines. The issuance of shares at a premium, was a commercial decision and it is the prerogative of the Board Directors to decide the premium amount and the wisdom of the shareholders on whether they want to subscribe to those shares, at the said price. In a day-to-day market, unless and until a rate is fixed by any govt. Authority or unless there is any restriction on the amount of share premium un....
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....LLP. However, in and around May, 2017 with an intent to receive investment to allow the LLP to grow and expand, an Agreement dated 01.05.2017 was entered between M/s PP Newsclick Studio LLP with M/s BGJC Associates LLP to value PP Newsclick Studio LLP. Thereafter, the Petitioner converted itself into a private limited Company pursuant to Board Resolution dated 03.06.2017 and it came into existence on 11.01.2018. The Petitioner became a Private Limited Company in order to be able to receive FDI from foreign entity. 69. It is further the admitted that M/s Worldwide Media Holdings LLC agreed to invest a total of USD 4.5 Million in three tranches of USD 1.5 M each in exchange of total 23.07% shares of the Petitioner. The first tranche of 1.5 Million was received by the Petitioner on 11.04.2018. The first allegation against the Petitioner was that there was overvaluation of shares to avoid restriction/cap in FDI. The Petitioner has explained that there was no regulatory permission required for FDI in online publication of news. In fact, the Petitioner had written a Letter dated 20.12.2017 to Ministry of Information and Broadcasting requesting a clarification to the policy in respect ....
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....wth of the Company, that 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. 74. The valuation was done through the established method of Discounted Cash Flow which was the accepted international standard including by the Ministry of Finance. All the relevant factors were duly examined by the in assessing the fair price value of the shares. 75. The next allegation against the Petitioner was of siphoning of the FDI received from M/s Worldwide Media Holdings LLC, in payment of salary, consultation fee, rent and other expenses of the promoters, journalists, employees associated with the Company. 76. However, 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, then too it does not disclose any criminal offence. The allegation of siphoning is, therefore, not tenable. 77. Significantly, one Status Report dated 26.07.2021, copy of which was forwarded to the Petitioner as an advance copy, though not place....
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....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. 84. The second offence with which the Petitioner has been charged under Section 406 IPC for having misappropriated the property that was entrusted to him by some person. By the same logic there is neither any person who has claimed to have entrusted a property or that it has been misappropriated by the Petitioner. There may have been a business transaction of investment and purchase of shares by M/s Worldwide Media Holdings LLC on payment of 1.5 Million USD, but by no stretch of interpretation can it be said to be an entrustment by M/s Worldwide Media Holdings LLC or misappropriation by the Petitioner. 8....
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....ith the Petitioners to record their statements under Section 50 PMLA. The Petitioner No. 2 has joined the investigations and has provided all the information sought, furnished several documents and reports of the company. 92. Allowing the Respondent to follow such an approach is arbitrary, unfair and prejudicial to the Petitioners' right to a fair and impartial investigation under Article 21 of the Constitution of India, which provides that every person has a right to be informed about the allegations against him for which reliance is placed on In Re: Madhu Limaye, (1969) 1 SCC 292; Court on its Own Motion v. State 2010 SCC OnLine Del 4309; Youth Bar Association v. Union of India (2016) 9 SCC 473; Dhanpat Singh v. Emperor, AIR 1917 Pat 625; Panchanan Mondal v. State (1971) Crl.L.J 875 and Jayantibhai Lalubhai Patel v. State of Gujarat 1992 Crl.L.J. 2373; J. Sekar v. Union of India 2018 SCC OnLine Del 6523; Shri Chamundi Mopeds Ltd. v. Church of South India Trust Association (1992) 3 SCC 1; Allegeny Finlease Pvt. Ltd. and Ors. v. Deputy Director, Directorate of Enforcement 2017 SCC OnLine ATPMLA 1. 93. It is further contended that the duty to disclose ECIR, also draws strength....
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....t ED in multiple cases has voluntarily disclosed ECIR, while filing applications and complaints under Section 8 PMLA. It is ex facie evident that the action of Respondent No. 2 in supplying ECIR as and when it pleases, in the absence of any guidelines or policy determining the same, is an action that is fully capricious and falls foul of the requirements of equal treatment under Article 14 of Constitution of India. 98. The meaning and import of arbitrariness in State action has been elucidated by the Supreme Court in countless judgments, including Kumari Shrilekha Vidyarthi and Ors. v. State of UP and Ors. (1991) 1 SCC 212. A prayer is, therefore, made that the direction be given to ED to supply the copy of the complaint/ECIR dated 02.09.2020 to the Petitioner. 99. The Respondent No. 1 in its Reply stated that on registration of FIR No. 0116/2020 under Section 406/420/120B IPC, the EOW found a prima facie case of money laundering punishable under Sections 3 & 4 PMLA against the Petitioners. 100. The investigations were conducted to identity the proceeds of crime and also other persons involved in money laundering. The ECIR/14/HIU/2020 dated 02.09.2020 was recorded against ....
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....constitute the offence of criminal conspiracy. The very act of entering into an agreement by the co-conspirators is in itself an offence and punishable under law. The offence under Section 120B IPC is a separate and independent offence and the PMLA investigation flowing from the commission of the offence of criminal conspiracy is well within the framework of law. 105. For this, reliance is placed on Yogesh @ Sachin Jagdish Joshi v. State of Maharashtra (2008) 10 SCC 394, wherein it was held that the offence of conspiracy is a substantive offence and renders the mere agreement to commit an offence punishable even if the offence does not take place pursuant to the illegal agreement. Reliance is also placed on Ahsan Ahmad Mirza and Others v. Enforcement Directorate, W.P.(Crl.) 2780/2019, C.M. No.5528 of 2019, wherein it was held that Section 120B IPC is distinct, independent and stand-alone offence and is one of the scheduled offence under PMLA. Where a property is derived or obtained by any person directly or indirectly as a result of criminal activity relating to the offence of conspiracy, it would come within the definition of proceeds of crime, including its concealment, posses....
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....as no right to claim a copy of the same. On merits, all the averments made in the Petition are denied. 113. The Petitioner, however, has stated that cognizant of the position that no offence under Sections 406/420 IPC is made out against the Petitioners, the ED has relied upon invocation of Section 120B IPC in the said FIR. It is submitted that in terms of FIR, no offence under Section 120B IPC is made out. Criminal conspiracy is an agreement between two or more persons to do an illegal act or an act, which is not illegal by illegal means. 114. The ED in the Reply has alleged that criminal conspiracy is made out "in view of the connivance between Prabir Purkayastha, Jason Pfetcher and Neville Roy Singham". It is asserted that such allegation of conspiracy, is completely baseless and there is absolutely no material on record to substantiate the allegations of ED. These are only bald and baseless assertions, which are not supported by any material. 115. There is no agreement to commit either an illegal act or a legal act by illegal means. The allegations in the FIR at the highest is that FDI was infused in the Petitioners Company at inflated value in violation of FDI guideli....
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....nstitutional right to a free and fair investigation and mala fide registration of impugned ECIR and mala fide investigation being conducted by ED hampers the investigations. Moreover, in terms of Bhajan Lal (supra), S.N. Sharma (supra), where criminal proceedings are manifestly attended with mala fide or are maliciously instituted with an ulterior motive, the same is bound to be quashed. 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. 122. While the ED has contended that ECIR is an internal document and the copy of the same cannot be provided to the Petitioners, the ED has failed to appreciate that even in the case of Vijay Madan Lal Chaudhary (Supra), Supreme Court has not held that ED can, as a matter of right, reject the request for supply of ECIR. It has merely stated that it is not mandatory that, in each case, ED shall supply the copy of ECIR and non-supply of ECIR will not constitute violation of the Constitutional right of the Accused. 123. Further, the ED has filed an Application bearing Criminal M.A. No. 9589/2021, dated 22.06.2021 in Criminal W.P. (Crl.) 1....
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....ce must be registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum; thirdly, in the event there is already a registered scheduled offence but the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or quashing of the criminal case of the scheduled offence, there can be no action for money laundering against not only such a person but also any person claiming through him in relation to the property linked to the stated scheduled offence. In other words no action under PMLA can be resorted to unless there is a substratum of a scheduled offence for the same, which substratum should legally exist in the form of a subsisting (not quashed) criminal complaint/inquiry or if it did exist the accused has since been discharged or acquitted by a Court of competent jurisdiction." 128. In this regard reference may also be placed on para 253 of Vijay Madanlal Choudhary vs. Union of India (2023) 12 SCC 1 which reads as under: "253. Tersely put, it is only such property which is derived or obtained, directly or indirectl....