FIR Quashed Against Newsclick: PMLA Proceedings Cannot Stand Alone Without A Predicate Offence, Rules Delhi High Court

"Quashing of FIR of regular case automatically created a situation that the offences, stated and alleged in the FIR has no existence; thus the 'Scheduled Offence' has also no existence after quashing of the FIR, " Delhi High Court, in a significant ruling, quashed the FIR and the consequential Money Laundering investigation against M/S PPK Newsclick Studio Pvt. Ltd., holding that PMLA proceedings cannot be sustained once the predicate offence is extinguished.

A bench of Justice Neena Bansal Krishna observed that without the existence of a scheduled offence, the Enforcement Directorate (ED) cannot resort to action for money laundering on a mere assumption of criminal activity.

The court was dealing with a batch of petitions seeking the quashing of an FIR registered by the Economic Offences Wing (EOW) under Sections 406, 420, and 120B of the IPC, and the Enforcement Case Information Report (ECIR) registered by the ED. The allegations primarily concerned the receipt of Foreign Direct Investment (FDI) at an allegedly inflated share valuation and the purported siphoning of those funds through consultancy fees and salaries.

The case originated from a complaint alleging that Newsclick received FDI of approximately Rs. 9.59 crore from a US-based entity, Worldwide Media Holdings LLC (WWMH), by overvaluing its shares to bypass the 26% FDI cap for digital media. The investigative agencies alleged that these funds were diverted for "ulterior motives" and that the investor entity had been "voided" in its home jurisdiction at the time of the transaction. The Petitioners maintained that the investment followed all FEMA guidelines, the FDI cap was not applicable in 2018, and the valuation was based on standard economic methodologies.

The primary question before the court was whether the allegations in the FIR disclosed the commission of any cognizable offence under Sections 406, 420, or 120B of the IPC. Furthermore, the court had to determine if the ECIR and the investigation under the Prevention of Money Laundering Act (PMLA) could legally continue if the underlying predicate FIR was quashed.

Court Explains Essential Ingredients Of Cheating Under Section 420 IPC

The Court noted that for the offence of cheating under Section 420 IPC, there must be an aggrieved person who has been deceived into delivering property. It observed that in the present case, the investor entity, WWMH, had raised no complaint of being cheated or induced.

The bench emphasized that the complaint was filed by a third party who 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 Court remarked while holding the offence of cheating not established.

No Criminal Breach Of Trust In Commercial Investment Transactions

Regarding Section 406 IPC, the Court held that the "crucial ingredient" of entrustment was missing from the FIR and the subsequent investigation. It reasoned that the infusion of FDI was a business transaction involving the purchase of shares, which by no stretch of interpretation could be termed as "entrustment" of property.

The bench clarified that for misappropriation to be proved, there must first be a legal entrustment. In the absence of any person claiming to have entrusted property that was subsequently misappropriated, the invocation of Section 406 IPC was found to be legally untenable.

Share Valuation At A Premium Is A Protected Economic Decision

Addressing the allegations of overvaluation, the Court held that the issuance of shares at a premium is a commercial prerogative of the Board of Directors. It noted that the valuation was conducted using the Discounted Cash Flow (DCF) method, an internationally accepted standard recognized by the Ministry of Finance.

"The price of the shares is decided on the basis of mutual understanding of the parties concerned. It is an economic decision which does not spell out any criminal offence."

Absence Of FDI Regulatory Restrictions At The Time Of Transaction

The Court found that at the time the FDI was received in April 2018, there was no 26% cap on digital news media, as such restrictions were only introduced through a Government Press Note in September 2019. Consequently, the allegation that shares were overvalued to circumvent a non-existent law was deemed "absurd."

The bench further highlighted that the Reserve Bank of India (RBI) had refuted the allegations of wrongful FDI, confirming that the remittance was under the automatic route and complied with FEMA regulations. The Court noted that even a violation of FEMA, if any, would only constitute a civil contravention and not a scheduled offence under the PMLA.

PMLA Investigation Cannot Survive In A Vacuum Without A Scheduled Offence

The Court placed heavy reliance on the Supreme Court's landmark judgment in Vijay Madanlal Choudhary vs. Union of India, which settled the law regarding the dependency of PMLA proceedings on the predicate offence. The bench reiterated that "proceeds of crime" can only be derived from criminal activity relating to a scheduled offence.

"If 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... quashing of the criminal case, there can be no action for money laundering."

The Court concluded that since the FIR failed to disclose any cognizable offence under the IPC, the "substratum" for a money laundering investigation had vanished. Relying on precedents from various High Courts, Justice Krishna held that the quashing of a regular case FIR automatically renders the PMLA proceedings unsustainable as they cannot "stand alone."

The High Court allowed all three writ petitions, quashing the EOW FIR and the ED’s ECIR. The bench held that the continuation of such proceedings would amount to a "gross abuse of the process of law." By quashing the investigations, the Court reaffirmed that the special powers of the ED under the PMLA are contingent upon the existence of a legally valid and subsisting predicate offence.

Date of Decision: 29 May 2026