No Predicate Offence, No PMLA: Delhi High Court Quashes FIR And Consequential ED Proceedings Against NewsClick

No Predicate Offence, No PMLA:

Delhi High Court Quashes FIR and Consequential ED Proceedings Against NewsClick

In M/s PPK Newsclick Studio Pvt. Ltd. v. State (NCT of Delhi) & Ors., 2026:DHC:5098 the Delhi High Court delivered an important judgment reaffirming that criminal law and investigative powers cannot be invoked to convert commercial, regulatory, or business decisions into allegations of cheating, conspiracy, or money laundering in the absence of foundational criminal ingredients. Holding that the proceedings lacked any sustainable basis, the Court quashed both the FIR registered by the Economic Offences Wing (“EOW”) and the consequential proceedings initiated by the Enforcement Directorate (“ED”) under the Prevention of Money Laundering Act, 2002 (“PMLA”).

Significantly, the Court observed that the action against the petitioners amounted not merely to legal overreach but to an abuse of power affecting independent journalism.

Brief Facts

The proceedings originated from an FIR registered by the EOW alleging offences under Sections 406, 420 and 120B IPC against Newsclick and its promoter in relation to foreign investment received by the company.

The allegations broadly centred around the manner in which investment had been structured and utilised, including allegations of overvaluation of shares, diversion of funds, and use of company funds towards salaries, consultancy fees, rent and operational expenses.

Based on the FIR, the ED initiated proceedings under the PMLA.

The petitioners challenged the proceedings contending that the allegations, even if accepted at their highest, did not satisfy the ingredients of any criminal offence.

Commercial Decisions and Regulatory Issues Cannot Automatically Become Criminal Offences

At the outset, the Court examined whether the allegations disclosed the ingredients of cheating, criminal breach of trust, or conspiracy.

The Court found that the prosecution failed to identify any person who had been deceived or dishonestly induced.

Importantly, the Court observed that the investor itself had not alleged any deception or fraud.

The Court rejected the allegations relating to valuation of shares and observed that valuation and investment structuring are matters of commercial and economic decision-making.

In an important observation, the Court held:

“It is an economic decision which does not spell out any criminal offence.”

The Court held that mere disagreement with business or regulatory choices cannot be retrospectively converted into criminal liability. 

Ordinary Business Expenditure Cannot Be Labelled as Siphoning of Funds

One of the principal allegations was that investment had been siphoned through payment of salaries, consultancy charges, rent and operational expenditure.

Rejecting this contention, the Court held that such expenses are normal incidents of carrying on business.

The Court observed that there was no material demonstrating unlawful diversion, dishonest appropriation, or criminal utilisation of funds.

Accordingly, the allegation that expenditure incurred in running operations amounted to siphoning of investment was held to be untenable.

No Offence Made Out Under Sections 406, 420 or 120B IPC

The Court examined whether the allegations disclosed the ingredients of cheating under Section 420 IPC.

The Court reiterated that to sustain an allegation of cheating, there must exist dishonest intention at the inception and deception resulting in inducement.Applying these principles, the Court found that the FIR itself failed to identify any person who had been deceived or induced to part with property.

The Court noted that the investor had voluntarily entered into the transaction and there was no allegation that it had been misled or defrauded.

The Court also examined whether allegations disclosed an offence under Section 406 IPC.

The Court observed that criminal breach of trust necessarily requires entrustment of property coupled with dishonest misappropriation.

However, in the present case, the investment had entered the company as part of a commercial transaction and no material demonstrated entrustment followed by dishonest conversion.

The Court therefore held that the essential ingredients of criminal breach of trust were absent.

With respect to Section 120B IPC, the Court held that merely because parties entered into an arrangement or transaction is insufficient to establish conspiracy unless there exists material showing an unlawful objective or illegal means adopted to achieve such objective.

Extensive Investigation Yielded No Incriminating Material

A particularly significant aspect of the judgment was the Court’s criticism of the investigative exercise undertaken by the ED.

The Court noted that extensive investigations had continued for nearly one and a half years and that the petitioners and employees had repeatedly appeared before authorities and participated in the investigation.

Despite this, no incriminating material had been brought on record.

The Court observed:

“Aside from bald assertions of there being a criminal conspiracy, there is not a whisper of any incriminating allegation…”

The Court further held that the allegation regarding existence of a scheduled offence under the PMLA was fundamentally unsustainable. 

ED Cannot Conduct Fishing and Roving Inquiries in Absence of an Offence

In strong observations, the Court held that the investigation itself demonstrated absence of any foundational offence.

The Court observed:

“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.”

The Court held that investigative agencies cannot invoke extraordinary powers merely to search for an offence after initiating proceedings.

Criminal Proceedings Cannot Continue Merely Because Investigation Is Pending

The Court also rejected the contention that quashing should be refused merely because investigation was ongoing.

The Court observed that where allegations do not disclose commission of any offence or are patently absurd or mala fide, pendency of investigation cannot by itself prevent judicial interference.

The Court held:

“If the FIR does not disclose any offence or the allegations are patently absurd and born out of mala fide, then merely by claiming that investigation is at a crucial stage, it would not be an impediment for the Court to quash the FIR.”

PMLA Proceedings Cannot Survive Without Predicate Offence

Having concluded that the FIR itself disclosed no cognizable offence, the Court proceeded to examine the ECIR initiated under the PMLA.

The Court held that once the scheduled offence itself collapses, proceedings under the PMLA cannot independently survive.

Accordingly, the FIR and consequential ED proceedings were quashed.

In particularly strong remarks, the Court observed:

“Not only are the present proceedings mala fide, but also an arbitrary attack and abuse of powers on the free and impartial journalism of the petitioners.”

Conclusion

The judgment serves as an important reaffirmation that criminal law cannot be deployed to criminalise commercial conduct, retrospectively question business decisions, or convert regulatory concerns into allegations of cheating and money laundering without satisfying statutory ingredients. It further underscores that investigative powers under the PMLA cannot become tools for conducting open ended inquiries in search of an offence. The Court strongly criticised the investigation as a “fishing and roving inquiry” conducted without the existence of any offence and held that PMLA proceedings cannot survive once the predicate offence itself collapses.  

Article By
Rajat Jain, Advocate
Vaish Associates Advocates
Email id: rajatjain@vaishlaw.com
Mobile No. 9953887311
LinkedIn: https://www.linkedin.com/in/rajat-jain-75772398/

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