The Enforcement Directorate (ED) has imposed a total penalty of ₹184 crore on digital news platform NewsClick and its founder-editor Prabir Purkayastha for alleged violations of foreign exchange regulations under the Foreign Exchange Management Act (FEMA).
Rs. 184 Crore Penalty Under FEMA
According to an official statement issued on Monday, the adjudicating authority under FEMA levied a penalty of ₹120 crore on PPK Newsclick Studio Pvt. Ltd., which operates NewsClick, and ₹64 crore on Purkayastha in his capacity as the director responsible for the company’s affairs during the relevant period.
The ED stated that the order followed adjudication proceedings concerning alleged contraventions involving foreign direct investment (FDI) and foreign inward remittances.
Alleged Misrepresentation in FDI Filings
The agency alleged that during the financial year 2018–19, the company received foreign direct investment amounting to approximately ₹9.59 crore by misrepresenting the nature of its business activities in statutory filings. According to the ED, this allegedly enabled the entity to circumvent sectoral conditions and entry route requirements prescribed under FEMA regulations.
In addition, the agency flagged foreign inward remittances totalling ₹82.63 crore received between FY 2018–19 and FY 2023–24. These funds were reportedly shown as proceeds from export of services. However, the ED claimed that the transactions were misclassified and did not comply with mandatory reporting norms, including submission of SOFTEX forms required for export-related foreign exchange inflows.
The adjudicating authority held that the transactions were structured in a manner that undermined the objectives of India’s foreign exchange regulatory framework.
Director Held Liable Under Section 42
The ED found Purkayastha responsible under Section 42 of FEMA, which deals with offences committed by companies and fixes liability on persons in charge of, and responsible for, the conduct of business at the time of the contravention.
Invoking powers under Section 13(1) of FEMA, the authority imposed monetary penalties after concluding that the violations were substantial, systemic and deliberate in nature, involving large-scale foreign exchange transactions and alleged breach of statutory declarations.
Multiple Investigations Ongoing
NewsClick and its founder are facing investigations by several agencies, including the Central Bureau of Investigation(CBI), the Delhi Police, the Income Tax Department, and the ED. The probes pertain to allegations ranging from foreign funding irregularities and money laundering to potential violations of the Foreign Contribution Regulation Act (FCRA).
In October 2023, the Delhi Police arrested Purkayastha under provisions of anti-terror legislation, alleging a broader conspiracy to disrupt India’s sovereignty and integrity. He is currently out on bail.
As part of its investigation, the ED also issued summons to Neville Roy Singham, an American businessman presently based in Shanghai, in connection with the alleged funding trail. Officials indicated that there was no response to the summons.
NewsClick’s Response
In earlier statements, NewsClick has denied all allegations. The portal maintained that it has never published content at the behest of any foreign entity, including Chinese interests, and has not acted under directions from Singham.
The company has asserted that all funds received were routed through proper banking channels and were duly reported to regulatory authorities, including the Reserve Bank of India, in accordance with applicable laws.
Regulatory Framework Under FEMA
The Foreign Exchange Management Act, 1999, is a civil legislation aimed at facilitating external trade and payments while ensuring orderly development and regulation of India’s foreign exchange market. The Reserve Bank of India (RBI) functions as the country’s primary foreign exchange regulator, while the Enforcement Directorate is responsible for investigating and adjudicating violations.
Under FEMA, the ED issues show-cause notices in cases of suspected contraventions. Following adjudication, penalties may be imposed, and in certain cases, confiscation of currency or property may be ordered.
The latest penalty order marks a significant development in the ongoing scrutiny of NewsClick’s foreign funding structure and is likely to trigger further legal proceedings, including potential appeals before the appropriate appellate authorities.
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