India’s financial enforcement landscape saw a major development this week as the Enforcement Directorate (ED) imposed a hefty ₹184 crore penalty on digital news portal NewsClick and its founder Prabir Purkayastha for alleged violations of the Foreign Exchange Management Act (FEMA).
According to the agency, ₹120 crore of the penalty has been levied on PPK Newsclick Studio Pvt. Ltd., while ₹64 crore has been imposed on Purkayastha in his personal capacity. The order follows adjudication proceedings related to foreign direct investment (FDI) and foreign inward remittances received by the company.
The case adds another chapter to the ongoing scrutiny of the portal by multiple investigative agencies.
Credits: The Hindu
What the ED Found: FDI and Remittance Violations
In its statement, the ED said the adjudicating authority under FEMA concluded that NewsClick had received approximately ₹9.59 crore in foreign direct investment during FY 2018–19 by allegedly misrepresenting the nature of its business activities in statutory filings.
According to the agency, this misrepresentation allowed the company to bypass prescribed sectoral conditions and entry route requirements under FEMA.
Further, foreign inward remittances aggregating to ₹82.63 crore between FY 2018–19 and FY 2023–24 were reportedly received under the head of export of services. The ED claims these transactions violated FEMA provisions due to misclassification of exports and non-compliance with mandatory reporting requirements, including submission of SOFTEX forms.
The agency described the transactions as “substantial, deliberate, and systemic,” asserting that they were structured in a way that defeated the objectives of India’s foreign exchange regulatory framework.
Liability of the Founder
The ED held Prabir Purkayastha personally liable under Section 42 of FEMA, stating that he was in charge of and responsible for the conduct of business at the relevant time.
Under Section 13(1) of FEMA, penalties can be imposed for contraventions involving foreign exchange transactions. As a result, the authority ordered ₹120 crore in penalties on the company and ₹64 crore on Purkayastha.
Notably, FEMA is a civil law enacted in 1999 to facilitate external trade and payments and promote the orderly development and maintenance of India’s foreign exchange market. While the Reserve Bank of India (RBI) regulates foreign exchange, the ED is tasked with investigating violations and issuing show cause notices.
Wider Investigations and Arrest
The FEMA case is only one part of a broader investigation involving multiple agencies, including the Enforcement Directorate, the Central Bureau of Investigation (CBI), the Delhi Police, and the Income Tax Department.
In October 2023, Delhi Police arrested Purkayastha under anti-terror laws, alleging that he was part of a conspiracy to disrupt India’s sovereignty and territorial integrity and to cause disaffection against the country. He is currently out on bail.
Authorities have also issued summons to Neville Roy Singham, an American businessman currently based in Shanghai, as part of the investigation. Officials stated that the summons went unanswered.
The Global Funding Allegations
The case gained international attention following a 2023 report by The New York Times, which alleged that NewsClick was part of a global network receiving funding to promote Chinese government talking points.
The report claimed that Singham had funded NewsClick and other media outlets across the world, influencing editorial content. These allegations intensified scrutiny from Indian authorities and formed part of the broader investigative narrative.
NewsClick’s Response
NewsClick has consistently denied all allegations against it. The portal has maintained that it never published news at the behest of any Chinese entity or authority and did not take directions from Singham.
In earlier statements, the company asserted that all funding received was routed through appropriate banking channels and duly reported to relevant authorities as required by law. It cited proceedings before the Delhi High Court where, according to the portal, the RBI had substantiated compliance with reporting requirements.
The portal has positioned the actions against it as unjustified and has refuted accusations of anti-national activities or financial misconduct.
Credits: Mathrubhumi English
What Lies Ahead?
The regulatory action against NewsClick has significantly escalated with the ₹184 crore penalty. The legal procedure is far from over, though. Parties may appeal adjudication orders before the Appellate Tribunal and higher courts under FEMA.
The case highlights broader issues regarding foreign funding, media independence, regulatory compliance, and the distinctions between civil financial infractions and national security concerns as investigations proceed on several fronts.
As of this now, the ED’s ruling is among the most severe FEMA sanctions ever levied against a digital media company; this development is probably going to have far-reaching effects.
