ED flags ‘info warfare’ angle in NewsClick case

AMerican billionaire Neville Roy Singham, on with Prabir Purkayastha, was mired in “conceptualising and structuring” the routing of strange pecuniary resource to republic of india by projecting NewsClick as a “services entity” rather than a “news entity”, the Enforcement Directorate (ED) has said in its Foreign Exchange Management Act (FEMA) notice against the news portal and its founder.The federal agency has also alleged, in the notice,that funds received by NewsClick were used to orchestrate “information warfare” against India and to encourage separatism across divergent, unconnected and independent ideological axes.The adjudicating authority of ED under FEMA last week imposed penalties worth ₹184 crore on NewsClick ( ₹120 crore) and Purkayastha ( ₹64 crore) for contravention of various provisions of the foreign funding law.“Neville Roy Singham and Purkayastha were involved in conceptualising and structuring the routing of foreign funds into India and ensuring that the noticee company was projected as a services entity rather than a news entity, with a view to avoiding regulatory scrutiny,” ED said in its FEMA notice issued to NewsClick and Purkayastha, reviewed by HT.In the notice, the agency has cited Singham’s email communications with Purkayastha and others to allege that he was actively involved in the “funding, content strategy and coordination of the activities of NewsClick”.Officials said summons were issued to Singham, who is currently based in Shanghai, in October 2023 but ED never heard back from him.Elaborating the violations, ED has said that NewsClick received foreign direct investment worth ₹9.59 crore under the automatic route. “While reporting the receipt of FDI and allotment of shares, it declared its principal business activity as ‘making digital media content for the web’ and adopted NIC Code 63999 (other information services activities n.e.c.),” the notice states, adding that such a declaration was factually incorrect and misleading.“…the actual business activity of NewsClick falls within the sector ‘publishing of newspapers and periodicals dealing with news and current affairs’, which, under the applicable FEMA regulations and the extant FDI Policy, attracts a sectoral cap of 26% with mandatory government approval. By mischaracterising its business activity and adopting an inappropriate NIC Code in its statutory filings with the Reserve Bank of India, NewsClick wrongfully availed the automatic route for receiving foreign investment and bypassed the requirement of prior government approval, thereby contravening the sectoral cap and entry-route conditions prescribed under FEMA,” the agency’s document added.Subsequently, ED, according to the notice, found that NewsClick received foreign inward remittances aggregating to ₹82, 63, 80,627 in its bank account maintained with ICICI Bank, purportedly towards export of services from entities situated outside India. This money was received from foreign entities, including The Justice and Education Fund, Inc., The Tricontinental Ltd., GSPAN LLC, and Centro Popular De Midias CP, and were declared under various purposes such as audio-visual and related services, information services, research and development services, software consultancy/implementation, business travel, and other services not included elsewhere. ED has said that the receipts were structured through service agreements entered into with the foreign remitters.“...on scrutiny of the service agreements, bank records, and related correspondence, the so-called export of services lacked essential attributes of a genuine arm’s length service transaction, inasmuch as the consideration was allegedly pre-determined, largely received in advance, and was not linked to identifiable, quantifiable, or verifiable services rendered by NewsClick,” the notice said.It asserted that the receipts were camouflaged as capital inflows, intended to evade FEMA regulations governing foreign investment and reporting.Stating that the utilisation of FDI by NewsClick was in violation of the anti-terror law –– Unlawful Activities Prevention Act (UAPA), ED has concurred with the Delhi Police investigations that the funds were used for anti-India activities.“...while reporting the receipt of FDI in Form FC-GPR, Newsclick furnished a declaration to the Reserve Bank of India affirming that the foreign investment received by it would be utilised in compliance with the provisions of the PMLA (prevention of money laundering act) and the UAPA. However, subsequent investigation revealed that the said declaration was false and misleading, in as much as the foreign funds received by NewsClick company were allegedly utilised for activities attracting offences under the provisions of the UAPA, 1967,” states the notice.The agency has also recorded its independent findings on the violation of UAPA in the notice.It has relied on several e-mails which demonstrate the use of funds by Newslick for the “spread of misinformation during the Covid-19 pandemic, information warfare against the Republic of India, and creation of incorrect maps of the Republic of India”.HT has reached out to NewsClick’s legal team for comments on ED’s allegations.