American billionaire Neville Roy Singham, along with Prabir Purkayastha, was involved in “conceptualizing and structuring” the channeling of foreign funds into India by portraying NewsClick as a “services entity” rather than a “news entity”, the Enforcement Directorate (ED) said in a Foreign Exchange Management Act (FEMA) notice against the news portal and its founder.
The federal agency, in the notice, also alleged that the funds received by NewsClick were used to organize an “information war” against India and encourage separatism across disparate, disconnected and independent ideological axes.
The ED’s jurisdiction under FEMA last week imposed penalties of $184 Crore on NewsClick ( $120 Crores) and Purkayastha ( $64 crore) for violating various provisions of the Foreign Funding Act.
“Neville Roy Singham and Purkayastha were involved in conceptualizing and structuring the channeling of foreign funds to India and ensuring that the receiving company was expected to be a service entity and not a news entity, with the aim of avoiding regulatory scrutiny,” the ED said in the FEMA notice issued to NewsClick and Purkayastha, which was reviewed by HT.
In the notice, the agency cited Singham’s email correspondence with Purkayastha and others to allege that he was actively involved in “financing, content strategy and coordination of NewsClick’s activities.”
Officials said summonses were issued to Singham, who currently resides in Shanghai, in October 2023, but the executive has not heard back from him.
Explaining the violations, the ED said NewsClick received foreign direct investments worth $9.59 crore under the automatic route. “While reporting receipt of FDI and allotment of shares, it declared its principal business activity to be ‘creation of digital media content for the web’ and adopted NIC Code No. 63999 (other information service activities n.e.c.),” the notice said, adding that such declaration was factually incorrect and misleading.
“…NewsClick’s actual business activity falls under the ‘publishing of newspapers and periodicals covering news and current affairs’ sector, which, under FEMA regulations and existing FDI policy, attracts a 26% sectoral limit with mandatory government approval. By mischaracterizing its business activity and adopting an inappropriate NIC in its legal filings with the RBI, NewsClick has illegally benefited from the automatic route to receive foreign investment and has bypassed the requirement of obtaining prior government approval, thereby exceeding the requirements of obtaining prior government approval,” the agency document added. “Contrary to the sectoral maximum and entry route conditions established under FEMA.”
Later, according to the notice, the ED found that NewsClick had received bulk foreign remittances to $82, 63, 80,627 in its bank account with ICICI Bank, allegedly for the purpose of exporting services from entities located outside India. These funds were received from foreign entities, including The Justice and Education Fund, Inc., The Tricontinental Ltd., GSPAN LLC, and Centro Popular De Midias CP, and are declared under various purposes such as audio-visual and related services, information services, research and development services, software consulting/implementation, business travel, and other services not listed elsewhere. ED said the receipts were regulated through service agreements concluded with foreign remitters.
“…Upon scrutiny of the service agreements, banking records, and related correspondence, the so-called export of services lacked the essential features of a genuine service transaction on an arm’s-length basis, insofar as the consideration was alleged to have been predetermined, received substantially in advance, and was not related to the identifiable, measurable, or verifiable services provided by NewsClick,” the notice said.
It asserted that the receipts were camouflaged as capital flows, intended to evade FEMA regulations governing foreign investment and reporting.
Noting that the use of FDI by NewsClick was a violation of the anti-terrorism law – Unlawful Activities Prevention Act (UAPA), the ED agreed with the Delhi Police investigation that the funds were used for anti-India activities.
“…While reporting the receipt of FDI in Form FC-GPR, Newsclick submitted a declaration to the Reserve Bank of India asserting that the foreign investment received by it would be used in accordance with the provisions of the PMLA (Prevention of Money Laundering Act) and the UAPA Act. However, subsequent investigation revealed that the said declaration was false and misleading, inasmuch as the foreign funds received by NewsClick were alleged to have been used in activities attracting offenses under the provisions of the UAPA Act, 1967,” the notice said.
The agency also recorded its independent findings of UAPA violation in the notice.
It relied on numerous emails showing Newslick using funds to “spread misinformation during the Covid-19 pandemic, information warfare against the Republic of India, and create incorrect maps of the Republic of India.”
HT has reached out to NewsClick’s legal team for comment on the ED’s allegations.
