Sweeping Powers of Directorate of Enforcement (ED)

Published: 5th Apr, 2024

Context

The Supreme Court endorsed the sweeping powers of the Directorate of Enforcement (ED), saying the Central agency could call “anybody for any information” even as it castigated Tamil Nadu District Collectors for failing to appear in person in response to a summons issued to them by the anti-money laundering body.

1: Dimension- Power and Function of ED:

Search and Seizure- ED carries out search (property) and seizure (money/documents) under Section 16 and Section 17 of the PMLA.
In case of Arrest-If the person is arrested, the ED gets 60 days to file the prosecution complaint (charge sheet) as the punishment under PMLA doesn't go beyond seven years.
In property attachment- If no one is arrested and only the property is attached, then the prosecution complaint along with attachment order is to be submitted before the adjudicating authoritywithin 60 days.

2: Dimension- Power of ED for ‘interrogation’ and ‘Custody’:

Under Prevention of Money Laundering Act, 2002 (PMLA):Following the recommendations of the Financial Action Task Force (FATF) India enacted PMLA.
The ED has been entrusted with the responsibility of executing the provisions of PMLA by conducting investigation to trace the assets derived from proceeds of crime, to provisionally attach the property and to ensure prosecution of the offenders and confiscation of the property by the Special court.
The ED carries out search (property) and seizure (money/documents)after it has decided that the money has been laundered, under Section 16 (power of survey) and Section 17 (search and seizure) of the PMLA.
On the basis of that, the authorities decide if arrest is needed as per Section 19 (power of arrest).
Under Section 50 of the PMLA, the ED can also directly carry out search and seizure without calling the person for questioning.
It is not necessary to summon the person first and then start with the search and seizure.
If the person is arrested, the ED gets 60 days to file the prosecution complaint (chargesheet) as the punishment under PMLA doesn't go beyond seven years.
If no one is arrested and only the property is attached, then the prosecution complaint along with attachment order is to be submitted before the adjudicating authority within 60 days.

3: Dimension- Effectiveness of ED

As of March 31, 2022, the ED's conviction rate was less than 0.5 per cent, with only 23 convictions in 5,422 PMLA cases. In comparison, the national conviction rate in India for offences of the Indian Penal Code was 57 per cent in 2021.
Petitions challenging PMLA provisions, particularly related to arrests and property attachments, have been presented in the Supreme Court.

Fact Box

Important Judgments:

Supreme Court’s view: In its “Vijay Madanlal Choudhary v. Union of India”, the Supreme Court upheld various provisions of the PMLA which relate to the powers of arrest, attachment, search, and seizure conferred upon the ED.
- The court was of the opinion that all the provisions under PMLA have a reasonable nexus with the objects sought to be achieved by the Act to prevent money-laundering effectively.
In P. Chidambaram v. Directorate of Enforcement (2019), the Supreme Court rejected a prayer for anticipatory bail with respect to an offence of money laundering and proceeded to grant custody to the ED.
- The court reasoned that in a case of money laundering which involves many stages of placement and layering of funds, a ‘systematic and analysed’ investigation is required which would be frustrated if pre-arrest bail is granted.

Enforcement Directorate (ED):

Directorate of Enforcement is a Multi-Disciplinary Organization mandated with the task of enforcing the provisions of two special fiscal laws – Foreign Exchange Management Act, 1999 (FEMA) and Prevention of Money Laundering Act, 2002 (PMLA).
Whenever any offence is registered by a local police station, which has generated proceeds of crime over and above Rs 1 crore, the ED steps in.
As per the Prevention of Money Laundering Act, the ED got its power to investigate under Sections 48 (authorities under act) and 49 (appointment and powers of authorities and other officers).
If money has been laundered abroad, the PMLA court (constituted as per the Act) has the right to send a letter of rogatory under Section 105 (reciprocal arrangements regarding processes) of the Code of Criminal Procedure.

Mains Practice Question

Q: Despite being a central agency, the Enforcement Directorate possesses jurisdiction across India, posing intricate legal inquiries. Comment (250 words)

UPSC PYQ (Related)

Q: The jurisdiction of the Central Bureau of Investigation (CBI) regarding lodging an FIR and conducting probe within a particular state is being questioned by various States. However, the power of States to withhold consent to the CBI is not absolute. Explain with special reference to the federal character of India. (UPSC 2021)

CURRENT AFFAIRS FOR UPSC IAS

Sweeping Powers of Directorate of Enforcement (ED)

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CURRENT AFFAIRS FOR UPSC IAS

Sweeping Powers of Directorate of Enforcement (ED)

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