28 Nov

Enforcement Directorate

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Contents

• History
• Objectives
• What makes ED so Strong?
• Controversies/Issues/Critique
• Issue of Extension of Tenure of ED Head

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Enforcement Directorate- Key issues and concerns

Introduction

• The Directorate General of Economic Enforcement is a law enforcement and economic intelligence agency responsible for economic laws and fighting economic crimes in India.
• It is part of Department of Revenue, Ministry of Finance. It comprises of officers of the IRS, IPS and IAS.

History

• The origin of this Directorate goes back to 1st May, 1956, when an ‘Enforcement Unit’ was formed, in Department of Economic Affairs, for handling Exchange Control Laws violation under Foreign Exchange Regulation Act, 1947. In the year 1957, this unit was renamed as ‘Enforcement Directorate’.

Objectives

Presently, ED deals with four laws:

a. Foreign Exchange Management Act, 1999 (FEMA)

• It is a civil law dealing with foreign exchange market in India.
• ED has the responsibility to investigate suspected contraventions of foreign exchange laws and regulations, to adjudicate and impose penalties on those adjudged to have contravened the law.

b. Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA)

• The ED is the sponsoring agency of COFEPOSA. Under this the ED is empowered to sponsor cases of preventive detention with regard to contravention of FEMA.

c. Prevention of Money Laundering Act, 2002 (PMLA)

• It is a criminal law to prevent money laundering and to provide for confiscation of property involved in money laundering.

d. Fugitive Economic Offenders Act, 2018 (FEOA)

• It deals with Indian offenders who leave India to escape laws. This allows ED to attack properties of fugitive offenders who have escaped India.

What makes ED so Strong?

• The ED has a set of powers that CBI or state police don’t have, making it a feared agency it is.

These powers are:
a. Under PMLA which ED deals with, a statement before an investigation officer is admissible in court as evidence.
b. The burden of proof is on the accused.
c. All offences under PMLA are non-bailable.
d. Unlike CBI or state police, ED doesn’t have its lockups, so there are no special cells with ED for VIPsin its custody. People in ED custody go to lockup of the nearest police station, irrespective of its status.
e. It’s very hard to retrieve property attached by ED.

Controversies/Issues/Critique:

i. The PMLA, created in 2022, has periodically undergone several significant reforms to strengthen it against money laundering.

• However, due to these revisions, several petitions have been submitted nationwide, questioning the ED’s nearly unrestricted powers under the PMLA to search for, seize, look into, and attach property deemed to be proceeds of crime.

ii. Overreach and Selective Targeting:

• PMLA has been used for investigation of common crimes as well.
• Allegation of becoming more active before elections.
• Allegation of ED going soft on government supporters:
  • For e.g. no proceedings against Himanta Biswa Sarma after he changed his party to move to BJP.
  • Cases against Ramdev and Balkrishna were shut down by the ED after government changed in 2014.

iii. Lack of transparency and Clarity:

• Because it is an “internal document”, the Enforcement Case Information Report (ECIR), the FIR’s equivalent, is not provided to the accused.
• Similarly, there is also a lack of transparency about how ED selects its cases to investigate.

iv. Very low rate of conviction:

• As per a data published in Indian Express in 2019, the ED had approximately 2,400 PMLA cases between 2005-19 and convictions were secured only in eight and investigation was pending in 898 cases.

v. Delays in Investigation – The investigation process of the ED can be quite time consuming, leading to delays in delivering justice. This can also impact the business operations of the entities being investigate.

vi. Third extension for Enforcement Directorate (ED) chief is illegal: Supreme Court.

Way Forward:

• Oversight Committee – An oversight committee needs to be created to overlook and streamline the case selection process based on objective criteria and to boost transparency in the functioning of ED.
• Increased Resources – To deal with pending number of cases.

 Conclusion:

• While the ED plays a significant role in tackling economic offenses and financial crimes in India, there are valid concerns about its functioning, including issues of accountability, selective targeting and legal ambiguity.
• Striking a balance between its investigatory powers and safeguarding individual rights is crucial
  for its effective functioning. Reforms that address these concerns and enhance transparency can
  improve the agency’s overall credibility and effectiveness.

Issue of Extension of Tenure of ED Head

What was held in 2021 verdict?

• The Union government’s order of Nov 2020 extending Mr. Mishra’s tenure with retrospective effect was challenged before the Supreme Court in the Common Cause v. Union of India (2021).
• In Sep 2021, a Supreme Court bench upheld the tenure extension but clarified that Mishra would not be given any further extension beyond Nov 17, 2021, upon completion of three years of his tenure, issuing a writ of mandamus to this effect.
• It also held that extension of tenure of ED officials who has attained the age of superannuation should be done in ‘rare and exceptional cases’ and that such extensions should be for a short period only.
• The court held that in Section 25(d) of the CVC Act, the words “no less than two years” cannot be read to mean “not more than two years” and there is no fetter on the power of the Central government in appointing the Directorate of Enforcement beyond a period of two years.

Nov 2021 Amendments:

• In Nov 2021, three days before Mr. Mishra was about to retire, two ordinance were promulgated by then-President Ram Nath Kovind, amending the CVC Act, The Delhi Special Police Establishment Act, 1946 and the Fundamental Rules.
• It allowed ED and CBI chief’s tenures to be extended by upto three years after the mandated term of two years.
• This allowed government to keep two chiefs in their posts for a year after the completion of their two year terms and to keep these one year extension until they complete five years as
  chiefs.
  ­Thus, Mr. Mishra was granted another one-year extension of tenure for the second time. In Nov 2022, he was granted a third tenure extension upto Nov 18, 2023.

Challenge in Supreme Court:

• A batch of petitions was filed in the Supreme Court challenging the orders allowing the extension of Mr. Mishra’s tenure as well as amendments to the law.
• Why the amendment were challenged?
  • Centre could use the prospect of service extension as a ‘carrot and stick’ policy to ensure that the CBI and ED Directors work according to its wishes.
• On 11th July 2023, (in Jaya Thakur vs Union of India), the SC upheld the amendments made by the legislature but ruled that extension granted to Mr. Mishra were contrary to the court’s 2021 judgement in Common Cause and thus was illegal.
• The court upheld the amendment and observed that the extensions were not given at the “sweet will” of the government but instead were recommended by a five member High-Level Committee comprising of Central Vigilance Commissioner and Vigilance Commissioners.
• Besides the committee was required to record reasons in writing in support of their recommendations.
• It further held that amendments were passed by elected representatives of the people who are “supposed to know and be aware of the needs of the people and what is good or bad for them”.

However, on July 27, the Supreme Court extended the tenure of the incumbent ED Director Sanjay Kumar Mishra till Sep 15, 2023, to serve ‘public and national interest’.

• Government had made a submission that Mishra’s presence was necessary for the ongoing FATF evaluation of India’s money-laundering probe operations which is at a critical stage.

­ Concerns raised:

• Experts have flagged the judgment for being an instance of judicial deference to the Centre.
• Constitutional law expert Gaurav Bhatia wrote “If the Supreme Court is unable – or unwilling to enforce its own previous, direct orders (not once, not twice, but many times) in the face of executive recalcitrance, then what hope – if any – ought citizens to have in its ability or willingness to adjudicate cases involving serious and far-reaching constitutional breaches by the executive?”