Quantum of Enforcement Directorate’s Power: Warranted or Arbitrary?

History of ED’s Power under PMLA

Enforcement directorate is enshrined with the responsibility of examining and investigating financial offences and encroaches of legislations pertaining to foreign exchange. Over the course of its history, it has undergone progressions in terms of its organizational structure, position within the government, and the breadth of its responsibilities.[1] Enforcement Directorate (ED) has led high-profile probes in recent years.

The powers of the ED are mandated by the Prevention of Money laundering Act (PMLA) which was adopted in the year of 2002. The act was established to fulfil India’s global responsibility towards combating money laundering plaguing the global economy. The Act underwent many modifications and petitioners challenging the ED’s unrestrained powers, including as arrests, summons the guilty, search and seizure, and incriminating admissions[2]. The PMLA could not be used without a foundation charge, according to the then-finance minister who made the following statement when the measure was first introduced: “Without a predicate offence, the PMLA could not be invoked.” Thus, additional statutory requirements and limits served as a curb on the ED’s authority under the Act. Interestingly, 2019 was a successful year for the law enforcement agency. The organization made 11 indictments in a single year. This data is intriguing since it was only effectively able to make three between the years of 2002 to 2017. However, the number of investigations does not align with the number of convictions made by it. Why is this there such a disparity between investigations and arrests? This quandary is indictive of the speculation around the intentions of some probes and investigations made by the agency which ultimately tends to undermine the purpose of establishment of the organization.[3]

What makes ED so powerful?

The ED possesses a set of powers which are exclusive and separate from other law enforcement agencies like the police and CBI. Amongst other things, declaration made to investigating officers at ED are admissible under the court of law, which otherwise is not the case with a police officer. Second, offences covered under the act are non bailable. Further, it is extremely challenging to remove property that has been seized by ED. It takes years to regain the possession of the property attached by the agency.

Recently, Ashok Gehlot, chief minister of Rajasthan and a member of the Congress party, has claimed that the ED, despite its less success rate than the CBI (about 5%), is now more influential.[4]

There were just 112 investigations undertaken by the Enforcement directorate between 2004 and 2014. Simultaneously, it had associated assets that were worth around 5300 crores.   From 2005, when the Prevention of Money Laundering Act (PMLA) was passed, the ED has performed dozens of investigations; up until February of this year, it had done over 3086 spot checks. An enormous improvement compared to the decade prior 2014.   Conviction rates are quite low in relation to the number of searches conducted. So yet, the ED has only secured convictions in 23 cases.[5]

Judgement: Vijay Madanlal Choudhary vs Union of India.

In a judgement dated 27th July, the Apex court came in light on account of upholding certain provisions of the Prevention of Money Laundering act.[6] The bench was headed by Justice AM Khaliwikar. [7]

The PMLA’s Sections 5, 8(4), 15, 17, and 19 (which govern ED’s ability to make arrests, attach property, and conduct searches and seizures) were all found to be lawful by the court. Furthermore, the Court maintained Section 24 of the Act, which places the burden of proof on the defendant, stating that it has “reasonable linkage” with the purposes of the Act.[8]

In its decision, the highest court in the country stated that the directive given under Section 8(4) for taking possession of the property in question before a formal judgement of confiscation is passed ought to be the exception rather than the rule.  The ED has the jurisdiction under Section 8(4) to take possession of the property that has been attached as soon as the adjudicating body has confirmed that a provisional attachment has been placed on the property.[9]

In light of recent charges of ED misuse of power in its pursuit of the government’s political opponents, the court’s ruling comes at an opportune time. ED has been alleged to be used for political intimidation and out of spite against the opposition. This accusation has garnered quantum since Sonia Gandhi and Rahul Gandhi were probed in by the agency recently.

The ED has also targeted Kamal Nath’s nephew and Sonia Gandhi’s son-in-law, Robert Vadra.   ED is allegedly mild on BJP leaders or converts.[10]

Jarringly, the PMLA also authorizes the executive body to make arrests without providing the accused with a copy of Enforcement case information report (ECIR). This is an equivalent of a FIR. The court here opined that the ECIR is an internal document belonging to the ER and doesn’t necessarily have to be given out. The ED’s notice to the defendants of the charges against them is adequate.[11]

What is critical here is that this is a departure from the ordeal criminal procedure. The court specifies that the ED officer is not a police officer. A confession or a declarable made to a law enforcement officer in court is not admissible as covered under the Evidence Act, 1972. Further, article 20 of the constitution protects the individual his fundamental right against self- incrimination.

Twin test

Unlike Indian criminal law, which generally views bail as the norm and imprisonment as the exception, the PMLA renders the offences it addresses unbailable and establishes a strict twin-test for obtaining bail.   According to this standard, a special court may only issue bail to an accused person if it has a prima facie case that the person is innocent and won’t commit a crime if released on bond.[12]

Article 21 is flagrantly violated by the double bail condition listed in Section 45, which promotes preventative detention without the usual protections. The Court must be convinced that the defendant is not responsible for him to be to grant bail under the PMLA. However, it just so happens that both post and prior to the complaint being filed and post, the charged lack adequate tools to demonstrate their innocence prima facie.[13]

In an instance where the accused are called before the agency, detention is undertaken without adhering to the regulations outlined in the s.19 of the act which establishes the power to arrest. his occurs despite the fact that the accused have been given a right to an attorney.

Burden of proof on the accused

Section 24 of the act shifts the burden of proof, now on the accused, and violates Articles 20 and 21 by assuming an offence, has occurred without providing necessary remedies.

Also talk about how the judge retired a day before giving the judgement.

Other provisions addressed

Additionally, during the seize and arrests made by the agency, the act earlier limited the utilization of its section 17 and 19, pertaining to seize and arrests, to situations where the accused had been charged with a crime with filing of a charge sheet underlying the offence. The protections were scrapped off by the amendment made in 2019. However, the supreme court maintains that it is a “self-contained law”.[14]

A questionable use of authority can be inferred from the revisions that were enacted by means of the Finance Act, which was first proposed as a Money Bill. The monitoring of the Rajya Sabha has been sidestepped in this procedure.[15]

The bench headed by Justice AM Khaliwikar was an interesting instance. What comes as a surprise is that the judge was set to retire after delivering the judgement. What was one of the founding principles of Indian criminal law has now been undermined by the decision. There hasn’t been a single ounce of solitary and empathy to those wrongfully prosecuted under the PMLA.

Regardless of the premise that it is not even a legitimate body that is assigned with the task of maintaining public order, the Enforcement Directorate (ED) has supplanted the CBI as the foremost investigating agency of the Central government. What should be looked into is that there is a noticeable tendency in which the government uses the ED against political adversaries, while those in the ruling party or supporting it get away with corruption and money laundering. This is a very troubling trend. The changes that were made to the PMLA ought to be interpreted as a weaponization of the legislation in order to achieve selfish, personal, political purposes. A proverb that has stood the test of time asserts that power corrupts, and that absolute power corrupts completely. The number of applications that have been submitted in opposition to the judgement is an indication of the doubts that have surfaced in the minds of the general public. In order to safeguard the values of justice and fair play, it would be appropriate for the Supreme Court to take action on its own initiative and request that the verdict be reviewed by a more extensive Bench.

As of 25th July, 2022, Supreme Court has agreed to review the much-speculated judgement.

[1] Outlook. 2022. The Birth And Evolution Of Enforcement Directorate As Indian State’s Sword Arm. [online] Available at: <https://www.outlookindia.com/national/explained-the-birth-and-evolution-of-enforcement-directorate-as-indian-state-sword-arm-news-212141&gt; [Accessed 25 August 2022].

[2] Deshpande, D., 2022. A landmark verdict validating powers of Enforcement Directorate under PMLA – Part I. [online] Times of India Blog. Available at: <https://timesofindia.indiatimes.com/blogs/truth-lies-and-politics/a-landmark-verdict-validating-powers-of-enforcement-directorate-under-pmla-part-i/&gt; [Accessed 25 August 2022].

[3] Outlook. 2022. The Birth And Evolution Of Enforcement Directorate As Indian State’s Sword Arm. [online] Available at: <https://www.outlookindia.com/national/explained-the-birth-and-evolution-of-enforcement-directorate-as-indian-state-sword-arm-news-212141&gt; [Accessed 25 August 2022].

[4] Hindustan Times. 2022. ED more powerful than CBI: Congress on Sonia Gandhi’s 3rd-day interrogation. [online] Available at: <https://www.hindustantimes.com/india-news/ed-more-powerful-than-cbi-congress-ahead-of-sonia-gandhi-s-3rd-day-quizzing-101658899589911.html&gt; [Accessed 25 August 2022].

[5] Moneycontrol. 2022. MC Explains | What the PMLA judgment means for powers of ED. [online] Available at: <https://www.moneycontrol.com/news/trends/legal-trends/mc-explains-what-the-pmla-judgment-means-for-powers-of-ed-8908111.html&gt; [Accessed 25 August 2022].

[6] Vijay Madanlal Choudhary vs Union of India, SLP (Crl) 4634 OF 2014.

[7] Id.

[8] Id.

[9] Id.

[10] The Wire. 2022. SC Backs ED’s Powers Under PMLA, Says Supply of ECIR to All Concerned Not Mandatory. [online] Available at: <https://thewire.in/law/supreme-court-pmla-ed&gt; [Accessed 25 August 2022].

[11] NETWORK, L., 2022. Summary Of Supreme Court’s PMLA Judgement- Vijay Madanlal Choudhary Vs Union of India. [online] Livelaw.in. Available at: <https://www.livelaw.in/top-stories/supreme-courts-pmla-judgement-vijay-madanlal-choudhary-vs-union-of-india-204937?infinitescroll=1&gt; [Accessed 25 August 2022].

[12] A2Z Taxcorp LLP |. 2022. SC upholds ED’s Power of Arrest, Attachment, Search & Seizure and “Twin-Conditions” for Bail; says PMLA has stringent safeguards | A2Z Taxcorp LLP. [online] Available at: <https://www.a2ztaxcorp.com/sc-upholds-eds-power-of-arrest-attachment-search-says-pmla-has-stringent-safeguards/&gt; [Accessed 25 August 2022].

[13] Id.

[14] Thehindubusinessline.com. 2022. Money laundering: SC upholds ED’s powers. [online] Available at: <https://www.thehindubusinessline.com/business-laws/money-laundering-sc-upholds-eds-powers/article65704597.ece&gt; [Accessed 25 August 2022].

[15] Id.

Author: Kashvi Vachhani from GNLU

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