ED’s powers and functions call for scrutiny

It looks as though the ED has lowered its priority of international responsibilities, almost like our Narcotics Control Bureau. Otherwise, our govt should not have been surprised by the 2016 Panama or 2021 Pandora papers leading to the detection of Rs20,353 crore of unaccounted money from 930 ‘India-linked entities’, as revealed in Parliament on December 16.

Increasing clout: The Enforcement Directoate has unprecedented powers which even the police do not have under the CrPC. PTI

Vappala Balachandran

Author and Columnist

TWO recent higher court observations on the Enforcement Directorate (ED) have put in focus the functioning of the directorate, which has been in the news for several reasons.

The first was on December 15 when the Supreme Court ‘slammed’ the agency for “weaponising Prevention of Money Laundering Act (PMLA) by invoking its stringent provisions even in minor cases to put people behind bars”. CJI NV Ramana had said: “You are diluting the Act by invoking the PMLA provisions indiscriminately”.

The second instance was on December 17 when the Kerala High Court reminded the ED of its responsibility “of persons outside India” in the fake antiquities case against the infamous dealer Monson Mavunkal and that the ED and Crime Branch should work in tandem to reveal the full picture.

It looks as though the ED has lowered its priority of international responsibilities, almost like our Narcotics Control Bureau. Otherwise, our government should not have been surprised by the 2016 Panama or 2021 Pandora papers leading to the detection of Rs 20,353 crore of unaccounted money from 930 ‘India-linked entities’ as revealed in Parliament on December 16. Like a typical Bollywood film, the ED was seen rushing in after the hero had caught the thief. This, despite the 2020-21 annual report of our Department of Economic Affairs (DEA) saying that this is the ED’s ‘primary function’.

The ED was established in 1956 as an enforcement unit of the Department of Economic Affairs, in the Ministry of Finance for investigating exchange control violations under the Foreign Exchange Regulation Act (FERA), 1947. In 1960, it was brought under the Department of Revenue to enforce the new FERA of 1973 which became a new law, Foreign Exchange Management Act (FEMA) in 1999.

In 2002, it was designated “as the sole body” to implement the PMLA to meet our international obligations under the United Nations General Assembly’s (UNGA) special session of February 23, 1990, and the UNGA’s Special Session of June 8-10, 1998, calling upon member states to adopt national money laundering legislation and programmes.

Pages 178-184 of the DEA’s annual report (2020-21) give the ED’s performance under PMLA, while pages 184-186 disclose its work under FEMA. However, these dry statistics give no clue on the quality of cases detected nor the final disposal with conviction figures, unlike the statements of the National Crime Records Bureau (NCRB).

Was the PMLA drafted in haste without due legal scrutiny? This is because several legal issues started cropping up during its implementation as it encroached upon the jurisdiction of our States which, under Schedule 7 of our Constitution, oversaw the police.

Since the ED was also doing ‘investigation’, resulting in arrests and remands like the police, there are serious doubts whether this ran counter to the assurance given by Dr BR Ambedkar to our Constituent Assembly on August 29, 1949, that Central agencies like the proposed Intelligence Bureau would not make ‘investigation’: “The point of the matter is the word ‘investigation’ here does not permit and will not permit the making of an investigation into a crime because that matter under the Criminal Procedure Code (CrPC) is left exclusively to a police officer. Police is exclusively a State subject; it has no place on the Union List. The word ‘investigation’ therefore is intended to cover general inquiry for the purpose of finding out what is going on. This investigation is not investigation preparatory to the filing of a charge against an offender which only a police officer under the Criminal Procedure Code can do.”

Are ED officers ‘police’ as defined in the Police Act, 1861? An article in Law Street India on August 21, 2020, had said that this point was examined by the Delhi High Court, which referred to a higher Bench whether the provisions of CrPC apply to ED under the PMLA and to what extent. This is still pending. Also, under Section 54 of PMLA, police officers are “empowered and required” to assist the ED. If so, is the ED considered as “Superior Officer” under Section 36 of the CrPC competent to over-rule the state hierarchy’s decisions?

Also, unprecedented powers were delegated to the ED officials which are not given to police officials under the CrPC who also investigate cases of export and imports of currency and counterfeiting under the Indian Penal Code (IPC). Under Section 25 of the Indian Evidence Act, no confession before a police officer is admissible in a court, the basic idea being that a person who is investigating a case under the CrPC should not be empowered to create self-inculpatory evidence against the accused. However, this is not followed by the ED.

A second question about Section 50 under PMLA is whether it violates Article 20(3) of the Constitution which protects against self-incrimination. In other words, an individual cannot be compelled to be a witness against himself. However, the Supreme Court has laid down that Article 20(3) can be availed of only if a person is ‘accused’ of a crime. Yet Section 50 under PMLA does not distinguish between a witness and an accused person. All can be summoned.

This technical loophole allows ED to summon anybody to record their statements without accusation, thereby preventing that person his constitutional protection under Article 20(3) as in many cases the ED file charges based on such recorded statements.

All these questions were cited on July 19, 2021, when the Supreme Court took up a hearing wherein it was ruled that there would be no stay in trial or investigation in cases where order of no coercive simpliciter was passed. However, it was revealed that 200 pleas on various issues relating to the ED’s powers to launch probes, issue summons, arrest, search and seize evidence were pending since 2014. The Solicitor General formulated 14 questions of law on PMLA including whether the offences under PMLA is cognisable or non-cognisable offence, considering the ‘explanation’ under Section 3 inserted in 2019?

Until all these legal issues are decided, there will be no clarity on the ED’s functioning and the impression that it is ‘weaponising’ the PMLA will persist.