 "Enforcement Directorate, ED")
On November 21, the Directorate of Enforcement or the Enforcement Directorate (ED) issued a show-cause notice of Rs 9,362 crore to Think & Learn, the company behind Byju's education platform, and its founder Byju Raveendran for alleged violations of forex rules while attracting foreign investments from 2011 to 2023.
The ED is often in the news, sometimes for raids or cases against political leaders in the country and sometimes for acting against corporate entities. But what is the ED?
The Directorate of Enforcement or Enforcement Directorate (ED) is a domestic law enforcement and economic intelligence agency in India. It is tasked with enforcing economic laws and combating economic crimes. It operates under the Department of Revenue, Ministry of Finance, Government of India.
When did the ED come into being?
The ED originated as an "Enforcement Unit" on May 1, 1956, under the Department of Economic Affairs, handling exchange control law violations.
Over the years, it transitioned through legislative changes, such as the repeal of the Foreign Exchange Regulation Act (FERA), 1947 and the introduction of the Foreign Exchange Management Act (FEMA) in 2000. The enactment of PMLA in 2002 further strengthened ED's role in addressing money laundering, aligning its functions with international standards.
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On March 11, 2011, the ED underwent significant restructuring, expanding its workforce to 2064 officers/staff from 758 and increasing its offices from 21 to 49 across India.
Who heads the ED?
The Enforcement Directorate's headquarters is in New Delhi. The leadership structure comprises the Director of Enforcement at the helm, who oversees regional offices in Mumbai, Chennai, Chandigarh, Kolkata, and Delhi, which are led by Special Directors of Enforcement.
The ED's zonal and sub-zonal offices, headed by Joint and Deputy Directors, respectively, extend its operational reach.
Rahul Navin, a 1993-batch IRS officer, became the in-charge director of the Enforcement Directorate on September 15, 2023, succeeding Sanjay Kumar Mishra.
What is the role of the ED?
The ED is a multi-disciplinary organisation mandated to enforce two pivotal fiscal laws:
Foreign Exchange Management Act, 1999 (FEMA): This civil law with quasi-judicial powers investigates contraventions of exchange control laws and imposes penalties.
Prevention of Money Laundering Act, 2002 (PMLA): This is a criminal law that empowers officers to conduct inquiries, attach/confiscate assets, and prosecute money launderers.
The ED's primary focus is on curbing the generation and circulation of black money and ensuring compliance with foreign exchange and money laundering laws.
Other laws and acts that the ED can enforce include:
Fugitive Economic Offenders Act, 2018 (FEOA): This act enables action against criminals who fled the country after committing economic crimes.
Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA): This act helps prevent smuggling activities.
What powers does the ED have?
The ED has extensive powers to investigate and act against individuals violating enforced laws, including special powers for confiscating disproportionate assets under the PMLA Act. Major laws and acts enforced by the ED encompass FEMA, PMLA, FEOA, and COFEPOSA, regulating diverse aspects of economic offences.
Supreme Court clarifications on ED powers
On July 27, 2022, the Supreme Court, in its rulings, upheld the powers of the ED under the PMLA, emphasising its crucial role in preventing money laundering. However, the Supreme Court clarified that ED officials were not equivalent to police officers and could not make arrests under the PMLA, highlighting the importance of adherence to the rule of law and establishing checks and balances in the ED's operations.
On August 22, 2022, the Supreme Court accepted a petition to review core PMLA amendments, highlighting concerns about specific provisions related to providing information reports to the accused and reversing the presumption of innocence.
Controversy over the ED director's tenure extension
Former ED Director Sanjay Kumar Mishra's initial two-year term, starting November 2018, was extended to three years in November 2020 despite reaching the retirement age of 60 in May 2020. The 2021 ruling in the Common Cause case upheld this extension but restricted further extensions beyond November 17, 2021. However, in November 2021, amendments allowed extensions for the Central Bureau of Investigation (CBI) and ED chiefs for up to three years, and Mishra received a third extension until November 18, 2023.
Petitions were filed challenging the Supreme Court's decision to extend Mishra's tenure by Congress party spokesperson Randeep Singh Surjewala, Trinamool Congress leader Mahua Moitra and social activist and general secretary of Madhya Pradesh Congress Mahila Committee Jaya Thakur.
On July 11, a court verdict instructed Mishra to step down by July 31, considering his third consecutive extension until November 2023 illegal. However, on July 27, 2022, the Supreme Court extended the incumbent ED director until September 15, 2023, citing "public and national interest."
Mishra stepped down from his role as ED Director on September 15. Rahul Navin was named interim director.
How effective is the ED?
In July 2022, the Union government shared data with the Parliament that raised concerns regarding the effectiveness of the 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.
Pankaj Chaudhary, the Union minister of state for finance, told the Lok Sabha in a written response, "Till March 31, 2022, ED recorded 5,422 cases under the PMLA, attached proceeds of crime of Rs 1,04,702 crore (approximately), and filed prosecution complaints (charge sheets) in 992 cases, resulting in the confiscation of Rs 869.31 crore and the conviction of 23 accused."
Petitions challenging PMLA provisions, particularly related to arrests and property attachments, have been presented in the Supreme Court.
Many politicians have also accused the central government of misusing agencies, including the ED, to raid leaders of Opposition parties ahead of elections.
On March 24, 14 Opposition parties, including INC, DMK, RJD, BRS, Trinamool Congress, AAP, NCP, Shiv Sena (UBT), JMM, JD(U), CPI(M), CPI, Samajwadi Party, and J&K National Conference, filed a petition with the Supreme Court alleging misuse of ED.
Senior advocate A M Singhvi, representing the petitioners, argued that the number of politicians investigated by the ED had drastically risen after 2014. Singhvi argued that 95 per cent of the politicians investigated belonged to opposition parties. Petitioners had requested the court to issue "pre-arrest" and "post-arrest" guidelines for politicians involved in non-violent cases. While the Chief Justice issued a date to hear the case, the top court later rejected the petition.
In early November, the Congress party also approached the Election Commission over the misuse of the ED as a "political tool" ahead of state Assembly polls after the directorate had conducted multiple raids in poll-bound Rajasthan, Madhya Pradesh, and Chhattisgarh.
