TAG: GS 2: POLITY
THE CONTEXT: On July 12, the Supreme Court of India delivered a significant judgment regarding the powers of the Directorate of Enforcement (ED) under the Prevention of Money Laundering Act (PMLA).
EXPLANATION:
- The court emphasized that the ED’s power to arrest must not be exercised arbitrarily but should be based on objective and fair consideration of evidence.
- The court raised concerns about whether the ED has a consistent and uniform policy for arrests.
- It stressed that the power to arrest must be exercised based on an objective and fair evaluation of the material against an individual.
- This decision addresses concerns that arrests should not be made on mere whims and fancies of ED officers.
Legal Basis for Arrests under PMLA
- Under Section 19(1) of the PMLA, ED officers have the authority to arrest a person if they have reasons to believe, based on the material in their possession, that the individual is guilty of money laundering.
- However, the Supreme Court noted that this power is drastic and could potentially violate the right to life and liberty under Article 21 of the Constitution if misused.
- The judgment stemmed from a petition filed by the Delhi Chief Minister, challenging his arrest by the ED on money laundering charges.
- The court granted him interim bail and used the case to highlight broader issues with the ED’s arrest procedures.
Statistics on ED’s Activities
- Justice Sanjiv Khanna, authoring the verdict, presented data on ED activities from 2023:
- Enforcement Case Information Reports (ECIRs): 5,906 registered by December 31, 2023.
- Searches Conducted: 531 ECIRs led to the issuance of 4,954 search warrants.
- Cases Involving Politicians: 176 ECIRs recorded against ex-MPs, MLAs, and MLCs.
- Arrests and Prosecutions: 513 persons were arrested, and 1,142 prosecution complaints were filed.
- The data was not updated beyond this date, raising questions about the consistency and transparency of the ED’s actions.
Supreme Court’s Analysis
- The court underscored that the ED’s reasons for believing that a person is guilty should not be based on mere suspicion.
- Suspicion, requiring a lower degree of satisfaction, does not equate to belief.
- Belief must be beyond speculation or doubt and grounded in fair and objective consideration of the available material at the time of arrest.
- Under PMLA, an accused should be provided with written reasons explaining the investigating officer’s belief in their guilt and the justification for their arrest.
- This ensures transparency and accountability in the arrest process.
Consideration of Exculpatory Material
- The Supreme Court also highlighted that ED officers should not focus exclusively on incriminating evidence.
- They must also consider material that could absolve or exculpate the accused.
- The court warned against selectively picking and choosing evidence to justify an arrest, emphasizing that officers must apply their minds to all relevant material.
Enforcement Directorate (ED)
- ED is a Multi-Disciplinary Organisation under the Department of Revenue, Min of Finance mandated with the task of enforcing the Foreign Exchange Management Act, 1999 (FEMA) and Prevention of Money Laundering Act, 2002 (PMLA)
- The ED, headquartered in New Delhi, is headed by the Director of Enforcement. There are five Regional offices and other zonal and subzonal offices in various parts of the country.
- It was formed in 1956 in the Department of Economic Affairs to investigate cases of foreign exchange-related violations, a civil provision. However, in 2002, after the introduction of the PMLA, it started taking up cases of financial fraud and money laundering, which were of criminal nature.
- FEMA 1999 regulates currency transactions, the import and export of commodities, securities, the purchase and sale of any kind, etc.
- FEMA’s main objective is to facilitate external trade and payments. It was also formulated to assist the orderly development and maintenance of the Indian forex market.
- Contraventions of FEMA are dealt with by way of adjudication by designated authorities of ED and penalties up to three times the sum involved can be imposed.
- The PMLA provides authority to the ED to investigate offences of money laundering and to take actions of attachment and confiscation of property.
- PMLA provides for the prosecution of persons involved in money laundering. There are 156 offences under 28 statutes, which are Scheduled Offences under PMLA.
- ED also processes cases of fugitive/s from India under the Fugitive Economic Offenders Act, 2018.
- The powers of the survey, search and seizure, the search of persons, retention of property or of records, to issue summons to enforce the attendance of any person and compel him to give evidence or produce records, discovery or inspection, and the power to arrest, etc are conferred by various provisions of PMLA.
- Render cooperation to foreign countries in matters relating to money laundering, etc.