Enforcement Directorate (ED): Objectives, Powers and Functions

Supreme Court has recently passed a judgement upholding the PMLA and jurisdiction of ED. While section 45 of the PMLA deals with the aspect of offences to be cognisable and non-bailable, section 436A of the CrPC deals with the maximum period for which an undertrial prisoner can be detained. SC also said that Enforcement Case Information Report (ECIR) cannot be equated with an FIR and the supply of ECIR to the accused is not mandatory.

The Directorate of Enforcement (ED) is a versatile organisation that is entrusted with implementing the provisions of two fiscal laws-- Foreign Exchange Management Act, 1999 (FEMA) and the Prevention of Money Laundering Act, 2002 (PMLA).

What is Enforcement Directorate?

Established: It was established in May 1956 with the formation of an 'Enforcement Unit' under the aegis of the Department of Economic Affairs and handles Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 (FERA 1947). 

A year later, the Enforcement Unit was renamed Enforcement Directorate. By then, ED had three branches in Bombay, Calcutta and Madras. 

Headquarter: The Directorate of Enforcement (ED) is headquartered in New Delhi. The organisation is headed by the Director of Enforcement, Sanjay Kumar Mishra, IRS. 

Regional Offices: The Enforcement Directorate has five Regional Offices in Mumbai, Chennai, Chandigarh, Kolkata, and Delhi. The regional offices are headed by the Special Directors of Enforcement.

Zonal Offices: The Zonal Offices are in Ahmedabad, Bangalore, Chandigarh, Chennai, Kochi, Delhi, Panaji, Guwahati, Hyderabad, Jaipur, Jalandhar, Kolkata, Lucknow, Mumbai, Patna and Srinagar. The Zonal Offices are headed by a Joint Director.

Sub-Zonal Offices: The Sub-Zonal Offices are in Bhubaneshwar, Kozhikode, Indore, Madurai, Nagpur, Allahabad, Raipur, Dehradun, Ranchi, Surat, Shimla, Vishakhapatnam and Jammu. The Sub-Zonal Offices are headed by a Deputy Director.

Administrative Powers of Enforcement Directorate (ED): In 1960, the administrative powers were transferred from the Department of Economic Affairs to the Department of Revenue. From 1973 to 1977, ED remained under the administrative jurisdiction of the Department of Personnel & Administrative Reforms. The Directorate of Enforcement functions under the aegis of the Department of Revenue, Ministry of Finance.

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Objectives of Enforcement Directorate

Enactment of FEMA and PMLA

FERA 1947 was repealed and replaced by FERA 1973. However, FERA 1973 was repealed, and Foreign Exchange Management Act, 1999 (FEMA) came into effect. 

In line with the International Anti-Money Laundering regime, the Prevention of Money Laundering Act, 2002 (PMLA) was enacted. 

Power to officers under FEMA and PMLA

ED enforces two laws, FEMA and PMLA. FEMA is civil law. It has quasi-judicial powers to investigate suspected contraventions of the Exchange Control Laws and Regulations and impose penalties on those adjudged guilty. 

PMLA is a criminal law wherein the officers concerned have the powers to conduct enquiries to locate, provisionally attach or confiscate assets derived from acts of Scheduled Offences besides arresting and prosecuting the money launderers.

Functions of Enforcement Directorate

The key functions of the Enforcement Directorate (ED) are as follows: 

1- Investigate infringements of the provisions of FEMA that came into effect in 2000. The violations of provisions of FEMA are dealt with by the designated authorities and involve penalties up to three times the sum involved. 

2- The organisation also investigates offences under PMLA that came into force in 2005. If the crime is a Scheduled Offence, the concerned officers can confiscate the property and prosecute the individual(s) involved in money laundering.

3- The directorate can adjudicate Show Cause Notices issued under the repealed FERA 1973 up to May 31, 2002, for the alleged contraventions of the Act that may result in the imposition of penalties and further pursue prosecutions launched under FERA in the concerned courts.

4- Under the Fugitive Economic Offenders Act, 2018, the ED processes cases of fugitive(s) from India. The Act helps economic offenders from evading the process of law in India by staying outside the jurisdiction of Indian Courts and preserving the sanctity of the rule of law in India.

5- The ED put forth the cases of preventive detention under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974(COFEPOSA) concerning the contraventions of FEMA.

6- ED also renders cooperation to foreign countries in matters related to money laundering and restitution of assets under the provisions of PMLA and seeks cooperation in such matters.

Powers of Enforcement Directorate

1. Sections 48 & 49 of the PMLA empower the ED officers to investigate cases of Money Laundering.

Case 1: Suman Sehgal v Union of India

Section 37(3) does not refer to any express provision of the Income Tax Act. The only conclusion which can be therefore logically read is that there is no pre-condition that any ‘proceeding’ ought to be pending against a particular or specified individual nor is the pre-requisite for the exercise of such power dependent upon existing judicial proceedings. As long as there are certain matters under the investigation of the concerned authority, it can invoke the power under Section 37(3).

2. Summon an individual whose attendance is essential, whether to give evidence or to produce any records, during investigation or proceedings.

Case 2: T.T.V. Dinakaran v. Enforcement Officer of Enforcement Directorate 

When there is suspicion about the involvement of the petitioner in any of the transactions which are prohibited under the FERA Act, it is open to the authorities to summon the individual for enquiry. Since the documents are about the individual, it cannot be said that the investigation has no nexus with the documents called for from the petitioner. When an investigation is commenced, the authorities cannot conclude about the involvement or the non-involvement of any person until the enquiry is completed. During the enquiry, if the authorities get any information concerning the involvement of any other individual, those individual(s) can also be summoned by the concerned officer to complete the enquiry. When Section 40(4) of the FERA Act specifically mentions that the proceedings taken by the authorities are judicial, it is not open to the petitioner to challenge the summons issued under the said proceedings as ab initio void. The petitioner cannot claim any right under Article 21 of the Constitution of India and Section 24 of the Evidence Act, as he is not an accused.

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