• The Supreme Court quashed the Centre’s decision to grant two extensions of tenure to Enforcement Directorate (ED) chief Sanjay Kumar Mishra and termed it as “illegal”.

• The SC has permitted Mishra to continue to hold office till July 31.

• The 1984-batch IRS officer was otherwise to remain in office till November 18, 2023.

• Meanwhile, the SC bench affirmed the amendments of the Central Vigilance Commission Act, and the Delhi Special Police Establishment Act to extend the tenure of ED director for a maximum of five years.

• In December 2021, the Parliament enacted the Central Vigilance Commission (Amendment) Act, 2021 and the Delhi Special Police Establishment (Amendment) Act, 2021. 

What was the case about?

• Mishra, 62, was first appointed the director of the ED for two years on November 19, 2018. 

• Later, by an order dated November 13, 2020, the central government modified the appointment letter retrospectively and his two-year term was changed to three years.

• The term of ED chief was further extended for a period of one year from November 18, 2022 to November 18, 2023.

• In December 2022, the top court sought the response from the Centre and others to a plea challenging the third extension granted to Mishra.

• On May 8, the Supreme Court reserved its verdict on a batch of pleas challenging the two extensions of service granted to the ED chief which was defended by the Centre on grounds of the peer review being conducted by the Financial Action Task Force (FATF).

• In its verdict, the Supreme Court termed that orders dated November 17, 2021 and November 17, 2022 granting extensions to the tenure of Mishra for a period of one year each are illegal.

Enforcement Directorate

• The ED functions under the Union finance ministry and it enforces the criminal provisions of the Prevention of Money Laundering Act (PMLA), the Fugitive Economic Offenders Act that was brought by the Modi government in 2018, and the civil sections of the Foreign Exchange Management Act (FEMA).

• The ED was first established in 1956 as ‘Enforcement Unit’ under department of economic affairs  for dealing cases of violations on exchange control laws under Foreign Exchange Regulation Act, 1947 (FERA).

• In 1957, this unit was renamed as ‘Enforcement Directorate’. The administrative control of ED was transferred from department of economic affairs to department of revenue in 1960.

• The ED is headed by the director, who is not below the rank of additional secretary to the government of India.

• There are five regional offices located at Chandigarh (Northern Region), Chennai (Southern Region), Delhi (Central Region), Kolkata (Eastern Region) and Mumbai (Western Region), each headed by a special director. In addition, there is a Headquarters Investigation Unit (HIU) headed by a special director. There are zonal offices and sub-zonal offices.

Functioning of the ED and Acts

Prevention of Money Laundering Act

• The primary function of the Enforcement Directorate is administration and enforcement of the Prevention of Money Laundering Act, 2002 (PMLA) including investigation into the offence of money laundering, filing of prosecution complaint before the special court against the accused, attachment and confiscation of property involved in money laundering and carrying out international cooperation with competent authorities in foreign jurisdictions. 

• The ED has the sole jurisdiction to investigate the money laundering cases and the law enforcement agencies having the responsibility to investigate a “predicate offence”, including the state police authorities, are required to make a reference to the ED to examine the money laundering aspect of the criminal activity. 

• In certain cases, the fact that a predicate offence has taken place is also obtained from publicly available sources or on receipt of information from the Financial Intelligence Unit (FIU). 

• On receipt of the reference or information and after making certain preliminary verification, the ED registers a case and initiates investigation (Enforcement Case Information Report or the ECIR) following a risk based approach taking into consideration factors such as materiality of the offence, transnational nature of the crime, complexity of the case, the larger public interest and the availability of resources.

Foreign Exchange Management Act

• The ED is  entrusted with the implementation of the Foreign Exchange Management Act (FEMA) whose object is to consolidate and amend the law relating to foreign exchange for facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange resources. 

• The ED initiates investigations and issues Show Cause Notices (SCN) in cases where the allegations of contravention of provisions under FEMA are noticed. These SCNs upon adjudication result in imposition of penalty as well as confiscation of currency/property involved.

Fugitive Economic Offenders Act

• The Enforcement Directorate has also recently been entrusted with the implementation of the Fugitive Economic Offenders Act, 2018 (FEOA). 

• The FEOA provides for the measures to deter the fugitive economic offenders from evading the process of law in India by staying outside the jurisdiction of Indian courts and to preserve the sanctity of the rule of law in India. 

• Action under the said Act can be initiated against economic offenders who have left India so as to avoid criminal prosecution or who, being abroad, refuse to return to India to face criminal prosecution and the total amount involved in the economic offence is more than Rs 100 crore.

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