• India
  • Apr 03

ED can summon any person, says SC

• The Supreme Court strongly deprecated the non-appearance of five district collectors of Tamil Nadu before the Enforcement Directorate (ED) in connection with an ongoing money laundering probe related to alleged illegal sand mining, despite the court’s order.

• It directed the officials to appear before the ED personally on April 25 saying failure to do so will have serious consequences.

• A bench of justices said the officials adopted a “cavalier approach” and the action shows they have no respect for the court, law and the Constitution.

• The bench asked them to read section 50 of the Prevention of Money Laundering Act (PMLA) and said, “ED can summon anybody as it says any person”. 

• Section 50(2) of the PMLA says “the director, additional director, joint director, deputy director or assistant director shall have power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under this Act. 

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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