Enforcement Directorate: 10 High Profile Cases in India

8 Aug 2022  Read 2143 Views

The Enforcement Directorate (ED) has been at the wheel of some of the most publicized investigations lately, such as the National Herald case, the INX Media case, the Patra Chawl case, the SSR Death case, and many more. ED is an agency under the Ministry of Finance. The ruling government (Narendra Modi’s) states these investigations as genuine. However, the Opposition has been claiming that these cases are govt. witch hunts for political benefit. 

In this article, we will discuss the history of ED, laws dealt with by this organization, its functions, powers, and high profile ED cases, etc. Let’s get started.

What is the enforcement directorate?

The ED is been vested with the power to investigate economic crimes and violations of foreign exchange laws. Its hierarchy, status, and scope of work have evolved with time and expanded over the years.

  • It was founded as the "Enforcement Unit" within the Department of Economic Affairs of the Ministry of Finance in 1956. 

  • It originally handled Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 (FERA)

  • It was renamed "Enforcement Directorate" in 1957, initially, it had its headquarters in Delhi and two branches in Bombay (now known as Mumbai) and Calcutta (now known as Kolkata). 

  • In 1957, another branch at Madras (now Chennai) was added. Now it has expanded to 39 zones, as per its organizational structure on its website.

  • In 1960, ED's administrative control was transferred to the Department of Revenue. Then, between 1973-77, ED went under the administrative jurisdiction of the Department of Personnel and Administrative Reforms. 

  • In simple words, the nature of ED changed as India changed. In the pre-liberalization era, the laws driving ED were "regulation" laws, but in the post-liberalization era, those became "management" laws. 

If we take a look at the words prescribed on the website, it’s written as, "With the onset of the process of economic liberalization, FERA 1973 [which replaced FERA 1947], which was a regulatory law, was repealed and a new law was brought instead, that is. the Foreign Exchange Management Act, 1999 (FEMA), came into operation from 1st June 2000." Hence, regulatory law was replaced with management law.

The laws ED deals with

Currently, the ED deals with four laws:

1. The Prevention of Money Laundering Act, 2002 (PMLA): 

It is a criminal law to prevent money laundering and to provide for confiscation of property involved in money laundering.

2. The Foreign Exchange Management Act, 1999 (FEMA): 

A civil law that deals with the foreign exchange market in India. The website states that "ED has been given the responsibility to investigate suspected contraventions of foreign exchange laws and regulations, to adjudicate and impose penalties on those adjudged to have contravened the law." 

3. The Fugitive Economic Offenders Act, 2018 (FEOA): 

This law deals with Indian offenders who move out of India to escape laws. This allows ED to attach properties of fugitive offenders who have escaped our country to avoid trial.

According to External Affairs Ministry, 25+ fugitive economic offenders have been living outside India few of which are popular businessmen such as Chetan Jayantilal Sandesara, Nitin Jayantilal Sandesara, Diptiben Chetankumar Sandesara, Nirav Modi, Vijay Mallya, Mehul Choksi, Sabya Seth, Rajiv Goyal, Alka Goyal, Lalit Modi, etc.

Did you know?

The CBI, on one hand, is pursuing cases about 23 fugitives, while on the other hand, the ED is handling 13 cases. Commonly 8 people- Vijay Mallya, Mehul Choksi, Nirav Modi, Jatin Mehta, Ashish Jobanputra, Chetan Jayantilal Sandesara, Nitin Jayantilal Sandesara, and Diptiben Chetankumar Sandesara finds a place in both the lists (CBI + ED’s).

Amongst businessmen who are fugitives living outside India. Five unknown fugitive businessmen who are residing outside India are:

  1. Dharmendra Singh Anand: Close aide of meat exporter Moin Qureshi

  2. Jatin Mehta: Promoter of Winsome Diamonds Group

  3. Ashish Jobanputra and Priti Jobanputra: Promoters of Ahmedabad-based ABC Cotspin

  4. Sabhya Seth: Owner of Delhi-based Dwarka Das Seth International

  5. Hitesh Narendra Bhai Patel: Sterling Biotech case

 4. Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA)

The ED is the sponsoring agency under COFEPOSA. Under this law, the ED is empowered to sponsor cases of preventive detention (detention without trial) regarding the contraventions of FEMA.

What is the structure of ED?

The organizational structure of ED is as follows:

  • Hierarchy- The Directorate of Enforcement (ED), with its headquarters in New Delhi, is headed by the Director of Enforcement.

    • There are five regional offices in Mumbai, Chennai, Chandigarh, Kolkata, and Delhi headed by Special Directors of Enforcement.

    • The Directorate has 10 Zonal offices, each of which is headed by a Deputy Director, and 11 sub Zonal Offices, each of which is headed by an Assistant Director.

  • Recruitment- Recruitment of the officers (not the heads, the officers) is done directly & by drawing officers from other investigation agencies.

    • It comprises officers of IRS (Indian Revenue Services), IPS (Indian Police Services), and IAS (Indian Administrative Services) ranks like Income Tax officer, Excise officer, Customs officer, and police.

  • Tenure- By the end of 2021, the President of India promulgated two ordinances permitting the Centre to extend the tenures of the directors of the Central Bureau of Investigation (CBI) and the Enforcement Directorate from 2 years to up to 5 years.

    • The Delhi Special Police Establishment (DSPE) Act, 1946 (for ED) and the Central Vigilance Commission (CVC) Act, 2003 (for CV Commissioners) have been amended to provide the government the power to keep the two chiefs in their posts for one year after they have completed their 2-year terms.

    • The chiefs of the Central agencies currently have a fixed two-year tenure but can now be given three annual extensions.

    • However, no further extension can be granted after the completion of a period of five years in total, including the period mentioned in the initial appointment.

What are the powers of ED? 

1. Inspection or raid- 

  • It can conduct an inspection/raid at any place in India with the search memo issued by investigating officer as per the provisions of the CrPC. Even if such an investigation or raid continues till the time, no one will question it. 

  • However, if the place inspected or raided has a woman, then it cannot be carried out till night, and it should be conducted during the day only, but it can continue till night if the investigating team has a woman officer. 

  • The investigation agency, along with the local police, should support the ED during the raid or search. 

  • The presence of two dignified individuals at the time of the raid and the presence of an independent witness (as per section 100 of CrPC) is mandatory, but even if the search is conducted without an independent witness, then also it will not be questioned. 

  • The house owner should sign the search memo for the raid, and if he does not do that, the ED can forcefully start the raid. 

  • ED can arrest any person during inspection or raid under Section 19 of the Prevention of Money Laundering Act, and it can also seize or attach the property under section 17 or section 8 of the same Act. And to release such property, one has to take the court's order.

2. Issue of Summons- 

According to section 50 of the Prevention of Money Laundering Act, any person who receives a summon from ED has to appear at the place mentioned. If he fails to do so, the ED has the power to take action against or can arrest him.

10 High Profile ED Cases in India

ED has conducted ample raids lately, so a few of the important cases investigated by ED are:

1. Amway India- Pyramid Scheme Allegations, 2011

The ED attached ₹757.77 crores worth of assets of direct-selling company Amway India Enterprises Private Limited, accusing it of running a multi-level marketing scam (Pyramid scheme) by enrolling lakhs of people as its members by offering them lucrative commissions on exorbitantly priced products, as long as they kept adding members below them. The probe revealed that Amway was running a pyramid fraud disguised as a direct selling network. “It is observed that the prices of most of the products offered by the company are unreasonable, and there was no focus on the product compared to the alternative popular products of reputed manufacturers available in the open market."

2. M. Chidambaram v. Directorate of Enforcement (INX Media Case), 2018

Mr. Karti Chidambaram is alleged to have exercised his influence over the officials of the Foreign Investment Promotion Board (FIPB) unit, which led to the said officials showing undue favor to M/s INX News (P) Ltd. The Supreme Court granted bail to Chidambaram by setting aside the order of the Delhi High Court and provided the executing bail bond for a sum of Rs.2 lakhs along with two securities before the learned Special Judge. The Court also instructed the appellant (Chidambaram) not to leave the country without specific orders or give any interview about the case and for his passport to remain deposited with the CBI. 

3. National Herald case- Sonia Gandhi & Rahul Gandhi, 2012

Sonia Gandhi was recently questioned by the Enforcement Directorate about a money laundering case in the National Herald newspaper. National Herald newspaper was published by Associated Journals Limited (AJL), a brainchild of PM Jawaharlal Nehru, who started this company in 1937 with 5,000 freedom fighters as its shareholders. In 2011, when AJL incurred losses. So, the holdings of the company were transferred to Young India. Many other shareholders of AJL, alleged that they were not served any notice when Young Indian 'took over' AJL. 

4. Vijay Madanlal Choudhary v. UOI, 2022

The Supreme Court upheld several provisions of the Prevention of Money Laundering Act, 2002, including those related to the power of arrest, attachment, and search and seizure conferred on the Enforcement Directorate (ED). With this judgment, the ED has been permitted to retain a lot of brazen powers that can be exercised during their investigation. So, these powers can be divided into two parts:

  • Power of arrest

  • Power of attachment of property and search/seizure of property involved in money laundering

5. PACL Scam case, 2016

The ED moved a special PMLA court in Mumbai seeking custody of Shiv Sena MP Pravin Raut in the PACL scam case and wanted to take him to Delhi for investigation. Raut couldn't be taken to Delhi due to manpower-related issues, but the legal proceedings are still on. PACL allegedly collected Rs 49,100 crore from millions of investors on the pretext of the sale and development of agricultural land. During the probe, it was established that directors of PACL siphoned off amounts received from investors and used the same for personal gains by investing in several other entities.

6. Sanjay Raut Patra Chawl case, 2022

Shiv Sena MP Sanjay Raut is currently in ED custody in a money laundering case related to irregularities relevant to the Patra Chawl case. The ED raided Raut's Bhandup bungalow and seized Rs 11.5 lakh in cash. It also recovered significant documents during raids, including records that Raut paid Rs 3 crores in cash to the sellers for ten plots of land in Alibaug. The Court sent Raut to ED custody. The agency has also accused Raut of trying to tamper with the evidence and influence key witnesses.

7. Punjab National Bank Case, 2018

The PNB fraud case against Nirav Modi is being probed by the CBI and relates to the fraudulent obtaining of letters of undertakings (LoUs) or loan agreements. The ED case pertains to the laundering of the proceeds of that fraud. Nirav Modi is wanted in India for fraud and money laundering in connection with the Rs 14,000 crore PNB scam. The Enforcement Directorate (ED) has attached properties, jewelry, and bank balances amounting to Rs 253.62 crore belonging to fugitive jeweler Nirav Modi under the Prevention of Money Laundering Act (PMLA).

8. Vijay Mallya Case, 2017

The Enforcement Directorate has filed one of its longest charge sheets, of approximately 5300 pages, against Vijay Mallya, Kingfisher Airlines Ltd, and United Breweries (Holding) Ltd under the Prevention of Money Laundering Act. Vijay Mallya case as an accused of Money Laundering and fraud in our country. He has committed fraud with 17 Indian Banks of approximately Rs. 9000 Crores. 

Vijay Mallya started an airline company called Kingfisher Airlines Limited in 2015, the airline company was borning loss and was under heavy debt to keep the operations running. In 2016, a bunch of Indian Banks were defrauded by Vijay Mallya and his Kingfisher Airline Limited and moved to the Debt Recovery Tribunal against him. In January 2019, under the Fugitive Economic Offenders Act, Mr. Vijay Mallya was declared a fugitive economic offender.

The Enforcement Directorate has booked Mallya based on an FIR filed by CBI in the Vijay Mallya case. It has filed a charge sheet against Vijay Mallya under the PMLA after investigation. The charge sheet of the Vijay Mallya case stated that Mr. Mallya had used his Kingfisher to launder an amount of Rs. 9990 crores. On 14th July 2017, a final judgment came in the Vijay Mallya case that the allegations made by the Indian banks against Mr. Mallya are correct, and he has been guilty of contempt as he has not paid the dues of 9,900 crores to the banks.

9. WazirX case, 2021

ED is probing two cases against  WazirX, India’s biggest cryptocurrency exchange by trading volume, for allegedly violating provisions of the Foreign Exchange Management Act, or Fema, for the cryptocurrency of around 2,790 crores. In the period under investigation, users of WazirX via its pool account have received incoming cryptocurrency worth ₹880 crores from Binance accounts and transferred out cryptocurrency worth ₹1,400 crores to Binance accounts. None of these transactions are available on the blockchain for audit or investigation

10. Bhupinder Singh Honey in sand mining case, 2022

The ED conducted raids on the premises owned by former Punjab CM Charanjit Singh Channi's nephew Bhupinder Singh Honey in an alleged illegal sand mining case. Honey was arrested by ED on February 3 from Jalandhar. The agency seized more than Rs 10 crore, gold worth above Rs 21 lakh, and a Rolex watch worth Rs 12 lakh from the residential premises of Honey. This was one of the biggest raids of 2022. Channi was also questioned by the ED in connection with an alleged illegal sand mining case.

Conclusion

The ED is presently a multi-disciplinary organization. The object behind the formation of the Directorate of Enforcement was to create a body capable of enforcing the provisions of two special fiscal laws, i.e., the Foreign Exchange Management Act, 1999 (FEMA) and the Prevention of Money Laundering Act, 2002 (PMLA).

About the Author: Kakoli Nath | 157 Post(s)

Kakoli Nath is a legal Content Manager at Finology Legal who pursued BBA.LL.B (5 years integrated course). She is a patent analyst & had also done advanced certification in Forensics Psychology and Criminal Profiling from IFS, Pune.

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