According to the government reply in Parliament, in the last eight years, the Enforcement Directorate (ED) has conducted over 3,000 raids and seized assets totalling more than ₹99 crore under the Prevention of Money Laundering Act (PMLA).
The ED is currently a multidisciplinary organisation with the objective of enforcing the provisions of two special fiscal laws: the Foreign Exchange Management Act, 1999 (FEMA) and the Prevention of Money Laundering Act, 2002 (PMLA). The Enforcement Directorate (ED) has been involved in some of the most publicised investigations lately, such as the INX Media case, the Sushant Singh Rajput Death case, the 2G scam and many more.
In this article, we will discuss the history of ED, the laws dealt with by this organisation, its functions and powers, high-profile ED cases, and more. Let’s get started.
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 the External Affairs Ministry, 25+ fugitive economic offenders have been living outside India, some of whom 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 the one hand, is pursuing cases of about 23 fugitives, while the ED is handling 13 cases. Eight people—Vijay Mallya, Mehul Choksi, Nirav Modi, Jatin Mehta, Ashish Jobanputra, Chetan Jayantilal Sandesara, Nitin Jayantilal Sandesara, and Diptiben Chetankumar Sandesara—find a place in both the lists (CBI + ED).
Amongst businessmen who are fugitives living outside India. Five unknown fugitive businessmen who are residing outside India are:
A. Dharmendra Singh Anand: Close aide of meat exporter Moin Qureshi
B. Jatin Mehta: Promoter of Winsome Diamonds Group
C. Ashish Jobanputra and Priti Jobanputra: Promoters of Ahmedabad-based ABC Cotspin
D. Sabhya Seth: Owner of Delhi-based Dwarka Das Seth International
E. 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 FEMA contraventions.
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What is the Structure of ED?
The organizational structure of ED is as follows:
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Hierarchy- The Directorate of Enforcement (ED), with its headquarters in New Delhi, is headed by the Director of Enforcement.
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Five regional offices, headed by Special Directors of Enforcement, are located in Mumbai, Chennai, Chandigarh, Kolkata, and Delhi.
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The Directorate has 10 Zonal offices, each headed by a Deputy Director, and 11 Sub-Zonal Offices, each headed by an Assistant Director.
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Recruitment- Recruitment of the officers (not the heads, the officers) is done directly & by drawing officers from other investigation agencies.
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It comprises officers of the IRS (Indian Revenue Services), IPS (Indian Police Services), and IAS (Indian Administrative Services) ranks, such as Income Tax officers, Excise officers, Customs officers, and police.
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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.
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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 with the power to keep the two chiefs in their posts for one year after they have completed their 2-year terms.
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The chiefs of the Central agencies currently have a fixed two-year tenure but can now be given three annual extensions.
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However, no further extension can be granted after the completion of a total period of five years, including the period mentioned in the initial appointment.
What are the powers of ED?
1. Inspection or Raid-
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It can conduct an inspection/raid at any place in India with the search memo issued by the 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.
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However, if the place inspected or raided has a female officer, the investigation cannot be carried out until night; it should be conducted during the day only. However, if the investigating team has a woman officer, the investigation can continue until night.
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The investigation agency, along with the local police, should support the ED during the raid or search.
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The presence of two dignified individuals at the time of the raid and an independent witness (as per section 100 of CrPC) is mandatory, but even if the search is conducted without an independent witness, it will not be questioned.
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The house owner should sign the search memo for the raid. If he does not, the ED can forcefully start the raid.
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ED can arrest any person during inspection or raid under Section 19 of the Prevention of Money Laundering Act. It can also seize or attach property under Section 17 or Section 8 of the same Act. To release such property, one has to get a court order.
2. Issue of Summons-
According to section 50 of the Prevention of Money Laundering Act, any person who receives a summons from the ED must appear at the place mentioned. If he fails to do so, the ED has the power to take action against or 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. P. 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 favour to M/s INX News (P) Ltd. The Supreme Court granted bail to Chidambaram by setting aside the Delhi High Court's order. It provided the executing bail bond for a sum of ₹ 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, AJL incurred losses, so the company's holdings 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 many brazen powers that can be exercised during their investigation. So, these powers can be divided into two parts:
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 ongoing. PACL allegedly collected ₹ 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 ₹ 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, jewellery, and bank balances amounting to ₹ 253.62 crore belonging to fugitive jeweller 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 ₹ 9000 Crores.
Vijay Mallya started an airline company called Kingfisher Airlines Limited in 2015. The airline company was at a loss and in heavy debt to keep the operations running. In 2016, several 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 an 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 14 July 2017, a final judgment came in the Vijay Mallya case that the allegations made by the Indian banks against Mr Mallya were correct, and he was guilty of contempt as he had 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 3 February from Jalandhar. The agency seized over ₹ 10 crore, gold worth above ₹ 21 lakh, and a Rolex watch worth Rs 12 lakh from Honey's residential premises. This was one of the biggest raids of 2022. Channi was also questioned by the ED about an alleged illegal sand mining case.