-Abhinav Pandey
Table of Contents
What is the Enforcement Directorate (ED)?
The Directorate General of Economic Enforcement was established on 1st May 1956 and has its headquarters in New Delhi along with other regional offices all over the country. Its responsibility includes enforcing economic laws and regulating economic crime in India. It was formed for handling violations of Exchange Control Law under the Foreign Exchange Regulation Act, 1947. While it was initially established under the control of the Department of Economic Affairs in 1956, it now forms part of the Department of Revenue and is under their administrative control since 1960 for operational purposes. The Directorate of Enforcement (ED) is a specialized body tasked with implementing two crucial financial laws: the Prevention of Money Laundering Act (PMLA) of 2002 and the Foreign Exchange Management Act (FEMA) of 1999. Apart from directly recruiting people, the Directorate also derives officers from several Investigating Agencies, such as Central Excise and customs, Police and Income Tax.
Establishment of Enforcement Directorate
It was established in 1st 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.
Headquarter of Enforcement Directorate
The Directorate of Enforcement (ED) with its headquarters at New Delhi, is headed by the Director of Enforcement.
Regional Offices of Enforcement Directorate
The Enforcement Directorate has five Regional Offices in Chennai, Mumbai Chandigarh, Delhi and Kolkata. The regional offices are headed by the Special Directors of Enforcement
Zonal Offices of Enforcement Directorate
The Zonal Offices are in Lucknow, Patna, Banglore, Ahmedabad, Chandigarh, Kochi Chennai, Delhi, Guwahati, Panaji, Hyderabad, Jaipur, Jalandhar, Kolkata, Mumbai, and Srinagar. the zonal offices are headed by a Joint Director.
Sub-Zonal Offices of Enforcement Directorate
The Sub-Zonal Offices are in Indore, Madurai, Bhubaneshwar, Kozhikode, Nagpur, Paryagraj , 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.
Features of the Enforcement Directorate
- It is an investigation agency and deals in matters related to finance and economics.
- It primarily deals with the Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA)
- It has its own Courts and appellate tribunals for trials.
- It forms part of the Department of Revenue of the Ministry of Finance.
- It adjudicates matters through the provisions in the Acts.
Power to officers under FEMA and PMLA
1. Powers of the Officers:
The primary powers of the ED Officers include investigating cases of money laundering, attaching property, and prosecuting those who are found guilty of committing an offense under the Acts.
2. Powers of Investigating Officers
Section 37 of the Foreign Exchange Management Act (FEMA) gives the Director and Assistant Director of the Enforcement Directorate the authority to investigate any violation of the Foreign Exchange Management Act (FEMA). Under the Foreign Exchange Management Act (FEMA) these officers have the authority to exercise all of the investigative powers granted to Income-Tax authorities under the Income Tax Act of 196. When trying an action in relation to subjects under Section 131 of the ITA, the Enforcement Directorate has been given the same powers as a Civil court under the Code of Civil Procedure, 1908.
Under the Prevention of Money Laundering Act, 2002, an Investigating Officer can:
- Attach any property purchased with laundered money,
- Search or examine the area as well as the records of the property,
- Arrest the accused, summon witnesses, and record their statements.
3. Powers during the search
The ED Officers and authorities have the power to enter the property of the accused, search, confiscate, or freeze it. They may also investigate persons connected with the property.
4. Power of summons
Section 37(3) of the Foreign Exchange Management Act (FEMA) grants the Director or Assistant Director of Enforcement Directorate (ED) the authority to summon someone. As the Madras High Court stated in the matter of KA. Manzoor vs. Assistant Director, Enforcement Directorate ( ED), Government of India, such a right under Section 37(3) to be summoned by the Enforcement Directorate (ED) cannot be disputed in court by way of writ. The ability to summon a person to appear in order to submit relevant documents is part of the ED’s preliminary inquiry and does not render a person ‘accused’ in the eyes of the law. As a result, the issuance of a summons does not infringe on a person’s rights, and they are unable to challenge it in court.
5. Power to penalize
Section 13 of the Foreign Exchange Management Act (FEMA) imposes penalties on anyone who violates the Act provisions or any order or regulation issued in the exercise of the Act functions. When the contraventions are quantifiable, the penalty can be up to three times the total amount involved. In this aspect, the Enforcement Directorate (ED) has vast authority in its hands to collect such payment arrears. The Enforcement Directorate (ED) has the same powers as the authorized agencies under the Income-Tax Act (ITA) when it comes to income tax collection. In the case of Director of Enforcement vs M.C.T.M. Corporation Pvt. the existence of “Mens rea or Criminal intent” for failure to repatriate foreign exchange was necessary before the respondents could be penalized for contravention of the provisions of Section 10(l)(a) of Foreign Exchange Regulation Act (FERA) 1947. In the case of Suborno Bose vs Enforcement Directorate, the High Court has observed that “Mens rea” is essential for imposing a penalty for breach of civil obligations. It also noted that the penalty is remedial and coercive in its nature thus it emphasizes the fact of loss of revenue
Functions of the Enforcement Directorate
Its basic functions include enforcing economic laws such as the Foreign Exchange Management Act (FEMA), 1999, and certain provisions of the Prevention of Money Laundering Act (PMLA). The Enforcement Directorate is entrusted with the work related to the investigation and prosecution of cases under Prevention of Money Laundering and has been assigned to the ED as well.
Investigating FEMA cases:
The designated Enforcement Directorate Officials investigate and adjudicate violations under FERA and FEMA. Violations under Foreign Exchange Management Act (FEMA) may include non-realization of export earnings, foreign exchange racketeering, and non-repatriating foreign exchange. A violation under these provisions is punishable by an arrest by the Enforcement Directorate, settlement, or imposition of a penalty up to three times the sum involved.
Investigating cases under the Prevention of Money Laundering Act:
The Enforcement Directorate (ED) is entrusted with the power to attach the assets of the accused found guilty or seize, or search or freeze the property of the accused. Attaching the assets means prohibiting the converting of property, transfer of property, or moving of property. The offenses covered under the Prevention of Money Laundering Act (PMLA0 are criminal in nature.
Handling cases of fugitives from India:
The Fugitive Economic Offenders Act, 2018 prohibits economic offenders who choose to stay outside the country’s jurisdiction to protect themselves from evading the law of the country and preserve its justice system. Under the Act, the Enforcement Directorate (ED) has been conferred with the power to cooperate with the Government of India and foreign governments to trace and arrest the guilty.
Cooperating with foreign countries:
Enforcement Directorate offers cooperation to foreign countries where a matter relates to money laundering or restoring assets under the Prevention of Money Laundering Act (PMLA) provisions. Section 56 of the PMLA enables the Government of India to enter into an agreement with any other country to enforce the provisions of the Act. The Enforcement Directorate (ED) also recommends and processes cases for preventive detention under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act 1974 (COFEPOSA) this Directorate is empowered to sponsor cases of preventive detention with regard to contraventions of the Foreign Exchange Management Act, 1999 (FEMA).
What are the Statutory Functions of the Enforcement Directorate?
The statutory functions of the Directorate include enforcement of the following Acts:
Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
Under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA), this Directorate is empowered to sponsor cases of preventive detention with regard to contraventions of FEMA.
Foreign Exchange Management Act, 1999 (FEMA):
It is a civil law enacted to consolidate and amend the laws relating to facilitating external trade and payments and to promote the orderly development and maintenance of the foreign exchange market in India. Enforcement Directorate has been given the responsibility to conduct an investigation into suspected contraventions of foreign exchange laws and regulations and to adjudicate and impose penalties on those adjudged to have contravened the law.
Prevention of Money Laundering Act, 2002 (PMLA):
Following the recommendations of the Financial Action Task Force (FATF) India enacted PMLA.The ED has been entrusted with the responsibility of executing the provisions of PMLA by conducting an investigation to trace the assets derived from proceeds of crime, provisionally attach the property, and ensuring the prosecution of the offenders and confiscation of the property by the Special court.
Fugitive Economic Offenders Act, 2018 (FEOA):
Lately, with the increase in the number of cases relating to economic offenders taking shelter in foreign countries, the Government of India introduced the Fugitive Economic Offenders Act, 2018 (FEOA) and Enforcement Directorate is entrusted with its enforcement. This law was enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. Under this law, the Enforcement Directorate (ED) is mandated to attach the properties of the fugitive economic offenders who have escaped from India warranting arrest and provide for the confiscation of their properties to the Central Government.
Special courts
For the trial of an offence punishable under Section 4 of the Prevention of Money Laundering Act, 2002 (PMLA), the Central Government in consultation with the Chief Justice of the High Court, designates one or more Special Court or Session Court. The Court is also known as “PMLA Court”. Any appeal against any order passed by PMLA Court can directly be filled in the High Court for that jurisdiction.
Conclusion
The Enforcement Directorate (ED) basically deals with cases related to financing and economics. Though being an elite force of the nation still it needs to undergo structural reforms to work efficiently. The most important reason behind this is its way of tackling politically sensitive issues without ending up being a part of controversies. Hence, it is the legislature’s responsibility to ensure sufficient transparency in submitting this closure report in order to limit any misuse of ED’s powers. The fundamental way in which the adjudicating authority can perform their duty as an officer of the law is to refrain from deviating from the essence of the law in any case that directly impinges on the victim’s fundamental right under Article 14 of the Constitution. To stop the exploitation of the rights of innocent victims, legislators must be proactive and take strict action against officers who violate the law.
REFERENCES
1.KA. Manzoor Vs. Assistant Director, Enforcement Directorate ( ED), Government of India
2.Suborno Bose vs Enforcement Directorate case
3.https://www.thehindu.com
4.https://indianexpress.com
5.https://www.indiatimes.com
6.https://timesofindia.indiatimes.com
7.Wikipedia
8.Oxford English Dictionary
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