ED’s rise, from a small unit in 1956 to the ruling party’s Brahmastra

Much of the Enforcement Directorate’s current aggression has come about over the past decade, since it began to handle political cases under PMLA

ED, Enforcement Directorate
Representational image

It can break political parties, trigger coups, and cleave public opinion on just any issue. When it hits the headlines, one portion of the political spectrum rejoices while the other sneers at its apparent high-handedness.

Playing a key role in India’s current political arena is the Enforcement Directorate, a government department tasked with handling money-laundering cases and not much else. The misleadingly simple abbreviation ‘ED’ now strikes terror in the hearts of politicians, both at the central and state level. 

The ‘power’ of ED, which the BJP government at the Centre appears to deploy at its behest, works in multiple ways. One, it keeps Opposition leaders on their toes. Two, in a veiled way, it forces some leaders to tone down their anti-government rhetoric.

Among the high-profile cases where the Centre has unleashed the ED on its opponents and critics are Congress leader Karthi Chidambaram (INX Media case), TMC leader Partha Chatterjee (SSC recruitment scam), AAP leader Satyendar Jain (money laundering case), Shiv Sena leader Sanjay Raut (Patra Chawl scam), NCP leader Nawab Malik (alleged links to Dawood Ibrahim), Farooq Abdullah (Jammu and Kashmir Cricket Association Fund scam), and Washington Post columnist Rana Ayyub (money laundering case linked to PM CARES)

Three, ED’s actions nudge some of the Opposition leaders into switching camps to the BJP.

Also read: ED Raj reigns supreme as Shinde-Fadnavis regime completes a month

A coup amply helped by ED

The third can be a potent weapon for the ruling party at the Centre. The most recent example would be Maharashtra, where Uddhav Thackeray’s MVA government was uprooted and replaced by a Shiv Sena-BJP one led by Eknath Shinde and Devendra Fadnavis. 

The whole event is seen to have been triggered by ED probes into various Sena leaders, such as Anil Parab, Pratap Sarnaik, Yashwant Jadhav and Bhavana Gawali. Many of the leaders sought to save themselves from the predicament by leaving the Uddhav camp and lending support to the BJP alliance government led by the Shinde camp.

Meanwhile, Sanjay Raut, who stuck to the Uddhav camp, remains under the ED’s scanner, wife in tow. He has been placed under judicial custody till August 22. 

AAP leader and Delhi Minister Satyendar Jain, also under ED probe, continues to be in judicial custody. As does Partha Chatterjee, TMC leader and former West Bengal minister, whose ED case has significantly impacted the Mamata Banerjee government.

The genesis of ED

The ED is a multi-disciplinary organisation mandated with investigation of economic crimes and violations of foreign exchange laws. Its origins go back to May 1, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under the Foreign Exchange Regulation Act, 1947 (FERA 47). 

This unit, with its headquarters in Delhi and branches in Bombay (Mumbai) and Calcutta (Kolkata), was headed by a legal service officer – the Director of Enforcement – assisted by an officer drawn on deputation from the Reserve Bank of India (RBI) and three inspectors of special police establishment.

Also read: Enforcement Directorate raids up 26 times since 2014: Govt data

In 1957, this unit was renamed as the Enforcement Directorate and another branch was opened in Madras (Chennai). In 1960, the administrative control of the Directorate was transferred from the Department of Economic Affairs to the Department of Revenue. Presently, it is under the administrative control of the Revenue Department in the Union Ministry of Finance.

1973, the initial turning point

For much of its existence since 1957, the ED remained a small enforcement agency with its domain limited to the corporate world and often prosecuting civil offences. It was only in 1973, with amendments brought into FERA, that the ED acquired some teeth.

FERA 1973 was a very powerful law. It allowed even an enforcement officer (equivalent to an inspector) to arrest anyone and enter any business premise without a warrant. Even an Assistant EO could search any vehicle or person without a warrant. With so much power, the ED then even courted allegations of third-degree torture in custody. Still, its domain was largely limited to the corporate world. It remained a dreaded agency among businessmen until the 1990s.

With economic liberalisation, FERA began to be viewed as an excessively coercive and obsolete law, and was repealed in January 2000. It was replaced by the Foreign Exchange Management Act (FEMA), which turned forex violations into civil offences, compoundable after payment of a fine. The move served to defang the ED as it could no longer arrest or take people into custody.

However, the 9/11 attacks brought international focus on terror financing. There was pressure on India to bring in a mechanism to deal with money laundering and thus was born the Prevention of Money Laundering Act (PMLA) and the ED was entrusted with its enforcement from July 1, 2005.

Recently, with an increase in the number of cases relating to economic offenders taking shelter in foreign countries, the government has passed the Fugitive Economic Offenders Act, 2018 (FEOA) and the ED is entrusted with its enforcement with effect from April 21, 2018.

Much of the ED’s current aggression, followed by frenetic media coverage, has come about over the past decade, since the ED began to handle political cases under the PMLA.

Taking up political cases

The Congress now cries foul over the ED’s questioning of Sonia and Rahul Gandhi in the National Herald case, calling it a witch-hunt. Yet, it was under Chidambaram, when he was Finance Minister, that the ED began to frequently take up political cases. 

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During the UPA regime, it regularly hit headlines with actions in the Madhu Koda case, the 2G scam probe, the Aircel-Maxis case, the CWG case, the Sahara case, the Bellary mining case involving the BJP’s Reddy brothers, the Vanpic projects case involving YS Jagan Mohan Reddy and cases against Baba Ramdev.

The cases against Ramdev were closed after the NDA came to power. The Madhu Koda case became the first in the history of the agency to end in conviction. The 2G scam case has fallen through in court and the accused in the Aircel-Maxis case have been discharged. The CWG case and the Sahara case are still on. In the cases against the Reddy brothers and Jagan, there have been no major developments since the NDA came to power.

In 2011, the ED underwent a massive restructuring, becoming a force of 2,067 officers (sanctioned strength) and staff, up from 758 earlier, even as its offices increased from 21 to 49 across the country. In comparison, the CBI has 4,000 officers and staff.

Powers and show of strength

The PMLA’s ambit was increased through amendments in 2009 and 2013, giving ED the teeth it now has. Its provisions practically make the ED far more powerful than the CBI. It’s the only Act in the country where a statement recorded before an investigating officer is admissible in a court as evidence. Laws with such provisions, such as TADA and POTA, have long been repealed.

Also read: Has ED missed a basic legal point in the National Herald case?

Thanks to the PMLA, the ED is the only central agency in the country that does not require permission from the government to summon or prosecute politicians, government functionaries and businessmen. It is said to have become more powerful than the CBI.

The most potent and coercive tool that the Act grants the ED is the power to attach the properties of the accused. The PMLA also puts the burden of proof on the accused as it presumes intent. Under the statute, if a person possesses a property that the agency can prove has been bought with the proceeds of a crime, it is not bound by law to prove that the person had an intention to launder money. 

Similarly, Section 22 states that where any property or records are seized from any person under this Act, it shall be presumed that such a person is the owner of such property or records. In contrast, the CBI can only arrest and prosecute people.

Low rate of conviction

For all its powers and show of strength, the agency has a rather poor record in terms of taking cases to the logical conclusion. Of around 2,400 cases that it has registered under the PMLA since 2005, only eight have ended in conviction. 

Hence, most of those investigated by ED do not lose their confiscated assets permanently. However, the course of the case — the frequent visits to the ED office, the judicial custody, the media attention — can be a punishment in itself.

ED’s investigation too has remained tardy, with prosecution complaints having been filed in only 688 cases till June 2019. It’s this record that has remained a matter of concern for the Finance Ministry. 

Also read: SC upholds ED’s power to search, seize, arrest, attach properties under PMLA

Meanwhile, its vast powers recently got endorsement from the Supreme Court. The SC recently passed a judgment upholding PMLA and jurisdiction of ED. While Section 45 of the PMLA deals with the aspect of offences to be cognisable and non-bailable, Section 436A of the CrPC deals with the maximum period for which an undertrial prisoner can be detained. 

The SC also said that the Enforcement Case Information Report (ECIR) cannot be equated with an FIR and the supply of ECIR to the accused is not mandatory.