Timely caution – The SC on the functioning of the Enforcement Directorate (ED) | 18th May 2023 | UPSC Daily Editorial Analysis

What's the article about?

• It talks about the recent Supreme Court observation on the functioning of the  Enforcement Directorate (ED).

Relevance:

• GS2: Statutory, Regulatory and various Quasi-judicial Bodies;
• Prelims

Context:

• The functioning of the Enforcement Directorate (ED) is frequently news due to allegations by the opposition parties about its misuse.
• Now the SC gave a verdict on the functioning of the ED.

What is the Directorate of Enforcement (ED)?

• The Directorate of Enforcement (ED) is a multi-disciplinary organization mandated with investigation of offences of money laundering and violations of foreign exchange laws.
• It functions under the Department of Revenue of the Ministry of Finance.
• As a premier financial investigation agency of the Government of India, the Enforcement Directorate functions in strict compliance with the Constitution and Laws of India.

Criticism of the ED:

• Being Used for Ordinary Crimes: PMLA is pulled into the investigation of even “ordinary” crimes and assets of genuine victims have been attached.
• Lack of Transparency and Clarity: The Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
  • The ED treats itself as an exception to the principles and practises and chooses to register an ECIR on its own whims and fancies on its own file.

Analysis:

• The Supreme Court’s exhortation to the Enforcement Directorate (ED) not to create an atmosphere of fear indicates how much the agency needs to temper its zeal in investigating allegations against political opponents of the current regime.
• Responding to complaints that the ED is harassing employees of the Excise Department in Chhattisgarh in the name of investigating the money-laundering aspects of an alleged liquor scandal, a Bench has made the pertinent point that even a bona fide cause would seem suspect if a law enforcement agency conducted itself in a way that created fear.
• The observation is both a caution against transgressing the limits of a lawful investigation and a warning against letting a perception gain ground that the agency would go to any lengths to implicate someone.
• A major complaint from the Opposition concerns the alleged politicisation of investigations and the personnel heading the agency.
• Some parties fear that the money-laundering law is being used for a political witch-hunt.
• The list of offences that may attract a money-laundering probe, over and above the police investigation into them, is quite long.
• Corruption allegations being quite common against politicians holding public office, each time a scam or a scandal is uncovered, the ED follows closely on the heels of the agency conducting the anti-corruption probe, to register a separate case under the Prevention of Money Laundering Act.
• While there is no problem with a stringent law on the subject, its executors have to be cautious about excessive zeal and expansive probes without identifying specific payoffs or following a money trail.
• The current Director of Enforcement was appointed for a two-year term in 2018, but continues to this day, thanks to extensions and a change in the law governing such extensions.

Way Forward:

• The government often says the agency is only doing its duty and holding lawful investigations, but the perception of others is unlikely to be positive in the backdrop of the way it controls the agency’s leadership.