Jurisdiction Of Enforcement Directorate: Experts Weigh In

The Directorate of Enforcement, popularly known as the Enforcement Directorate or ED has been mandated to investigate the offence of money laundering. The agency investigates offences under the Prevention of Money Laundering Act 2002 (PMLA), Foreign Exchange Management Act 1999 (FEMA) and Fugitive Economic Offenders Act 2018 (FEOA). 

The Enforcement Directorate (ED) conducts searches and seizes property or money/documents after determining that money laundering has occurred, as authorized by Section 16 (power of survey) and Section 17 (search and seizure) of the Prevention of Money Laundering Act (PMLA). Based on this, authorities assess whether an arrest is warranted under Section 19 (power of arrest). Additionally, under Section 50 of the PMLA, the ED has the authority to conduct search and seizure directly without summoning the individual for questioning beforehand. This means there's no requirement to summon the person before initiating search and seizure actions. If an individual is arrested, the ED has 60 days to file a prosecution complaint (chargesheet) since the punishment under PMLA does not exceed seven years. However, if no one is arrested and only property is attached, the prosecution complaint along with the attachment order must be submitted to the adjudicating authority within 60 days.

ED wields enormous power as arrest and consequent pre trial custody can be imposed and bail in PMLA cases is an uphill task. With the ED crackdown on opposition leaders, its excessive use of power of arrest has come under heavy scrutiny.

As per the seventh schedule of the Constitution of India, Police has been enumerated under the State List, meaning thereby, that states hold the authority to make and execute law regarding the subject - police.

However, the Enforcement Directorate, despite being a central agency, has pan India jurisdiction. This raises complex legal questions.

Speaking with BW Legal World, C Aryama Sundaram, Senior Advocate, Supreme Court of India, said,"The Enforcement Directorate has been constituted under a Central Statute being the Prevention of Money Laundering Act, 2002, a complete and comprehensive legislation for preventing money laundering and ancillary activities. Police being a State subject grants powers to the State Police to investigate and take all necessary consequential steps in furtherance of any crime / offence committed within the jurisdictional limits of such State. While the police cannot and ought not to investigate or take any consequential actions in other States, the Enforcement Directorate has a pan India jurisdiction. While the jurisdiction of the State Police pertains to criminal offences having been committed within the territorial boundaries of it’s State, the jurisdictional fact necessary for the initiation of proceedings under the PMLA, 2002 is the commission of the “predicate offence” i.e., the commission of a crime / offence other than that contemplated under the PMLA, 2002. The Enforcement Directorate is then empowered to track down the proceeds of crime derived from or as a result of such offence. The said exception is very much legally and Constitutionally binding inasmuch as the Directorate derives its powers and jurisdiction to the PMLA, 2002, and therefore, as long as the said PMLA, 2002 continues to exist, the Enforcement Directorate, as the name suggests, shall continue to exist to implement the said PMLA, 2002 in letter and spirit."

Many people from the legal fraternity believe that the actions of the ED are motivated and it is acting at the behest of the ruling establishment.

"I don’t quite believe in perception formed without legal and factual backing. While there has, in the recent past, been a spate of incidents under the PMLA, 2002, I do not buy into the common public perception of the Directorate having become a tool in the hands of the Government, inasmuch as, any such action of the Enforcement Directorate, has been backed by legislation. The judgement of the Supreme Court in the case of Vijay Madanlal Chaudhry might be open to be reviewed by the Supreme Court itself, however, until and unless the Statute is struck down, there does not appear to be any clipping of wings of the Enforcement Directorate, apart from certain technical and procedural aspects of the functioning of the Enforcement Directorate," Sundaram added.

Commenting on ED's role and jurisdiction, Manmeet Kaur, Partner, Karanjawala and Co. said, "The PMLA is a Central Act wherein under Section 19 of the Act the powers to make arrest have been given to the ED officers after informing the reasons of arrest. The ED also has powers of search and seizures under Section 17 of the Act. The aggrieved person has the remedy to approach the appropriate courts if they find the actions of the ED to be in contravention. The government/legislature can always formulate laws in case they feel any need to address inconsistencies or requirements with passage of time. Presently there are multiple petitions pending seeking reconsideration of the judgment "Vijay Madanlal Choudhary vs Union of India".