Enforcement Directorate: History, Composition, Functions, Powers

Key Takeaways

• Established in the year 1956.
• Headquartered in New Delhi, with zonal offices in 10 cities.
• Functioning under the Department of Revenue, Ministry of Finance.
• Investigates offenses under the PMLA 2002, FEMA 1999, and FEOA 2018.

History of ED

On 1st May 1956, an Enforcement Unit was formed by the Department of Economic Affairs with the objective of handling violations of Exchange Control Laws, under the FERA 1947, i.e., Foreign Exchange Regulation Act 1947.The unit headquartered in Delhi had the post of director of enforcement at its helm, assisted by an officer from the Reserve Bank of India drawn on deputation, and accompanied by 3 inspectors from the Special Police Establishment. At the time, the unit had 2 branches, located in Calcutta and Bombay.

It was later in the year 1957, that this unit was renamed the ‘Enforcement Directorate’. The same year, ED opened its third branch in Madras. The ED at the time had been under the administrative control of the Department of Economic Affairs. This changed in 1960, as the control was transferred to the Department of Revenue.

Changing Times

The FERA, which was the main legislation the ED worked upon, was repealed and replaced by the FERA of 1973.During this period of transition, the ED underwent some temporary changes as well. From 1973 to 1977, the ED previously under the Department of Revenue was transferred to the Department of Personnel and Administrative Reforms. Later it was transferred back to the revenue department of the ministry of finance.

Then came the era of economic reforms and much-needed liberalization of the economy. The FERA 1973 which was prevalent at the time had a very narrow view. Foreign Exchange was conceived as a scarce resource, and foreign payments were strictly regulated. The Act had become outdated, lacking IT provisions, and exclusion of banking units in its definition of authorized persons. Thus, the Vajpayee Government repealed the FERA and replaced it with the Foreign Exchange Management Act (FEMA) 1999, which aimed to increase India’s Foreign Exchange Reserves and promote international trade.

Other than the FEMA, the ED was entrusted with the enforcement of the Prevention of Money Laundering Act, 2002 (PMLA), enacted in tune with the International Anti Money Laundering Regime, from 1st July 2005.

As the country witnessed an increase in economic offenders fleeing the country, the ED was also entrusted with the Fugitive Economic Offenders Act 2002.

Composition

The total strength of the directorate is less than 2000.Around 70% of this strength comes from deputations from various departments such as the Indian Revenue Service, Indian Police Service, and the Indian Administrative Servicewhile the rest are sourced from promotions in the directorate’s own cadre. Deputations from investigating agencies such as Income Tax, Excise department, Police and others are also appointed.

Functions

• Recommending and processing cases under the COFEPOSA, i.e., Conservation of Foreign Exchange and Prevention of Smuggling Activities Act.
• Development, collection, and dissemination of intelligence under FEMA,1999 from sources such as central, and state intelligence agencies
• Investigating various violations under the FEMA,1999 like hawala racketeering, non-realization of export proceeds, and others.
• The realization of penalties that were imposed after the closure of judicial proceedings
• Conduct surveys and searches, as well as arrest and seize properties under the PMLA offense
• Providing and seeking mutual legal assistance from states for confiscation of proceeds and also cooperating with respect to the transfer of accused persons.
• Handling of prosecution cases and appeals under erstwhile FERA 1973 and FEMA 1999.

Powers

• Powers of the Officers: The power of investigating cases of money laundering, initiating property attachment, and launching prosecution are vested with the officers of the ED, Suman Sehgal v Union of India [(2006) 203 CTR 0129].
• Powers to Investigating Officers: The Investigative officers of the directorate can,

1. Attach property or property value that has been purchased with laundered money either directly or indirectly
2. Survey places,search locations, and record arrests
3. Summon and record statements of the accused

• Power of Authority: Identification marks may be placed by the directorate authorities on confiscated property or records,they can also record statements of accused and witnesses, and make inventories.
• Powers during a search: These include access to the accused’s property, search, seizing and even freezing property, and examining any person if required.
• Powers during summons:Directors of the enforcement directorates possess the power to summon people related to economic crimes, case in reference T.T.V. Dinakaran and Another vs The Enforcement Officer [(1997) CriLJ 130] and such persons are bound to attend such meetings as they fall under Section 45 of the IPC and are thus considered judicial proceedings.

Who’s who (as of June 1,2022)

• Directorate of Enforcement: Sanjay Kumar Mishra
• Special Directorate: Rahul Navin
• Additional Directorates: Sonia Narang, Monika Sharma, Satyabrata Kumar