17 May Supreme Court Curbs power of ED

This article covers “Daily current affairs” and the topic details of “Supreme Court Curbs power of ED” This topic is relevant in the “Polity and Governance” section of the UPSC- CSE Exam.

Why in the news?

Supreme Court has upheld the Right to Personal Liberty in cases related to which  a person summoned by a designated special court under the Prevention of Money Laundering Act (PMLA), is not supposed to be in custody and apply for bail Under the stringent provisions of the anti-money laundering legislation.

Directions given by the court :

• If the accused person appears before the special court on the summons, then it cannot be treated as custody, and no need to apply for bail for the accused.
• This judgement limits the power of the Directorate of Enforcement after a special court take a cognisance of the case.
• The special court directed the accused to provide bonds in terms of Section 88 of the Code of Criminal Procedure. An order accepting bond under Section 88 does not amount to a grant of bail, and hence, the twin conditions of Section 45 of the PMLA are not applicable to it,
• The ED has to apply separately for the custody of a person once he or she appears in court by giving specific reasons.
• The accused should be able to convince the judge he would not commit any offence while on bail. The burden of proof is entirely on the incarcerated accused.
• When the ED wants to conduct a further investigation concerning the same offence, it may arrest a person not shown as an accused in the complaint led under Section 44(1)(b) of the PMLA, provided the requirements of Section 19 (procedures of arrest) under the Act were fulfilled.
• When a person applies for bail under the regular provisions of the Code of Criminal Procedure, then the person has to satisfy the twin conditions imposed by Section 45 of the PMLA. 

Significance of the judgement on personal liberty

Protection of Fundamental Rights:

1. Article 21 of the Constitution: The due process of law is crucial in upholding Article 21, it guarantees the right to life and personal liberty. It ensures that no person is deprived of these rights except according to procedures established by law.
2. Judicial Safeguards: Due process provides a legal framework that protects individuals from arbitrary actions by the state, ensuring fairness and justice in legal proceedings.

Judicial Review and Independence:

1. Checks and Balances: It strengthens the judiciary to review and strike down laws and actions of the executive and legislature that violate fundamental rights.
2.  Judicial Activism: Indian courts, particularly the Supreme Court, have used due process to interpret laws broadly, enhancing the protection of civil liberties and leading to landmark judgments expanding the scope of fundamental rights.

Fair Legal Procedures:

1. Right to a Fair Trial: Due process ensures that individuals receive a fair trial with impartial procedures, proper notice, and a chance to be heard.
2. Equality Before Law: It upholds the principle that all individuals are treated equally under the law, preventing discrimination and ensuring justice for all, including marginalised groups.

Protection Against Arbitrary Actions:

1. Preventive Detention: Due process is essential in cases of preventive detention, ensuring that such measures are not misused and that detainees have access to legal remedies.
2. Property Rights: It protects individuals from unlawful deprivation of property, ensuring compensation and legal recourse if property is taken by the state.

About ED:

• The Directorate of Enforcement (ED) is a multi-disciplinary organisation responsible for investigating economic crimes and violations of foreign exchange laws.
•  Its origins date back to May 1, 1956, when an ‘Enforcement Unit’ was established within the Department of Economic Affairs to address infringement of the Foreign Exchange Regulation Act 1947.
• With the starting of economic liberalization, the regulatory FERA, 1973 was repealed and replaced by the Foreign Exchange Management Act, 1999 (FEMA). 
• With the rise of cases of economic offenders seeking refuge in foreign countries, the government enacted the Fugitive Economic Offenders Act, 2018 (FEOA), with the ED tasked with its enforcement.

ED derived power from:

• The Prevention of Money Laundering Act, 2002 (PMLA):
• The ED is authorised to enforce the PMLA by investigating and tracing assets obtained through criminal activities, provisionally attaching these properties, and ensuring the prosecution of offenders and confiscation of the assets by the Special Court.
• The Foreign Exchange Management Act, 1999 (FEMA):
• The ED is tasked with investigating suspected violations of foreign exchange laws and regulations, adjudicating these cases, and imposing penalties on those found to have breached the law.
• The Fugitive Economic Offenders Act, 2018 (FEOA):
• Under this law, the Directorate is authorised to seize the properties of fugitive economic offenders who have fled India to avoid arrest and facilitate the confiscation of their properties by the Central Government.

PMLA (Amendment) Act, 2012:

• Introduces the concept of a ‘reporting entity,’ encompassing banking companies, financial institutions, intermediaries, and similar entities.
•  While PMLA 2002 imposed a fine of up to Rs 5 lakh, the amendment has eliminated this upper limit.
• It allows for the provisional attachment and confiscation of property belonging to individuals involved in such activities.

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Prelims Based question

Q. Consider the following questions.

1. The directorate of enforcement has the authority to arrest without permission of the court.
2. The ED has to apply separately for the custody of a person once he or she appears in court by giving specific reasons.

Which of the above statements is/are correct?

(a). 1 Only

(b). 2 Only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: B

Mains based question:

Q. Why are safeguards necessary to prevent the misuse of ED’s power?

Vishal Yadav