The Hindu Editorial Analysis- 13th July 2023 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Weakening autonomy

Why in News?

The Supreme Court’s verdict upholding statutory amendments made in 2021 to allow multiple extensions of service to heads of investigative agencies is a setback to the cause of protecting their institutional independence. While the part of the judgment quashing the two one-year extensions given to the Director of Enforcement, S.K. Mishra, may be welcomed, the rest of it is a free pass to the government to undermine the autonomy of these agencies.

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.

Where does the Genesis of ED Lie?

• The origin of this Directorate goes back to 1^st May, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under Foreign Exchange Regulation Act (FERA), 1947.
• It was headquartered in Delhi, headed by a Legal Service Officer as the Director of Enforcement.
• It had two branches – at Bombay and Calcutta.
• In the year 1957, this Unit was renamed as ‘Enforcement Directorate’, and another branch was opened at Madras (now Chennai).
• In 1960, the administrative control of the Directorate was transferred from the Department of Economic Affairs to the Department of Revenue.
• With the passage of time, FERA 1947 was repealed and replaced by FERA, 1973.
• With the onset of the process of economic liberalisation, FERA, 1973, which was a regulatory law, was repealed and in its place, a new law viz. the Foreign Exchange Management Act, 1999 (FEMA) came into operation w.e.f. 1^st June 2000.
• Further, in tune with the International Anti Money Laundering regime, the Prevention of Money Laundering Act, 2002 (PMLA) was enacted and ED was entrusted with its enforcement w.e.f. 1^st July 2005.

What is the Structure of ED?

• Hierarchy: The Directorate of Enforcement, with its headquarters at New Delhi, is headed by the Director of Enforcement.
  • There are five regional offices at Mumbai, Chennai, Chandigarh, Kolkata and Delhi headed by Special Directors of Enforcement.
  • The Directorate has 10 Zonal offices each of which is headed by a Deputy Director and 11 sub Zonal Offices each of which is headed by an Assistant Director.
• Recruitment: Recruitment of the officers is done directly and by drawing officers from other investigation agencies.
  • It comprises officers of IRS (Indian Revenue Services), IPS (Indian Police Services) and IAS (Indian Administrative Services) such as Income Tax officer, Excise officer, Customs officer, and police.
• Tenure: In November 2021, the President of India promulgated two ordinances allowing the Centre to extend the tenures of the directors of the Central Bureau of Investigation (CBI) and the Enforcement Directorate from two years to up to five years.
  • The Delhi Special Police Establishment (DSPE) Act, 1946 (for ED) and the Central Vigilance Commission (CVC) Act, 2003 (for CV Commissioners) have been amended to give the government the power to keep the two chiefs in their posts for one year after they have completed their two-year terms.
  • The chiefs of the Central agencies currently have a fixed two-year tenure, but can now be given three annual extensions.
  • However, no further extension can be granted after the completion of a period of five years in total including the period mentioned in the initial appointment.

What are the Statutory Functions of ED?

• COFEPOSA: Under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA), this Directorate is empowered to sponsor cases of preventive detention with regard to contraventions of FEMA.
• Foreign Exchange Management Act, 1999 (FEMA): It is a civil law enacted to consolidate and amend the laws relating to facilitate external trade and payments and to promote the orderly development and maintenance of foreign exchange market in India.
• ED has been given the responsibility to conduct investigation into suspected contraventions of foreign exchange laws and regulations, to adjudicate and impose penalties on those adjudged to have contravened the law.
• Prevention of Money Laundering Act, 2002 (PMLA): Following the recommendations of the Financial Action Task Force (FATF) India enacted PMLA.
• The ED has been entrusted with the responsibility of executing the provisions of PMLA by conducting investigation to trace the assets derived from proceeds of crime, to provisionally attach the property and to ensure prosecution of the offenders and confiscation of the property by the Special court.
• Fugitive Economic Offenders Act, 2018 (FEOA): Lately, with the increase in the number of cases relating to economic offenders taking shelter in foreign countries, the Government of India introduced the Fugitive Economic Offenders Act, 2018 (FEOA) and ED is entrusted with its enforcement.
• This law was enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.
• Under this law, the ED is mandated to attach the properties of the fugitive economic offenders who have escaped from India warranting arrest and provide for the confiscation of their properties to the Central Government.

What is the Central Bureau of Investigation (CBI)?

• About:
  • The CBI was established in 1963 and is governed by the Delhi Special Police Establishment (DSPE) Act.
  • It was established on the recommendations of Santhanam Committee on Prevention of Corruption (1962–1964).
  • Currently, CBI functions under the Department of Personnel, Ministry of Personnel, Pension & Public Grievances of the Government of India.
• Functions:
  • Investigating cases of corruption, bribery and misconduct of Central government employees under the Prevention of Corruption Act against Indian public officials, public sector undertakings, corporations, and bodies that are owned or controlled by the Indian government.
  • Investigating cases relating to infringement of fiscal and economic laws, that is, breach of laws concerning export and import control, customs and central excise, income tax foreign exchange regulations.
  • Example: Fake Indian Currency Notes, Bank Frauds, Import Export & Foreign Exchange violations etc.
• Issues:
  • CBI v/s State Police:
    • CBI investigation in a particular state is subjected to approval by the State Government.
    • The ruling party in a state, sometimes genuinely and many times on flimsy grounds, has denied permission to the CBI to investigate matters, thereby limiting the extent of investigations.
  • Overlapping/Duplication:
    • Along with state police forces, the Special Police Establishment (a division of CBI) enjoys the concurrent powers of investigation and prosecution for offences that sometimes lead to duplication and overlapping of cases.
• Political Interference:
  • The Supreme Court of India has criticised the CBI for excessive political interference in its functioning, calling it a "caged parrot speaking in its master's voice".