Latest news with #TASMAC
Indian Express
3 days ago
- Business
- Indian Express
SC pulls up ED: What are the powers of India's financial crime watchdog?
— Kannan K The Supreme Court recently reprimanded the Enforcement Directorate (ED) for 'crossing all limits' and 'violating the federal structure' by conducting raids on government-run liquor retailer Tamil Nadu State Marketing Corporation (TASMAC). Chief Justice of India (CJI) B R Gavai described the central agency's actions against the State corporation as a violation of the Constitution's federal structure. Notably, the TASMAC case is not the first time the apex court has pulled up the ED. Earlier this month, the Court criticised the body for making 'allegations without any reference to anything' in a liquor scam case in Chhattisgarh. In another case in Chhattisgarh, it had called out the agency for paying scant heed to the 'fundamental rights of the accused'. These developments warrant revisiting the formation and evolution of India's economic intelligence agency, and its role in enforcing economic laws and combating financial crimes. The ED was established on May 1, 1956, as the 'Enforcement Unit' under the Department of Economic Affairs within the Ministry of Finance for handling violations of exchange control laws under the now-repealed Foreign Exchange Regulation Act, 1947/1973 (FERA). Later on, it was renamed the Enforcement Directorate and was transferred to the administrative control of the Department of Revenue, and subsequently entrusted with the enforcement of a broader range of financial laws. The enactment of the Foreign Exchange Management Act (FEMA), which replaced FERA in 1999, and the Prevention of Money Laundering Act (PMLA) in the early 2000s, increased the power of ED. These moves aligned its functions with international standards to combat financial crimes, notably those recommended by the Financial Action Task Force (FATF). In 2006, India received observer status in FATF – which was created in 1989 to coordinate anti-money laundering efforts across the world – and in 2010, it became its member state. While the ED has a broad mandate to investigate offences related to money laundering and foreign exchange violations, it's mandated to enforce the following key laws: — The Prevention of Money Laundering Act, 2002 (PMLA): The ED traces assets from money laundering activities and is responsible for ensuring the prosecution of offenders and confiscation (permanent seizure of ownership, usually after conviction) of such assets. — The Foreign Exchange Management Act, 1999 (FEMA): The law enforcement agency is also responsible for imposing penalties on offenders of FEMA and in the cases pertaining to violations committed prior to the repeal of the FERA of 1973, which FEMA replaced, thus being responsible for the handling of legacy FERA cases. — The Fugitive Economic Offenders Act, 2018 (FEOA): The ED is mandated to attach (temporarily seizing of property without assuming ownership to prevent sale, usually during trial phase) and confiscate properties of economic offenders evading Indian law by fleeing abroad — The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA), 1974: The Directorate is the sponsor of cases under the law and can initiate preventive detention proceedings on FEMA violations based on COFEPOSA. ED's power and federal structure Thus, as the primary body to enforce economic laws, the ED enjoys significant powers to investigate, detect, and prevent economic crimes. For instance, under the PMLA, the central agency is empowered to summon individuals, enforce their attendance, and record their statements, which are valid as evidence. The ED also has the authority to conduct searches and seize property or documents linked to money laundering, provided there's a recorded 'reason to believe' and the statutory prerequisites are met. It can also make arrests based on material evidence and written justification – but with the condition that the grounds for arrest are communicated to the accused. This is a higher threshold than that required for arrests under the Bharatiya Nagarik Suraksha Sanhita (BNSS). The ED also has the power to attach properties suspected to be proceeds of crimes for up to 180 days to prevent their sale during investigation. A distinctive feature of PMLA is the reversal of the burden of proof, where the onus often shifts to the accused to prove innocence by showing the legitimacy of the attached assets. Under the FEMA, the ED has adjudication powers and acts as a quasi-judicial body to impose penalties for foreign exchange regulation violations. Further, the FEOA grants the ED powers to attach and confiscate properties of economic offenders who have absconded from India. Taken together, these wide range of powers to investigate, secure evidence, attach and confiscate assets strengthen the ED's objective of protecting the integrity of India's financial system. However, these powers are subject to constitutional limits rooted in federalism. The Supreme Court has repeatedly warned the ED on overreaching its jurisdiction, stressing the need to respect state autonomy and to avoid causing any disruption to the union-state balance. These instructions are relevant, particularly in light of allegations regarding the use of the ED as a tool to interfere in investigations that fall under state jurisdiction. While the ED has an important role in safeguarding India's financial integrity, its functioning has regularly drawn scrutiny and raised significant concerns, as seen in the Supreme Court's recent criticism of the TASMAC case. The CJI's observation regarding a violation of the Constitution's federal structure coupled with concerns about the agency's operational independence and allegations of partisan motivations underlined the need for introspection. A significant criticism faced by the ED is regarding its low conviction rate under the PMLA, despite a substantial number of cases registered and properties. Of the 5,297 cases registered under the PMLA from 2014 to 2024, only 40 cases have seen convictions, prompting the apex court to direct the agency to 'focus on quality prosecution and evidence' in August 2024. This has raised questions about the intent and effectiveness of the ED's investigative and prosecution mechanisms in securing convictions. The extensive powers granted to the ED, particularly under PMLA, including the power to arrest, provisionally attach assets, and the unique provision of a reversed burden of proof, have led to debates regarding their potential impact on due process and civil liberties. It has been alleged that the provision placing the burden of proof on the accused to prove their innocence has been used as a political tool to stifle the opposition. The Supreme Court's observations regarding a pattern of accusations without proof, and dismissal of multiple cases due to lack of evidence, substantiate such concerns. Critics argue that such powers are likely to be misused for political gain. The recent arrest of a high-ranking ED official by the CBI on grounds of taking bribes apparently contributed to eroding public trust in the body. Concerns have also been raised regarding the operational independence of the ED. Allegations of political influence and targeting of specific individuals or entities have frequently surfaced, impacting public perception and the agency's credibility. The need for greater transparency in its case selection process, investigations, and conviction rates is widely discussed. Additionally, the ED's actions sometimes overstep its jurisdictions, taking up cases that fall under the states' ambit, as seen in the TASMAC case, leading to federal friction. The ED would benefit from certain reforms aimed at increasing its effectiveness and improving the public perception regarding its functioning. A key step perhaps could be to place the agency under stronger judicial oversight, particularly the investigation, arrest, and attachment processes to prevent overstepping of jurisdiction. Another step could involve strict adherence to due process to counter allegations of political interests and harassment, which could be supported by establishing clear Standard Operating Procedures (SOPs) and effective training and capacity-building for ED personnel. Reorienting the ED's functioning to make investigations intelligence-driven and focussing on convictions through strong evidence might further help to dispel the perception of bias. To conclude, an economic intelligence agency such as the ED is a necessity to protect the economic integrity of India, ensuring the prevention of financial crimes. Reforms that keep pace with the times and strict adherence to due process and constitutional norms will be essential to ensure its fair and effective functioning. How has the ED's mandate evolved over time since its inception in 1956? What are the key laws enforced by the Enforcement Directorate, and how do they define its jurisdiction? How does the ED's role intersect with federal principles enshrined in the Indian Constitution? The Supreme Court criticised the Enforcement Directorate (ED) for 'crossing all limits' and 'violating the federal structure' in the Tamil Nadu State Marketing Corporation (TASMAC) case. Evaluate the concerns raised by the Court. Do you think the political misuse of agencies like the ED impact democratic institutions and public trust in governance? What is the significance of the ED's powers to attach and confiscate property under different laws like PMLA, FEMA, and FEOA? (Kannan K is a doctoral candidate in Political Science at the Centre for Economic and Social Studies, Hyderabad.)
The Hindu
4 days ago
- Politics
- The Hindu
DMK condemns the Union government for misusing Central agencies against Opposition-ruled States
Condemning the Union government led by the Bharatiya Janata Party (BJP) for letting loose the Central agencies such as the CBI, Income Tax and Directorate of Enforcement against the non-BJP State governments in the country, the Dravida Munnetra Kazhagam (DMK) said that it would not be cowed down by such threats. The party general council meeting was held in Madurai on Sunday under the leadership of its president and TN Chief Minister M K Stalin in which a large number of senior leaders, ministers, MPs, MLAs and council members from across Tamil Nadu participated. As many as 28 resolutions were passed at the meeting. The meeting condemned the searches conducted by the ED officials in the TASMAC headquarters in Chennai. While the Directorate of Vigilance and Anti-Corruption (DVAC) had booked cases against the TASMAC during the AIADMK regime, the BJP had used the ED to raid the offices of the TASMAC and its officials thus giving impression that the DMK government was involved in malpractices. Lauding Mr Stalin for his able administration and leading the State towards progressive growth in every sphere, the meeting said that Tamil Nadu not only stood on top of the board but set a 'model' for the entire nation through innovation and for its implementation of novel welfare programs. The swift move to approach the Supreme Court by Mr Stalin came in for unanimous appreciation. After the Governor failed in his duty, the apex court's directive to the Governor had set a new meaning to the Constitution. It was not a victory to the elected government in Tamil Nadu, but the order put at rest the confusion over the federal structure in a democratic fabric, a resolution said. In another resolution, the ruling party said that fearing trouble, the AIADMK had pledged its self-respect with the BJP. The DMK would not fall prey to any such pressure tactics. It would not be 'controlled' by Amit Shah or any Shah. The DMK would protect the rights of the people boldly, the resolution affirmed. A majority of the resolutions targeted the BJP and the party's prime political opponent AIADMK. From the time Mr Stalin took over as the president of the party, there has been no looking back for the organisation as it had emerged victorious in the Lok Sabha polls, Assembly elections, by-polls, local body elections in the State. The trend would continue in the next year Assembly elections and the party would romp home victory, the meeting resolved. June 3 as 'Semmozhi' Day The party would celebrate June 3, the birthday of late leader M Karunanidhi, as Semmozhi Day by organising meetings in 102 locations in Tamil Nadu. The late leader's sacrifices and achievements, who toiled for the State and served the people for over five decades and ruled for five terms as Chief Minister, would be disseminated to the younger generations, a resolution said. The meeting resolved to retrieve Katchatheevu in the larger interest of the traditional fishermen. The members strongly opposed imposition of Hindi language in any form. They condemned the Union government for continuously neglecting the State's interest in Railways and other Central projects. The members urged through a resolution to take back Waqf amendment 2025 by the Union government and urged to take up the caste census swiftly.
Indian Express
28-05-2025
- Business
- Indian Express
Rapped by Supreme Court in TASMAC case, ED only has itself to blame
The Supreme Court on May 22, while hearing a batch of petitions related to the Enforcement Directorate's (ED) investigation into an alleged liquor scam in Tamil Nadu, came down heavily on the ED with respect to the mode and manner in which the said investigation was being carried out. The petitions were filed against the ED by the State of Tamil Nadu and the Tamil Nadu State Marketing Corporation (TASMAC), which is wholly owned by the Government of Tamil Nadu and vested with the exclusive privilege of wholesale supply of IMFL (Indian Made Foreign Liquor) and other liquor in the state. The Court, while issuing notice, was pleased to stay further proceedings qua TASMAC and also granted protection from any coercive steps to TASMAC and its officials. This order assumes significance as courts are usually reluctant to interfere with or stay ongoing high-profile investigations. The allegations, as culled out from multiple FIRs registered by the Tamil Nadu Police since 2017, are broadly that employees of TASMAC-operated shops allegedly collected amounts in excess of the MRP from customers while selling liquor, and further, that high-ranking TASMAC officials were being bribed to allow these shops to sell liquor at higher rates. These allegations were initially being investigated by the Tamil Nadu Police; however, the ED eventually entered the picture, given that the offences alleged in these state FIRs, namely, corruption, cheating, etc were 'scheduled offences,' the only prerequisite to invoke the provisions of the Prevention of Money Laundering Act, 2002 (PMLA). This armed the ED to parallelly investigate the money laundering aspect of the offence and, in the process, carry out extensive search and seizure operations, which became the subject matter of the said petitions. The bone of contention is a raid conducted by the ED on March 6 at the TASMAC Headquarters in Chennai, in purported exercise of powers under Section 17 of the PMLA. The raid went on for three days, totalling around 60 hours, and it has been alleged by employees and staff of TASMAC that during the course of the raid, the ED harassed and coerced them. It is alleged that employees were unlawfully confined for long hours, not provided with food or rest, denied communication with anyone, and that some were detained for the entirety of the 60 hours. Accordingly, writ petitions were filed before the Madras High Court on behalf of the State of Tamil Nadu and TASMAC, seeking a declaration that the raid conducted by the ED was illegal and further seeking a declaration that the ED's investigation, without the consent of the State, violated the federal structure and the basic structure of the Constitution of India. It was also alleged that a large number of documents were indiscriminately copied and seized, and that digital devices of the company and its employees were cloned and retained, thereby violating the right to privacy of these individuals. The Madras High Court dismissed these writ petitions and upheld the ED's investigation and the validity of the said search and seizure carried out. It held that the allegations of harassment were not substantiated through any physical evidence and, therefore, could not be believed. It further stated that the records of the search proceedings incidentally created by the ED itself did not mention any instance of harassment and, therefore, no such harassment could be presumed to have taken place. It also held that the ED was well within its powers to conduct the search and that there was no violation of the federal structure. There was also a legal challenge to the search itself, in light of the mandate of Section 17 of the PMLA, which requires the existence of 'reasons to believe,' supported by 'material in possession,' to justify conducting a search in the first place. The Supreme Court, in its recent ruling in the Arvind Kejriwal case, held that the 'reasons to believe' under Section 19 of the PMLA which bears similarly worded provisions, must have a nexus with the 'material in possession'. The dictum of the Madras High Court is flawed on several counts and the contentions of TASMAC and its employees deserve consideration, as is evident from the Supreme Court's interim order. The issues raised before both the Supreme Court and the High Court are not only interlinked but also reflect the long-standing issue of duplicated and parallel investigations being carried out by state and central agencies (such as the ED, CBI, etc). On the issue of the alleged harassment, the High Court should not have relied so heavily on documents created by the ED to conclude that no harassment occurred. These search documents, such as panchnamas, are prepared by ED officials themselves and, by their very nature, would not contain any admission of misconduct. These concerns must also be understood in the context of the ED's inherently secretive style of operation. The ED often refuses to supply copies of seizure memos or reports prepared during searches. It is not even mandated to supply a copy of the Enforcement Case Information Report (ECIR), the very document that sets an investigation in motion. Furthermore, given that the Tamil Nadu Police has been investigating the alleged liquor scam since 2017, the ED's abrupt intervention and mass seizures not only undermine the federal structure but also derail the ongoing investigation. Due to its wide-ranging powers, the ED often dictates the manner and trajectory of the investigation, essentially positioning itself as a superior investigating agency. This can also demoralise state police forces from pursuing their work effectively, out of fear of conflict with the Central Government, even though the investigation of offences is essentially within the domain of the state as per the Constitution of India. Now, the Supreme Court in Arvind Kejriwal vs Directorate of Enforcement held that 'reasons to believe' in Sections 17 and 19 of the PMLA must be cogent, evidence-based, and subject to judicial scrutiny. However, the High Court effectively diluted this standard in the context of Section 17, as it held that such a high threshold for 'reasons to believe,' as required for a valid arrest, was not applicable to search/raid proceedings. Yet, judicial review of such 'reasons to believe' is all the more essential in such cases, especially since the ED also has the power to record statements, and several TASMAC employees have complained of coercion and harassment. Scrutiny of this requirement would determine whether the search was genuinely warranted or merely a means of intimidation. Given the sweeping powers conferred by the PMLA, these procedural safeguards exist for a reason and must be scrupulously followed to ensure a balance between investigative efficacy and the protection of individual rights. In OPTO Circuit India Ltd. v Axis Bank & Others, the Supreme Court held that compliance with Section 17's mandate is essential and must be uniformly observed. The ED has appeared somewhat overzealous and trigger-happy in its recent investigation into TASMAC. There seemed to be no immediate urgency to conduct searches in the manner alleged by the TASMAC employees. This is underscored by the fact that the ED could have taken a more measured approach and sought assistance from TASMAC. Under Section 54(j) of the PMLA, the ED could have requested TASMAC's assistance in obtaining relevant records, as this provision allows it to seek cooperation from officers or corporate bodies established under central or state enactments. Moreover, the ED could have, based on available evidence, informed the Tamil Nadu Government of appropriate action under Section 66(2) of the PMLA. The very fact that these more cooperative options were bypassed in favour of a full-scale search and seizure justifies the criticism levelled against the ED. Unfortunately, the ED is now, perhaps, a victim of its own reputation where even genuine investigations tend to be sullied by allegations of malice and overreach. The writer is a lawyer practicing in Delhi
The Hindu
27-05-2025
- The Hindu
Madurai Bench of Madras High Court finds ‘something wrong' with TASMAC
Taking into account that complaints regarding a District Manager and a Supervisor of Tamil Nadu State Marketing Corporation Limited (TASMAC) allegedly collecting bribes from its outlets in Madurai district had not been addressed properly, the Madurai Bench of the Madras High Court observed that there was something wrong with the Corporation. The court was hearing the petitions filed in 2022 by K. Mayakannan, S. Murugan and V. Ramasamy, who were salesmen in TASMAC shops. The case of the petitioners was that the then District Manager of TASMAC, Madurai South, Rajeswari, colluded with the then Supervisor of TASMAC, Tirumangalam, Selvam, and collected bribes every month from the shops under her control. There were also other allegations against Rajeswari. The petitioners lodged a complaint with the Directorate of Vigilance and Anti-Corruption, which was forwarded to TASMAC authorities. An inquiry was ordered. The petitioners also submitted their representations. Since, the grievances of the petitioners were not addressed, they gave an interview to the media. They were suspended by the management on the grounds that their conduct was against the Employees Code of Conduct circular. Challenging the order, the petitions were filed. Justice B. Pugalendhi observed that the petitioners lodged a complaint, along with the recording of a conversation between Rajeswari and Selvam. The authorities conducted an inquiry and closed it stating that the corruption charges were without any materials and that the alleged conversation in the phone was denied by Supervisor Selvam. The person against whom allegations were made was transferred to the parent department and it was reported that she had retired from service. However, the petitioners' complaint had been closed by recording the statement of Selvam that he was not part of the conversation. The available materials showed that there was something wrong in the government-run Corporation. The government should not allow corruption in its functioning. The Corporation had to realise its mistake, the court observed. Considering the manner in which the issue was handled, the court set aside the suspension orders with liberty to the Corporation to initiate disciplinary proceedings against the petitioners for violating the circular.
New Indian Express
25-05-2025
- Politics
- New Indian Express
NITI Aayog meeting 'excuse' for Stalin's Delhi visit, claims TVK chief Vijay
CHENNAI: Tamilaga Vetri Kazhagam founder leader Vijay on Sunday alleged that Chief Minister MK Stalin visited Delhi and met Prime Minister Narendra Modi under the pretext of NITI Aayog meeting after realising that the ED's action in the alleged Rs 1,000 crore TASMAC scam was akin to a snake entangling a person's legs. The ruling DMK has already rubbished all allegations of the opposition parties in this regard. The ED recently held searches on premises linked to those close to the family members of the DMK's top leadership as well, Vijay said, adding the DMK-led Tamil Nadu government got a stay on the ED probe into the alleged TASMAC scam by petitioning the Supreme Court. Since the court stay was interim in nature and not "permanent," the "empty publicity-model" DMK government's Chief Minister Stalin was prompted to seek avenues that would halt the investigation, and the participation in the NITI Aayog meeting explains it, Vijay alleged in a statement. Referring to Stalin skipping the meeting last year, Vijay alleged the reason for the visit now was only the ED probe. The chief minister visited Delhi under the pretext of NITI Aayog meeting and met Prime Minister Narendra Modi all alone realising that ED action was similar to a "snake encircling one's legs," and due to fear over trouble to his family members in case the central agency were to deep dive into the Rs 1,000 crore scam. Vijay further asked whether Stalin could declare that he did not discuss anything about the ED case with the Prime Minister. The TVK chief ridiculed the DMK for releasing black balloons to oppose PM Modi's visit to Tamil Nadu while it was in opposition, and now shaking hands with the union government leadership after becoming the ruling party in the state. "This is the politics of trickery," the actor-politician said, hitting out at the DMK and accusing the state's ruling party brass of performing "deceitful drama." The CM's Delhi visit is not to get funds for the state but only to safeguard the funds of his family heir, and even the common people are aware of it, the fledgling party chief claimed, thereby levelling one more allegation against the DMK first family. Also, Vijay claimed that DMK has realised that it would be defeated in the 2026 Assembly election and, hence, it was thinking of "direct or indirect alliance with the divisive BJP."
