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Introduction

The Prevention of Money Laundering Act (PMLA), 2002, was enacted to combat the global menace of money laundering and safeguard the financial system’s integrity. As the primary agency for its implementation, the Enforcement Directorate (ED) is vested with far-reaching powers. However, in recent years, its functioning has faced intense scrutiny for alleged procedural overreach and the erosion of fundamental liberties.

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ED Powers in the Context of Recent Judicial Observations

• Arrest and Custody (Section 19): Courts have recently emphasized that the ED must provide “reasons to believe” in writing and promptly communicate the “grounds of arrest” to the accused to avoid arbitrariness.
  Eg: In Pankaj Bansal v. Union of India, the Supreme Court (SC) held that the grounds of arrest must be supplied in writing to the accused to enable them to seek legal counsel.
• Sequential Property Attachment: Judicial rulings have clarified that the ED must strictly follow a three-phase graded framework—search, retention, and adjudication operating sequentially under Sections 17, 20, and 8 of the PMLA.
  Eg: The Delhi High Court (2025) ruled in the Anirudh Agarwal case that skipping the mandatory “reasoned retention order” under Section 20 renders a seizure void.
• Predicate Offense Linkage: Recent observations have steered away from treating money laundering as an “absolute standalone offense,” reinforcing that a PMLA probe cannot proceed if the original crime (predicate offense) is quashed.
  Eg: The SC recently noted that the ED is “crossing all limits” in cases where no clear link to a scheduled offense is established, particularly in state-level probes.
• Speedy Trial Mandate: Courts have increasingly intervened in cases of “prolonged pre-trial incarceration”, asserting that the rigors of PMLA bail conditions (Section 45) cannot override the fundamental right to a speedy trial. 

ED Powers and the Principles of Natural Justice

• Right to Documents: The principle of “Audi Alteram Partem” (hear the other side) has been bolstered by directing the ED to provide accused persons with copies of seized records, including “unrelied” documents.
  Eg: The SC held in 2024-25 that an accused is entitled to a list of all materials collected during the investigation to prepare an effective defense.
• Statements Under Oath (Section 50): Statements recorded by the ED are admissible as evidence (unlike before the police); however, courts have warned against “coercive interrogations” that force self-incrimination.
  Eg: The SC rebuked the ED in January 2025 for conducting a 15-hour overnight interrogation, calling it “inhuman” and against human dignity (Article-14).
• Right to Sleep: Courts have recognized that the “right to sleep” is a basic human requirement that must be respected even during intensive PMLA investigations.
  Eg: The Bombay High Court (2024) chastised the ED for violating an accused’s right to sleep, leading to the issuance of new interrogation guidelines.
• Adjudicatory Neutrality: Concerns have been raised regarding the non-judicial background of members in the Adjudicating Authority, potentially compromising fair play in property attachment cases.

Concerns Associated with Overreach

• Low Conviction Rates: Despite thousands of investigations and raids, the overall conviction rate remains strikingly low, leading to allegations that “the process is the punishment.”
  Eg: Government data shared in Parliament (Dec 2024) revealed a conviction rate of approximately 6.4% in ED cases over a five-year period.
• Selective Enforcement: Critics and international reports have pointed toward a pattern of “partisan enforcement,” where investigations are allegedly concentrated against political critics and opposition figures.
• Weaponization of PMLA: The inclusion of minor offenses in the PMLA schedule allows the ED to intervene in cases with no significant threat to national financial security.
• Lack of Transparency: The non-requirement to share the Enforcement Case Information Report (ECIR)—the equivalent of an FIR—at the time of arrest remains a major procedural hurdle for the accused.

Way Forward

• Legislative Refinement: Amend the PMLA to distinguish between “serious financial crimes” and minor offenses, ensuring the ED focuses on high-impact money laundering.
• Judicial Oversight of Arrests: Institutionalize the requirement for a judicial warrant or prior judicial scrutiny before the ED can provisionally freeze assets or effect arrests.
• Techno-Scientific Investigation: Shift from “confession-centric” to “evidence-centric” investigations using digital forensics to improve conviction rates without resorting to coercive interrogation.
• Fixed Trial Timelines: Establish Special PMLA Fast-Track Courts with mandatory timelines to ensure that pre-trial detention does not become a de-facto sentence.
• Independent Oversight Body: Create an autonomous ombudsman or audit committee to review the ED’s performance and investigate complaints of procedural high-handedness.

Conclusion

The Enforcement Directorate plays a vital role in protecting India’s sovereign economic interests. However, as the Supreme Court has noted, an agency “cannot arrogate powers unto itself” at the cost of the Rule of Law. To maintain institutional legitimacy, the ED must align its “draconian” powers with “pristine standards of fair play.” Only by ensuring that the fight against financial crime respects constitutional guardrails can India foster a financial system that is both secure and free.

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