Introduction: Why ED Jurisdiction Matters
The Enforcement Directorate (ED) is India’s premier financial investigation agency responsible for probing offences under the Prevention of Money Laundering Act, 2002 (PMLA). In recent years, it has played an increasingly visible role in cases involving high-value financial frauds, alleged economic crimes, and even political investigations. Yet, despite its prominence, there remains considerable confusion about the precise legal framework that governs ED’s powers, how its jurisdiction is triggered, and what remedies are available to those under its scanner.
Unlike police authorities that act on a wide range of offences directly, the ED can only investigate cases that have a specific legal foundation under PMLA — primarily centred around the concept of a “predicate” or “scheduled offence.” Understanding this jurisdictional threshold is essential not just for legal practitioners, but for businesses, individuals, and public officials who may find themselves entangled in such proceedings.
This article aims to provide a structured and in-depth overview of how ED’s jurisdiction operates, the procedural flow once it gets involved, and the legal remedies available to persons or entities facing ED scrutiny.
What Triggers ED’s Jurisdiction?
The ED does not have independent, standalone jurisdiction. Its powers under PMLA are activated only when a predicate offence — also known as a “scheduled offence” — has been committed, as defined under the Schedule to the PMLA.
What is a Predicate or Scheduled Offence?
A predicate offence is an offence that forms the basis for initiating a money laundering investigation. The Schedule to the PMLA lists these offences and is divided into three parts:
- Part A includes major offences such as:
- Offences under the IPC (e.g., cheating, forgery, criminal breach of trust)
- Offences under the Narcotic Drugs and Psychotropic Substances (NDPS) Act
- Offences under the Prevention of Corruption Act
- Offences under the Customs Act, Companies Act, Arms Act, etc.
- Part B includes certain offences where the value involved exceeds ₹1 crore (threshold-based).
- Part C deals with transnational offences and cross-border crimes, including terrorism financing and organised crime with international links.
The ED can only initiate proceedings after another competent authority, such as the police, CBI, SFIO, or DRI, has registered an FIR or filed a chargesheet for a scheduled offence.
Hence, ED’s jurisdiction is derivative, not original. It is contingent upon the existence of a primary offence.
The Process Once ED Gets Involved:
Once a scheduled offence is established through an FIR or complaint by another agency, the ED can begin its inquiry into whether “proceeds of crime” have been generated, concealed, or used for money laundering.
Key Legal Steps in ED Proceedings:
i. Provisional Attachment of Property (Section 5, PMLA)
If the ED has reason to believe that a property is involved in money laundering, it may provisionally attach the property for a period of up to 180 days, subject to confirmation by the Adjudicating Authority.
This includes:
- Immovable properties (land, buildings)
- Movable assets (bank accounts, shares, cash)
ii. Summons under Section 50 PMLA
The ED has civil court-like powers under Section 50. It may:
- Summon any person (including accused persons)
- Require attendance and testimony under oath
- Seek production of books, records, or assets
Failure to comply can lead to penalties and even arrest, and statements recorded under Section 50 are admissible as evidence.
iii. Search and Seizure (Section 17)
With proper internal authorisation, the ED may:
- Search residential and business premises
- Seize documents, digital devices, cash, jewellery, etc.
- Freeze bank accounts or lockers
iv. Arrest (Section 19)
The ED can arrest an individual if it has material evidence and “reasons to believe” that the person is guilty of money laundering. The grounds must be recorded in writing and communicated to the accused at the time of arrest.
v. Enforcement Case Information Report (ECIR)
An ECIR is the ED’s version of an FIR. However:
- It is an internal document, not required to be furnished to the accused
- The Supreme Court in Vijay Madanlal Choudhary (2022) upheld this position
This procedural opacity is controversial but currently valid in law.
ED Notices Explained:
The ED issues various types of notices, each with distinct legal consequences:
1. Summons under Section 50:
- Issued to individuals for deposition, clarification, or document production
- Can be issued to anyone — accused, witness, employee, or family member
2. Provisional Attachment Order (Section 5):
- Temporarily freezes assets suspected of being involved in money laundering
- Subject to confirmation by the Adjudicating Authority
- If unchallenged, may lead to confiscation
3. Search Notice (Section 17):
- Authorises search of property, including bank lockers or electronic devices
- Based on the recorded “reason to believe”
- Legal challenge possible if search violates procedure
4. Arrest Memo (Section 19):
- Must be accompanied by:
i. Grounds of arrest in writing
ii. Medical examination of the accused
iii. Information to family members
- The accused must be produced before a magistrate within 24 hours
Note: These notices are often challenged for procedural lapses, non-application of mind, or vague allegations.
Legal Remedies & Defences:
A. Challenging Attachment before Adjudicating Authority
- Affected parties can object to provisional attachment within 30 days
- The authority decides whether the attachment was justified
- If not confirmed, the property is released
B. Appeal Process (Section 26 – 42)
- Decisions of the Adjudicating Authority can be appealed to the Appellate Tribunal
- Further appeal lies with the High Court
- Time-sensitive process — delay can limit remedies
C. Bail under Section 45 of PMLA
- Twin Conditions:
- The prosecutor must be given the opportunity to oppose bail
- The court must be satisfied that the accused is not guilty and unlikely to commit an offence on bail
- Initially struck down by the Supreme Court in Nikesh Tarachand Shah v. Union of India (2017)
- Restored in Vijay Madanlal Choudhary (2022), though courts have since taken a balanced view, especially in cases of medical hardship, senior citizens, or lack of material evidence
D. Writ Petitions under Article 226
- High Courts can quash ED proceedings if:
- Fundamental rights are violated
- An arrest is made without following due process
- There is manifest abuse of authority
Landmark Judicial Developments:
Vijay Madanlal Choudhary vs. Union of India (2022)
- Upheld most ED powers under PMLA
- Revalidated twin bail conditions
- Held ECIR not equivalent to FIR and not subject to mandatory disclosure
Nikesh Tarachand Shah vs. Union of India (2017)
- Initially struck down Section 45’s twin bail conditions as discriminatory and unconstitutional
Pankaj Bansal vs. Union of India, Delhi High Court – ECIR and Arrest Grounds
- Reiterated that while ECIR need not be disclosed, the grounds of arrest must be provided
- Emphasised, ED must ensure transparency and fairness in arrests and searches
Conclusion:
The Enforcement Directorate’s powers are vast — but not boundless. Its jurisdiction depends on the existence of a scheduled offence, and every procedural action — from summons to arrest — must conform to the safeguards laid out under the Constitution and the PMLA.
For individuals or companies facing ED scrutiny, early legal advice, proper documentation, and prompt exercise of remedies can make all the difference. In an era of increasing regulatory scrutiny, awareness of your rights and obligations is your best defence.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. The content may not reflect the most current legal developments and is not guaranteed to be accurate, complete, or up-to-date. Readers should consult a qualified legal professional before taking any action based on the information provided. The authors and publishers disclaim any liability for any loss or damage incurred as a result of reliance on this article. This article does not create an attorney-client relationship.