Supreme Court to ED: 'You Can't Act Like a Crook'

A special bench, hearing review petitions against the 2022 PMLA judgment, has put the Enforcement Directorate's operational conduct and low conviction rate under intense judicial scrutiny, raising fundamental questions about accountability and procedural fairness.

New Delhi – In a significant judicial admonishment, the Supreme Court of India delivered a sharp rebuke to the Enforcement Directorate (ED), cautioning the premier financial investigation agency that it must operate strictly within legal boundaries and cannot "act like a crook." The stern observation came from a special bench comprising Justices Surya Kant, Ujjal Bhuyan, and N. Kotiswar Singh during the hearing of petitions seeking a review of the Court's controversial July 2022 judgment in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. , which had upheld the sweeping powers of the ED under the Prevention of Money Laundering Act (PMLA), 2002.

The hearing has reopened a critical debate on the balance between the state's power to combat economic crime and the individual's fundamental rights, placing the ED's expansive authority and its practical application under a renewed judicial microscope.

---

The Heart of the Matter: Reviewing the Vijay Madanlal Verdict

The current proceedings are centered on a batch of review petitions challenging the 2022 verdict that affirmed the constitutional validity of several contentious PMLA provisions. That judgment had validated, among other things, the ED's powers of arrest, search, and seizure; the stringent twin conditions for bail under Section 45; and the practice of not mandatorily supplying the Enforcement Case Information Report (ECIR) to the accused. The decision was widely seen as a major endorsement of the agency's powers, significantly altering the landscape of criminal procedure in financial crime cases.

Representing the Union government and the ED, Additional Solicitor General (ASG) S.V. Raju mounted a strong preliminary objection, arguing that the review petitions were not maintainable. He characterized them as "disguised appeals," asserting that they did not meet the limited grounds for a review, such as an error apparent on the face of the record. The ASG contended that "influential crooks" were exploiting the legal process through multiple applications to stymie investigations, forcing ED officers to spend more time in court than on probes. He further defended the agency's actions by highlighting the challenges posed when high-profile accused individuals flee to foreign jurisdictions like the Cayman Islands, effectively handicapping the investigation.

Judicial Scrutiny on Conviction Rates and Accountability

The bench, however, was not swayed by these arguments and pivoted the discussion towards the agency's performance and accountability. Justice Ujjal Bhuyan pointedly questioned the ED's track record, highlighting a stark and concerning statistic.

"You can't act like a crook, you have to act within the four corners of the law," Justice Bhuyan stated. "I observed in one of my judgments that ED has registered around 5,000 ECIRs in the past five years but the conviction rate is less than 10 per cent. We are also concerned about ED’s image. After 5–6 years of custody, if people are acquitted, who takes responsibility?”

This line of questioning cuts to the core of concerns voiced by the legal and civil rights community. The PMLA's stringent bail conditions often lead to prolonged pre-trial incarceration. Justice Bhuyan's query underscores the grave injustice faced by individuals who are eventually acquitted after spending years in custody, with no institutional mechanism to hold the agency accountable for what may amount to wrongful prosecution. The low conviction rate, when juxtaposed with the high number of registered cases and arrests, raises serious questions about whether the coercive powers of the PMLA are being used judiciously or as a tool of harassment pending trial.

A Pattern of Judicial Concern: Federalism and Overreach

This is not the first instance of the Supreme Court expressing strong reservations about the ED's conduct. In May of this year, a bench led by Chief Justice of India D.Y. Chandrachud (the provided source incorrectly names B.R. Gavai as the CJI, but the context points to a bench including him) had censured the ED in the Tamil Nadu State Marketing Corporation (TASMAC) 'liquor scam' case.

"The ED is crossing all limits… you are totally violating the federal structure of the country," the apex court had remarked, questioning the agency's jurisdiction and actions in a state governed by an opposition party. These comments, made in a separate context, echo a broader anxiety about the ED's role potentially becoming politicized and its investigations encroaching upon the domain of state police forces, thereby upsetting India's delicate constitutional balance.

The current bench's comments, therefore, are not an isolated outburst but part of a developing pattern of judicial oversight aimed at reining in an agency perceived by many as having unchecked power.

Legal and Practice Implications for Counsel

The outcome of these review hearings, which are set to continue, will have profound implications for legal practitioners, particularly those in white-collar and criminal defense.

1. Potential Re-evaluation of PMLA Powers: While a review has a narrow scope, the Court's pointed questions suggest a willingness to examine the practical consequences of the Vijay Madanlal judgment. Any modification, clarification, or even strong obiter dicta on the application of PMLA provisions could provide fresh grounds for challenging ED actions in lower courts.

2. Focus on Procedural Fairness: The bench's emphasis on acting "within the four corners of the law" reinforces the importance of procedural arguments. Defence counsel may find greater traction in challenging the ED on procedural lapses, non-compliance with statutory safeguards, and the basis for initiating an ECIR.

3. Accountability as a Defence Argument: Justice Bhuyan’s query about "who takes responsibility" for acquittals after long detentions can be leveraged in bail arguments. Counsel can argue that the high probability of eventual acquittal, coupled with the immense personal and professional cost of pre-trial detention, weighs in favour of granting bail.

4. Federalism and Jurisdiction: The Court's previous remarks on federalism provide a potent argument for challenging the ED's jurisdiction, especially in cases where the predicate offence is being investigated by state police and there is no clear inter-state or international money laundering trail.

As the Supreme Court continues to hear the matter, the legal fraternity watches with bated breath. The bench's critical stance signals that while the fight against money laundering is crucial, it cannot come at the cost of due process, personal liberty, and the fundamental principle that an investigative agency of the state must remain a servant of the law, not its master.