SUPREME COURT RULING ON ED (Syllabus: GS Paper 2 – Polity)

Context: The Supreme Court ruled that the Directorate of Enforcement (ED) cannot arbitrarily exercise the power to arrest under the Prevention of Money Laundering Act (PMLA). The court emphasized that arrests must not be based on the "whims and fancies" of ED officers.

Supreme Court observation on ED arrest:

• Inconsistent Arrest Policies: The court wondered if the ED even had a consistent, uniform, and “one-rule-for-all” policy on when they should arrest people.

o It said the ED’s power to arrest must be based on objective and fair consideration of material against a person.

• Conditions for Arrest: Under the PMLA, ED officers can arrest a person if they have reasons to believe, based on the material in their possession, that the individual is guilty.
• Judicial Concern: A Bench of Justices in a judgment, said the power of arrest given to ED officers under Section 19 (1) of the PMLA was drastic and ran the risk of violating the right to life and liberty under Article 21 of the Constitution.
• Subjective vs. Objective Opinion: Highlighting that PMLA allowed arrests on the subjective opinion of ED officers, the court said an officer’s “reasons to believe” that a person was guilty and deserved arrest should not be based on mere suspicion.
• Difference Between Suspicion and Belief: “Suspicion requires a lower degree of satisfaction, and does not amount to belief. 

o Belief is beyond speculation or doubt… Existence and validity of the ‘reasons to believe’ goes to the root of the power to arrest. 

o The subjective opinion of the arresting officer must be founded and based upon fair and objective consideration of the material, as available with them on the date of arrest.”

Prevention of Money Laundering Act (PMLA)

• About: Money laundering is the process of hiding the source of money obtained from illegal sources and converting it to a clean source, for the purpose of avoiding prosecution, conviction, and confiscation of the criminal funds.
• Aim: To prevent money-laundering
• To provide for confiscation of property derived from or involved in money-laundering
• The Department of Revenue within the Ministry of Finance oversees the investigation of money laundering offenses under the PMLA through the Enforcement Directorate (ED).