PMLA 5/8 - Oversight

“Quis custodiet ipsos custodes?”

– Satire VI, 347-348

In any constitutional democracy, especially one as large and diverse as India, enforcement agencies that wield coercive powers must be subject to independent oversight – both parliamentary and administrative. Yet, in the case of the Pevention of Money Laundering Act, 2002 (PMLA), there is virtually no external check. In this chapter, we review the common checks and balances claimed for the PMLA, and the ways they are sidestepped.

 

1. “Any attachment under the Prevention of Money Laundering Act, 2002 (PMLA) needs to be confirmed by the Adjudicating Authority (AA). The AA is a quasi-judicial forum and hence impartial by nature.”

Section 6 of the PMLA envisages that the AA shall consist of a Chairperson and two members – at least one of whom will have experience in the field of law. In reality, the Adjudicating Authority consists of a single-member bench who is an IRS – not from the field of law.

Most tribunals in the country operate under the Ministry of Law, to prevent any conflict of interest. For example, the Income Tax Appellate Tribunal (ITAT) comes under the Ministry of Law. However, the AA takes administrative support from the Ministry of Finance – the same as the ED. This is not just oversight – it’s institutional incest.

A Right to Information request revealed that only 2.1% of 1,518 Provisional Attachment Orders filed by the ED have been struck down by the AA. This is not “independent application of mind.” This is rubber-stamp adjudication. And the consequences are dire – properties are seized, bank accounts are frozen, businesses collapse – all before a court trial even begins.

The Supreme Court, in cases like Union of India v. R. Gandhi and Swiss Ribbons v. Union of India, has made it abundantly clear: adjudicatory bodies must not be under the administrative thumb of the ministries that appear before them.

The Supreme Court warned in L. Chandra Kumar v. Union of India (1997), judicial independence is not just a matter of structure – it’s about function. Tribunals, especially those dealing with life-altering powers like asset seizure and forfeiture, must be both independent and perceived to be independent.

Telangana High Court observed in VANPIC Ports Pvt. Ltd. v. ED, the AA often issues mechanical, copy-pasted orders, lifting language directly from the ED’s “reasons to believe” and reproducing them word-for-word in its Show Cause Notice and attachment confirmation. In plain English: the ED writes the script, and the Adjudicating Authority reads it out loud.

Article 50 of the Constitution, part of the Directive Principles of State Policy, mandates that the judiciary be separated from the executive. Because justice demands independence. It demands that no one be a judge in their own cause — nemo judex in causa sua.

The Adjudicating Authority, as it currently exists, is not a safeguard. It’s a bureaucratic backroom posing as a courtroom.

 

2. “There’s an appellate. If someone is unhappy with the tribunal’s decision, they can always appeal to a higher forum. There’s the Appellate Tribunal after the AA, and the High Courts after that, and the Supreme Court after that.”

Judicial appeals are not a substitute for fairness. Appeals are expensive, time-consuming, and emotionally exhausting. The very fact that one has to appeal to get a fair hearing is the problem. If the lower-level adjudication is biased or compromised, the damage is already done – especially when businesses are shut down, assets are seized, and reputations are destroyed in the meantime. Oversight that arrives only after injustice is not oversight. It is eulogy.

The damage here isn't just legal. It's moral. When business owners and professionals see their properties taken, not after a fair trial, but through an administrative order issued by someone who isn’t even required to have legal training – faith in the system crumbles. We don't need more layers of appeal. We need first-instance fairness.

And perhaps most importantly, we need to remember that a truly democratic state doesn't just prosecute crime – it protects its citizens from abuse of power.

 

3. Press Releases by the ED

The illusion of judicial oversight is further shattered when one examines the ED’s conduct outside the courtroom. The ED routinely issues press releases naming accused persons and alleging money laundering even before filing prosecution complaints (chargesheets). Meaning – the ED makes a public declaration of guilt before an investigation. A declaration of arrest is also a declaration of success – before any trial has even begun.

This openly prejudices the courts, violates the principle of presumption of innocence (a bedrock of Article 21, Constitution of India), and constitutes potential criminal contempt under Section 2(c) of the Contempt of Courts Act, 1971.

In Re: P.C. Sen (1969), the Supreme Court held that prejudicial media commentary can constitute contempt of court.

Yet, no restraint is visible when the ED publicly narrates cases like completed stories, pre-empting judicial findings. The watchdog has become the storyteller – and the verdict writer. ED trials often end only in increased TRPs, while the legal trial never begins.

 

4. Summons

Another method the ED uses to circumvent fairness is through abusive issuance of summons. Summons under Section 50 of PMLA (invoking powers of a civil court under the CPC) are issued without reasonable notice. In multiple cases, notices were served after the time of appearance had already lapsed. Summons are issued across city and state borders, violating Order V, Rule 19A of the CPC, which limits such practices to prevent harassment. The ED hence, routinely operates outside of its jurisdiction.

The result: the accused are forced into logistical impossibilities, made to travel across states at short notice, and labelled non-cooperative when they fail. "Due process," in this system, has been reduced to a theatrical formalism.

 

5. Vigilance

Unlike the CBI, which is at least notionally under the supervision of the Central Vigilance Commission (CVC), the ED enjoys a freedom from accountability that is unmatched. It functions under the Ministry of Finance, and yet none of its procedural norms, internal audits, or patterns of investigation are subject to regular legislative review. No parliamentary committee examines the ED’s performance, misuse of powers, pendency of cases, conviction rates, or complaints from citizens. It is a black box wrapped in impunity.

We now turn to the internal vigilance mechanism – a system so flawed that it would be ridiculous if it weren’t so dangerous. In most government departments, vigilance is overseen by a Chief Vigilance Officer (CVO) – typically operating independent of the agency, tasked with reviewing misconduct, procedural violations, and abuse of power. But in the ED, the CVO is the Director of Enforcement himself.

Let that sink in: the chief of the ED is also in charge of investigating complaints against the ED. In other words, the watchdog reports to itself.

This is not just an administrative quirk – it is a violation of every known principle of natural justice, constitutional governance, and basic common sense. It undermines the very idea of vigilance, which is built on independence, insulation, and the ability to scrutinize without fear or favor.

A system where the ED is both the actor and the auditor creates a total collapse of internal accountability. Complaints from citizens, lawyers, and even other departments about procedural abuse – such as misuse of arrest powers, failure to provide ECIRs, or arbitrary attachment of property – are either ignored or dismissed summarily. There is no credible investigation, no transparency, and certainly no action.

When the person being abused by the system asks for redress, the system responds with silence. Because the judiciary will take months. The tribunal is toothless. The High Court is slow. The CVO? He’s the one who signed the arrest warrant.

What we’re looking at here is not just a lack of vigilance – it’s a deliberate design to avoid it. A system where the ED is accountable to no one but itself, and where the government has no institutional interest in reform, because the ED serves political ends far more effectively than it serves public justice.

In any healthy democracy, a law with such extraordinary powers — powers to arrest, to seize, to interrogate — must be accompanied by extraordinary safeguards. But here, we have the opposite: extraordinary powers and no safeguards. The fox is guarding the henhouse and the farmer has stopped asking questions. This is not how oversight works. This is how unconstitutional fiefdoms are born.

 

Not a single detailed report on ED’s performance has ever been tabled before Parliament. No whitepaper. No independent audit. What PMLA offers today is not real judicial or parliamentary oversight. It is a self-reinforcing administrative machinery, disguised in the trappings of law. The ED investigates. The ED's colleague adjudicates. The ED narrates guilt to the media. And when challenged, the ED says: Appeal if you dare.

Until there is first-instance fairness, until investigative and adjudicatory functions are separated, and until the courts demand and enforce real accountability, the PMLA will not just punish the guilty – it will destroy faith in justice itself.