The Enforcement Case Information Report (ECIR)

The PMLA is considered to be an important tool to combat financial crimes in India. The major power to investigate and prosecute the offenses under the Act has been given to the Enforcement Directorate (ED). Like any other law, PMLA is not free from criticism. The major criticism is that it is considered to be a weapon in the hands of the government to harass people for various reasons such as stringent bail procedure, the burden of proof on the accused, not informing grounds of arrest to the accused, etc. Since its enforcement, the Act has been amended quite many times and the recent amendment was in 2019 but the Act has failed to provide straightforward answers to many critical issues which led to over 200 petitions piled up in the Supreme Court of India (SC). The Court merged these petitions and dealt with issues ranging from the scope of money laundering to the bail procedure laid down u/s. 45 of the Act. Though the Act attracts a lot of criticism on various issues, this blog will only examine the status and scope of the Enforcement Case Information Report (ECIR).

PMLA: Backdrop

The Prevention of Money Laundering Act, 2002¹ (PMLA) received the President’s assent on 17th January 2003 but came into force on July 1st, 2005 intending to prevent money laundering and to provide for confiscation of property derived from. There has been constant global effort to combat money laundering and India being part of such efforts, has to conform to international conventions. The UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances adopted in Vienna in the year 1988 (Vienna Convention) provides for comprehensive measures against drug trafficking including provisions against money laundering.² It provides for international cooperation and India being a signatory has to adhere to the provisions. Afterward, in the year 1989 at the G-7 summit in Paris, the Financial Action Task Force (FATF) was established to examine and develop measures to combat money laundering. Later, FATF expanded its scope to also combat terrorist financing.³ Also in the year 2002, the UN Convention against Transnational Organized Crime⁴ (Palermo Convention) was adopted to fight against transnational organized crime and urged the states that ratified the convention to take measures against such crimes and adopt new frameworks in their domestic jurisdiction. India also ratified this convention and thus, PMLA was a cumulative result of all these signed instruments.

ECIR ≠ FIR

The ED registers an ECIR in cases under PMLA which is similar to FIR (First Information Report) registered in criminal cases. However, it is mandatory under CRPC⁵ to provide a copy of FIR to the accused whereas ECIR is not mandatory to be shared with the accused on the ground that it is an internal document as ECIR might contain some details of the material seized by the concerned authority and if revealed during the stage of investigation/inquiry may impact the outcome.⁶ Another notable point of the Act is that the ED has the power to arrest a person based on ECIR without informing him of the grounds of his arrest in writing. This power makes it difficult for an individual to seek bail without knowing the charges against him.⁷

In the case of Vijay Madanlal Choudhary v Union of India,⁸ an issue was raised- whether it is necessary to furnish a copy of ECIR to the person concerned apprehending arrest or at least after his arrest. The Supreme Court discussed the question in detail in light of A.21 & 22⁹ and held that the supply of ECIR in every case to the person concerned is not mandatory and if in the case made mandatory then it will defeat the purpose of the Act. However as per S.19 of the Act¹⁰ while arresting an individual, ED is law bound to inform the grounds of arrest. It also observed that ECIR cannot be equated with an FIR and thus, non-supply of ECIR is not a violation of constitutional rights.

Implications

The registration of ECIR and supply of ECIR to the accused is not mandatory as observed by the SC. This observation might have some serious implications as not having a copy of ECIR will make it difficult for an individual to prepare for his bail as well as to apply for anticipatory bail u/s 438 of CRPC. Most importantly, the remedy of quashing the proceedings available u/s 482¹¹ cannot be availed by the individual in case ECIR is not registered.¹²

However, the authority is duty bound to inform the grounds of arrest as per S.19 of the Act but since the copy of ECIR is not provided and relying on verbal communication of the grounds of arrest violates Art. 22¹³ and makes it difficult for an arrested individual to apply for bail and also fulfill twin conditions¹⁴ of hearing the prosecution as well as proving innocence. In the case of Nikesh Tarachand Shah v. Union of India,¹⁵ the Supreme Court completely invalidated S.45 of the Act on the grounds of violation of Arts. 14 & 15 of the Constitution of India, but later on the government re-enforced the provision with twin conditions- opportunity to the prosecution of being heard and proving innocence by the accused.

Therefore, non-mandating to register ECIR and consequently, not providing a copy to the accused can have damaging after-effects on the investigation process as well as the accused and overall can hinder the pursuit of justice. It may lead to a lack of proper documentation, delay in initiating legal action, and difficulty in gathering evidence. Additionally, it may result in the authorities not being held accountable for their action, if the power is misused. Furthermore, it can undermine public trust in the legal system. Moreover, not giving a copy of ECIR to the accused or verbally communicating the grounds of arrest is a potential violation of their rights to access information that is vital for their defense. Transparency and fairness in the legal process is the cardinal principle of criminal jurisprudence which needs to be adhered to in all circumstances.

Conclusion

Financial crimes are one of the biggest problems in the Indian Economy. The nation has witnessed some biggest scams in global history such as – the 2G Scam, the Punjab National Bank fraud case, the Commonwealth Games scam, the Colgate scam, the Satyam case, and many more. Besides this, technological advancement has added to this cause. The newer versions of transactions through online platforms, and investment in cryptocurrencies have made it urgent for the government to overhaul the act in light of future happenings.

The primary objective of the Act was to combat money laundering and track down the proceeds of crime.¹⁶ While keeping this in mind, the legislature framed the law but it turned out not to be a comprehensive law and left most of the provisions for interpretation by the courts. In the Judgment of Vijay Madanlal, the Court has settled the law on various issues and made a decent attempt to balance the rights of citizens guaranteed under the Constitution and the duty of the state to conform to international laws.

However, the SC has admitted the review petition against the judgment on two issues: providing a copy of ECIR to the accused and burden of proof reversal which will be heard in open court.¹⁷

This article is authored by Uniqua Singh, a Ph.D. Student from IIULER, Goa.