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loyallogic · 7 years ago

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Organisational setup and functions of Enforcement Directorate

In this article, Himanshu Juneja discusses the organisational setup and functions of Enforcement Directorate.

About Enforcement Directorate

It is an agency which enforces laws related to the economy and fights with the problems related to economic crimes in India. It is also an Economic intelligence agency which works for the enforcement of the provisions of two main laws for the economic development of the country. Two main laws are as follows:

Foreign Exchange Management Act (FEMA), 1999,

Prevention of Money Laundering Act (PMLA), 2002.

Headquarter and other offices

This agency is a part of the Revenue Department, Financial Ministry.

Its HQ is situated at New Delhi which is headed by the Director of Enforcement.

five regional offices are in Mumbai, Chennai, Kolkata, Chandigarh, and Delhi. These offices are headed by special Directors of Enforcement.

its zonal offices are in Ahmedabad, Bangalore, Chandigarh, Delhi, Lucknow, Mumbai, Patna, Srinagar, Panaji, Guwahati, Hyderabad, Kochi, Chennai, Jaipur, Jalandhar, and Kolkata. These offices are headed by Joint Director.

Its sub-zonal offices are in Bhuvneshwar, Kozhikode, Indore, Madurai, Nagpur, Surat, Allahabad, Raipur, Ranchi, Dehradun, and Shimla. These offices are headed by Deputy Director.

Recruitment of the officers is directly and by drawing officers from other investigation agencies. So, it comprises officers of IRS(Indian Revenue Services), IPS(Indian Police Services) and IAS(Indian Administrative Services) such as Income Tax officer, Excise officer, Customs officer, and police.

History

Its history can be traced from 1956 when on the 1st May of 1956, a unit (Enforcement unit) was formed in Economic Affairs Department. It was formed for the control some issues relating to the violation of the provisions of FERA (Foreign Exchange Regulation Act),1947. This Enforcement unit was renamed as “Enforcement Directorate” in 1957 and the administrative control was transferred to Revenue department from Economic Department in 1960. Later the FERA Act was repealed after 1977 and a new Act was passed named FEMA(Foreign Exchange Management Act),1999 which came into effect from 1st June of 2000. Further the Prevention of Money Laundering Act, 2002 was passed by the parliament to prevent and control money laundering in India and to deal with such issues. Later the responsibility for the enforcement of provisions of both acts was given to the Enforcement Directorate on 1st July of 2005 and since today it is working for the enforcement of the provisions of both acts.

Characteristics of Enforcement Directorate

It is an investigation agency which investigates cases related to finance.

It is a part of Revenue Department of Finance ministry.

It mainly deals with two laws which are, FEMA(Foreign Exchange Management Act), and PMLA(Prevention of Money Laundering Act).

It works for the enforcement of provisions of these two acts.

It has its own courts for trial and also its own appellate tribunals.

It investigates and files suits in courts against those who violate the rules of FEMA and PMLA.

It resolves the matters or issues by adjudication and has provision for appeal in both acts.

It works to achieve the objects of both acts.

Way of Working: Modus Operandi

Work with upgraded systems and methods to improve work performance and remove outdated systems and methods.

The team working for better communication with each other.

The process of learning from Global best practices to sharpen their investigation skills.

Delegate tasks and strictly follow rules to deal with issues to get excellence in its working.

Deals with all laws for which they are responsible and try to achieve the better result.

Fair and reasonable investigation in all cases while investigating.

It collects the facts and reveals the truth without any fear.

Takes right decision without favoring anyone.

Fair actions, without bias.

Does not allow the abuse of power.

The team is responsible for the consequences of their actions and answerable for an outcome.

Work with the discipline to achieve their goals.

How to report matter to Enforcement Directorate

Can a person directly approach the Enforcement Directorate?

A person cannot directly approach Enforcement Directorate. But complaints relating to illegalities in foreign exchange and money laundering may be sent to the Enforcement Directorate at the following address:

Director,

Enforcement Directorate,

6th Floor, Lok Nayak Bhawan,

Khan Market,

New Delhi- 110003

Website: http://finmin.nic.in

An application can also be filed with the court to refer the matter to Enforcement Directorate and to investigate the matter by Enforcement Directorate agency.

Complaint to any other agency : If someone wants to report a matter related to the violation of FEMA or PMLA act, he has to register a complaint with any other agency or Police than ED. PMLA contains 157 sections regarding the offences related to the money laundering. These offences are called schedules or predicate offences. If such registered offence is one of any schedules or predicate offences than Enforcement Directorate can take action against such person. Officers can investigate, search and confiscate the property of such person.

Does Enforcement Directorate take action, suo motu or on a complaint?

ED can not take an action suo motu. One has to complaint to any other agency or Police first and then ED will investigate the matter and will identify the accused. Agency will investigate the matter and may attach the property of an accused person and also make an arrest and start proceeding with the violation of the provisions of FEMA and PMLA act. The matter will be resolved by the way of adjudication by courts or PMLA court.

Jurisdiction

Both FEMA or PMLA applies to the whole India including Jammu and Kashmir. So, the Enforcement Directorate can take action against any person on which this act applies. Cases under FEMA may lie in civil courts where PMLA cases will lie in criminal courts.

The agency has jurisdiction over a person or any other legal entity who commits a crime whether he is a politician or a businessman. All the public servants come under the jurisdiction of the agency if they are involved in any offence related to the money laundering.

Job opportunities for Law Graduates in Enforcement Directorate

Enforcement Directorate is increasing his offices in many other states and cities. Many zonal and sub-zonal offices have opened by the order of Central Govt and soon they will function properly. So, there is a lot of opportunities for Law Graduates. It may soon hire some legal consultant and legal advisors.

Law Graduates can get more opportunities as a legal advisor, a judge in adjudication authorities and in appellate tribunals of the agency.

Procedure followed by Enforcement Directorate for investigation

Search of place and person

After the registration of complaint to an agency or police for schedules or predicate offence under the PMLA, first of all, they have to report magistrate under section 157 of the Code of Criminal Procedure. After the approval of Magistrate, the officers may search any place, building, vehicle, and vessel or break down any locker, safe or almirah or any other receptacle for exercising his power. They are empowered to search a Person if they have reason to believe that he may be involved in any crime.

Seize property

Officers can seize any property if they have reason to believe that such property has any relation to the money laundering. Officers will follow the Code of Criminal Procedure, 1973 while confiscating or attaching any property. Section 17 and 18 of PMLA has provisions for the search and seizure of any property or person.

Section 19 of the PMLA, empowers the officers to arrest a person if they have reason to believe that such person is involved in a crime related to money laundering.

Investigation powers of Enforcement Directorate officers

Section 36 and 37 of FEMA deals with the establishment of this agency and empowers its officers to investigate the matters which contravene the provisions of this act and any other rule or order passed by the authority by exercising of the power given under this act.

Power to investigate

The officers below the rank of assistant directors are not allowed to investigate the matter and all other upper-rank officers are allowed to investigate including director of Enforcement.

Investigate any person or place

An officer of Enforcement Directorate is empowered to investigate any place, building, vehicle or any other area to find evidence for the further proceeding. He can break down any locker or almirah to find evidence and take an oath of any person.

Power to arrest a person

After investigation or at any time of investigation if they found any person guilty of a crime related to money laundering, they have the power to arrest such person and can start a legal proceeding against such person in court.

What actions are taken on the report prepared by Enforcement Directorate officer

After the investigation of the matter, officers make a report of the matter which includes the detail of the report, investigation done by officer, places, and persons investigated, attachment report of the attached property, report of an arrested person.

After the preparation of the report matter may be adjudicated in ED’s own adjudicating authority or the case may be referred to CBI court or Apex court also. The aggrieved party of the case may go to the higher court for the appeal. The agency has its own appellate tribunal for the purpose to take an appeal.

The court on the decision of the matter may impose fine thrice of the sum involved in case of contravention of the provisions of the FEMA and may punish with rigorous imprisonment not exceeding seven years.

Functions and powers of the Agency

This investigation agency works for the enforcement of provisions of the FEMA and PMLA. It is working to achieve the objects of these acts and impose penalties on those who violate the provisions of these acts.

Some basic functions and powers are to investigate the matter, search any suspected place or person, confiscate any property purchased from laundered money, arrest any accused or person relates to such crime, file suit against accused person and some other function of its adjudication authorities and appellate authorities, such as to decide any case by taking evidence, power to penalize victim with imprisonment and fine. Some functions, procedure, and powers given in dealing acts are such as.

Investigate the contravention of FEMA

The investigation agency and its officers investigate the contravention of the provisions of Foreign Exchange Management Act,1999. If an individual or any other person violates the provisions of FEMA, officers deal with such contravention of any provision by the way of adjudication. Enforcement Directorate designates such adjudicative authority which is empowered to adjudicate and impose penalty up to thrice of the sum involved.

Investigate the offences under PMLA

The offences covered under this act are of criminal nature. The agency investigates the offences related to money laundering covered under any section of the Prevention of Money Laundering Act, 2002. Under section 5 of this act, agency and its officers are empowered to take action of attachment and confiscation of the property if they have reason to believe that such property is derived from laundered money. Further, they are also empowered to prosecute the person involved in the crime of money laundering. The Involved person may be punished with a term not less than 3 years and may extend to 7 years and with fine which may extend to rs. 5 lac. The punishment may be rigorous.

Adjudication of show cause notice under FERA

That act(Foreign Exchange Regulation Act) was passed by Indian Parliament in 1973 and came into force from 1st January 1974 and was repealed and replaced by the Foreign Exchange Management Act, 1999. It was repealed by the Govt. of Atal Bihari Vajpayee in 1998. FEMA adjudicates the show cause notices issued by the FERA authorities to many MNCs and to others up to 31-05-2005 for the alleged contravention of this act. The adjudication authorities may impose penalties.

Sponsor cases under COFEPOSA in regard to contravention of FEMA

COFEPOSA(conservation of foreign exchange and prevention of smuggling activities) act was passed in 1974 during the administration of Indira Gandhi. This act was passed to retain foreign currency in India and to prevent smuggling activities. Agency act as sponsor to cases of preventive detention under COFEPOSA in regard to contravention of the provisions of Foreign Exchange Management Act, 1999.

Cooperation with foreign countries to prevent money laundering crimes

According to section 56 of Prevention of Money Laundering Act, 2002, Central Govt. may enter into an agreement with any foreign country for enforcing the provisions of this act. Hence, agency cooperates with other foreign countries in matters relating to money laundering and restitution of assets. Agency can share information to prevent any crime related to money laundering and seek cooperation in such matters.

Case study

Jagdish Bhola Drug Racket Case

A former DSP of Punjab was arrested by Punjab police while raided at his home. Fatehgarh Police found drugs of rs. 100 crore at his residence in Mohali. A Deputy Director(Niranjan) of ED filed a case against him with many other politicians and NRI who supported him in this racket.

Niranjan has to face so many problems including his transfer from Jalandhar to Kolkata which was cancelled by the Punjab and Haryana High Court. He did plan not only to investigate in that matter but also to attach property of Rs. 1000 crore or more of many politicians of Punjab. He did all as an investigation officer of ED but later on the decision of the Court, his duty was changed to as a supervisor of the case where he could only supervise the case instead of investigating the case. The case is still going on and many other politicians with Bhola are under police investigation. Some are in Judicial custody while many in jail also. The matter is related to a drug racket of Rs. 6000 crore or more.

Vijay Mallya case

Vijay Mallya was a big businessman and also a politician of India as a member of Parliament running many of companies including airline service and liquor business in India. He took a loan of Rs. 9000 crore from many banks and did not return. Later he leaves India and he has declared a defaulter and now Indian Govt. is demanding him back from London court or Govt.

Enforcement Directorate has also filed a case against Mallya charging him with money laundering under PMLA. ED registered a case on the basis of CBI probe which alleged him and A. Raghunathan(CFO of Kingfisher Airlines) with a default of 900 crores with IDBI Bank officials.

Conclusion

Directorate Enforcement is a department of our Govt. which is working to develop our nation. As we have discussed its structure and working with its functions and powers, now we can say that it is working with some specific objects. This is Govt supporting agency to control and prevent money laundering in India. It is working with a good and clear vision to serve the nation. Many officers from many different departments work to support this agency. They investigate and resolve the matter with the process of adjudication and also perform many other functions by using their power given to them by an agency. It is functioning to strengthen our economy. It punishes fraud persons involving in money laundering and those who contravene the provisions of FEMA and PMLA. Its work for controlling and preventing money laundering and as a guardian of two important laws or acts will make India better and develop our economy.

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juudgeblog · 7 years ago

Text

Organisational setup and functions of Enforcement Directorate

In this article, Himanshu Juneja discusses the organisational setup and functions of Enforcement Directorate.

About Enforcement Directorate

Foreign Exchange Management Act (FEMA), 1999,

Prevention of Money Laundering Act (PMLA), 2002.

Headquarter and other offices

This agency is a part of the Revenue Department, Financial Ministry.

Its HQ is situated at New Delhi which is headed by the Director of Enforcement.

five regional offices are in Mumbai, Chennai, Kolkata, Chandigarh, and Delhi. These offices are headed by special Directors of Enforcement.

Its sub-zonal offices are in Bhuvneshwar, Kozhikode, Indore, Madurai, Nagpur, Surat, Allahabad, Raipur, Ranchi, Dehradun, and Shimla. These offices are headed by Deputy Director.

History

Characteristics of Enforcement Directorate

It is an investigation agency which investigates cases related to finance.

It is a part of Revenue Department of Finance ministry.

It mainly deals with two laws which are, FEMA(Foreign Exchange Management Act), and PMLA(Prevention of Money Laundering Act).

It works for the enforcement of provisions of these two acts.

It has its own courts for trial and also its own appellate tribunals.

It investigates and files suits in courts against those who violate the rules of FEMA and PMLA.

It resolves the matters or issues by adjudication and has provision for appeal in both acts.

It works to achieve the objects of both acts.

Way of Working: Modus Operandi

Work with upgraded systems and methods to improve work performance and remove outdated systems and methods.

The team working for better communication with each other.

The process of learning from Global best practices to sharpen their investigation skills.

Delegate tasks and strictly follow rules to deal with issues to get excellence in its working.

Deals with all laws for which they are responsible and try to achieve the better result.

Fair and reasonable investigation in all cases while investigating.

It collects the facts and reveals the truth without any fear.

Takes right decision without favoring anyone.

Fair actions, without bias.

Does not allow the abuse of power.

The team is responsible for the consequences of their actions and answerable for an outcome.

Work with the discipline to achieve their goals.

How to report matter to Enforcement Directorate

Can a person directly approach the Enforcement Directorate?

Director,

Enforcement Directorate,

6th Floor, Lok Nayak Bhawan,

Khan Market,

New Delhi- 110003

Website: http://finmin.nic.in

An application can also be filed with the court to refer the matter to Enforcement Directorate and to investigate the matter by Enforcement Directorate agency.

Does Enforcement Directorate take action, suo motu or on a complaint?

Jurisdiction

Job opportunities for Law Graduates in Enforcement Directorate

Law Graduates can get more opportunities as a legal advisor, a judge in adjudication authorities and in appellate tribunals of the agency.

Procedure followed by Enforcement Directorate for investigation

Search of place and person

Seize property

Section 19 of the PMLA, empowers the officers to arrest a person if they have reason to believe that such person is involved in a crime related to money laundering.

Investigation powers of Enforcement Directorate officers

Power to investigate

The officers below the rank of assistant directors are not allowed to investigate the matter and all other upper-rank officers are allowed to investigate including director of Enforcement.

Investigate any person or place

Power to arrest a person

What actions are taken on the report prepared by Enforcement Directorate officer

Functions and powers of the Agency

Investigate the contravention of FEMA

Investigate the offences under PMLA

Adjudication of show cause notice under FERA

Sponsor cases under COFEPOSA in regard to contravention of FEMA

Cooperation with foreign countries to prevent money laundering crimes

Case study

Jagdish Bhola Drug Racket Case

Vijay Mallya case

Conclusion

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onlevelup01 · 6 years ago

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MUMBAI: Chartered accountants across the country have requested the Prime Minister’s office and the Finance Ministry to rein in tax officials who have been directed to take “all possible actions” to recover tax amid a shortfall in revenue collection.On March 26, the Central Board of Direct taxes (CBDT), the apex body, issued instructions to all principal chief income tax commissioners (CITs) across India to take “all possible action” immediately to boost the collection of direct taxes, including recovery of arrears.This kind of instruction causes a great deal of concern in the minds of tax payers as it is bound to create unrealistic pressure on tax officers, particularly days before the end of the financial year, said a press statement jointly issued by the Bombay Chartered Accountants’ Society, Chartered Accountants Association Ahmedabad, Chartered Accountants Association Surat, Karnataka State Chartered Accountants’ Association and Lucknow Chartered Accountants’ Society.“Such a situation would be in sharp contrast to the stated motto of the government of ushering in a tax friendly regime,” said the communique which was signed by Sunil Gabhawalla (Mumbai), Chintan M Doshi (Ahmedabad), Rashesh Shah (Surat), Raghavendra Shetty (Karnataka) and R.L.Bajpai (Lucknow).According to the release there are thousands of cases across India where demands may have been raised due to mismatch in the credit of TDS as per form 26AS and as per income tax portal for various valid reasons; the tax demand could also be because of pending disposable of rectification application for giving effect to orders to Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal (TAT). Many a time the tax demand is seen pending due to non-intimation of manual rectification carried out by assessing officer. 68640430 In a large number of cases the demands are disputed in appeal and the concerned tax payers have a high chance of succeeding in the appeals, said the associations who have appealed to the PMO and the MoF to instruct CBDT and ground level officials of the I-T department to refrain from taking actions which are not in the interest of the tax paying community. The associations have pointed out that “if at all recovery measures are to be adopted, they should be done after following the due process of law.”The direct tax collection achieved is only 85.1% or Rs 10,21,251 crore against the budgeted target of Rs 12,00,000 crores, representing a shortfall of Rs. 1,78, 749 crore.As per the letter dated 26th March by CBDT member Neena Kumar to all the principle chief commissioners, direct tax collection indicates worsening trend of negative growth in regular collection at -6.9% as against -5.2% in the last week. The letter further states that this alarming situation requires immediate action.“The Board has discussed strategies through various communications with you and it was expected that by this time your strategies would have succeeded resulting into improved collections. However, the figures of collection give a different account…,” said the letter from the CBDT member. from Economic Times https://ift.tt/2UfPUzj

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legalseat · 7 years ago

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Corporatisation Prospects for Unregistered Entities: Amendment to Section 366 of the Companies Act, 2013

[Pammy Jaiswal is a Partner at Vinod Kothari and Company]

Background

By virtue of the enforcement notification of the Ministry of Corporate Affairs (‘MCA’) dated 5 July 2018, the proposed change under section 75 of the Companies (Amendment) Act, 2017 (‘Amendment Act’) relating to section 366 of the Companies Act, 2013 (‘Act, 2013’) has been notified with effect from 15 August 2018. Further, by way of its notification dated 5 July 2018, the MCA has also issued the Companies (Authorised to Register) Second Amendment Rules, 2018 (‘Amendment Rules’). The said Amendment Rules shall also come into force from 15 August 2018.

The section deals with registration of unregistered entities like partnership firms, limited liability partnerships (‘LLPs’), cooperative societies and such other entities as a company under the Act, 2013. The amendment paves way for such entities having two or more members to get themselves registered under the Act, 2013 either as a company limited by guarantee, company limited by shares or unlimited companies.

This post endeavours to briefly discuss the impact of the amendment to the section and also Amendment Rules.

Legal Aspects – Not a Transfer

Registration of unregistered entities under the Act, 2013 does not tantamount to transfer at all as the same take place as operation by law and is not inter-vivos between the parties. The said arrangement is not a transfer but a mere conversion wherein old entity is transformed into a new registered company under the Act, 2013.

Further, as per section 47 (xiii) of the Income Tax Act, 1961, the transfer of a capital asset or intangible asset in the form of a business by a firm to a company as a result of succession of the firm by a company shall not be treated as transfer at all. This is so long as certain prescribed conditions are complied with. This approach was followed by the Income Tax Appellate Tribunal, Ahmedabad in the case of Vishal Containers P. Ltd. v. Assessee.

No Stamp Duty Implication on Conversion

Stamp duty is payable on transfer of property or conveyance. Section 3 of the Indian Stamp Act, 1899 (‘Stamp Act’) spells out the applicability of the instruments chargeable with stamp duty. Further, section 2(14) of the Stamp Act defines an instrument as “every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded:”

Nowhere under the Stamp Act does it provides for payment of stamp duty on vesting of property. Various courts of law have also firmly taken the aforesaid view. Extracts of some of the cases are set below:

(i) In Vali Pattabhirama Rao v. Sri Ramanuja Ginning and Rice Factory (P) Ltd. AIR 1984 AP 176, the Court stated:

“The Division Bench of Andhra Pradesh High Court relying on Section 575 of the Companies Act, 1956 has held that if a partnership firm registered as a company, there was a statutory vesting including of all immovable property and no separate conveyance was required for the same;”

(ii) In Union of India v. Mahalaxmi Saw Mills P. Limited, the High Court of Delhi held:

“If no conveyance deed is required for vesting of a property from a partnership firm to a company, it could not be said that any transfer of the property takes place which would require levy of unearned increase;”

As a result of the aforesaid amendment, a partnership firm with even two persons can be converted into a company. This promotes corporatisation, particularly in case of a property-owning partnership. Section 368 of the Act, 2013 clearly states the following:

“All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, on such registration, pass to and vest in the company as incorporated under this Act for all the estate and interest of the company therein.”

[Emphasis supplied]

On reading of the aforesaid section it becomes clear and evident that the property comes into the company without any conveyance, and the company thereby becomes transferable by transfer of shares. Accordingly, there is no stamp duty at the time of conversion as there is vesting of property. The effect of the section is that there is an automatic vesting and divesting. The old entity is divested of the properties and the newly converted company is vested with the properties. The vesting being statutory, no registered instrument of transfer is necessary. Accordingly, one can expect increase in the corporatisation since the amendment shall give impetus to property owning partnership forms, LLPs, and other unregistered entities to embark upon incorporating companies under the Act, 2013.

The position would be different where the company incorporated had come into existence even while the firm existed and a separate agreement of transfer was entered into between the directors of the company and partners of the firm. Stewart & Co. Ltd. v. C. Machertech; AIR 1963 Cal 198 (DB).

Conclusion

While various changes have been brought by way of the Amendment Act, one of the important changes relates to section 366. By reducing the number from seven to two, the Amendment Act encourages the unregistered entities to register themselves as companies under the Act, 2013 with the same set of owners without the undue harassment of identifying and inducting new members in such unregistered entity. As a result of the change, one may find an increase in corporatisation which in turn promotes commercialisation and improved governance.

– Pammy Jaiswal

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