40 Convictions in 5,000 Money Laundering Cases, Court Observes

The Supreme Court of India Points to the Enforcement Directorate’s Inefficiency

Newsreel Asia Insight #304
August 8, 2024

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The Supreme Court of India has made critical observations regarding the Enforcement Directorate (ED) while hearing a matter related to the Prevention of Money Laundering Act (PMLA). The court noted the inefficiency of the agency, pointing out the disproportionally low conviction rate, with only 40 convictions in 5,000 registered cases. Could this inefficiency stem from the ED’s alleged politicisation and weaponisation by the ruling party, creating a bureaucracy where loyalty overshadows skill and professionalism?

The Court made the observations during the bail hearing of Sunil Kumar Aggarwal, a businessman from Chhattisgarh arrested under the PMLA for alleged illegal activities related to coal transportation, as reported by NDTV. The Court’s remarks about the inefficiency of the ED should raise broader concerns.

In March 2023, opposition parties led by the Indian National Congress filed a joint petition in the Supreme Court against the central government’s “arbitrary use” of agencies like the ED and the Central Bureau of Investigation (CBI), as reported by The Hindu at the time. The petition challenges the government’s actions of arresting and initiating criminal proceedings against opposition leaders who express dissent or disagree with the government.

In May 2024, Special Judge Vishal Gogne of the Rouse Avenue Courts stated, “If there are any lessons to be learned from history, it would be observed that ‘strong’ leaders, laws, and agencies generally come back to bite the very citizens they vow to protect. After the masculinity of the law has been expressed against the stated targets, such laws are invariably alleged to have been employed against average citizens,” as reported by The Indian Express.

The principle of impartiality is essential to effective governance. As political appointees or those aligned with the ruling party increasingly populate these agencies, decisions are more likely to be driven by party agendas rather than the rule of law or public interest. This can lead to a culture of compliance where bureaucrats prioritise party loyalty over professional ethics, fearing repercussions like demotion or dismissal for non-compliance. Consequently, this environment stifles dissent and critical thinking, which are crucial for healthy administrative practices.

The efficiency of an economy heavily depends on the integrity and effectiveness of its regulatory and enforcement bodies. Without these, businesses might see a higher risk of arbitrary regulatory actions and decide against investing.

Furthermore, when enforcement agencies focus on prosecuting political targets rather than genuine economic crimes, significant cases involving large-scale economic offenses may be neglected or mishandled—potentially leading to economic disruptions, as highlighted by the escape of economic offenders like Nirav Modi, Vijay Mallya and Mehul Choksi.

The cumulative impact of a politicised bureaucracy is a decline in the quality of governance, rendering the bureaucracy less capable of meeting the actual needs of the state and its citizens. And this erosion of capabilities can have long-term detrimental effects on governance, economic stability and the rule of law, ultimately weakening the state’s ability to function effectively.