TMC's Account Freeze Is the Latest Test of the ED's Sweeping Powers

What Mamata Banerjee can now do is challenge the ED’s freeze specifically under the PMLA, writes Sneharshi Dasgupta.

What the Mamata Banerjee-led faction of the TMC can now do is challenge the ED’s freeze specifically under the PMLA, but the inherent problems and the draconian provisions within the Act cannot be fixed by the party.

(Photo: Kamran Akhter/The Quint)

Since 2021, the Enforcement Directorate (ED) has featured quite prominently in the press, albeit under not-so-favourable circumstances. The timing and case choices in Maharashtra, Delhi, Jharkhand, and, most recently, West Bengal have proven to be quite controversial. The investigating and detaining powers the ED enjoys under the Prevention of Money Laundering Act, 2002 (PMLA) have also been extensively discussed and critiqued.

What happens when a central agency, wielding considerable power with limited independent legal scrutiny, becomes a tool for pursuing an Opposition—especially regional leaders—that has lost political patronage and, with it, any certainty over its own finances? The issue, then, ceases to be one concerning political parties alone and transforms into one pertaining to the very legal architecture that empowers such selective enforcement, which effectively operates as an invisible baton.

The ED does not, however, randomly pick its cases. There is first a state-level complaint lodged, which is investigated by the state police, and then comes the ED on its chariot. The initial FIR is important because that is the predicate offence upon which the ED may choose to investigate an individual or an organisation.

After all, legally, money laundering is a secondary or derivative crime—proceeds from a primary crime that is laundered or routed through various companies.

The Chronology

The latest case against the All India Trinamool Congress (TMC), following its defeat in the West Bengal state elections on 4 May, is illustrative of this.

On 18 June, an FIR was lodged at the cybercrime police station of the Bidhannagar Police Commissionerate, alleging that the TMC party bank accounts held proceeds of crime, following a complaint by rebel TMC MLA Biswanath Das and nine other legislators aligned with the Ritabrata Banerjee-led faction. The former TMC treasurer and cabinet minister, Arup Biswas, also wrote to the party’s bank requesting that any debit transactions be frozen “to safeguard the funds of the organisation”. 

On 19 June, three HDFC Bank accounts of the TMC, with around Rs 440.42 crore, were frozen by the Bidhannagar police. The Mamata-led faction of the TMC, then, moved to the Calcutta High Court.

On 7 July, the ED steps into the picture and raids five locations associated with the TMC to investigate irregularities in party funds, including the premises of Carewell Aviation India Pvt Ltd, which had allegedly received around Rs 160 crore from TMC bank accounts between April 2023 and June 2026.

On 8 July, the ED ordered the freezing of three TMC bank accounts under Section 17(1-A) of the PMLA, alleging that around Rs 160 crore was routed through Carewell Aviation to buy an Embraer Legacy 600 jet and an AgustaWestland helicopter leased to the party. 

On 9 July, Justice Saugata Bhattacharyya of the Calcutta High Court bench heard TMC's petition challenging the earlier freeze of three bank accounts by the state police and passed an interim order appointing retired Justice Subrata Talukdar as special officer to supervise withdrawals strictly for day-to-day party running and legal expenses.

By 11 July, the freezes had widened. It was reported that at least a dozen party accounts holding close to Rs 1,000 crore were all frozen. Crucially, the three accounts the ED froze under the PMLA are the very same accounts at issue in the High Court petition. In other words, even after the 9 July HC order easing the police freeze, the party very likely still could not access the money, because the ED's separate freeze on those accounts stood.

The Burden of Proof

From a legal perspective, there is a significant distinction between probes of financial irregularities conducted by the state police and the ED. In the latter case, the ED operates under the PMLA. While it cited Section 17(1-A) of the PMLA to freeze the TMC bank accounts, it is Section 24 which is more concerning, as it shifts the burden of proof to the accused in question and not the investigative agency. 

• Section 17 gives the ED the power to do a search-and-seizure on the basis of information or evidence in their possession that suggests an individual or an organisation has committed any act which constitutes money-laundering.

• Sub-section 1-A allows the ED to freeze the property.

• And, based on Section 24, the ED can presume that such an act is indeed money-laundering based on evidence gathered, until and unless the accused can prove to the contrary.

However, under this broader Act, there must first be an original or predicate offence, which the FIR at the Bidhannagar Police Commissionerate serves as a basis for the ED to independently inquire into the matter.

The Supreme Court, in the Vijay Madanlal Choudhary v Union of India matter, reaffirmed the ED’s wide power of investigation and its capacity to arrest under the PMLA. The court, in its judgment, made it clear that ED searches are indeed different from ordinary criminal investigations, i.e., the host of procedural requirements and safeguards that apply to the police, under the Code of Criminal Procedure, 1973 (CrPC), are not relevant in the case of the ED. 

Furthermore, the court remarked that the ED is not required to provide an accused with the Enforcement Case Information Report (ECIR). The judgment treated it as an “internal document” as opposed to the money laundering equivalent of an FIR, a copy of which must be supplied to an accused under the CrPC.

This means ED is not legally obligated to share any of its findings until they are presented in front of an adjudicating authority or a court of law. In other words, there is no transparency if one is under an ED investigation, and since bail is not the norm under Section 45 of the PMLA, individuals inevitably spend time in jail. 

Satyendar Jain, Nawab Malik, V Senthil Balaji, Sanjay Singh, and Sanjay Raut are all among individuals belonging to Opposition parties who were investigated by the ED under PMLA and were incarcerated for anywhere between three and 18 months before being granted bail.

Does this mean India does not need a dedicated agency investigating serious financial crimes and money laundering? It would be simplistic to presume so and call for dismantling the ED, as serious financial crimes do happen. In fact, the ED’s modern form, alongside the PMLA, was enacted to implement India's commitments under UN anti-money-laundering resolutions, and its global standards were set by the inter-governmental Financial Action Task Force.

PMLA's Problems Can't Be Fixed by the Party

The problem, however, lies in the draconian provisions of the PMLA, which are effectively used against political opponents.

In 2019, the Lok Sabha passed a set of significant amendments to the PMLA by widening definitions of "proceeds of crime,” expanding what counts as money-laundering, and adding provisions on attachment and provisional retention of property, through the Finance Act, 2019, which was routed as a Money Bill. There are very specific definitions of what constitutes a Money Bill, and fitting the PMLA within it was read by the Opposition as an attack on the legislative process.

Furthermore, the Bill was not discussed in the Rajya Sabha as under Article 110 of the Constitution, a Money Bill can be introduced only in the Lok Sabha. The Opposition argued that the purpose of these backdoor amendments was to give more sweeping powers to the ED: to intimidate and imprison political opponents.

This tactic to use Central government agencies to threaten political opponents, or get them in line, is not entirely without precedents.

In the UPA governments, the Central Bureau of Investigation (CBI) was the preferred agency of choice to curb dissent, and it too had an abysmally low conviction rate.

However, the scale and simultaneity with which the ED at present is deployed against Opposition parties in multiple states at once is alarming. In Maharashtra, ED cases against NCP and Shiv Sena leaders were followed by the collapse of the Maha Vikas Aghadi government, and these splits produced the Eknath Shinde and Ajit Pawar factions. In Delhi, ED cases put almost the entire senior AAP leadership in prison: Jain, Sisodia, Sanjay Singh, and eventually Arvind Kejriwal, which led to the party losing the polls.

In West Bengal specifically, an intra-party rebellion and a rebel's complaint came first, followed by the state police freezing accounts within a day, and the ED arriving only weeks later and issuing a PMLA freeze on accounts already frozen.

It is not so much that the ED manufactured this present crisis, but rather that a state police force and a central agency moved in rapid succession against the same defeated party, on the back of an internal dispute, that makes it unprecedented.

What is even more concerning is the sweeping power of a central agency over state matters, which threatens the autonomy of the state governments by creating an uneven Centre-state relationship.

What the Mamata Banerjee-led faction of the TMC can now do is challenge the ED’s freeze specifically under the PMLA, but the inherent problems and the draconian provisions within the Act cannot be fixed by the party.

The other challenge to such a petition will be the factional rivalry within the TMC itself, wherein the Ritabrata Banerjee-led faction is accusing the Mamata Banerjee-led faction of corruption. This further provides legitimate grounds for the ED to keep the TMC party bank accounts frozen, as well as a reasonable basis for the courts to not act in haste.

As far as the PMLA is concerned, under which the ED operates, there is already a review pending at the Supreme Court on the Vijay Mandanlal matter. It has been pending since 2022. Alas, until the court finishes what it began, the invisible baton stays in hand, and the next party to feel it will simply be whichever one refuses to get in line.

(Sneharshi Dasgupta is a Research Fellow at the Vidhi Centre for Legal Policy, New Delhi. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)