Supreme Court Questions ED’s PMLA Conviction Rate, Urges Crypto Regulation

Supreme Court Challenges Enforcement Directorate: Calls for Immediate Cryptocurrency Regulation Framework

The Supreme Court of India has issued a pointed challenge to the Enforcement Directorate (ED) over its questionable conviction record and prolonged pretrial detentions, while simultaneously pressing for the urgent establishment of a regulatory framework governing cryptocurrencies. This development highlights intensifying judicial scrutiny over the enforcement agency’s performance under the Prevention of Money Laundering Act (PMLA) and signals a potential turning point for crypto regulation in India.

Judicial Scrutiny Over Enforcement Directorate’s Low Conviction Rate

During a landmark day of hearings, two separate benches of the Supreme Court examined the effectiveness and legal processes employed by the Enforcement Directorate. Chief Justice Bhushan R. Gavai, heading one bench, openly questioned the agency's credibility by highlighting its dismal conviction rate — fewer than 10 convictions in over 5,000 cases.

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The cases under review included petitions connected to the insolvency proceedings of Bhushan Power & Steel Limited. In a candid exchange, Justice Gavai sharply criticized ED’s approach, specifically the practice of extended pretrial custody under strict bail conditions mandated by the PMLA. He condemned what he described as “sentencing without trial,” emphasizing that holding individuals for years before adjudication undermines the principles of justice and due process.

Solicitor-General Tushar Mehta acknowledged the low conviction figures but argued they were comparable to other penal offences. Nevertheless, the Court’s tone underscored the necessity for reform in investigative practices and expedited judicial processes.

Enforcement Directorate Defends Its Actions

In its defense, the Enforcement Directorate pointed to its successful recovery of approximately ₹23,000 crore returned to victims of financial crimes. Mehta detailed high-profile raids involving large sums of cash, emphasizing the scale and complexity of the ED’s operations.

Despite these assertions, the Court maintained its focus on the rule of law and expressed skepticism toward relying solely on media portrayals of enforcement success. The Chief Justice reiterated that justice must be anchored in facts and legal principles rather than public perception.

Supreme Court Warns Enforcement Directorate: “Cannot Act Like a Crook”

A separate three-judge bench led by Justice Surya Kant delivered stern warnings to the ED, stressing that enforcement actions must remain within the legal framework. Justice Ujjal Bhuyan voiced concern over prolonged judicial custody and questioned accountability for wrongful detentions, asking, “And after five or six years of judicial custody, if people are acquitted, who will compensate them?”

The bench called for enhanced training in investigation techniques and better witness management to improve conviction rates and protect individual rights. The Court’s observations suggest a strong demand for accountability and a more balanced approach to enforcement.

Supreme Court Advocates for Cryptocurrency Regulation, Not Ban

In a significant moment, the Supreme Court addressed the growing concerns around cryptocurrency’s role in money laundering. The judges clarified that their remarks did not advocate an outright ban on digital assets but emphasized the necessity of regulatory oversight.

“We are not saying ban cryptocurrency. But there should be some regulation. Indian currency is also under certain regulations. Why can’t crypto be subjected to regulations?” the bench remarked, signaling judicial support for formalizing a policy framework.

This comes at a time when the Indian government has yet to enact comprehensive cryptocurrency legislation. Current measures mainly involve tax regulations and certain anti-money laundering obligations imposed on crypto exchanges. The Supreme Court’s comments could accelerate efforts toward legislative clarity and structured compliance requirements for the digital asset sector.

Ongoing Review of Landmark Vijay Madanlal Judgment

The Court’s hearings also involved review petitions challenging the 2022 Supreme Court ruling in Vijay Madanlal Choudhary, which affirmed the Enforcement Directorate’s broad powers, including arrests without a First Information Report (FIR), reversal of burden of proof on the accused, and stringent bail conditions.

Opponents of the ruling argue that these provisions erode constitutional safeguards and create risks of misuse. However, Additional Solicitor-General SV Raju opposed the review, maintaining that the scope should be limited to procedural issues concerning the supply of Enforcement Case Information Reports (ECIR) and bail provisions.

Implications for Enforcement Practices and the Crypto Ecosystem

The Supreme Court’s intense scrutiny of the Enforcement Directorate’s investigative approach and conviction record reflects a broader demand for reform in India’s criminal justice system, especially under the PMLA framework. These judicial remarks could trigger procedural improvements and greater respect for due process rights.

Simultaneously, the judiciary’s call for crypto regulation is likely to influence the policy environment around digital assets. The Supreme Court’s openness to regulation rather than prohibition aligns with global trends toward integrating cryptocurrencies within transparent, accountable frameworks.

For investors, exchanges, and the burgeoning crypto industry in India, this judicial push could mark a critical juncture. Clear and balanced crypto regulations would provide much-needed certainty, foster innovation, and enhance investor protection.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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