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DAILY CURRENT AFFAIRS, 08 NOVEMBER 2024

UNLAWFUL ACTIVITIES (PREVENTION) ACT (UAPA)

 
 
 
1. Context
 
 
The police forces of the States should invoke the Unlawful Activities (Prevention) Act (UAPA) without hesitation when required, Union Home Minister Amit Shah said on Thursday, adding that a National Counter Terrorism Policy and Strategy will be introduced soon to fight terrorism, terrorists, and the entire ecosystem supporting them
 
 
2. About Unlawful Activities (Prevention) Act (UAPA)
 

The Unlawful Activities (Prevention) Act (UAPA) is an Indian law that was enacted in 1967 to effectively prevent unlawful activities that pose a threat to the sovereignty and integrity of India.

Key highlights of the UAPA

  • Objective: The primary objective of the UAPA is to provide law enforcement agencies with effective tools to combat terrorism and other activities that threaten the security of the nation.
  • Definition of Unlawful Activities: The act defines unlawful activities to include actions that intend to or support the cession of a part of the territory of India or disrupt the sovereignty and integrity of the country.
  • Powers of Designation: The government has the authority to designate an organization as a terrorist organization if it believes that such an organization is involved in terrorism. This designation has significant legal consequences, including the freezing of assets.
  • Powers of Arrest and Detention: The UAPA provides law enforcement agencies with powers of arrest and detention to prevent individuals from engaging in unlawful activities. The act allows for preventive detention to curb potential threats before they materialise.
  • Banning of Terrorist Organizations: The government can proscribe organizations as terrorist organizations, making their activities illegal. This includes banning these organisations, freezing their assets, and taking other measures to curb their operations.
  • Admissibility of Confessions: The UAPA allows for confessions made to police officers to be admissible in court, subject to certain safeguards. This provision has been a point of contention, with concerns about potential misuse and coercion.
  • Designation of Individuals as Terrorists: In addition to organizations, the UAPA allows the government to designate individuals as terrorists. This designation carries legal consequences, including restrictions on travel and freezing of assets.
  • Amendments and Stringency: Over the years, the UAPA has undergone several amendments to strengthen its provisions and make it more effective in dealing with emerging threats. However, these amendments have also been criticized for potential violations of civil liberties.
  • International Cooperation: The UAPA allows for cooperation with foreign countries in matters related to the prevention of unlawful activities. This includes extradition of individuals involved in such activities.
 

3. Unlawful Activities (Prevention) Act (UAPA) and Human Rights

 

The Unlawful Activities (Prevention) Act (UAPA) and human rights lie in the impact the act can have on various fundamental rights guaranteed by the Constitution of India and international human rights standards.

The key points connecting the UAPA and human rights:

  • The UAPA allows for preventive detention, which means individuals can be detained without formal charges based on suspicions of involvement in unlawful activities. This raises concerns about the right to liberty, as individuals may be deprived of their freedom without the presumption of innocence until proven guilty.
  • The admissibility of confessions made to police officers under the UAPA raises issues related to the right against self-incrimination. There is a risk that such confessions might be obtained under duress or coercion, compromising the fairness of legal proceedings.
  • Designating individuals as terrorists and proscribing organizations without due process may impinge on the right to a fair trial. This includes the right to be informed of charges, the right to legal representation, and the right to present a defense.
  • The UAPA provides authorities with the power to proscribe organizations as terrorist organizations, limiting their activities. Critics argue that this may infringe upon the right to freedom of association, particularly when such designations are made without sufficient evidence or proper legal procedures.
  • The potential for misuse of the UAPA to target individuals or organizations critical of the government raises concerns about freedom of expression. If the act is used to suppress dissent or stifle legitimate political or social activities, it can undermine this fundamental right.
  • The UAPA grants authorities the power to intercept communications and conduct surveillance on individuals suspected of engaging in unlawful activities. This raises concerns about the right to privacy, as individuals may be subjected to intrusive surveillance without adequate safeguards.
  • Human rights standards require that any restrictions on rights, such as those imposed by the UAPA, must be proportionate and necessary for achieving a legitimate aim. Critics argue that the broad scope of the UAPA may lead to disproportionate measures that unduly restrict individual rights.
  • The UAPA's compatibility with international human rights standards, including the International Covenant on Civil and Political Rights (ICCPR), is a critical point of consideration. Ensuring that the act aligns with these standards is essential to upholding human rights principles.
 

4. Unlawful Activities (Prevention) Act (UAPA) and Article 22 of the Constitution

 

The Unlawful Activities (Prevention) Act (UAPA) and Article 22 of the Indian Constitution lie in how the UAPA's provisions for arrest and detention intersect with the constitutional safeguards provided under Article 22. 

  • Article 22 provides certain protections to individuals who are arrested or detained. It outlines the rights of arrested individuals, emphasizing safeguards to prevent arbitrary or unlawful detention.
  • Article 22(1) states that every person who is arrested and detained shall be informed, as soon as may be, of the grounds for such arrest. This provision ensures that individuals are aware of the reasons behind their arrest, preventing arbitrary or secret detentions.
  • Article 22(1) also guarantees the right of an arrested person to consult and be defended by a legal practitioner of their choice. This ensures that individuals have access to legal assistance during the legal process, contributing to a fair and just legal system.
  • The UAPA includes provisions for preventive detention, allowing authorities to detain individuals to prevent them from committing certain offences. However, Article 22(4) allows preventive detention only under specific circumstances, and certain safeguards must be followed, such as providing the detenu with the grounds for detention and an opportunity to make a representation against the detention.
  • Article 22(4) further mandates that a person detained under a law providing for preventive detention must be afforded the earliest opportunity to make a representation against the detention. Additionally, the case of every person detained is required to be placed before an advisory board within three months.
  • The UAPA allows for confessions made to police officers to be admissible in court, subject to certain safeguards. However, this provision has been a point of concern concerning Article 22, as confessions obtained under duress or coercion may violate the right against self-incrimination.
  • Article 22(2) ensures the right to be brought before the nearest magistrate within 24 hours of arrest, excluding the time necessary for the journey. This provision aims to prevent prolonged detention without judicial oversight and contributes to the right to a speedy trial.
 
 
For Prelims: Unlawful Activities (Prevention) Act, Article 22, Terrorism
For Mains: 
1. Discuss the key provisions of the Unlawful Activities (Prevention) Act (UAPA) and analyze how they may impact fundamental human rights. Elaborate on the balance between national security concerns and the protection of individual rights. (250 Words)

 

Previous Year Questions

1. Under Article 22 of the Constitution of India, with the exception of certain provisions stated there in, what is the maximum period for detention of a person under preventive detention? (MPSC 2014)

A. 2 months       B. 3 months         C. 4 months           D. 6 months

 

2. Article 22 of the Constitution ensures (CTET 2016)

A. Right not to be ill-treated during arrest or while in custody

B. Right to Constitutional Remedies

C. Right against Exploitation

D. Right to Education

Answers: 1-B, 2-A

Mains

1. Indian government has recently strengthed the anti-terrorism laws by amending the Unlawful Activities(Prevention) Act, (UAPA), 1967 and the NIA Act. Analyze the changes in the context of prevailing security environment while discussing scope and reasons for opposing the UAPA by human rights organizations. (UPSC 2019)

Source: The Indian Express

 

INDUS WATER TREATY

1. Context

India’s move to serve formal notice on August 30, 2024, in line with Article XII (3) of the Indus Waters Treaty (IWT), underlines its concerns about meeting ever-increasing domestic water needs in a sustainable manner
 

2. The dispute over the hydel projects

  • The notice appears to be a fallout of a longstanding dispute over two hydroelectric power projects that India is constructing one on the Kishanganga river, a tributary of Jhelum and the other on the Chenab.
  • Pakistan has raised objections to these projects and dispute resolution mechanisms under the Treaty have been invoked multiple times. But a full resolution has not been reached.
  • In 2015, Pakistan asked that a Neutral Expert should be appointed to examine its technical objections to the Kishanganga and Ratle HEPs.
  • But the following year, Pakistan unilaterally retracted this request and proposed that a Court of Arbitration should adjudicate its objections.
  • In August 2016, Pakistan approached the World Bank, which brokered the 1960 Treaty, seeking the constitution of a Court of Arbitration under the relevant dispute redressal provisions of the Treaty.
Instead of responding to Pakistan's request for a Court of Arbitration, India moved a separate application asking for the appointment of a Neutral Expert, which is a lower level of dispute resolution provided in the Treaty.
  • India argued that Pakistan's request for a Court of Arbitration violated the graded mechanism of dispute resolution in the Treaty.
  • In between, a significant event happened that had consequences for the Treaty.
  • A Pakistan-backed terror attack on Uri in September 2016 prompted calls within India to walk out of the Indus Waters Treaty, which allows a significantly bigger share of the six river glasses of water to Pakistan.
  • The Prime Minister had famously said that blood and water could not flow together and India has suspended routine bi-annual talks between the Indus Commissioners of the two countries.

3. Applications moved by Pakistan and India

  • The World Bank, the third party to the Treaty and the acknowledged arbiter of disputes were, meanwhile faced with a unique situation of having received two separate requests for the same dispute.
  • New Delhi feels that the World Bank is just a facilitator and has a limited role.
  • On December 12, 2016, the World Bank announced a "pause" in the separate processes initiated by India and Pakistan under the Indus Waters Treaty to allow the two countries to consider alternative ways to resolve their disagreements.
  • The regular meetings of Indus Waters Commissioners resumed in 2017 and India tried to use these to find mutually agreeable solutions between 2017 and 2022.
  • Pakistan refused to discuss these issues at these meetings.
  • At Pakistan's continued insistence, the World Bank, in March last year, initiated actions on the requests of both India and Pakistan.
On March 31, 2022, the World Bank decided to resume the process of appointing a Neutral Expert and a Chairman for the Court of Arbitration.
In October last year, the Bank named Michel Lino as the Neutral Expert and Prof. Sean Murphy as Chairman of the Court of Arbitration.
  • They will carry out their duties in their capacity as subject matter experts and independently of any other appointments they may currently hold.
  • On October 19, 2022, the Ministry of External Affairs said, " We have noted the World Bank's announcement to concurrently appoint a Neutral Expert and a Chair of the Court of Arbitration in the ongoing matter related to the Kishanganga and Ratle projects".
  • Recognising the World Bank's admission in its announcement that "carrying out two processes concurrently poses practical and legal challenges".
  • India would assess the matter that "India believes that the implementation of the Indus Water Treaty must be in the letter and spirit of the Treaty".
  • Such parallel consideration of the same issues is not provided for in any provisions of the Treaty and India has been repeatedly citing the possibility of the two processes delivering contradictory rulings, which could lead to an unprecedented and legally untenable situation, which is unforeseen in Treaty provisions.

4. Dispute redressal mechanism 

  • The dispute redressal mechanism provided under Article IX of the IWT is graded.
  • It's a 3-level mechanism.
  • So, whenever India plans to start a project, under the Indus Water Treaty, it has to inform Pakistan that it is planning to build a project.
  • Pakistan might oppose it and ask for more details. That would mean there is a question and in case there is a question, that question has to be clarified between the two sides at the level of the Indus Commissioners.
  • If that difference is not resolved by them, then the level is raised. The question then becomes a difference.
  • That difference is to be resolved by another set mechanism, which is the Natural Expert.
  • It is at this stage that the World Bank comes into the picture.
  • In case the Neutral Expert says that they are not able to resolve the difference or that the issue needs an interpretation of the Treaty, then that difference becomes a dispute.
    It then goes to the third stage the Court of Arbitration.
  • To Sum up, it's a very graded and sequential mechanism first Commissioner, then the Neutral Expert and only then the Court of Arbitration.

5. India's notice and its implications

  • While the immediate provocation for the modification is to address the issue of two parallel mechanisms, at this point, the implications of India's notice for modifying the treaty are not very clear.
  • Article XII (3) of the Treaty that India has invoked is not a dispute redressal mechanism.
  • It is in effect, a provision to amend the Treaty.
  • However, an amendment or modification can happen only through a "duly ratified Treaty concluded for that purpose between the two governments". 
  • Pakistan is under no obligation to agree to India's proposal.
  • As of now, it is not clear what happens if Pakistan does not respond to India's notice within 90 days.
The next provision in the Treaty, Article XII (4), provides for the termination of the Treaty through a similar process " a duly ratified Treaty concluded for that the purpose between the two governments".
  • India has not spelt out exactly what it wants to be modified in the Treaty.
  • But over the last few years, especially since the Uri attack, there has been a growing demand in India to use the Indus Waters Treaty as a strategic tool, considering that India has the natural advantage of being the upper riparian state.
  • India has not fully utilized its rights over the waters of the three east-flowing rivers Ravi, Beas and Sutlej over which India has full control under the Treaty.
    It has also not adequately utilized the limited rights over the three west-flowing rivers Indus, Chenab and Jhelum which are meant for Pakistan.
  • Following the Uri attack, India established a high-level task force to exploit the full potential of the Indus Waters Treaty.
  • Accordingly, India has been working to start several big and small hydroelectric projects that had either been stalled or were in the planning stages.

For Prelims & Mains

For Prelims: Indus water treaty, World Bank, India and Pakistan, Ravi, Jhelum, Sutlej, Beas, Chennab, Court of Arbitration, Uri attack, Neutral Expert, hydel projects, 
For Mains:
1. What is Indus Water Treaty and discuss India's recent notice and its implications (250 Words)
 
Source: The Indian Express
 

PRIVATE PROPERTY

 
 
1. Context
 
A nine-judge Constitution Bench of the Supreme Court, in a majority judgment (8:1), held that not every private resource can be considered a ‘material resource of the community’ to be used by the government to serve the ‘common good.’ This overturns the earlier interpretation formed in 1977 that has been followed by the Supreme Court till 1997.
 
2. What is Private Property?
 
Private property refers to assets or resources owned by individuals or entities (such as corporations) rather than by the state or community. This concept forms a fundamental part of many economic and legal systems, where the right to private property is protected by law. It includes physical possessions, real estate, intellectual property, and other forms of wealth that an individual or group can own, control, transfer, or sell at their discretion.

Key Characteristics of Private Property

  • Exclusive Ownership: The owner has the exclusive right to use, manage, and enjoy the property. This includes the right to prevent others from accessing or using it.
  • Transferability: Owners can transfer or sell their property to others. This characteristic supports market transactions and economic exchange.
  • Economic Utility: Private property encourages economic growth by allowing owners to invest in and improve their assets, thereby contributing to the production of goods and services.
  • Legal Protection: Private property rights are generally protected by law, and governments enforce these rights through the legal system. This protection can include restitution if property is stolen or wrongfully taken.
 
3. Constitutional Provisions
 
  • Part IV of the Indian Constitution includes the Directive Principles of State Policy (DPSP), which outline guidelines for the government to promote social and economic justice within society. Article 39(b) in this section emphasizes that material resources should be managed and distributed in a way that serves the common good.
  • Originally, the Constitution enshrined the right to property as a Fundamental Right under Articles 19(1)(f) and 31, including compensation for property acquisition.
  • However, with the 25th Amendment in 1971, Article 31C was introduced, allowing laws aimed at implementing principles under Articles 39(b) and (c) to override Fundamental Rights, including the right to property.
  • In the landmark Kesavananda Bharati case (1973), a 13-judge Supreme Court Bench upheld Article 31C but subjected it to judicial review.
  • Later, in 1978, the right to property was removed from Fundamental Rights and reclassified as a constitutional right under Article 300A.
  • Currently, any government acquisition of private property must serve a public purpose and provide adequate compensation
 
Earlier Judgements
 
In the 1977 case of State of Karnataka v. Ranganatha Reddy, a seven-judge Supreme Court Bench upheld Karnataka’s law nationalizing private bus transport. Justice V.R. Krishna Iyer, in a separate commentary, offered an interpretation of "material resources of the community" under Article 39(b), expanding it to include not just natural resources but all national wealth, covering both private and public assets necessary for material needs. This interpretation, though a minority opinion, later influenced the 1982 Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Limited case, which upheld the nationalization of coke oven plants, and was again referenced in the 1996 Mafatlal Industries Ltd. v. Union of India case
 
4. Current Judgements
 
  • In Property Owners’ Association v. State of Maharashtra, a seven-judge Supreme Court Bench referred the issue of interpreting Article 39(b) to a nine-judge Bench.
  • The current majority view, supported by seven judges including the Chief Justice, rejected Justice V.R. Krishna Iyer’s interpretation that any private property could be used by the state as a "material resource" for the "common good," considering this as an inflexible economic stance promoting state control over private resources. The majority noted that India has transitioned from a socialist model to a liberalized, market-driven economy.
  • According to the majority, for a resource to qualify as a "material resource of the community," it must indeed be both "material" and "of the community."
  • Key factors such as the public trust doctrine, the resource's intrinsic qualities, its significance for community welfare, its scarcity, and the implications of its private ownership would determine if it falls within Article 39(b).
  • This means certain resources like forests, water bodies, spectrum, and minerals might be covered, even if privately owned.
  • However, not every private asset qualifies just because it meets material needs. Additionally, "distribute" in Article 39(b) has a broad interpretation, allowing both state acquisition and distribution to private parties when it serves the common good.
  • Justice Nagarathna partially agreed with the majority, suggesting that all private resources, except "personal effects" such as clothing and jewelry, could potentially be designated as "material resources of the community" through nationalization or acquisition.
  • Justice Sudhanshu Dhulia dissented, supporting Justice Iyer’s interpretation from Ranganatha Reddy and asserting that it is the legislature's role to determine how resources should be managed for the public good
 
5. Way Forward
 
Our economy has shifted from a socialist framework to a liberalized, market-driven model. This transition has led to substantial economic growth, helping lift many out of extreme poverty. Nonetheless, rising inequality remains a concern that requires attention. This judgment aims to safeguard small farms and forest lands owned by marginalized groups from forcible government acquisitions. Equally essential is the sustainable management and distribution of public resources under government authority
 
 
Source: The Hindu

CORPORATE SOCIAL RESPONSIBILITY (CSR)

 
 
1. Context
 
A decade ago, India became the first country to legally mandate Corporate Social Responsibility (CSR). Section 135 of the Companies Act 2013 outlines the rules and regulations governing CSR. According to the National CSR Portal, from 2014 to 2023, ₹1.84 lakh crore of CSR funds were disbursed. With the extent of contributions increasing, a question arises: how can CSR help agriculture?
 
2. Corporate Social Responsibility (CSR)
 
Corporate Social Responsibility (CSR) refers to the practice where businesses voluntarily take actions to contribute positively to society and the environment. CSR involves going beyond profit-making to address social, ethical, and environmental concerns, creating a balance between economic, social, and environmental goals.
 
  • Environmental Responsibility: Companies engage in sustainable practices, such as reducing carbon emissions, managing waste, and conserving natural resources.
  • Ethical Business Practices: CSR encourages ethical operations, including transparency, fair trade, and responsible sourcing.
  • Community Engagement: Many companies invest in community welfare by supporting local education, healthcare, and infrastructure development.
  • Employee Well-being: CSR also includes providing safe working conditions, fair wages, and professional growth opportunities
 
 
3. CSR's Contribution to agriculture
 
  • Around 47% of India’s population relies on agriculture for employment, a share far above the global average of 25%. Agriculture contributes about 16.73% to India’s GDP. With food production now relatively stable, current concerns focus on issues like the degradation of natural resources, stagnating farmer incomes, and the impacts of climate change.
  • Recently, corporations have shown increased interest in supporting climate action and sustainability in India’s agricultural sector through their CSR budgets.
  • A CSR outlook report from last year indicated that 23% of surveyed companies prioritized “environment and sustainability” in their CSR initiatives. Indian agriculture today faces urgent needs for capital investment and infrastructure development, areas where CSR efforts have already made an impact and are expected to continue.
  • Examples include establishing grain banks, farmer training centers, agriculture-based livelihood projects, water conservation programs, and energy-efficient irrigation systems.
  • The recent shift towards sustainable and modern agriculture further underscores the role CSR funding from the private sector can play in supporting these efforts
 
4. Challenges
 
  • A significant challenge limiting CSR's impact on agriculture is the lack of a comprehensive system to consistently track and categorize funds directed specifically toward agriculture-related projects.
  • Current reporting methods do not emphasize agricultural CSR initiatives distinctly. According to Schedule VII of the Companies Act, CSR activities that support agricultural sustainability may fall within 11 of the 29 categories for CSR spending.
  • These categories include areas like gender equality, agroforestry, hunger and poverty eradication, technology incubation, animal welfare, environmental sustainability, livelihood enhancement, resource conservation, rural development, reducing socio-economic inequalities, and women’s empowerment.
  • However, these broad categories cover diverse activities, many unrelated to agricultural sustainability, making it difficult to isolate and assess funding specifically for agriculture.
  • Given agriculture’s critical role in India’s economy and its alignment with national goals for sustainable growth and a just transition, defining agriculture as a standalone CSR sector is essential.
  • Shifting the reporting framework to focus on specific sectors receiving funds could enhance fund targeting, improve accountability, and ensure meaningful contributions.
  • Identifying key sustainability challenges in agriculture and directing resources accordingly would also support measurable progress in this vital sector
 
5. Advantages of Corporate Social Responsibility
 
Business Benefits
  • CSR enhances both a company's brand reputation and its financial performance. Initiatives like improving energy efficiency can cut operational expenses, often resulting in long-term savings.
  • Consumers increasingly prefer brands that align with their own values, and CSR policies allow companies to visibly uphold these values, fostering customer trust and loyalty that strengthens competitive advantage.
  • CSR can also attract skilled talent and boost employee satisfaction, as more people seek employers with values that mirror their own. Furthermore, addressing ethical and social responsibilities proactively can help avoid legal issues, fines, and potential damage to reputation.

Consumer Benefits

  • CSR efforts promote responsible consumption by providing consumers with products and services aligned with ethical values and educating them on sustainability and ethical choices. These initiatives encourage companies to prioritize rigorous testing, quality control, and safety measures, thereby reducing the risk of defective or harmful products reaching the market.

Environmental Benefits

  • CSR positively impacts environmental health by encouraging sustainable practices and accountability for environmental impacts. Through CSR, companies can reduce greenhouse gas emissions, work toward net-zero goals, conserve natural resources, lower pollution, and minimize ecosystem disruption. Additionally, CSR often promotes investment in research and development for eco-friendly products and practices.

Societal Benefits

  • CSR supports local communities and addresses key societal issues like poverty, inequality, and environmental challenges. By creating jobs and fueling economic growth, CSR initiatives benefit society as a whole.
  • Companies that lead in ethical practices inspire others, generating a positive ripple effect, and a commitment to ethical behavior at the corporate level strengthens ethical standards across society.
6. Way Forward
 
 Corporate Social Responsibility (CSR) offers a wide array of benefits not only for businesses but also for consumers, the environment, and society at large. For businesses, CSR enhances brand reputation, fosters customer loyalty, and attracts top talent, while also mitigating potential legal risks. Consumers benefit by having access to ethically produced products that align with their values, while CSR-driven practices help ensure safety and quality. Environmentally, CSR encourages sustainable practices that contribute to a healthier planet, and socially, it supports community development and tackles pressing societal issues. As companies increasingly recognize the importance of responsible and ethical behavior, CSR becomes an essential driver for positive change, benefiting all stakeholders and creating a ripple effect of goodwill that shapes a more sustainable and equitable future
 
 
For Prelims: Corporate Social Responsibility (CSR), Companies Act, 2013
 
For Mains: Detailed analysis, critical evaluation, and real-world applications of CSR
 
 
Source: The Hindu
 

DIRECTORATE OF ENFORCEMENT (ED)

1. Context

The Enforcement Directorate (ED) searched 19 premises across five States linked to the main vendors of Amazon and Flipkart for suspected violation under the Foreign Exchange Management Act (FEMA)

2. About the Directorate of Enforcement 

The Directorate of Enforcement (ED) is a law enforcement agency in India that operates under the Department of Revenue, Ministry of Finance. It is responsible for enforcing economic laws and fighting financial crimes in the country. The primary objective of the Directorate of Enforcement is to enforce the provisions of two major laws:

  • Foreign Exchange Management Act (FEMA): This law deals with foreign exchange and foreign trade in India. The ED ensures compliance with FEMA regulations and investigates violations related to foreign exchange transactions.

  • Prevention of Money Laundering Act (PMLA): The ED is also responsible for implementing the provisions of the PMLA, which focuses on preventing money laundering and combating the financing of terrorism. It investigates cases related to money laundering and takes appropriate action against those involved.

The Directorate of Enforcement plays a crucial role in maintaining the economic stability of the country by addressing financial offenses and ensuring compliance with relevant laws. It conducts investigations, searches, and seizures, and has the authority to attach and confiscate properties acquired through illegal means

3. Establishment and History

  • The Directorate of Enforcement was established on 1st May 1956, as the "Enforcement Unit" within the Department of Economic Affairs.
  • Its primary focus was on preventing and detecting violations of the Foreign Exchange Regulation Act (FERA) of 1947.
  • Over the years, the agency's role expanded, and in 1999, the Enforcement Directorate was established as a separate entity under the Ministry of Finance.
  • The enactment of the Prevention of Money Laundering Act (PMLA) in 2002 further broadened its jurisdiction, giving it the power to investigate cases related to money laundering.
  • Since its establishment, the ED has played a crucial role in combating economic offences and ensuring compliance with economic laws in India.
  • It has been involved in several high-profile cases, including those related to financial scams, money laundering by influential individuals, and cross-border financial crimes.
  • The ED collaborates with various domestic and international agencies, including financial intelligence units, law enforcement agencies, and Interpol, to gather information, share intelligence, and effectively coordinate efforts to combat economic offences.

4. Functions and Roles of ED

4.1. Enforcing Economic Laws

  • The primary function of the ED is to enforce two key economic laws in India: the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).
  • It ensures compliance with these laws and investigates money laundering, foreign exchange violations, and economic fraud cases.

4.2. Money Laundering Investigations

  • The ED investigates cases involving money laundering, which is the process of concealing the origins of illegally obtained money to make it appear legitimate.
  • It identifies and seizes properties and assets derived from illicit activities and prevents their further use.

4.3. Foreign Exchange Violations

  •  The ED is responsible for investigating cases related to violations of foreign exchange laws and regulations.
  • It monitors and controls foreign exchange transactions to maintain the stability of the Indian rupee and prevent illegal activities such as smuggling and illegal money transfers.

4.4 Financial Frauds

  • The ED also investigates and takes action against financial frauds, including bank frauds, Ponzi schemes, and other fraudulent activities affecting the Indian financial system.
  • It works closely with other law enforcement agencies, such as the Central Bureau of Investigation (CBI), to tackle complex financial crimes.

5.  Challenges

5.1. The complexity of economic crimes.

  • Economic crimes are often complex and involve a variety of financial transactions.
  • This can make it difficult for the ED to trace the proceeds of crime and to build a case against the perpetrators.

5.2. The difficulty of tracing the proceeds of crime

  • The proceeds of crime are often hidden in complex financial structures, making it difficult for the ED to track them down.
  • The ED also faces challenges in obtaining information from foreign jurisdictions, where the proceeds of crime may have been transferred.

5.3. The lack of international cooperation

  • Economic crime is often transnational, making it difficult for the ED to cooperate with foreign law enforcement agencies.
  • This is due to differences in legal systems, as well as political and economic considerations.

5.4. Political interference

  • The ED has been accused of being used as a political tool by the ruling party to target its opponents and critics.
  • This has raised questions about the independence and impartiality of the ED.

5.5. Lack of transparency

  • The ED has been criticized for its lack of transparency.
  • The agency does not publish its annual reports, and it is difficult to obtain information about its investigations.
  • This has made it difficult for the public to hold the ED accountable.

5.6. Human rights violations

  •  The ED has been accused of violating the human rights of those it investigates.
  • The agency has been accused of using coercive tactics, such as prolonged detention and interrogation, to extract confessions from suspects.

5.7. The limited resources

  • The ED is a relatively small agency with limited resources.
  • This can make it difficult for the ED to investigate complex economic crimes and prosecute the perpetrators.

6. Conclusion

  • The Directorate of Enforcement in India plays a crucial role in enforcing economic laws, preventing money laundering, and combating financial crimes.
  • With its specialized expertise, investigative capabilities, and coordination with domestic and international partners, the ED contributes to the integrity of the financial system, national security, and the country's overall socio-economic development.
For Prelims: Directorate of Enforcement, Financial Action Task Force, Prevention of Money Laundering Act (PMLA), the Foreign Exchange Management Act (FEMA), Supreme Court, Foreign Exchange Regulation Act (FERA) of 1947, Central Bureau of Investigation, 
For Mains: 
1. Discuss the establishment and evolution of the Directorate of Enforcement in India. Explain its key functions and roles in combating economic offences. (250 Words)
 
 

Previous Year Questions

1. Which one of the following is not correct in respect of Directorate of Enforcement ? (CDS  2021)
A. It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance.
B. It enforces the Foreign Exchange Management Act, 1999.
C. It enforces the Prevention of Money Laundering Act, 2002.
D. It enforces the Prohibition of Benami Property Transaction Act, 1988.
 
Answer: D
 
2. The Prevention of Money Laundering Act, 2002 become effective since which one of the following dates? (UKPSC RO/ARO 2012)
 
A. July 2002          B. August 2003        C. July 2004         D. July 2005
 
Answer: D
 
3. FEMA (Foreign Exchange Management Act) was finally implemented in the year (UPPSC  2013)
A. 1991         B. 1997         C. 2000             D. 2007
 
Answer: C
 
4. The Foreign Exchange Regulation Act was replaced by the ______ in India. (SSC Steno 2020) 
A. Foreign Exchange Currency Act
B. Foreign Exchange Finances Act
C. Foreign Exchange Funds Act
D. Foreign Exchange Management Act
 
Answer: D
 
5. "Central Bureau of Intelligence and Investigation" is listed in the __________ list given in the Seventh Schedule of the Constitution of India. (SSC CGL 2017) 
A. Union             B. State             C. Global          D. Concurrent
 
Answer: A
 
Source: The Indian Express
 
 

FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)

 
 
1. Context
 

The Enforcement Directorate (ED) searched 19 premises across five States linked to the main vendors of Amazon and Flipkart for suspected violation under the Foreign Exchange Management Act (FEMA)

2.Foreign Exchange Management Act(FEMA)

The Foreign Exchange Management Act (FEMA) is an important piece of legislation in India that governs foreign exchange and payments.

Here is an overview of FEMA and its history:

FEMA replaced the Foreign Exchange Regulation Act (FERA) of 1973. FERA was considered stringent and primarily aimed at controlling and regulating foreign exchange in India. However, it was felt that the economic environment required a more liberalized and contemporary approach

FEMA was introduced in 1999 to replace FERA, aligning with the economic reforms and liberalization measures undertaken by the Indian government in the early 1990s. The primary objective was to promote external trade and payments and to facilitate foreign investment in India.

3.Key Features of FEMA

  • FEMA brought about a more liberalized approach compared to its predecessor. It aimed to simplify and rationalize foreign exchange management, making it more conducive for foreign trade and investment
  • FEMA distinguishes between current account transactions (related to trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements)
  • FEMA provides a comprehensive regulatory framework for foreign exchange transactions and seeks to manage and regulate various aspects, including dealings in foreign exchange, export and import of currency, and opening and maintenance of foreign currency accounts
  • The act empowers the Reserve Bank of India (RBI) to regulate foreign exchange transactions. It also prescribes penalties for contravention of its provisions to ensure compliance.
  • FEMA establishes adjudicating authorities to hear cases related to violations. It also provides for the establishment of the Foreign Exchange Appellate Tribunal to hear appeals against the orders of the adjudicating authorities
  • Since its enactment, FEMA has undergone several amendments to keep pace with changing economic scenarios and to address emerging challenges. Amendments have been made to enhance regulatory measures, facilitate ease of doing business, and align with international best practices
4.Foreign Exchange Management Act: Objectives
 
The Foreign Exchange Management Act (FEMA) in India was enacted with several objectives, aiming to govern and facilitate foreign exchange transactions while aligning with the broader economic goals of liberalization and globalization.
 
The key objectives of FEMA include:
  • One of the primary objectives of FEMA is to liberalize and facilitate foreign exchange transactions. It aims to simplify procedures and create a conducive environment for foreign trade and investment
  • FEMA seeks to promote external trade and payments by providing a regulatory framework that governs the flow of foreign exchange in and out of the country. This includes facilitating imports and exports of goods and services
  • FEMA is designed to encourage foreign direct investment (FDI) and foreign portfolio investment (FPI) by providing a transparent and predictable regulatory environment. The act lays down the rules and regulations governing the acquisition and transfer of immovable property by non-residents
  • FEMA empowers the Reserve Bank of India (RBI) to manage and regulate the country's foreign exchange reserves effectively. This involves maintaining stability in the foreign exchange market and ensuring the availability of adequate reserves to meet external obligations
  • FEMA distinguishes between current account transactions (related to day-to-day trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements). This helps in applying appropriate regulations to different types of transactions
  • The act aims to establish a robust adjudication and enforcement mechanism to ensure compliance with its provisions. It provides for penalties and adjudicating authorities to address violations and maintain the integrity of the foreign exchange management system
  • FEMA is designed to align with international best practices in the field of foreign exchange management. This alignment is essential for integrating India into the global economy and ensuring compatibility with international norms and standards
  • The act allows for amendments to be made to its provisions to adapt to changing economic conditions and emerging challenges. This ensures that the regulatory framework remains relevant and effective in a dynamic global economic environment.
5.Foreign Exchange Management Act: Applicability
 

The Foreign Exchange Management Act (FEMA) in India has a wide applicability, covering various individuals, entities, and transactions involved in foreign exchange dealings. Here's a breakdown of its applicability:

  • Residents and Non-Residents: FEMA applies to both residents and non-residents of India. Residents are individuals or entities ordinarily resident in India, while non-residents are those residing outside India.

  • Indian Entities: Indian entities, including companies, partnerships, trusts, and other forms of organizations, are subject to FEMA regulations concerning foreign exchange transactions.

  • Foreign Entities: Foreign entities, including companies, branches, subsidiaries, and other organizations, are also subject to FEMA regulations when conducting transactions involving Indian currency or assets in India.

  • Foreign Exchange Transactions: FEMA governs various foreign exchange transactions, including the acquisition and transfer of foreign exchange, remittances, import and export of goods and services, external commercial borrowings, and investments in India by non-residents.

  • Current and Capital Account Transactions: FEMA distinguishes between current account transactions and capital account transactions. Current account transactions include day-to-day trade in goods and services, while capital account transactions involve long-term investments and capital movements. FEMA applies different regulations to these types of transactions.

  • Authorized Persons: FEMA designates certain individuals and entities as authorized persons, such as authorized dealers, authorized banks, and other financial institutions. These authorized persons play a crucial role in facilitating foreign exchange transactions and are responsible for complying with FEMA regulations.

  • Regulatory Authorities: The Reserve Bank of India (RBI) is the primary regulatory authority responsible for administering FEMA and enforcing its provisions. The RBI issues regulations, notifications, and guidelines to ensure compliance with FEMA requirements.

  • Penalties and Enforcement: FEMA establishes penalties for contravention of its provisions, including fines, confiscation of assets, and imprisonment. Adjudicating authorities and appellate tribunals are designated to hear cases related to violations and enforce compliance with FEMA regulations.

6.Categories of Authorised Persons under FEMA
 
Category Description Examples
Authorized Dealers (ADs) Broadest category, authorized for a wide range of forex transactions. State banks, commercial banks, co-operative banks, foreign banks.
Full-Fledged Money Changers (FFMCs) Authorized to buy and sell foreign currency notes, travelers' cheques and foreign currency instruments. Money exchange companies, authorized hotels.
Authorised Money Changers (AMCs) Limited scope compared to FFMCs, can only buy and sell foreign currency notes and travelers' cheques. Small money exchange booths, airport counters.
Authorized Banks Specific banks authorized for limited forex transactions, like specific export-import transactions. Export houses, financial institutions engaged in specific foreign exchange activities.
 
 
 

 

Previous Year Questions

1.Which one of the following groups of items is included in India’s foreign-exchange reserves? (UPSC CSE 2013)

(a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries
(b) Foreign-currency assets, gold holdings of the RBI and SDRs
(c) Foreign-currency assets, loans from the World Bank and SDRs
(d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank

Answer: (b)

Mains

 

1.Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (2021)
 
 
Source: The Hindu
 

PM VIDYALAKSHMI SCHEME

 
 
1. Context
 
On November 6 2024, the Union Cabinet approved the PM-Vidyalaxmi Scheme, making students admitted to quality higher education institutions (QHEIs) eligible for collateral-free and guarantor-free education loans.
 
2. Key takeaways of PM Vidyalakshmi Scheme
 
  • The newly introduced Central Sector scheme aims to offer financial assistance to students, ensuring that financial limitations do not hinder anyone from pursuing higher education.
  • The key difference between a central sector scheme and a centrally sponsored scheme (CSS) is that, under the former, the Union government covers the entire cost, whereas in a CSS, the Union government shares the expenditure with the state governments.
  • The scheme has been allocated Rs 3,600 crore from 2024-25 to 2030-31, with an expected 7 lakh new students benefiting from the interest subsidy provided.
  • The central government will offer a 75% credit guarantee for loans up to Rs 7.5 lakh. Additionally, students from families earning up to Rs 8 lakh annually, who are not eligible for any other government scholarship or interest subvention, will receive a 3% interest subsidy for loans up to Rs 10 lakh during the moratorium period.
  • The interest subsidy will be extended to 1 lakh students annually, with priority given to those from government institutions pursuing technical or professional courses.
  • PM-Vidyalaxmi seeks to enhance and expand the impact of the Government of India’s education and financial inclusion programs over the past decade, aiming to increase access to quality higher education for youth in India. This initiative complements the Central Sector Interest Subsidy (CSIS) and the Credit Guarantee Fund Scheme for Education Loans (CGFSEL), both managed under the PM-USP by the Department of Higher Education.
  • Quality Higher Education Institutions (QHEIs) will be determined based on the National Institutional Ranking Framework (NIRF). The scheme will apply to institutions ranked in the top 100 overall and those within specific domains, state government institutions ranked 101-200, and all centrally run institutions. Initially, 860 eligible institutions, catering to over 2.2 million students, will be included in PM-Vidyalaxmi, potentially offering benefits to students who opt to participate.
  • An official from the Ministry of Education stated that students enrolled in all courses, not just technical or professional, will be eligible for the scheme. Students can apply for loans and interest subsidies through a dedicated portal.
  • The Department of Higher Education will launch a unified portal, PM-Vidyalaxmi, allowing students to apply for education loans and interest subsidies through a simplified process accessible across all participating banks
 
3. PM Internship Scheme
 

  • The Prime Minister’s Internship Scheme, which aims to offer internships to one crore youth across the top 500 companies over five years, launched its portal for companies to begin registering their internship opportunities on October 3 for the pilot phase.

  • The scheme is designed to create internship opportunities for students to tackle youth unemployment. The Prime Minister’s vision is to provide internships to 1 crore young people over the next five years.

  • Interns will receive a stipend of Rs 5,000 per month for a 12-month period. Of this amount, Rs 500 will be provided by the company through its CSR funds, and the government will contribute Rs 4,500.

  • In addition to the monthly stipend, applicants will be given a one-time financial assistance of Rs 6,000 to cover incidental expenses. Moreover, initiatives such as PM Jeevan Jyoti Bima Yojana and PM Suraksha Bima Yojana will ensure that interns are covered by insurance, with the government paying the premiums.

  • The scheme is open to applicants aged 21-24 years and is being managed by the Ministry of Corporate Affairs

 
4. Way Forward
 
Prime Minister’s Internship Scheme is a significant initiative aimed at addressing youth unemployment by providing valuable internship opportunities to one crore young individuals over the next five years. With the financial support provided through stipends and insurance coverage, this scheme not only offers practical work experience but also ensures the well-being of interns. By collaborating with top companies and leveraging CSR funds, the scheme promises to bridge the skills gap, enhance employability, and empower the youth, contributing to India's long-term socio-economic development. Through its dedicated portal, the initiative also streamlines the application process, making it accessible and efficient for both companies and candidates
 
 
 
 
For Prelims: PM Vidyalakshmi Scheme, National Institutional Ranking Framework (NIRF)
 
For Mains: 1.The Prime Minister’s Internship Scheme aims to address youth unemployment by providing internship opportunities to one crore young individuals over five years. Analyze the potential impact of this scheme on skill development, employability, and youth empowerment in India. What challenges might it face in implementation, and how can these be addressed?
 
 
Source: Indianexpress
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