SC halts ED probe into TASMAC citing overreach on state rights

The Supreme Court on Tuesday (October 14) extended its stay on the Enforcement Directorate's (ED) money laundering investigation against the Tamil Nadu State Marketing Corporation (TASMAC).

The Bench, led by Chief Justice BR Gavai alongside Justice K Vinod Chandran, made the interim order absolute, effectively freezing the probe until the court resolves a long-pending review of key Prevention of Money Laundering Act (PMLA) provisions.

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The case relates to an alleged Rs 1,000 crore liquor scam rocking TASMAC, Tamil Nadu’s government-run monopoly on alcohol sales.

ED raid in March

The controversy erupted in March when ED sleuths raided TASMAC’s Chennai headquarters, seizing mobiles and documents from officials amid accusations of overpriced bottles, rigged tenders, and bribes at retail outlets dating back to 2014-2021.

What began as 47 state-registered FIRs against errant retailers snowballed into a central probe under PMLA, prompting the DMK-led Tamil Nadu government and TASMAC to cry foul. They first lost in the Madras High Court, which greenlit the ED's actions, before escalating to the apex court.

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The Supreme Court's intervention, building on a May stay where it had already rebuked the ED for "crossing all limits", now hinges on the fate of the 2022 Vijay Madanlal Choudhary judgment — a three-judge ruling that bolstered PMLA's arsenal, including warrantless arrests and the secrecy of Enforcement Case Information Reports (ECIRs).

Three-year limbo

CJI Gavai, visibly exasperated by the three-year limbo on the review pleas, quipped during hearings, "For the last three years, we are hearing review is on. When will it be heard?"

Yet, beneath the procedural gripe lies a deeper federal fault line: Does the ED's unchecked foray into state-led probes erode the constitutional balance? CJI Gavai didn't mince words, repeatedly probing the ED's counsel: "What happens to the federal structure?"

He zeroed in on whether the agency's raids amounted to "encroachment upon the right of the State to investigate", invoking Section 66(2) of PMLA, which mandates sharing intel with state sleuths.

"In every case, when you find that the state is not investigating the matter, you will go and do it yourself?" the Chief Justice pressed, adding that law and order must stay "within its own domain".

This isn't idle rhetoric; Gavai has previously slammed the ED for "violating the federal structure", a sentiment echoed in the bench's directive to tag the TASMAC pleas to the PMLA review. Tamil Nadu's legal heavyweights piled on.

TN accused of shielding officers

Senior advocate Kapil Sibal, for TASMAC, thundered that storming a "government corporate office" like TASMAC headquarters shreds federalism, especially since the graft allegations targeted individual retailers, not the corporation.

"How can you raid government corporate offices? What happens to the federal structures of this country?" Sibal argued, pointing out that corruption probes fall squarely under state jurisdiction — unlike the CBI, the ED needs no state nod.

Mukul Rohatgi, representing the state, amplified privacy woes from the ED's device seizures, framing it as another arrow in the quiver of central overreach. The ED pushed back hard.

Additional Solicitor General SV Raju defended the March raids as a "systematic" hunt for money laundering trails, not mere corruption, armed with PMLA's low-bar "reasons to suspect" threshold for searches.

He accused Tamil Nadu of shielding officers by quashing 37 FIRs and insisted the predicate offences — undisputed state filings — fed into a broader laundering web. Raju dismissed federalism pleas as a smokescreen, noting media bias claims cut both ways.

This TASMAC tussle isn't isolated; it spotlights a broader centre-state skirmish, where PMLA's expensive toolkit lets central hounds chase economic crimes without the handcuffs that bind agencies like the CBI. As Sibal hinted at political undertones — suggesting the ED's zeal might fade post-2026 polls — the ED bristled at "unnecessary politicisation".