Why exempt state premises from ED searches: Madras HC to TN govt in Tasmac case
High Court says it can't entertain allegations of political motives behind ED’s actions, and that this should be addressed by the public, not the judiciary
In a landmark ruling, the Madras High Court on Wednesday (April 23) dismissed three writ petitions filed by the Tamil Nadu State Marketing Corp (Tasmac) and the Tamil Nadu government challenging the Enforcement Directorate’s (ED) search and seizure operations under the Prevention of Money Laundering Act (PMLA), 2002.
The decision, delivered by Justices SM Subramaniam and K Rajasekar, upheld the ED’s authority to investigate allegations of corruption and money laundering within Tasmac, a state-owned company responsible for the wholesale and retail distribution of Indian Made Foreign Liquor (IMFL) across Tamil Nadu.
ED searches
The case originated from a three-day search operation conducted by the ED at the Tasmac headquarters at Egmore, Chennai, from March 6 to 8, 2025. The operation targeted the 4th and 5th floors of the CMDA Towers-II following multiple FIRs registered by the Tamil Nadu Directorate of Vigilance and Anti-Corruption (DVAC).
These FIRs, filed from 2017 to 2024, alleged rampant malpractices within Tasmac, including overcharging customers above the market retail price (MRP), collecting bribes for favourable staff postings and soliciting illegal gratification from brewery representatives.
Also read | Tasmac continues to power TN's treasury with Rs 48,344 cr tax revenue in FY25
Such offences, falling under Sections 7, 12 and 13 of the Prevention of Corruption Act, 1988, are classified as scheduled offences under the PMLA, triggering the ED’s jurisdiction.
Tamil Nadu plea
Tasmac and the state government alleged that the ED’s actions constituted harassment, claiming employees were detained for up to 60 hours, coerced into giving statements, and deprived of food, rest and communication.
The PMLA, a Central legislation, applies uniformly across India to combat economic offences that threaten national growth. Requiring state consent for ED actions would undermine the Act’s purpose: Madras HC
Specific affidavits from four officials, including Tasmac Managing Director S Visakan, alleged unlawful confinement and violation of fundamental rights. The court found these claims unsubstantiated.
The ED’s counter, supported by the panchnama (search record), said the statements were recorded voluntarily, with breaks for rest and food. Independent witnesses attested to the peaceful conduct of the search, and no female staff were detained at night. Safety measures were ensured, it was stated.
Federal row
The state’s 'federal' argument was firmly rejected. The court emphasised that the PMLA, a Central legislation, applies uniformly across India to combat economic offences that threaten national growth. Requiring state consent for ED actions would undermine the Act’s purpose, especially since the 2019 amendment removed the need for a prior FIR to initiate searches, it said.
Also read | TN vs Centre: Stalin forms high-level panel to push for state autonomy
The court found the state’s prayer to exempt Tamil Nadu government premises from PMLA searches “unjustifiable” and tantamount to seeking an exemption from the law.
The court’s 66-page order covered several key points, dismissing the petitioners’ pleas and upholding the ED’s actions.
Compliance with Section 17
The court clarified that the ED’s search at the Tasmac headquarters complied with Section 17 of the PMLA. This section allows searches based on “reasons to believe” recorded in writing.
The ED submitted these reasons in a sealed cover, which the court verified without scrutinising their sufficiency, limiting judicial review to procedural compliance at this stage.
The court said the enforcement case information report (ECIR) is an internal ED document and need not be shared with the petitioner. This does not violate constitutional rights as the searched party is informed of the grounds during subsequent stages such as trial or adjudication.
On the seizure of mobile phones and digital data, Tasmac argued a violation of privacy and free speech rights. The court held that such seizures were a reasonable restriction for crime detection, a legitimate state aim.
Also read | Fall in central funds leaves TN police missing out on critical modern tools
The judges clarified that privacy rights are personal and cannot be vicariously asserted by a company. The panchnama detailed the involvement of digital forensic analysts, hash value reports and compliance with the Bharatiya Sakshya Adhiniyam, 2023, ensuring data integrity, they said.
Tasmac as a 'person'
The court rejected the state’s plea to exclude state authorities from the definition of “person” under Section 2(1)(s) of the PMLA.
The court found the state’s prayer to exempt Tamil Nadu government premises from PMLA searches “unjustifiable” and tantamount to seeking an exemption from the law.
It clarified that Tasmac, a company under the Companies Act, 1956, falls within this definition. Section 70 further allows prosecution of companies, reinforcing that state-owned entities are not exempt.
The petitioners argued that the ED could only summon state officers notified under Section 54(j). The court clarified that Section 54 imposes a duty on certain authorities to assist the ED, not a restriction on the ED’s powers under Sections 17 and 50.
The ED can summon any person necessary for investigation, without state authorisation. The judges underscored that public servants, including Tasmac officials, have a duty to cooperate with investigating agencies.
Political vendetta claims
The court said it cannot entertain allegations of political motives behind the ED’s actions. Its role is to assess legal compliance, not political dynamics, which should be addressed by the public, not the judiciary, it said.
The further court criticised the state’s prayer to bar ED searches on Tamil Nadu government premises, calling it “unjustifiable” and akin to seeking an exemption from the PMLA. It clarified that such a blanket exemption would undermine the criminal justice system and the Act’s objectives.
Addressing claims that female employees were detained unsafely, the court said women in public service are empowered and capable. Individual grievances, if valid, should be raised by the affected persons, not the state, it added.
Intent to appeal to Supreme Court
Senior counsel for the Tamil Nadu government, led by Advocate General PS Raman, informed the court of their decision to escalate the matter to the Supreme Court.
The counsel argued that the state’s concerns regarding federalism and the ED’s jurisdiction over state entities warrant further judicial scrutiny, particularly the rejection of their prayer to restrict PMLA searches on state premises without consent.
