Are you not encroaching on the state’s rights? SC quizzes ED in TASMAC case

New Delhi: The Supreme Court on Tuesday extended its interim protection restraining the Enforcement Directorate (ED) from taking any coercive action—including search, seizure or further investigation—against the Tamil Nadu State Marketing Corporation (TASMAC) in connection with an alleged liquor retail scam.

A bench of Chief Justice of India (CJI) B R Gavai and Justice K Vinod Chandran questioned whether the ED’s intervention risked infringing upon the investigative powers of the state government. “Would it not amount to encroachment upon the right of the state to investigate? In every case, when you find that the state is not investigating, will you take it upon yourself? What happens to Section 66(2)?” the bench asked. The bench extended its earlier May 22 order that had stayed the ED’s probe into alleged money laundering linked to the grant of liquor shop licences. At that time, the court had said the central agency appeared to be “crossing all the limits” and undermining the federal structure.

The state government and TASMAC had approached the Supreme Court to challenge an April 23 Madras High Court order that upheld the ED’s raids on TASMAC premises. They argued that the searches violated the constitutional division of powers between the Centre and states and the safeguards provided under the Prevention of Money Laundering Act (PMLA).

Senior advocates Kapil Sibal and Mukul Rohatgi, appearing for the state and TASMAC, questioned the ED’s authority to raid a government-owned corporation. “How can you raid government corporate offices when the alleged offence is by certain retailers already being investigated by the state? What happens to the federal structure?” Sibal asked.

He told the court that the state’s Directorate of Vigilance and Anti-Corruption (DVAC) had registered 47 FIRs between 2014 and 2021 against individual liquor retailers for alleged corruption. “The ED suddenly entered the scene in 2025, raided TASMAC headquarters, and seized devices of officials,” Sibal said, adding that Section 66(2) of the PMLA required the agency to share information with state authorities probing the predicate offences.

Sibal also argued that the ED was effectively investigating “corruption”, which falls exclusively under the state’s jurisdiction and could only be probed by the CBI with state consent. “Corruption is a predicate offence. ED cannot probe corruption directly,” he said.

Representing the ED, Additional Solicitor General S V Raju maintained that the agency was well within its powers to pursue the money-laundering aspect once the state’s vigilance body had registered the predicate offences. “The ED has found incriminating evidence during its searches. Large-scale corruption was there. That corruption is being sought to be concealed behind arguments of federalism,” Raju said.

He alleged that state police were closing cases rapidly to hinder the ED’s investigation. “The quick closure of cases was itself intended to cut off the ED by closing predicate FIRs one by one,” he told the bench.

The bench said TASMAC’s petition challenging the Madras High Court ruling will now be taken up after the court disposes of review petitions concerning the 2022 Vijay Madanlal Choudhary judgment, which upheld key provisions of the PMLA, including those on arrest, search, and non-supply of the Enforcement Case Information Report (ECIR).

As the hearing drew to a close, CJI Gavai made a light comment, “In the last six years, we have had the opportunity to deal with many cases of ED... I don’t want to say more.”

The interim relief to TASMAC will continue until the Supreme Court revisits the larger issues surrounding the PMLA and the scope of the ED’s powers.