SC Rebukes ED for “Crossing all Limits” in Conducting Raids on Tamil Nadu Government-Run Corporation

Manas Dasgupta

NEW DELHI, May 22: The Supreme Court on Thursday rebuked the Enforcement Directorate for “crossing all limits” violating the concept of federal structure of governance by conducting raids in March and again last week on the state-run liquor shops and stayed investigation conducted by the Central agency following raids on the Tamil Nadu State Marketing Corporation (TASMAC) offices.

“How can a corporation commit an offence? The ED is crossing all limits,” Chief Justice of India B.R. Gavai addressed Additional Solicitor General S.V. Raju, appearing for the Central agency. Chief Justice Gavai said ED’s actions against the State corporation had breached the federal structure of the country. “You are totally violating the federal structure of the country,” CJI Gavai remarked.

The ED”s raids were over allegations of corruption in the transport of liquor, grant of bar licences, and unaccounted cash generated by siphoning funds in collusion with bottle-making firms and distilleries. “You may register cases against individuals… but corporations? Your ED is passing all limits! Issue notice, returnable after vacation.”

The court’s direction has been welcomed by the ruling DMK; ex-Rajya Sabha MP RS Bharathi who said the order was a ‘blow to the BJP’s efforts to malign the state government.’ The Supreme Court had been approached by the DMK-run state government and the state-run marketing corporation TASMAC granted a monopoly over wholesale and retail liquor trade in the state. They sought to challenge an April 23 order by the Madras High Court green-lighting ED action in this matter.

However, the ED’s knuckles were rapped after senior advocate Kapil Sibal told the court the agency had seized and cloned multiple mobile phones during raids on March 14 and May 16. Back in March the agency claimed it found “multiple irregularities” in the operations of TASMAC. The ED also said it found “unaccounted cash” worth over Rs 1,000 crores.

Specifically, it said it had found “incriminating” data related to corporate postings, and transport and bar licence tenders, as well as indent orders ‘favouring’ a few distilleries.

There was also “evidence”, the ED said of fraudulent pricing, i.e., surcharges of Rs 10 to Rs 30 per bottle sold by TASMAC outlets imposed with the “involvement” of TASMAC officials. The raids were repeated last week.

Ten premises were searched under the Prevention of Money Laundering Act (PMLA) and the ED claimed to have found ‘manipulated data’ indicating cheating during award of tenders. After this Tamil Nadu Excise Minister S Muthusamy launched a counterattack, accusing the ED of harassing state government officials. He accused the agency of a ‘political vendetta’ and said searches of TASMAC’s offices, in Chennai and elsewhere, had ‘ulterior political motives.’

He pointed out the ED had found no proof to substantiate the alleged irregularities, and said Chief Minister MK Stalin’s government firmly supports all state officials at all times. The ‘political vendetta’ reference was to claims by the opposition the BJP uses federal agencies to target rival political leaders and parties, particularly before a major election.

The alleged TASMAC liquor scam has erupted just as the ruling DMK and the main opposition, the AIADMK (and its on-again, off-again ally, the BJP) prep for next year’s Assembly poll.

In the uproar over the allegations, the BJP’s K Annamalai, the party’s former state unit chief, had fired a fierce attack on Tamil Nadu minister V Senthil Balaji, labelling him the “kingpin.” “I have my sources. I believe (the corruption) is over Rs 1,000 crore. Senthil Balaji is involved in every single scam. He is the kingpin. Supreme Court has questioned (him)…” he declared, referring to the court’s comments about the minister in a separate money laundering case.

Mr Balaji has denied all charges against him, accusing the ED of making claims without proof.

“Everything is transparent as far as TASMAC is concerned. As far as purchase is concerned… it would be done by calculating the average of the last three months of purchase brand. By taking the average of the last three years and the last month’s purchase, TASMAC will give a purchase order. So, we have not shown any discount to anyone on giving purchase orders,” he explained.

Senior advocate Mukul Rohatgi, for TASMAC, said the phones of the employees have been cloned. “There is something called privacy,” Mr Rohatgi submitted. Mr Sibal, for Tamil Nadu, said the State itself had registered 41 FIRs against liquor outlet operators over allegations of corruption.

The ED had entered the scene in 2025 and proceeded to raid the headquarters of TASMAC to confiscate the phones and devices found there. “How can a criminal offence be made out against the corporation. You may register FIRs against the individuals, but against the corporation, in a criminal matter?” CJI asked.

Mr Raju defended that the investigation involved a fraud committed to the tune of ₹ 1000 crore. He said politicians were involved in the case. But the court asked why the ED had to intervene despite the State having filed multiple FIRs. The Bench queried about the predicate offence involved which had prompted the ED to swoop in.

Mr Raju sought time to file a detailed response. He was given a fortnightly time to file his reply.