In a recent development concerning the Tamil Nadu State Marketing Corporation (TASMAC), a division bench of the Madras High Court, comprising Justices M.S. Ramesh and N. Senthilkumar, has recused itself from hearing petitions filed by the Tamil Nadu government and TASMAC. These petitions challenge the Enforcement Directorate's (ED) searches conducted at TASMAC's headquarters on March 6 and 8, 2025. The bench announced its decision to step down from the case, citing unspecified reasons, and indicated that the matter would likely be reassigned to a different bench for further proceedings.
Prior to their recusal, on March 20, the same bench had orally directed the ED to halt its investigation related to the searches until the next hearing. During that session, the court questioned the ED's authority to detain all TASMAC employees based on evidence against only certain individuals. The judges highlighted a discrepancy: while the ED claimed to possess sufficient incriminating material, TASMAC contended that such evidence had not been disclosed to them.
The Tamil Nadu government, through its Additional Chief Secretary, has argued that the ED's actions constitute a "roving enquiry" without substantial evidence. The state asserts that despite extensive searches, the ED failed to uncover any "proceeds of crime" under the Prevention of Money Laundering Act (PMLA), suggesting a lack of material implicating TASMAC in any offenses under the Act. Furthermore, the government alleges procedural lapses during the searches, including the absence of proper search warrants and the coercion of TASMAC officials into acknowledging documents they hadn't fully reviewed. These actions, the state argues, violate the fundamental rights to life, liberty, and dignity of TASMAC employees.
The ED's investigation into TASMAC centers on alleged financial irregularities amounting to approximately ₹1,000 crore. The agency has pointed to multiple discrepancies in TASMAC's operations, such as manipulations in tender processes and unaccounted cash transactions involving distillery companies. The ED claims to have evidence of corrupt practices, including kickbacks, following raids conducted on March 6. These raids targeted TASMAC employees, corporate offices of distilleries, and production facilities.
In response to the ED's actions, TASMAC has filed petitions seeking judicial intervention. The corporation requests that the ED be restrained from harassing its employees under the guise of investigation and argues that the ED's intrusion into state affairs without prior consent violates the principles of federalism. During court proceedings, the Advocate General representing Tamil Nadu emphasized that the ED should obtain state consent before conducting searches, a point met with skepticism by the bench, leading to a request for an amended plea.
Senior counsel for TASMAC has criticized the ED's raid tactics, describing them as invasive and lacking transparency. Concerns were raised about the seizure of digital devices and the prolonged detention of employees, including women, during the searches. The counsel highlighted that, under Section 17(1) of the PMLA, search and seizure operations require a written record of the reasons, which must be communicated to the concerned parties—a protocol allegedly not followed in this instance.
The ED, represented by Additional Solicitor General A.R.L. Sundaresan, has refuted these allegations, maintaining that the searches were conducted lawfully based on evidence of money laundering activities. The agency asserts that it adhered to legal procedures and that the actions taken were justified given the nature of the suspected offenses.
The Madras High Court has directed the ED to produce copies of the First Information Report (FIR), the Enforcement Case Information Report (ECIR), and any other materials relied upon in their investigation against TASMAC. The court has scheduled further hearings to examine these documents and address the issues raised by both parties.
This case underscores the ongoing tension between central investigative agencies and state authorities, highlighting concerns over jurisdictional boundaries and the exercise of power within India's federal structure. The outcome of this legal battle may have significant implications for the balance of authority between state and central agencies in conducting investigations and enforcing the law.
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