The Supreme Court on Tuesday extended its interim order restraining the Enforcement Directorate (ED) from carrying out any coercive action—including searches, seizures, or further investigation—against the Tamil Nadu State Marketing Corporation (TASMAC) in connection with an alleged liquor retail scam in the state.
A bench of Chief Justice B.R. Gavai and Justice K. Vinod Chandran raised sharp questions about the ED’s actions and their impact on the federal balance of investigative powers between the Centre and the states. “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 DMK-led Tamil Nadu government and TASMAC approached the Supreme Court after the ED conducted raids at TASMAC headquarters, challenging an April 23 order of the Madras High Court that had upheld the agency’s actions. They alleged that the ED’s probe amounted to a violation of constitutional rights and the federal structure.
On May 22, the Supreme Court had stayed the ED’s ongoing investigation into alleged money laundering linked to corruption in the grant of wine shop licences. The court observed then that the agency was “crossing all the limits” and acting in a way that undermined the concept of federal governance.
The bench had earlier ordered that “there shall be stay of further proceedings qua the respondent no.2 (TASMAC)… There shall also be ad-interim relief in terms of prayer Clause (B) of the prayer for interim relief, which reads as under: ‘(B) Issue an ad-interim order directing the Respondent No.1/ED to not take any coercive steps against the Respondent No.2/TASMAC and its officials during the pendency of the present petition’.”
On Tuesday, the bench extended this protection. TASMAC’s plea challenging the Madras High Court order will now be heard after the Supreme Court decides a batch of review petitions concerning the 2022 Vijay Madanlal Choudhary judgment, which had upheld key provisions of the Prevention of Money Laundering Act (PMLA), including those on arrest, search, and non-supply of the Enforcement Case Information Report (ECIR).
Senior advocates Kapil Sibal and Mukul Rohatgi, appearing for the Tamil Nadu government and TASMAC, argued that the ED’s searches violated both procedural safeguards and the federal division of investigative powers.
Sibal questioned how a government corporation could be raided by the ED when the alleged offences involved only certain private retailers already being investigated by the state’s Directorate of Vigilance and Anti-Corruption (DVAC).
“Corruption is a predicate offence. ED cannot probe corruption directly,” Sibal submitted, pointing to Section 66(2) of the PMLA, which requires the ED to share information about predicate offences with the competent authority. He highlighted that the DVAC had registered 47 FIRs between 2014 and 2021 against individual liquor outlet operators, investigated them, and closed 37 cases after due process.
Sibal alleged that the ED’s sudden entry into the scene in 2025—raiding TASMAC’s headquarters and seizing officials’ phones—overstepped its mandate.
Additional Solicitor General S.V. Raju, representing the ED, argued that since the state vigilance had registered predicate offences, the ED was fully empowered under the PMLA to investigate the corresponding money laundering aspect.
“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 maintained that the ED had conducted the searches “in a decent and systematic manner” and pointed out that the quick closure of predicate FIRs by the state police seemed aimed at “cutting off the ED by closing predicate FIRs one by one.”
Raju also clarified that under the PMLA, the ED could act on “reasons to suspect,” which implies a lower threshold than “reason to believe.”
The bench acknowledged that it is bound by the Vijay Madanlal judgment delivered by a three-judge bench, which currently governs the ED’s powers under the PMLA. Chief Justice Gavai made a light-hearted remark: “In the last six years we have had the opportunity to deal with many cases of ED… I don’t want to say more. Last time I said something, it was reported everywhere.”
The court will take up TASMAC’s plea after concluding the pending review petitions that challenge aspects of the Vijay Madanlal ruling. Until then, the interim protection against coercive action will continue.
