The Supreme Court has voiced strong concerns regarding the Enforcement Directorate's (ED) actions, suggesting that the agency is overstepping its bounds and potentially violating the federal structure of the Constitution. The court's remarks came during a hearing on a case involving the Tamil Nadu State Marketing Corporation (TASMAC), a state-run entity responsible for liquor sales, where the ED is conducting a money laundering investigation.
A bench comprising Chief Justice of India (CJI) B.R. Gavai and Justice A.G. Masih criticized the ED for "crossing all limits" and undermining the principles of federalism. The court questioned how an offense could be directed against a corporation like TASMAC, particularly when the state government had already registered numerous FIRs against individuals allegedly involved in corruption related to liquor shop licenses.
The case originated from allegations of corruption in the issuance of wine shop licenses, with the ED claiming a scam worth over ₹1,000 crore. The agency initiated raids on TASMAC premises, seizing phones and electronic devices from officials, a move that has been heavily contested by the Tamil Nadu government and TASMAC. They argued that the ED's actions were illegal and an overreach of its powers, challenging the Madras High Court's order that allowed the ED to continue its investigation under the Prevention of Money Laundering Act (PMLA).
Senior Advocate Kapil Sibal, representing the Tamil Nadu government, informed the Supreme Court that the state had already filed 41 FIRs between 2014 and 2021 against individuals accused of taking bribes for the allotment of liquor outlets. He argued that these were criminal acts by individuals, not by the corporation itself, and that the ED's intervention in 2025, with raids on TASMAC's head office and seizure of electronic devices, constituted a clear overreach. Sibal urged the court to prohibit the ED from using any data extracted from these devices, calling it a serious violation of privacy.
Senior Advocate Mukul Rohatgi, representing TASMAC, echoed these concerns, accusing the ED of breaching the privacy of officials by cloning their phones without due cause. In response, the Additional Solicitor General (ASG) S.V. Raju, appearing for the ED, maintained that the investigation was warranted due to large-scale corruption involving state officials and politicians, with distillery companies allegedly siphoning off unaccounted cash to secure lucrative supply contracts from TASMAC.
The Supreme Court, however, expressed skepticism about the ED's approach, questioning the basis for initiating action against a state-run body when the state itself had already taken action against individuals involved in the alleged corruption. The court issued a stay order on the ED's investigation, preventing the agency from continuing its probe until the next hearing. This decision underscores the court's concern about maintaining the balance of power between the central government and state governments in India's federal system.
The federal structure of the Constitution delineates specific powers and duties to both the central and state governments. Law and order, including police work, primarily falls under the purview of state governments. The Supreme Court's intervention highlights the importance of preventing central agencies like the ED from unduly interfering in matters that are essentially the responsibility of the states, thereby preserving the integrity of the federal framework.
The Supreme Court has sought a detailed response from the ED, and the matter has been scheduled for further hearing after the vacation. This case raises critical questions about the extent of the ED's authority and its role in investigating alleged offenses against state-run entities, particularly when the state government has already initiated its own investigations. The outcome of this case could have significant implications for the future of কেন্দ্র-state relations and the limits of central investigative powers in India.
