"ED Crossing All Limits": Supreme Court Slams Agency Over Raids At TN’s Liquor Corporation; Proceedings Stayed

The Bench of Chief Justice of India B.R. Gavai and Justice A.G. Masih strongly criticised the ED's actions, particularly questioning the agency’s authority to initiate proceedings against a government-owned corporation.

“This is a corporation that sells liquor. The State had registered 41 FIRs between 2014 and 2021. The ED only entered the picture in 2025 and now raids the corporation,” submitted Senior Advocate Kapil Sibal, appearing for the Tamil Nadu Government.

Sibal further alleged gross overreach by the central agency: “All phones of employees were seized, everything cloned. There is something called privacy. They should have investigated first.”

Echoing similar concerns, Senior Advocate Mukul Rohatgi, also representing the State, said, “Every employee’s phone was cloned. This is beyond investigative necessity.”

Taking serious note, CJI Gavai observed, “You may register against an individual, but a Corporation? How can you register? Your ED is passing all limits!”

Appearing for the ED, Additional Solicitor General (ASG) S.V. Raju defended the agency’s actions: “We have done nothing wrong. There was cash recovered. I will show. This is a Rs. 1000 crore fraud.”

The Bench, however, questioned the very basis of the ED’s involvement. “Where is the predicate offence?” asked CJI Gavai, reiterating the requirement of a scheduled offence for ED’s jurisdiction under the Prevention of Money Laundering Act (PMLA).

The Court has issued notice to the ED and directed the matter to be taken up after the summer vacation, with interim relief granted to Tamil Nadu through a stay on the proceedings.

The SLP had been filed through Advocate Misha Rohatgi last month, three days after the impugned judgment was passed.

Madras High Court on April 23, 2025, dismissed the petitions filed by the State government and Tamil Nadu State Marketing Corporation (Tasmac) challenging the Enforcement Directorate’s (ED) searches at its headquarters between March 6 and 8, 2025. State government had alleged procedural violations and an attempt to malign the State’s image.

However, the division bench of Justices S.M. Subramaniam and K. Rajasekar noted that in the present case, a mere search was conducted and the petitioners "with complete whimsical arguments" approached it seeking to declare the search itself as illegal.

"It is agonising that public servants who ought to work for the welfare of the people, have approached this Court stating that they were detained by an investigating agency while conducting a search and that this amounts harassment. How can a procedure established by law be termed as harassment. This is a challenge to the very ethos of criminal justice system," it said.

Court stressed, "Can a few inconveniences which is product of ‘procedure established by law’ as embedded in Article 21 be equated against the economic rights of the people of this country. It is the mandate of the Constitution to secure to all its citizens Economic Justice. And legislations such as PMLA serve this object".

Court also rejected the state's argument that political motive was at play and search was based on political vendetta. The division bench said, "But whether a Court can go and examine the political forces at play or be a partaker in the political game. Definitely not. That is not the duty of a Court of law".

The ED must be allowed to investigate money laundering, which affects public interest, the judges noted while ordering that the ED will be at liberty to proceed with all further actions under PMLA.

Three writ petitions were filed before the high court. The first, jointly submitted by the State government and Tasmac, sought a declaration that the ED’s search operations at the Tasmac headquarters in Chennai, were unconstitutional as they lacked the State’s consent, violating the principle of federalism. It also requested the ED to disclose a copy of the Enforcement Case Information Report (ECIR), which formed the basis of the search.

The other two petitions, filed solely by Tasmac, challenged the legality of the search and sought protection for its employees from alleged harassment under the guise of investigation. Tasmac also sought a court order directing the ED to furnish a copy of the search authorization issued by Joint Director Piyush Yadav and an interim injunction to prevent further intimidation of its officials.

The State government argued before high court that since no cash was recovered during the search, there were no “proceeds of crime” involved, and the ED had no authority to invoke the PMLA. The Home Secretary further alleged that the ED was conducting a “roving inquiry” into Tasmac’s affairs without any reasonable basis or material evidence suggesting financial wrongdoing. He also accused the ED of attempting to malign the reputation of both Tasmac and the Tamil Nadu government by making baseless allegations and misrepresenting facts.

Case Title: The State of Tamil Nadu v. Directorate of Enforcement