Supreme Court slams ED for crossing all the limits and violating the federal concept of governance

New Delhi: Coming down hard on the Enforcement Directorate, the Supreme Court on Thursday said that the agency is crossing "all the limits" and violating the Federal concept of governance. The apex court stayed the money laundering probe by the ED against Tamil Nadu-run liquor retailer TASMAC over alleged corruption in the grant of wine shop licences.

A bench comprising Chief Justice of India B.R. Gavai and Justice Augustine George Masih told additional solicitor-general S.V. Raju, appearing for the ED, “Your ED is crossing all the limits.”

The bench then issued notice to the ED on the plea filed by the Tamil Nadu government and Tamil Nadu State Marketing Corporation (TASMAC).

Questioning the ED raids over TASMAC, a state government agency, CJI Gavai said, “The Enforcement Directorate is violating the Federal concept (of governance).”

The top court took note of the submissions of senior advocates Kapil Sibal and Amit Anand Tiwari, appearing for the state government and the TASMAC, and stayed the ED's probe against the state-run liquor retailer.

The ASG, however, opposed the order, saying the issue involved corruption of over `1,000 crores and the ED is not crossing the limits “at least in this case”.

Mr Sibal said that it is the state and the TASMAC which have launched criminal prosecution into alleged illegalities in granting liquor shop licenses. As many as 41 FIRs were lodged against purported wrongdoers in cases related to the allotment of liquor shop licences from 2014, and now the ED jumps in the picture and raids the TASMAC, the senior counsel said.

“How can you raid the state-run TASMAC?” the bench asked.

The petition moved by the state government and TASMAC challenged an April 23 order of the Madras high court that upheld the ED's actions, alleging grave violations of constitutional rights and the Federal structure.

In its plea, the state government said, “The present petition raises questions of law having wide ramifications, including the issue of federalism laid bare by the respondent 1 (the ED) exceeding its remit and attempting to usurp the state's right to investigate offences occurring therein.”

The petition challenged the legality of the ED's 60-hour search and seizure operation conducted between March 6 and March 8, 2025.

“On March 6, respondent 1 (the ED) conducted a search and seizure proceeding under Section 17 of the PMLA at the headquarters of respondent 2 (TASMAC), which is a 100 per cent owned instrumentality of the petitioner/state,” it said.

TASMAC itself is not named as an accused in any of these FIRs and, in several cases, is the complainant, the plea added.

In the absence of any predicate offence involving TASMAC as an accused, the ED had no jurisdiction to initiate proceedings under the PMLA, it said.

The petitions also questioned the timing of the search operation by the ED, pointing out the delay in action as the last FIR was registered in 2021.

The ED's actions amounted to a "roving and fishing inquiry", rather than a targeted investigation, and that the agency failed to demonstrate the mandatory "reasons to believe" required under Section 17 of the PMLA.

Money laundering offence under the PMLA is a predicate offence and is not investigated on a standalone basis. It has to be based on some original offence under the criminal provisions of the law, like the BNS or the Income Tax Act, among others.

Several benches of the top court had earlier rapped the anti-money laundering probe agency for allegedly misusing the Prevention of Money Laundering Act.

The ED has also been targeted by the Opposition parties against the alleged abuse of PMLA provisions against political opponents of the government.