The Supreme Court stayed the Enforcement Directorate’s ongoing investigation and raids against the Tamil Nadu State Marketing Corporation (TASMAC), expressing strong concerns over the agency’s overreach and its impact on the federal structure. The Court intervened in a writ petition challenging the raids conducted by ED on TASMAC’s headquarters, highlighting serious questions about the legitimacy of targeting a state corporation. The bench underscored the violation of constitutional principles and emphasized the need for restraint in enforcement actions against a government entity.
The case arose from a controversy involving a purported Rs. 1000 crore scam related to TASMAC, Tamil Nadu’s state-run liquor distribution agency. Allegations surfaced that distillery firms illicitly siphoned funds through unaccounted cash payments, which were then allegedly used to secure additional supply orders from TASMAC. The Directorate of Vigilance and Anti-Corruption (DVAC) registered 41 FIRs against several liquor outlet operators between 2014 and 2021. In 2025, the Enforcement Directorate commenced raids at TASMAC’s headquarters, confiscating mobile phones and other electronic devices belonging to its officials.
The petitioner, the State of Tamil Nadu represented by Senior Advocate Kapil Sibal, argued that the state had already taken sufficient action against individuals involved in corruption through multiple FIRs. However, the ED’s intrusion into TASMAC as a corporate entity was unwarranted and constituted an overextension of its jurisdiction. Sibal contended that while the state targeted individuals suspected of wrongdoing, the ED’s search of the corporation’s headquarters and seizure of private devices amounted to an unjustified and invasive probe. Counsel further raised privacy concerns over the alleged cloning of phones belonging to TASMAC officials. It was urged that the Court restrain ED from exploiting the data extracted during these raids.
The Enforcement Directorate, represented by Additional Solicitor General S.V. Raju, justified the raids on the grounds of investigating a large-scale fraud and claimed that political interference was hampering its probe. The ED maintained that suspicion arising from multiple FIRs warranted such action, and the search was a necessary step to uncover evidence of financial irregularities involving TASMAC officials and liquor shops.
The Supreme Court bench, led by Chief Justice of India B.R. Gavai and Justice A.G. Masih, expressed strong displeasure with the ED’s approach. CJI Gavai questioned the basis for initiating criminal proceedings against TASMAC as a corporation, stating, “Your ED is crossing all limits. How can there be the offence against the corporation?” The Court emphasized the importance of preserving the federal structure and cautioned the ED against exceeding its mandate, remarking, “ED is crossing all limits. You are totally violating the federal structure of the country.”
The Court further acknowledged the State’s prior efforts to address the alleged corruption, pointing out that “the State itself has filed 41 FIRs from 2014-21 against individuals, not against the corporation.” Addressing the concerns about privacy, the bench noted the serious implications of cloning mobile devices, yet observed that it had already granted interim relief and could not impose further restrictions at that stage.
After examining submissions and the record, the Apex Court directed issuance of notice to the Enforcement Directorate and stayed all further investigation and raid proceedings against the petitioners, namely the State of Tamil Nadu and TASMAC. The Court observed that “in the meantime, there shall be stay of further proceedings qua the petitioners,” effectively halting the ED’s actions until the matter is further adjudicated.
This decision marks a significant judicial check on the ED’s exercise of power, reinforcing constitutional safeguards against unwarranted interference in state entities and emphasizing the need for investigations to respect the boundaries of jurisdiction and privacy.
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