‘What Happens To Federalism?’: Top Court Questions ED Over Tamil Nadu Liquor Scam Probe

Last Updated:October 14, 2025, 20:25 IST

This marks the second time in six months that the top court has pulled up the central agency for overstepping its mandate

The SC bench further pointed out that no provision in the Children’s Act, 1960, limited the court’s authority to grant relief. (PTI File)

The Supreme Court on Tuesday questioned the Enforcement Directorate (ED) over its ongoing investigation into an alleged liquor scam involving the Tamil Nadu State Marketing Corporation Limited (TASMAC), asking if the central agency was encroaching upon the state’s powers to probe the case.

This marks the second time in six months that the top court has pulled up the central agency for overstepping its mandate, particularly over two rounds of raids in March during which the ED claimed to have recovered “incriminating material."

“What happens to the federal structure? Are you not taking away the state government’s right to investigate?" a bench led by Chief Justice BR Gavai asked the ED, pressing the agency to justify its repeated raids and seizures.

As the hearing progressed, Chief Justice Gavai appeared to express concern over the frequency of ED’s interventions in state-related cases, remarking, “In the last six years, I have seen many cases investigated by the ED… but I will refrain from saying more, or it will be reported again."

Appearing for the Tamil Nadu government, senior advocates Kapil Sibal and Mukul Rohatgi questioned the ED’s authority to raid a state-run entity like TASMAC when state police had already registered cases and begun investigations.

“We have already filed FIRs. Why is the ED interfering when the state is investigating?" Sibal asked, while Rohatgi pointed to alleged procedural violations during the raids, including the seizure of employees’ phones and the detention of women staff.

In response, Additional Solicitor General SV Raju, representing the ED, defended the probe, claiming widespread irregularities.

“There are 47 police cases. Large-scale corruption continues. We are only investigating the money-laundering aspect — these are predicate offences," Raju told the court.

Sibal countered by citing Section 66(2) of the Prevention of Money Laundering Act (PMLA), arguing that if the ED discovers evidence of other offences, it must forward that information to the relevant authority rather than conduct parallel investigations.

At this point, the Chief Justice interjected again, asking Raju, “What happens to the federal structure? What happens to Section 66(2)?"

Raju maintained that “incriminating evidence" had been found, but Sibal retorted, “Then give it to us. You’ve seized the phones and detailed chats — let the state investigate."

Court Earlier Rebuked ED For Overreach

This is not the first time the Supreme Court has questioned the ED’s conduct in the TASMAC case.

In May, the court had told the agency, “You may register cases against individuals, but corporations? Your ED is crossing all limits!" It then directed the agency to pause its investigation temporarily.

The ruling DMK welcomed that order, calling it a “blow to the BJP’s efforts to malign the state government." Former Rajya Sabha MP RS Bharathi alleged that the BJP was using the ED to target the DMK following its electoral successes.

The DMK-led Tamil Nadu government and TASMAC approached the Supreme Court challenging an April 23 Madras High Court order that allowed the ED to continue its probe.

The state argued that TASMAC was not named as an accused in any of the police cases and was, in fact, the complainant in several.

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

ED’s Allegations

The controversy began in March when the ED conducted searches at ten premises under the PMLA, claiming to have uncovered “multiple irregularities" in TASMAC’s operations, including unaccounted cash worth Rs 1,000 crore, manipulated data, and irregular tender awards.

The agency alleged that certain TASMAC officials were involved in fraudulent pricing, imposing surcharges of Rs 10–Rs 30 per bottle, and that tenders were awarded to select distilleries in exchange for bribes.

Days later, Tamil Nadu Excise Minister S. Muthusamy hit back, accusing the ED of harassment and “political vendetta."

“The ED found nothing to substantiate its claims. These raids are part of a political conspiracy," he said, adding that Chief Minister M.K. Stalin’s government stood firmly behind state officials.

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