Institute of Legal and Management Studies

The State of Tamil Nadu has approached the Supreme Court challenging Madras High Court's rejection of its plea against searches conducted by the Enforcement Directorate on Tamil Nadu State Marketing Corporation (TASMAC) headquarters.

To recap briefly, the case pertains to an alleged Rs.1000 crores liquor scam stated to have taken place in Tamil Nadu. After ED conducted raids in March, allegations surfaced that distillery companies siphoned off the alleged amount in the form of unaccounted cash and the same was used to obtain more supply orders from TASMAC (a state-run liquor marketing body). While TASMAC senior officials were accused of corruption, its shops were alleged to be collecting amount in excess of actual MRP.

ED registered a case based on 41 FIRs lodged by the Directorate of Vigilance and Anti-Corruption (DVAC) regarding corruption in TASMAC.

On April 23, a Division Bench of the High Court dismissed pleas filed by the State of Tamil Nadu and TASMAC challenging ED's searches of the latter's headquarters.

Through its judgment, the High Court also rejected the allegations made by TASMAC that its employees and officials were harassed by ED while conducting searches at the State agency's headquarters in Chennai. The bench said that it was a matter of procedure for employees to be detained during raids and surprise checks, to prevent the destruction of evidence. The allegations of violation of employees' fundamental rights appeared to be an afterthought, said the Court.

While the case was pending before the High Court, the Tamil Nadu government and TASMAC had approached the Supreme Court seeking transfer of their plea against ED searches from the Madras High Court. However, their plea was not entertained.

Recently, ED conducted fresh searches at multiple locations in Tamil Nadu, including the houses of TASMAC Managing Director S Visakan and film producer Akash Baskaran. Reportedly, the TASMAC MD was also questioned at length for about 10 hours.

Submissions of TASMAC and ED before High Court

Before the High Court, TASMAC accused ED of conducting a roving and fishing inquiry without any materials. It was contended that authorities could not prosecute someone on mere assumption that a scheduled offence had been committed. TASMAC also claimed that ED had concealed data by not providing the 'reasons to believe' and the searches at its headquarters seemed to be to get details of the scheduled offence. TASMAC also argued that the action was in connection with the upcoming Tamil Nadu Elections, as ED wanted to tarnish the image of people involved in the election. It was further urged that ED did not have original jurisdiction to investigate a case and its jurisdiction would start only if an offence, which is a scheduled offence under the PMLA, is committed.

On the other hand, ED argued that the search at TASMAC head office had taken place due to surfacing of various FIRs regarding involvement of TASMAC officials in taking bribes, inflating marked prices on liquor bottles and manipulating postings and transfers of employees. It was pointed out that these complaints had been registered by the state police itself. It was also argued that suspicion alone could be used as a ground for search and the court did not have authority to intervene at that stage or to question the location for search chosen by the agency.

Case Title: THE STATE OF TAMIL NADU v. DIRECTORATE OF ENFORCEMENT, SLP(Crl) No. 007958/ 2025