Context: The Tasmac Below the Scanner
Recently, the Tamil Nadu State Marketing Corporation (TASMAC), a government-run organization that oversees the state’s liquor sales, came under investigation by the Enforcement Directorate (ED).The ED opened an investigation into TASMAC due to possible financial misconduct, operational irregularities, and allegations of money laundering.
Supreme Court Steps In After Tamil Nadu Challenges ED
The Tamil Nadu government took the matter to the Supreme Court, saying the Enforcement Directorate (ED) had gone too far. According to the state, the ED’s actions didn’t just overstep their authority—they also upset the balance of power between the central and state governments, which is protected by the Constitution.
The Supreme Court stops the ED’s investigation.
The Supreme Court temporarily halted the ED’s investigation into Tamil Nadu’s state-owned liquor company, TASMAC, on May 22, 2025. Chief Justice BR Gavai and Justice AG Masih led the bench, which was unreserved in its criticism. The judges’ statement that the ED was “crossing all limits” demonstrated how seriously they took the agency’s actions.
Is a State Corporation Liable? is the primary question.
“How can a corporation be the victim of an offense?” was the simple but important question the Court raised throughout the hearing.
The judges’ remarks showed clear skepticism toward the ED’s decision to go after a government-owned company without first proving that any individual had committed a crime.
This raised a key legal question:
If no specific offence has been established against any person, can a state-run organization like TASMAC still be prosecuted under the Prevention of Money Laundering Act (PMLA)?
It’s a question that could have a big impact on how future investigations involving public institutions are handled.
The answer to this question may influence how cases of this nature are handled in the future.
State Government’s Argument
Senior Advocate Kapil Sibal, representing the Tamil Nadu government, informed the Court that the state had already taken action where necessary. He mentioned that 41 FIRs had been filed between 2014 and 2021 against specific liquor outlet operators for alleged irregularities.
Sibal also pointed out that the ED’s entry into the scene in 2025, including raids on TASMAC’s headquarters and the cloning of mobile phones of senior officials, was an unjustified move that undermined the state’s authority and due process.
Federal Structure Violation?
The Supreme Court recognized Tamil Nadu’s concerns. It warned that the ED’s actions could jeopardize the federal system established in the Indian Constitution. The judges stressed that unless there is a strong and justifiable reason to do so, federal agencies must respect their boundaries and abstain from interfering in state affairs.
This statement is particularly significant because it highlights India’s precarious state-central power balance, which is a common topic in contemporary legal and political discourse.
Cloned Phone Information: Still Being Examined
The use of information gleaned from TASMAC employees’ cloned mobile phones continued even after the Supreme Court granted a stay on the investigation. The bench stated that this issue would be reviewed after the ED submits a formal reply, explaining the legal basis for collecting such data.
Political Reactions
The Supreme Court’s decision has sparked political debate. The ruling Dravida Munnetra Kazhagam (DMK) party welcomed the verdict, calling it a blow to the BJP-led Centre and its alleged misuse of central agencies to target opposition-led state governments.
In a public statement, DMK leader RS Bharathi endorsed the decision, saying it reaffirmed the judiciary’s responsibility to enforce the Constitution and defend state rights.
Next Actions
The Court has sent the ED a notice requesting an affidavit outlining the specific offense that justifies the PMLA investigation. The case is expected to return to the bench after this response is filed.
To sum up
This case raises significant constitutional and legal issues: Without a clear legal foundation, is it possible for a central agency to look into a state-run organization?This case also raises an important question: Where do we draw the line between a necessary investigation and overstepping boundaries?
As the Supreme Court continues to review the matter, its decision to temporarily halt the ED’s probe is a strong reminder that every investigation must follow due process and respect the balance of power between the Centre and the states, as laid out in the Constitution.
AUTHORED BY
Pragya Jakhar is a second-year Lovely Professional University student pursuing a B.A. LL.B. (Hons.). Human rights and constitutional law particularly interest her. Pragya likes to write about legal subjects and is committed to improving and making the legal system more accessible to all.
Throughout the years, she has written numerous articles that examine important legal issues, and her growing comprehension of the operation of the law, both in books and in practice, allows her to contribute perceptive opinions to academic and policy discussions. She enjoys keeping up with news and significant court decisions.