ED violating federal structure of the Constitution, says SC

The Supreme Court on Thursday slammed the Enforcement Directorate (ED) for "crossing all limits" and totally "violating the federal structure of the Constitution".

A division bench comprising Chief Justice of India (CJI) BR Gavai and Augustine George Masih hauled up the agency for its raids at the headquarters of Tamil Nadu State Marketing Corporation (TASMAC). The SC stayed further proceedings by the federal agency which is carrying out a money laundering investigation in the matter. The bench issued a notice to ED on a plea filed by the Tamil Nadu government challenging the Madras High Court order vide which the high court permitted ED to proceed in the alleged ₹1,000 crore TASMAC scandal. "How can this offence be against the corporation? You may register against individuals... A criminal matter against the corporation? ED is crossing all limits... Where is the predicate offence? ED is totally violating the federal structure of the Constitution," the CJI verbally observed.

ED had initiated an investigation on the basis of multiple FIRs registered under the Prevention of Corruption Act related to various issues in the TASMAC. These FIRs fall into the categories of (i) TASMAC shops collecting excess amount than the actual MRP; (ii) Distillery companies offering kickbacks to the officials of TASMAC for supply orders; (iii) Senior officials of TASMAC allegedly indulging in collection of bribes from the Retail TASMAC Shops and for transfer and posting of TASMAC Staff, etc.

ED claimed that it has found evidence of manipulation in TASMAC's transport tender allocations. "A glaring issue is the mismatch between the KYC details of the applicant and the Demand Draft (DD), suggesting that the final successful bidder did not even obtain the requisite DD before the application deadline. Additionally, tenders were awarded despite having only a single applicant in the final bid," a senior official said.

ED sources further said that the agency's investigation has revealed that distilleries systematically inflated expenses and fabricated bogus purchases, particularly through bottle-making companies, to siphon off over Rs 1,000 crore in unaccounted cash. "These funds were then used for kickbacks to secure increased supply orders from TASMAC. Bottling companies played a critical role in this fraudulent scheme by inflating sales figures, allowing distilleries to route excess payments which were later withdrawn in cash and returned after deducting commissions. This collusion between distilleries and bottling companies was done through manipulation of financial records, concealed cash flows, and systematic evasion," the official quoted above added.



( Originally published on May 22, 2025 )