Madras HC asks ED to hold off investigation against TASMAC

The Madras High Court, on Thursday, March 20, orally directed the Enforcement Directorate (ED) not to proceed with its investigation against the Tamil Nadu State Marketing Corporation (TASMAC) in an alleged money laundering case until the next hearing. A division bench comprising Justice MS Ramesh and Justice N Senthilkumar instructed the ED to submit a counter-affidavit in response to TASMAC’s petition, which challenges the recent searches conducted by the agency at its headquarters. The court adjourned the case to March 25, while orally saying that the ED should refrain from further action in the meantime.  

The Tamil Nadu government has also filed a petition questioning the ED’s authority to investigate money laundering cases within the state’s territorial limits without its consent. The state argued that such actions violated the principles of federalism and separation of powers. However, the court observed that the relief sought was broad and directed the state to refine its plea. Advocate General PS Raman assured the court that the necessary modifications would be made.  

Senior Advocate Vikram Chaudhri, representing TASMAC, raised concerns about the manner in which the ED conducted the search and seizure. Stating that searches must be carried out only when an officer of the rank of Deputy Director or above has "reason to believe" that an offence has been committed, he said that the reasons must be recorded in writing. He further added that the ED failed to do this. He also alleged that the ED’s actions amounted to an invasion of privacy, stating that officials entered the premises without due process, seized mobile phones, and took documents indiscriminately.

Additional Solicitor General ARL Sundaresan, appearing for the ED, denied these allegations and stated that employees were allowed to leave the premises. He maintained that the agency had sufficient material to justify its search and seizure operations.  

The court, however, questioned whether the ED had the authority to detain the entire office on the basis of evidence against only certain individuals. “You might have some inputs against a person or a group of persons. But can you withhold an entire office and all the staff under your control? Is it not an alarming situation?” the bench asked.  

In its plea, the Tamil Nadu government accused the ED of conducting a "roving enquiry" without substantial evidence. It argued that despite prolonged searches, the agency failed to recover any “proceeds of crime” under the PMLA, thus undermining the legitimacy of its actions. The search, it contended, was conducted in “blatant disregard” of the fundamental rights of TASMAC employees, including their right to life, liberty, and dignity.