‘ED crossing all limits…violating federal structure’: SC stays money-laundering probe against TASMAC

The Supreme Court of India stayed the Enforcement Directorate’s (ED) money laundering probe against the Tamil Nadu State Marketing Corporation (TASMAC). The ruling on May 22, 2025, marked a significant moment in the ongoing tussle between federal investigative agencies and state authorities.

Background: The ED’s Investigation Into TASMAC

TASMAC, Tamil Nadu’s state-run liquor retailer, has faced repeated allegations of financial mismanagement. The ED launched a money laundering investigation under the Prevention of Money Laundering Act (PMLA). The probe relied on more than 40 FIRs registered between 2014 and 2021 by the state’s Directorate of Vigilance and Anti-Corruption.

The ED claimed that these FIRs revealed financial irregularities within TASMAC’s operations. The Tamil Nadu government countered this claim. It argued that the FIRs targeted individuals, not TASMAC itself. The state also said the FIRs lacked a predicate offence needed to justify an ED investigation under the PMLA.

Supreme Court’s Strong Rebuke

The Supreme Court granted a stay on the ED’s probe. The court criticized the agency for “crossing all limits” and misusing its powers. Justice B.R. Gavai led the bench and warned that the ED could not bypass India’s federal structure.

The court stated, “The ED’s powers are not absolute.” It emphasized that the federal structure must remain respected. The ruling temporarily blocked any further ED action related to the TASMAC probe. This decision offered the Tamil Nadu government much-needed relief.

A Federalism Clash

This case highlights a growing conflict between the Centre and the States. Critics often accuse central agencies like the ED and the CBI of targeting opposition-ruled states. Tamil Nadu’s government is led by the DMK, a party frequently at odds with the central BJP government.

Tamil Nadu’s lawyers argued that the ED overstepped its mandate. They said the agency used state-level FIRs to justify a federal probe without proper legal grounds. “The Centre is misusing its power under the pretext of investigation,” the state’s counsel told the court.

The Supreme Court echoed this view. Justice Gavai noted, “Federalism is a two-way street.” He urged cooperation based on respect, not coercion.

TASMAC’s Controversial Role

TASMAC plays a big role in Tamil Nadu’s revenue system. As the sole liquor distributor, it generates major income for the state. However, the corporation has faced criticism for opaque dealings and alleged corruption.

Reports over the years have pointed to irregularities in procurement, favoritism in contracts, and underhand dealings. While some cases led to arrests, most were dealt with by state authorities. The ED’s probe marked a sharp escalation, seen by some as the Centre’s attempt to control state affairs.

Political Reactions

Political leaders quickly reacted to the Supreme Court ruling. Tamil Nadu Chief Minister M.K. Stalin called it a “victory for federalism and constitutional values.”

“This judgment shows that no agency, however powerful, is above the law,” Stalin said. “Tamil Nadu won’t tolerate misuse of central power to intimidate our institutions.”

Opposition leaders from West Bengal, Kerala, and Telangana echoed these views. They noted that their states had faced similar issues with central agencies.

The BJP responded critically. Party spokespeople said the ED was simply doing its duty. They accused opposition parties of using “federalism” as a cover for corruption.

Wider Implications

Experts believe this ruling could limit the ED’s unchecked power. The agency faces rising criticism for selective targeting of opposition politicians and states.

Constitutional expert Faizan Mustafa called the judgment “a much-needed correction.” He added, “The judiciary reminds agencies that they must follow the Constitution. They cannot act without clear legal grounds.”

A senior advocate noted that this judgment could influence other ED cases lacking strong legal bases.

What Comes Next?

The Supreme Court’s stay is temporary. The court will soon examine whether the ED had legal grounds to investigate TASMAC using the FIRs. Meanwhile, Tamil Nadu can push back against what it calls politically motivated interference.

This ruling underscores the importance of accountability and respect for the federal system. Investigations must proceed with legal rigor and fairness, not political motives.

Conclusion

The Supreme Court’s stay on the ED’s TASMAC probe is more than a legal decision. It is a strong statement defending India’s federal character. Corruption must be tackled, but agencies cannot misuse their powers. The judiciary’s warning reminds everyone that federalism must be preserved.

As this case unfolds, the nation will watch closely how courts balance law enforcement with constitutional principles. For now, the Supreme Court has sent a clear message: federalism must not be trampled in the name of investigation.