Chennai: In a decisive blow to the Tamil Nadu’s DMK government’s efforts to impede the investigation, a division bench of the Madras High Court has firmly upheld the Enforcement Directorate’s (ED) authority to continue its probe into alleged irregularities within the Tamil Nadu State Marketing Corporation (TASMAC), the state-run liquor retailer. The court dismissed a batch of petitions filed by the State Government and TASMAC itself, challenging the legality and motives behind the ED’s recent searches at the TASMAC headquarters on March 6 and March 8.
The ruling, delivered on Tuesday, April 22, by a bench comprising Justices SM Subramaniam and K Rajasekar, effectively clears the path for the ED to delve deeper into a suspected Rs 1,000 crore scam within the state’s lucrative liquor business. The court unequivocally rejected arguments of political bias leveled against the central agency, asserting that the fight against money laundering, a serious crime with national ramifications, cannot be obstructed by claims of minor inconveniences caused during the investigation.
In a strongly worded order, the bench emphasised the gravity of money laundering, stating, “the offence of money laundering is a serious crime that affects the whole country.” Addressing the complaints about alleged harassment of TASMAC employees during the raids, the court deemed them insufficient grounds to halt such a crucial investigation. “Just because some employees were troubled during the raids is not enough reason to stop such investigations. The offence of money laundering is a crime against people of nation,” the judgment stated, further adding that any “employees sent home at odd hours” was “highly disproportionate” when weighed against the larger objective of ensuring economic justice.
The court firmly asserted that conducting searches is a necessary step in uncovering the truth behind allegations of financial wrongdoing, stating that the ED’s actions were “conducted in benefit of nation.” It further reasoned that “a few inconveniences, when equated against (economic justice)… legislations such as PMLA serve this purpose (economic justice) …” The bench explicitly stated that it was “Not duty of court of law” to examine political motives behind the investigation, suggesting that such arguments should be placed before the public, as “Eventually what matters most is will of the people”.
The ED initiated its investigation based on a significant number of serious complaints detailed in approximately 41 to 46 First Information Reports (FIRs) registered over several years by either the Tamil Nadu government or TASMAC itself. These FIRs contained allegations indicative of potential money laundering activities, prompting the central agency to step in.
Justice SM Subramaniam, who authored the 66-page order, addressed the core contention of the petitions, stating, “The only question for consideration is, Whether the preconditions set out in Section 17 has been complied with or not?” He noted the ED’s counter-submission, which detailed that the investigation against TASMAC was launched based on multiple FIRs registered across Tamil Nadu concerning “malpractice of corruption, against many officers/staff/employees of TASMAC for the offences committed by them under Prevention of Corruption Act which is a scheduled offence under the schedule appended to PMLA.”
The court underscored the seriousness of the initial allegations against TASMAC, stating, “It is without doubt that the prima facie allegations and complaints against the Tamil Nadu State Marketing Corporation (TASMAC) are grave in nature. It definitely warrants deeper investigation.” The bench firmly rejected the challenge to the initial searches, emphasising that “To find out the truthfulness in the allegations, the primary step is to conduct a search, gathering evidence available and then the natural course of investigation shall progress based on the materials gathered.”
It further elaborated that if evidence is found, the investigation would gain momentum, and if not, the agency would drop further action. The court found it incredulous that the State Government would file a petition arguing against a search in a government company when the allegations were so serious, questioning, “How can a State Government would file a writ petition stating that an Investigating Agency cannot enter and conduct a search in a Government Company, that too when allegations are so serious in nature’’.
The judgment also highlighted the fact that “In fact, it is the TN DVAC which has registered multiple First Information Reports (F.I.Rs) regarding malpractices of corruption ongoing in TASMAC,” further weakening the argument that the ED’s probe was politically motivated.
Addressing the practicalities of conducting a surprise search in a state-owned entity, the bench questioned, “How can a raid or search be conducted in a State Government owned company in a surprise manner if permission is to be obtained beforehand? How can a search by an investigating agency even hold good if such absurd conditions are made? It is against basic principles of criminal justice system”.
The court clarified the legal framework concerning searches under the Prevention of Money Laundering Act (PMLA), stating, “It is only after a search is conducted that credible evidence be gathered to establish the offence of money laundering. If the DoE has all the relevant material evidence even before conducting the search then there is no requirement to conduct such search operation at all. Hence the requirement of actual material evidence before forming reasons to believe as contemplated under Section 19 cannot be accorded to Section 17 of PMLA… . Section 17 (a) explicitly states that an authorised officer may enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept.”
Dismissing the government’s claims of harassment of its officials, the court pointedly asked, “How does the Government assume that their officials were harassed, if at all, in the absence of any internal enquiry or complaints from the concerned officials…?” The bench further noted that the Panchnama (record of search proceedings) itself stated that “the search was conducted in a peaceful manner and no damage to the person or property was caused during the course of search. No coercion, threat, inducement, promise or any other external influence was used against the inmates”. Based on this, the court found “no procedural infirmity” in the ED’s actions, stating that “the validity of the panchnama is not a matter of dispute in the current petition”.
Additional Solicitor General SV Raju, representing the ED, corroborated this, stating that the Panchnama, which was accepted and signed by TASMAC officials, clearly indicated that officers were permitted to go home at night and that the search proceedings were paused during the night.
The case had a somewhat turbulent procedural history. Initially, a division bench comprising Justices MS Ramesh and Justice N Senthilkumar had taken up the petitions and orally requested the ED to halt its probe. However, in the subsequent hearing, this bench recused itself, leading to the assignment of the case to the current bench.
Adding another layer of complexity, the Tamil Nadu State and TASMAC had also approached the Supreme Court seeking a transfer of the pleas from the Madras High Court. However, the Apex Court refused to grant this relief, and the transfer petitions were subsequently withdrawn. This allowed the Madras High Court to continue hearing the matter, with the bench also expressing its displeasure at not being informed about the transfer petitions filed in the Supreme Court.
The Madras High Court’s strong order paves the way for the ED to proceed unhindered in its investigation into the alleged multi-crore scam within TASMAC. This ruling represents a significant setback for the DMK government, which had actively sought to stall the central agency’s probe.
