Madras High Court Dismisses Pleas Challenging ED Search Of TASMAC Headquarters

A division bench of Justice SM Subramaniam and Justice K Rajasekar while pronouncing the verdict observed that in money laundering cases, a few inconvenience in the procedure when equated against the economic justice, the latter prevails.

Also rejecting State's contention that the searches were politically motivated, in view of the upcoming assembly elections, the Court said it cannot examine such allegations.

"Not duty of court of law...Right place to place this submission is before the people. Eventually what matters most is will of the people," Court said and permitted ED to proceed with its enquiry.

The court had reserved orders on Monday after the marathon hearings comprising of arguments advanced by Senior Advocate Vikram Chaudhary, Senior Advocate Vikas Singh and Advocate General PS Raman (for TASMAC), and ASG SV Raju, and ED Special Prosecutor N Ramesh (for the ED).

Initially, the bench of Justice MS Ramesh and Justice N Senthilkumar had taken up the petitions. Though the bench had orally asked ED to halt the probe, it recused itself at the next hearing. Following this, the matter was posted before the present bench.

In the meanwhile, the State and TASMAC had also approached the Supreme Court seeking to transfer the pleas from the Madras High Court. However, since the Supreme Court was not inclined to grant the relief, these transfer petitions were withdrawn and the matter continued to be heard by the Madras High Court. The High Court had also expressed its displeasure at being kept in the dark about the transfer petitions and criticised the State and TASMAC for disrespecting the court.

Criticising the ED action, TASMAC accused the ED of conducting a roving and fishing inquiry without any materials. It was contended that the authorities under the Act could not prosecute someone on the notion or assumption that a scheduled offence has been conducted. TASMAC also contended that the ED hac concealed data by not providing the 'reasons to believe' which was essential under the Act. It was submitted that ED's searches at TASMAC headquarters seemed to be to get etails of the scheduled offence. TASMAC added that ED could have also chosen to seek the assistance of the officers under Section 54 of the Act but the agency chose to search the premises under Section 17 instead.

TASMAC also argued that the action was in connection with the upcoming Tamil Nadu Elections, as ED wanted to tarnish the image of people involved in the election. TASMAC stressed that ED's powers were circumscribed by law as it could conduct search and seizure only upon the existence of a scheduled offence, which was a pre-requisite under the Act. It was argued that the ED did not have original jurisdiction to investigate a case and its jurisdiction would start only if an offence, which is a scheduled offence under the PMLA, is committed. Singh emphasised that the ED could not start the investigation in the “hope” that there may be an FIR.

On the other hand, ED argued that the search at the TASMAC head office had only taken place due to various FIRs regarding involvement of TASMAC officials in taking bribes, inflating marked prices on liqour bottles and manipulating postings and transfers of employees had surfaced. It was pointed out that these complaints had been registered by the state police itself. It was argued that that suspicion alone can be used as a ground for search and that the court did not have the authority to intervene at this stage or to question the location for search chosen by the agency.

The ASG also submitted that TASMAC had raised the allegations of harassment for the first time in the petitions. Raju said that the Panchnama, which was accepted and signed by officials of TASMAC, clearly states that the officers were allowed to go home at night and that the search proceedings were paused during the night.

ED submitted that the petitioners had tried to bypass the statutory framework by approaching the court directly instead of going to the Adjudicating authority. He said that it was for the adjudicating authority to decide if the information of the search was immediately forwarded to the adjudicating authority, within a reasonable time under Section 17(2) of PMLA. He added that in the present case, the delay was cogent and there was a reasonable explanation.

Counsel for the Petitioners: Senior Advocate Mr.Vikram Chaudhri and Senior Advocate Vikas Singh Assisted by Mr.Stalin Abhimanyu Additional Government Pleader, Mr.P.S.Raman Advocate General Assisted by Mr.Edwin Prabhakar State Government Pleader and Mrs.E.Ranganayaki Additional Government Pleader

Counsel for the Respondents: Mr.S.V.Raju Additional Solicitor General of India Assisted by Mr.Zoeb Hussain and Mr.AR.L.Sundaresan Additional Solicitor General of India Assisted by Mr.N.Ramesh Special Public Prosecutor (ED)

Case Title: Tamil Nadu State Marketing Corporation Ltd TASMAC v. Directorate of Enforcement

Citation: 2025 LiveLaw (Mad) 147

Case No: WP 10348/ 2025