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The Supreme Court on Thursday (May 22) stayed proceedings in the Enforcement Directorate’s (ED’s) money-laundering investigation into government-run liquor retailer Tamil Nadu State Marketing Corporation (TASMAC), saying that the central agency was “crossing all limits” and “violating the federal structure”.
A two-judge Bench of Chief Justice of India (CJI) B R Gavai and Justice A G Masih was hearing the Tamil Nadu government’s plea challenging the ED searches at the TASMAC headquarters.
“How can [there be] an offence against [the] corporation?… You may register against individuals. How corporation in criminal matter?” CJI Gavai asked Additional Solicitor General S V Raju, who appeared for the ED. “You are totally violating the federal structure… The ED is crossing all limits,” the CJI said.
TASMAC is a state monopoly that operates about 7,000 liquor outlets in Tamil Nadu. The ED is investigating alleged financial irregularities in its functioning. Raju told the SC that there had been a fraud of Rs 1,000 crore involving politicians. Between March 6 and 8, the ED carried out searches at 20 locations, including the TASMAC headquarters in Chennai.
The ED, Chennai, began an investigation based on 41 FIRs registered by the Tamil Nadu Vigilance Department under sections of the Prevention of Corruption Act, 1988 from 2014 onward, over allegations of corruption in TASMAC.
These FIRs were registered against individuals on a range of allegations including overcharging at TASMAC shops, kickbacks being offered by distillers to TASMAC officials for supplying orders, and bribery involving senior TASMAC officials and retail outlets, and in the transfer and posting of staff, an ED source said.
The searches in March, carried out under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA), “led to the seizure of incriminating data related to transfers and postings, transport tender, bar licence tender, indent orders favouring a few distillery companies, excess charge of Rs 10 to Rs 30 per bottle by the TASMAC outlets involving the officials of TASMAC etc.,” the source said.
The ED also claims to have identified the “role of employees/ associates related to TASMAC, distillery and bottle-making companies along with other key associates in the illicit affairs related to TASMAC”.
The ED claims to have found manipulation in TASMAC’s transport tender allocations. “There is a 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,” another source said.
The ED has alleged irregularities in the tender process, including the award of tenders with only a single applicant in the final bid. “In the allocation of bar licence tenders by TASMAC, evidence relating to manipulation of tender conditions were found… Applicants without GST/ PAN numbers and proper KYC documentation were awarded tenders,” the source said.
Sources said the ED’s investigations have revealed evidence of large-scale financial fraud involving five distillery companies and three bottling entities, and a scheme for the generation of unaccounted cash and illicit payments.
Investigators are learnt to have found that distilleries systematically inflated expenses and fabricated bogus purchases through bottle-making companies to siphon off more than 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. The collusion between distilleries and bottling companies was done through manipulation of financial records, concealed cash flows, and systematic evasion,” a source said.
The ED’s TASMAC investigation is heating up as Tamil Nadu goes to Assembly elections in less than a year, and the political battle between the BJP and DMK intensifies.
Chief Minister M K Stalin has been attacking the BJP and the central government for allegedly seeking to impose Hindi on Tamil Nadu, and use the proposed delimitation of constituencies to reduce the importance of the state in national politics.
The BJP, on the other hand, has been protesting alleged corruption in the state on the DMK’s watch.
