SC upheld PMLA only because of its safeguards; ED flouted them in raids: TASMAC to Madras High Court

The Enforcement Directorate's (ED) raids at the premises of the Tamil Nadu State Marketing Corporation (TASMAC) reflected a violation of various safeguards laid down under the Prevention of Money Laundering Act (PMLA), TASMAC told Madras High Court on Wednesday. .A Bench of Justices SM Subramaniam and K Rajasekar was hearing petitions filed by the State government and TASMAC challenging ED raids conducted from March 6 to March 8 on allegations of financial irregularities amounting to over ₹1,000 crore in TASMAC's operations..Representing the State-run liquor distributor, Senior Advocate Vikram Chaudhary argued that the PMLA's inbuilt safeguards were the primary grounds on which the Supreme Court of India upheld its validity in the 2022 judgment in Vijay Madanlal Choudhary v Union of India."I would say Supreme Court has begrudgingly upheld PMLA. Why do I say 'begrudgingly'? Because, they (Supreme Court judges) said, because of safeguards, we are upholding. Had there been no safeguards, they might have struck it down as ultra vires or unconstitutional," he said. .He went on to flag several alleged violations of such procedural safeguards by the ED during its March raids at TASMAC premises, including the failure to inform TASMAC of the grounds on which the raids were conducted.“ED's conduct in this case is more concealing than revealing. They are not saying from that day of search till today - what are the ‘reasons to believe’? They (ED) are not telling - what is the ECIR? For what purpose they came? Nothing has been disclosed even in counter. (But) the moment they carry out search, they issue a press note which is scathing. This is one issue to be examined. What is the business of this (ED) officer who does not disclose anything, says it is all confidential - but you give it to the press with accurate details? If this is not a tainted, malicious exercise, what is it? Transparency milord (is needed), sunlight is the best infectant," the senior lawyer said. .He added that the Supreme Court's July 2024 observations in the Arvind Kejriwal case about certain pre-conditions before PMLA arrests, are applicable to search and seizure operations as well."'Money laundering' has the same meaning under every proceeding under the Act, there is nothing that is non-serious. Arvind Kejriwal principles have to be applied to every proceeding, (not just arrest) under PMLA … Reasons recorded in writing (by ED to justify its actions) can't be out of thin air. It has to be credible. It can't be cherry-picked. It is not that ED will first carry out a search and then find material. Search is only when you already have material," he said. .He also contended that the ED seems to be forgetting that it does not have any power unless a criminal case involving an offence found in the schedule to PMLA has already been registered."You (ED) do not have carte blanche to enter anyone's property or residence, saying you are a 'person' under Section 2(1)(s) PMLA," he added. The ED's job is not to go and find an offence. The ED's powers only kick in when a crime is already registered and the ED has to examine whether the proceeds of such a crime have been laundered, Chaudhary added."That is the thin line they are forgetting … There is an umbilical connection (between ED and scheduled offences). It (ED) cannot go beyond travails of the scheduled offence," he said. He further contended that laws cannot be misused for political ends. "We have unscrupulous elements everywhere… It (laws) cannot be used to destabilise government. That's where the role of courts come in," the senior lawyer argued. Referring to the ED's alleged action of holding back TASMAC officials for over 60 hours to question them, he added,“This practice (of recording ED statements at unearthly hours) has to be curbed. This ED officer's notion that he is law unto himself has to be dispelled.".Additional Solicitor General (ASG) SV Raju appeared for the ED. Advocate General PS Raman represented the State. TASMAC's counsel is expected to continue arguments on April 15. .[Read Live Coverage]