The Madras High Court on Thursday verbally told the Enforcement Directorate to put on hold its actions related to searches that it conducted at the offices of the Tamil Nadu State Marketing Corporation, or Tasmac, earlier this month, The Indian Express reported.

A bench of Justices MS Ramesh and N Senthilkumar, however, stopped short of ordering an interim stay on the investigation.

Tasmac is a government-owned company that has a monopoly over the wholesale and retail sales of alcoholic beverages in Tamil Nadu.

The ED has alleged that Tasmac is at the centre of a Rs 1,000-crore corruption network involving state officials, liquor distilleries and bottling companies. It based its investigation on first information reports filed under the Prevention of Money Laundering Act.

The agency on March 6 searched several locations across Tamil Nadu, including the Tasmac headquarters, in connection with the case.

Tasmac alleged that during the searches, Enforcement Directorate officials violated the rights of its employees by seizing their mobile phones, and claimed that some employees were detained for inquiry for 60 hours, Bar and Bench reported. The state-owned company claimed that ED officials did so without producing summons and without explaining the reasons for the searches to the employees.

The Enforcement Directorate, however, denied that employees were stopped from going back home.

Nevertheless, the High Court expressed concern about Tasmac’s allegations. "Is it not alarming situation?” the bench asked. “We can understand if you have specific input. But can you keep entire office under your control for hours together.”

The court told the ED to produce copies of the case that it registered, the first information report based on which it began its investigation, and any other material that it relied on, according to Bar and Bench. The case will be heard again on March 25.

During the hearing, Advocate General PS Raman, representing the Tamil Nadu government, told the court that the case at hand was not limited to Tasmac, but involved the broader questions of the ED’s jurisdiction, and of separation of powers between the Centre and states.

The counsel for Tasmac also questioned whether the ED could enter its premises without authorisation.

“Prevention of Money Laundering Act has stipulated where there is an inquiry, some standards are to be adopted,” the counsel said, according to Bar and Bench. “You can't enter the premises unless the officer is the director or authorised by director.”

The allegations

According to the agency, the investigation revealed manipulation in the tender process, with transport contracts worth Rs 100 crore allegedly awarded to bidders who failed to meet the eligibility criteria.

The ED alleged that leading liquor manufacturers – SNJ, Kals, Accord, SAIFL and Shiva Distillery – along with bottling entities such as Devi Bottles, Crystal Bottles and GLR holding, engaged in a “well-orchestrated scheme of unaccounted cash generation and illicit payments”.

The agency alleged that distilleries inflated expenses and fabricated purchase orders through bottle-making companies to siphon off more than Rs 1,000 crore in unaccounted cash. The funds were allegedly then used for kickbacks to secure increased supply orders from Tasmac.

The ED also alleged that Tasmac shops routinely overcharged customers by Rs 10 to Rs 30 per bottle.

The ruling Dravida Munnetra Kazhagam party has accused the Centre of misusing investigative agencies for political vendetta. Tamil Nadu Home Secretary Dheeraj Kumar alleged that the ED’s sole intention was to “malign and tarnish the reputation of Tasmac and the state government in the eyes of the public by making baseless allegations and misrepresenting facts, The Indian Express reported.

The Bharatiya Janata Party has demanded a thorough probe into the corruption allegations.

Several BJP leaders in Tamil Nadu, including the Hindutva party’s state chief K Annamalai and former Telangana Governor Tamilisai Soundararajan, were detained by the Chennai Police on Monday ahead of a protest against the alleged scam.