Centre-State Relations

The Enforcement Directorate (ED) conducted raids on TASMAC, a Tamil Nadu state-run liquor body, under the PMLA, prompting the state government to allege federal overreach. The Supreme Court intervened, staying the proceedings and cautioning the ED against violating constitutional federalism. The case underscores tensions between central investigative powers and state autonomy.

Enforcement Directorate: Role and Powers:

• ED enforces PMLA, 2002, empowered to probe financial crimes including money laundering and related corruption.
• The agency has jurisdiction over crimes with money laundering components but must operate within constitutional limits, especially regarding state subjects.

Federalism and Constitutional Provisions:

• Federalism in India is based on the distribution of powers between the Union and States via the Seventh Schedule of the Constitution.
• Liquor trade and regulation fall under the State List (Entry 51); hence, governance of TASMAC is primarily a state subject.
• Article 246(3): Parliament cannot legislate on State List subjects except in specified situations.
• Article 257 restricts the Union from interfering in State governance.
• Supreme Court’s role: Protecting federalism by checking overreach by Union agencies like ED.

Key Issues Highlighted:

• Jurisdictional Overreach: ED’s probe into a state PSU raises questions on the extent of its powers, especially when FIRs are filed against individuals, not the corporation.
• Privacy and Data Protection: Seizure and cloning of phones by ED bring forward concerns about violation of privacy rights under Article 21, which includes the Right to Privacy as recognized by the Supreme Court in the landmark Puttaswamy case (2017).
• Political Neutrality: The timing and conduct of probes into state governments’ affairs can affect democratic federalism and may reflect political motives, undermining trust in central agencies.
• Legal Ambiguity: Lack of clear legal boundaries on ED’s authority over state PSUs can lead to institutional conflicts.

Judicial Checks and Balances:

• Supreme Court’s intervention demonstrates the judiciary’s crucial role in:
• Upholding the constitutional federal structure.
• Protecting individual rights, including privacy.
• Ensuring investigative agencies act within the ambit of law.
• Past precedents such as Godavarman case (1996) reflect the judiciary’s role in environmental and federal issues, similarly applicable here for institutional balance.

Governance and Accountability Implications:

• Central investigative agencies must balance effective anti-corruption enforcement with respect for constitutional boundaries.
• Institutional accountability is essential to prevent misuse of power.
• Enhanced transparency and cooperation between Union and States are critical for seamless governance.

Way Forward:

• Legislative reforms to clearly define ED’s jurisdiction limits concerning state government entities and PSUs.
• Establishment of inter-agency protocols promoting coordination between State governments and ED.
• Strengthening the Right to Privacy safeguards in investigation procedures, aligned with Supreme Court guidelines.
• Encouraging judicial oversight to safeguard federalism and prevent arbitrary use of investigative powers.
• Promoting cooperative federalism through dialogue and trust-building mechanisms between Centre and States.