Don’t you know? It’s buy one get one free.” Late evening, December 2021. Over two dozen hands, each clutching a Rs 500 note, arise out of an incomprehensible coil of arms, competing for the little window on the liquor store counter. They swat at each other, are balled into fists to intimidate, or flail around in aimless desperation. From the fracas of cusses and pleas, the words stand out like a beacon. A silence settles over the crowd, as if to acknowledge the gravity of the spoken word. Then, the din returns.
The Delhi government, in November 2021, rolled out the much-hyped liquor excise policy; a promise to completely revamp the liquor trade in the Capital.
The city was boozing. As per official estimates, liquor shops in the city sold 24.50 million litres in February 22, almost double the average monthly sales of 13.2 million litres in 2019-20. And why was that? Well, liquor stores in the city offered a wide range of discounts; prices slashed by 35% in some instances, while some stores handed out buy-one-get-one offers on certain brands.
And then, it was gone. The policy was withdrawn eight months after it came into effect, amid allegations of corruption and ‘favouritism’ in granting liquor licenses. The CBI (Central Bureau of Investigation) registered a case. The ED (Enforcement Directorate) soon followed.
As the investigation continued, leaders of the ruling AAP dispensation found themselves more and more under the agency radar. Erstwhile Deputy Chief Minister Manish Sisodia was the first to be arrested in the spring of 2023. Senior leader and Rajya Sabha MP Sanjay Singh went next, in the fall of the same year.
And now, as another spring rolls into the heat of the Lok Sabha polls, a sitting Chief Minister (the very first), the alleged “kingpin”, has been arrested by the central agency in search of the elusive “money trail” of the mythologised Delhi liquor ‘scam’. However, what transpired in the past three years, whether on the investigation front or the politics that envelops it, warrants a deeper look.
A ‘brand’ new excise policy
It all started when the Delhi government constituted an expert panel on September 4, 2020 to augment the state excise duty, simplify liquor pricing procedures, check malpractices and evasion of duty in liquor trade, ensure equitable access to liquor supply and to transform foundations of liquor trade commensurate to the changing nature of the Capital.
Within a month, the expert committee submitted its report to the government and it was placed in the public domain on the last day of 2020 to invite comments from stakeholders and general public. More than 14,000 comments were received and the report was submitted before a Group of Ministers (GoM). In March, 2021, the Cabinet directed the department to implement the report of GoM and accordingly prepare the Excise Policy 2021-22.
The new policy, touted as a way to boost the city’s treasury, and to revolutionise the consumer experience by replacing existing liquor vends with swanky liquor stores, came into effect on November 17, while the deadly Delta variant of Covid-19 still raged havoc. Under this policy, retail licences were given to private bidders for 849 vends across the city, which was divided into 32 zones.
Some salient reforms came into place. Bars in hotels, clubs, restaurants in the Capital were allowed to serve Indian and foreign liquors in any area within their licensed premises, including terraces or balconies (as long as it was away from public view), while being allowed to operate till 3 am. The licensees were free to hand out rebates/discounts/concessions on the Maximum Retail Price (MRP) of liquor fixed by the excise commissioner. Thus, liquor prices fell. What was the problem then?
A bureaucrat’s report
Chief Secretary Naresh Kumar submitted a report before L-G VK Saxena in July 2022, flagging potential procedural irregularities in the formulation of the excise policy.The top bureaucrat accused esrtwhile excise minister Manish Sisodia of arbitrary and unilateral decisions, contending that the implementation of the new policy led to financial losses for the government while certain individuals (among them leaders and ministers of the AAP) allegedly received kickbacks (bribes). The Chief Secretary’s report pointed out prima facie violations of the GNCTD (Government of National Capital Territory of Delhi) Act 1991, Transaction of Business Rules (ToBR) 1993, Delhi Excise Act 2009 and Delhi Excise Rules 2010.
With the excise department headed by Sisodia then, allegations of financial ‘quid pro quo’ (illicit exchanges) around the excise policy were leveled against him. This newspaper was the first to report the ‘irregularities’ surrounding the excise policy that allegedly sought to benefit a select few alcohol merchants, in June 2022. A month later, L-G Saxena recommended a CBI probe into the matter.
The scent of ‘scam’
August 2022. The CBI begins probe; conducts a raid at the residence of the then Deputy Chief Minister Manish Sisodia and three others. Based on the findings, the ED files a case of money laundering linked to the liquor policy on August 22, 2022. The case took Sisodia behind bars in February 2023. Subsequently, the ED took it upon itself to trace the money trail arising from the alleged mal-transactions linked to the policy. In early March, the ED arrested Sisodia from his lodge in Tihar Jail in a PMLA (Prevention of Money Laundering) case.
Following the CBI’s identification of Sisodia and 14 others, including AAP communications in-charge Vijay Nair, in its FIR, the ED claimed in court in March 2023, that the proceeds of crime exceeded Rs 292 crore and emphasised the need to establish the modus operandi (mode of operation) behind the alleged financial irregularities.
What financial watchdogs said
The CBI had registered the case under Section 120B (criminal conspiracy) of the IPC and Section 7 of the Prevention of Corruption Act. As the mentioned sections were scheduled offences under PMLA, the ED initiated it investigation by recording an Enforcement Case Information Report. The ED claimed its investigation found a number of “cartels” which were formed in the Delhi liquor business with the implementation of the Excise Policy 2021-22. One group effectively came to control manufacturing, wholesale, as well as the retail entities in the liquor business. As per the ED, each cartel consisted of multiple entities, including proxy owners, sleeping partners, and hidden investments.
Investigation indicated that the brains behind the novel excise policy deliberately increased the profit margin for wholesalers to 12%, so that a portion of it, allegedly half of the margin, could be deviated as kickbacks, the ED said. Even retailers were given a profit margin of 185%, the agency added, claiming it was done to create a continuous stream of illegal funds for the AAP in form of bribes from wholesalers. The conspiracy was hatched by seasoned political minds, Arvind Kejriwal, Manish Sisodia, and K Kavitha among them, the ED asserted, adding that the accused South Group, comprising businessmen, Sarath Reddy, Magunta Srinivasulu Reddy, and K Kavitha, got nine zones out of the 32 in Delhi under the new excise policy.
The ED has conducted searches at 245 locations across the country since the registration of a case in 2022 and has arrested 16 people allegedly linked to the ‘scam’. It has filed a total of six charge sheets in the case till date, attaching assets worth over Rs 128 crore.
Accused turn Approvers
The ED, while seeking custody of Kavitha, submitted before the Rouse Avenue Court that she is one of the “key conspirators and beneficiaries” of the alleged scam and conspired with top AAP leaders, including Kejriwal and Sisodia, providing them kickbacks amounting to Rs 100 crore, receiving in return undue favours from the formulation and implementation of the Delhi excise policy 21-22. This, ED submitted, was revealed when other accused, members of ‘South Group’, Sarath Reddy, Raghav Magunta, and Magunta Srinivasulu Reddy turned approvers. According to a submission in court, Andhra Congress MP, Magunta Srinivasulu Reddy said that in March 2021, he read in a Delhi newspaper that the government was privatising liquor trade, pursuant to which, he met CM Arvind Kejriwal on March 16, 2021.
Srinivasulu told ED that he had met Kavitha on March 21 that year who told him she had spoken to Kejriwal, asking Srinivasulu to arrange Rs 50 crore. “Since I’m occupied with my duties as MP, I asked my son Raghav Magunta to deal with Kavitha... later I came to know that my son had paid Rs 25 crore to her (Kavitha’s) associate,” the remand application read. Raghav Magunta’s statement was also recorded by the ED under Section 50 of PMLA in July 2023, where he claimed that Kejriwal invited his father Srinivasulu Reddy to Delhi and said he will support him in the formulation of the new excise policy. “In return, he wanted a sum of money to fund the upcoming elections in Punjab and Goa. He asked for Rs 100 crore for the elections,” the ED’s remand application read.
Why an Approver bought electoral bonds?
Hyderabad-based businessman Sarath Chandra Reddy was arrested by the ED in November 2022. He turned approver in the case in June 2023, after he was granted bail on medical grounds. The ED didn’t oppose the bail. In his statement to the sleuths in April 2023, Reddy said he was wanted to invest in Delhi and expressed this desire to Arun Pillai (a key member of the South Group). Pillai directed him to Vijay Nair, AAP’s erstwhile communications in-charge and close associate of Kejriwal. As per the ED, Nair, who didn’t hold any position in the Delhi excise Department, “acted as a middleman on behalf of top leaders (specifically Arvind Kejriwal) for getting kickbacks from various stakeholders.”
Interestingly, after the Election Commission (ECI) released the unique numbers associated with each electoral bond, pursuant to the SBI (State Bank of India) disclosure following a dressing-down from the Supreme Court, it has come to the fore that the firm of accused Sarath Reddy, Aurobindo Pharma, donated electoral bonds worth Rs 5 crore to the BJP in November 2022, only five days after he was arrested. A year later, in November 2023, the same firm where Sarath Reddy was a director, donated Rs 25 crore to the saffron camp. Aurobindo Pharma is also connected to two other companies, who also, on the same day, separately donated Rs 10 and Rs 15 crore to the BJP via electoral bonds. The data on electoral bonds also indicate that 66% of these bonds were directed towards the BJP. 29% was cashed by the Bharat Rashtra Samithi while the remaining went to the Telugu Desam Party.
Why Kejriwal though?
Chief Minister Arvind Kejriwal was arrested from his residence on March 22, hours after the Delhi High Court denied him protection against “coercive action” by the ED in the money laundering case. The ED claims that Kejriwal had been intrinsically involved in the entire conspiracy and proceeds of the crime, to the tune of Rs 45 crore, were used to fund AAP’s election campaign in Goa. “The policy was drafted considering the favours to be granted to the South Group and was formulated in collusion with Vijay Nair, Manish Sisodia and members-representatives of the South Group,” the ED said in its remand application in Rouse Avenue Court.
According to the ED, Kejriwal’s role in formulation of the policy was evident from the statement of two people, C Arvind, (erstwhile secretary of Manish Sisodia) and Buchi Babu (accountant associated to K Kavitha). C Arvind said he was handed the draft GoM report by Sisodia at Kejriwal’s residence in presence of former minister Satyendra Jain. The document mentioned that wholesale licenses should be granted to private players and profit margin was to be fixed at 12%. As per ED, these points were never discussed in GoM meetings. Arvind prepared a draft and handed it over to former Deputy CM Sisodia. Later it was submitted before Cabinet. Meanwhile, certain Whatsapp messages retrieved from Buchi Babu’s cell phone revealed that certain provisions of the excise policy were shared with him two days before it was even finalised by the council of ministers. Babu revealed that these excerpts were sent to him by Vijay Nair.
Another “direct role” of Kejriwal, the ED claimed, was kickbacks received from the South Group in exchange of awarding favours to them in the formulation and implementation of the excise policy. This became evident from the statements of South Group members-turned-approvers Sarath Reddy, Raghav Magunta, and Magunta Srinivasulu Reddy. Kejriwal’s association with Vijay Nair too was flagged by the financial watchdogs, as crucial in the alleged irregularities. Notably, as per the ED, Nair’s association with Kejriwal enabled him to “act as a middleman” in the manipulation of the excise policy and thus ensure kickbacks from various stakeholders.
The ED probe also linked Kejriwal to the case, for alleged use of the proceeds of crime. The probe agency in its remand application stated that statements from various people engaged in AAP’s election campaign in Goa revealed that cash payments were made to them for their work as survey workers, area and assembly managers, etc. “These people have revealed that these payments were given to them in cash and were managed by Chanpreet. These people, and activities related to the election campaign, were overall managed by Vijay Nair and Durgesh Pathak, AAP MLA in Delhi,” the application read. The ED stated that this was also corroborated by one of the candidates of AAP in the 2022 Goa elections who received funds for election expenses in cash from the AAP volunteers in Goa.
