On Friday, 10th March 2023, a Delhi court remanded former deputy chief minister of Delhi Manish Sisodia to Enforcement Directorate (ED) custody till 17th March 2023. The federal investigative agency, which is probing the money laundering angle in the excise policy scam, in its remand notice presented before the court while seeking the custody of the AAP leader on March 10, revealed that Sisodia tweaked the excise policy according to the whims of the ‘South Group‘ in exchange for an upfront advance kickback of Rs 100 crore.
The money was allegedly given to one Vijay Nair, the communication incharge of the Aam Aadmi Party (AAP), at a South Delhi hotel by representatives of the ‘South Group’.
The policy, which was later scrapped, was designed to provide undue benefits to ‘South Group’, the liquor cartel, comprising of Magunta Srinivasulu Reddy, a YSR Congress MP from Ongole constituency in Andhra Pradesh; his son Magunta Raghava Reddy; Sarath Reddy, a non-executive director, of Aurobindo Pharma; and K. Kavitha, the daughter of Telangana Chief Minister K. Chandrasekhar Rao.
“Proceeds of the crime of at least Rs 292.8 crore (calculated as on date which is likely to increase during the course of the investigation) is attributable in respect of the role of Manish Sisodia…”, the ED said in its remand papers while seeking his custody.
The ED further said that Sisodia, “conspired with other persons and was actively involved in the formation of faulty policy against kickbacks…Sisodia has played role in the generation, transfer, and concealment of the proceeds of crime and projected the same as untainted.”
The ED claimed in a small tabular column that while Rs 100 crore was received as kickbacks from the liquor cartel’s ‘South Group,’ an accused company in the case, Indospirits, made a profit of Rs 192.8 crore from the proceeds of crime generated by the irregularities in the excise policy 2021-22.
The remand notice further revealed that Sisodia, on the recommendation of the ‘South Group’, changed the profit for wholesalers from 5% to 12% besides providing for higher turnover eligibility.
How it all began
In 2020, an expert committee was constituted to make suggestions for the new excise policy. The Expert Committee was chaired by Ravi Dhawan, the then Excise Commissioner. The other members were Deputy Commissioner (Excise) and Additional Commissioner (Trade & Taxes). The committee submitted the report with its recommendations on 13th October 2020.
The committee recommended:
- Separating the manufacturer from wholesale operations and handing it to one government entity which will handle the entire wholesale operation in Delhi.
- Individual-run private retail liquor vends were to be opened through a lottery system.
- The limited entity model in retail (wherein a limited number of entities of a pre-defined net worth and solvency are allocated retail licenses through a bidding process) was rejected as the same would lead to cartelization.
These recommendations were not to the liking of Manish Sisodia so the mechanism of GoM was adopted to change the recommendations of the expert committee. The GoM constituted Manish Sisodia, Satyendar Jain (ex-Delhi Health Minister, currently in jail in connection with a money laundering case) and Kailash Gehlot (Minister of Transport).
The Enforcement Department in the remand notice said that the GoM arbitrarily prepared the draft and placed it before the council of Ministers in March 2021 and directed the excise department to implement the report and prepare the Excise police 2020-2021.
However, during the investigation, it was discovered that, contrary to the recommendations made in the GoM report, a number of cartels were formed in the Delhi liquor business during the implementation of the Delhi Excise Policy 2021-22, in which one group/person effectively controlled manufacturing, wholesale, and retail entities in the liquor business, and the majority of the manufacturers, wholesalers (L1), and Retail zone licensees (L7) were involved. Each cartel was made up of a large number of entities, people, and so on, including proxy ownership, sleeping partners, concealed investments, and so on.
“Moreover, public opinion/comments were not sought on the report of the GoM that was placed on March 22, 2021, even though the GoM revamped the excise policy framework completely and had a considerable time gap (3 months) between when the policy was finalised and uploaded on July 5, 2021, which exposes the mala fide intention and conspiracy of Sisodia and reflects that he was seeking the public comments and suggestions as merely an eyewash,” the ED claimed.
Manish Sisodia’s role in the creation and implementation of Excise policy to permit unlawful earnings to specific parties in exchange for kickbacks
“Manish Sisodia got the policy formulated and implemented in a way so as to allow illegal gains to certain persons/entities against kickbacks. He took various decisions as a part of GoM and as the Excise Minister which ultimately resulted in huge loss to the exchequer and illegal gains to specific persons/entities against kickbacks,” the ED remand notice read, as it presented a table highlighting how the recommendations made by the expert committee was not taken into consideration by Manish Sisodia in the GoM report.
Manish Sisodia went against the expert committee’s recommendations and changed the profit margin for wholesalers to 12% from the previous profit margin of 5%.
“The deviation from the Expert committee is not a simple policy matter but is surrounded by conspiracy, kickbacks and undue favours. The proposed deviations were to give undue/illegal benefits to the certain manufacturers/wholesalers/retailers as a result of conspiracy against kickbacks,” said ED highlighting some of the grave irregularities committed in the formulation and execution/implementation of Excise Policy found during the course of investigation most of which were against the recommendations of Expert Committee
- Giving wholesale business to private entities
- Allowing huge benefits to retailers
- Allowing huge benefits to wholesalers
The ED said the objectives of the excise policy were made to appear grand but were diluted in the L1 terms and conditions.
“Sisodia/GoM gave the wholesale business to private players and fixed the profit margin to 12 per cent without any valid reasons with an intent to benefit the South Group to enable them to recoup the bribes,” it said.
Seeking public opinion a mere eyewash, tweaked definition of existing terms in the policy to allow cartelization
The ED said that though the total sales of liquor “actually increased in the new policy period (17.11.2021-31.08.2022) as compared to the similar period in the last 3 years, it led to a reduction in the licence fee to be deposited by license holders as they got relief of Rs 719 crore from the excise department on the ground that they were not able to open shops in non-conforming areas.
It added that Manish Sisodia went against the suggestions of the expert committee and the public comments.
“Manish Sisodia went against the suggestions of the expert committee and public comments. Moreover, public opinion/comments were not sought on the report of the GoM that was placed on 22nd March, 2021, even though the GoM revamped the Excise policy framework completely had considerable time gap (3 months) between the policy was finalized and uploaded on 05.07.2021, which exposes the malafide intention and conspiracy of the Sh. Manish Sisodia and reflect that seeking the public comments and suggestions was merely an eyewash,” the federal investigation department concluded.
The central agency further alleged that Manish Sisodia tweaked the definitions of some important existing terms for example ‘Related Persons’ in the new excise policy with criminal intent and in conspiracy with the manufacturers, wholesalers and retailers to allow cartelization. The cartels thus formed were intentionally promoted to receive kickbacks in return.
Revealing how Manish Sisodia tweaked the 2020-2021 Excise policy without taking the expert committee recommendations into consideration, the Enforcement Directorate remand note stated that Sisodia had called C Arvind, ex-excise commissioner and secretary to Sisodia, to the residence of chief minister Arvind Kejriwal on March 18, 2021, and handed over to him a 30-page document of recommendations which were never discussed in the GoM meetings and directed C Arvind to prepare the first draft of the new excise policy based on this document.
The ED disclosed that this document indicated that wholesale licences be granted to manufacturers’ representatives (private players), that one wholesale license holder can be a distributor for any number of manufacturers, and that the wholesale profit margin be set at 12%. “These points were never discussed in the GoM meetings and it was the first time that he (C Arvind) saw these points mentioned in the document handed over to him at CM’s residence.”
“In view of the above, the conspiracy of Sh. Manish Sisodia to give wholesale business to private entities and fix 12% margin to get 6% kickback out from the same is clear as there was neither any discussion in the GoM meetings about giving wholesale to private entities nor fixing 12% profit margin for them,” the remand notice read.
Manish Sisodia’s role in the conspiracy to allow illegal benefits in lieu of advance kickback of Rs 100 crores
According to the remand note, Manish Sisodia and other AAP leaders entered into an agreement with the ‘South Group’ through their representative Vijay Nair in which the South Group was allowed to get illegal benefits such as a partnership in Indospirits (L1), making Indospirits the distributor of one of the largest manufacturer Pernod Ricard, allowing South Group to control multiple retail zones, and so on.
The ED outlined the chronology of events surrounding the conspiracy in the subsequent pages of the remand note. It said that the Excise Policy Scam includes many branches, involving numerous corporate firms, individuals, groups, senior government officials, and a slew of middlemen.
The scam began with the drafting of the Excise Policy for 2021-22, by Sisodia and other AAP leaders, with the goal of generating illegal funds, which was followed by a nexus/understanding between key players in the South Group and Vijay Nair, of payment of advance kickbacks from the former to the latter in exchange for undue favours.
Next, for the hidden goal of recouping and recovering the kickbacks paid, apparently simple business entities are used.
The plot was masterminded by Vijay Nair (representative of Manish Sisodia and other AAP leaders) and the South Group (comprising of Sarath Reddy, Magunta Srinivasulu Reddy, Raghav Magunta and K Kavitha, who were represented by Arun Pillai, Abhishek Boinpally and Buchi Babu).
The new Excise Policy for 2021-22 established an extraordinary 12% profit margin for wholesalers and about 185% profit margin for retailers. As part of the scheme, 6% of the 12% margin was to be collected from wholesalers as a kickback to AAP leaders. The South Group, on the other hand, paid this bribe to the tune of 100 crores in advance to Vijay Nair, who was managing this scheme and conspiracy on behalf of the AAP officials.
In exchange for this advance kickback payment, Vijay Nair ensured that the South Group secured shares in wholesale enterprises, despite the fact that they had no hold/base in the Delhi liquor market. He made certain that they were permitted to have several retail licences in excess of what was permitted under the Excise Policy, as well as that they were granted other undue privileges.
One of the entities that partook in the sharing stakes with the South Group was M/s Indo Spirits of Sameer Mahandru. Sameer Mahandru formed this firm with a 65% partnership given to the representatives of the South Group who represented K Kavitha and Magunta Srinivasulu Reddy/Raghav Magunta respectively in this partnership firm.
Basically, Indo Spirits was one of the vehicles created in order to facilitate the recoupment of the kickbacks paid in advance by the South Group.
Notably, the fact that Vijay Nair has been working on behalf of Manish Sisodia has been also disclosed in his statement dated March 6, 2023, by Arun Pillai who was the representative of K. Kavitha in Indospirits. Butchi babu (representative of South Group), meanwhile, had disclosed in his statement dated February 28, 2023, that the total amount paid through Hawala channels in this deal was around Rs. 100 crores.
Nexus between Delhi CM Arvind Kejriwal, Manish Sisodia and K Kavitha
Revealing the nexus between Delhi CM Arvind Kejriwal, Deputy CM Manish Sisodia and K Kavitha, the daughter of Telangana Chief Minister K Chandrasekhar Rao, Butchi babu said that K Kavitha met Vijar Nair on March 19-20th, 2021. Out of the deal that was between K Kavitha and top AAP leaders, she was given stakes in partnership with Sameer and distribution of Pernod Ricard, read the document.
Notably, on March 10, the Enforcement Directorate (ED) interrogated MLC K. Kavitha, the daughter of Telangana Chief Minister K. Chandrashekar Rao, in Delhi. According to the Enforcement Directorate, she is a member of the ‘South Cartel,’ which allegedly received payments in the case.
The ED further shared screenshots of chats that happened between Butchi babu (representative of South Group) and Vijay Nair on Signal App, to reveal how the kickback money was transferred through Hawala.
AAP demanded advance kickbacks amounting to 100 crores from South Cartel to fund Goa and Punjab elections: ED
Dinesh Arora, a close aide of Manish Sisodia and Vijay Nair’s key planner, who was tasked with coordinating kickbacks and bringing them to Delhi, told the Enforcement Directorate that the advance kickback of Rs 100 crores was given to the Aam Aadmi Party as they needed to fund the elections in Punjab and Goa and the fund requirement was urgent.
Notably, Dinesh Arora had become a government approver last year.
Arora told ED that Vijay Nair told him the excise policy was designed with a 12% profit margin for Ll wholesalers in mind. Of this 12% profit, 6% was set aside as a kickback to the AAP. All Lls were meant to offer a 6% kickback in principle, but the major focus was only on the top three wholesalers.
He further said this kickback money would normally have gone to the AAP after the business’s operations, but the party’s demand was for supporting the elections in Punjab and Goa, and the finance requirement was urgent.
As a result, Vijay Nair reached an agreement with Arun Pillai, Abhishek Boinpally, and Buchi Babu (who were the representatives of South Group led by K Kavitha, MSR and Sarath Reddy). The south group paid Rs. 100 Cr to Vijay Nair (for AAP) and they were supposed to recoup this money from the 3 major wholesalers. Further, Indo Spirits itself was an entity controlled by the South Group, therefore the recoverable money was directly in control of them.
Further, Dinesh Arora and Arun Pillai, a part of the ‘south group’ that allegedly sent kickbacks worth Rs 100 crore to the Aam Admi Party (AAP) leaders, in their statements dated March 3, 2022, and November 11, 2022, respectively revealed that there was a meeting that took place in April 2022 at Oberoi Maidens, New Delhi. In this meeting, Dinesh Arora, Arun Pillai, Vijay Nair and K Kavitha were present. The agenda of the meeting was the recovery of the kickbacks that were paid in advance by the South Group to Vijay Nair. The meeting was further confirmed by the Hotel records from Oberoi Maidens.
ED used a chart to explain how the kickback was used for campaigning in Goa.
Destruction of digital evidence in order to obstruct the inquiry and erase evidence
The ED also alleged Sisodia used/changed/destroyed 14 phones/IMEIs and only 2 phones could be recovered during raids conducted by the CBI in this case.
The AAP politician, it said, not only used SIM subscribed in the name of his PS Devender Sharma but also used handsets purchased under various names.
“The sole purpose of using a SIM card and handset registered in the name of another person was to deny that the data connected with the SIM and stored in the phone belongs to him (Sisodia). This is a typical case of storing and using equipment owned in benami names,” the ED said.
The ED concluded that while Rs 100 crore was received as kickbacks from the liquor cartel’s ‘South Group,’ an accused company in the case, Indospirits, made a profit of Rs 192.8 crore from the proceeds of crime generated by the irregularities in the excise policy 2021-22.
“Manish Sisodia has conspired with other persons and actively involved in formation of faulty policy against kickbacks. By such acts, proceeds of crime (POC) to the tune of at least Rs. 292.8 cr has been generated and Sh. Manish Sisodia has played role in generation, transfer, concealment of the proceeds of crime and projected the same as untainted.”
“His statements under Section 50 of PMLA 2002 has been recorded on 07.03.2023 and 09.03.2023. He is not revealing the truth by giving evasive replies and hence he is not co-operating with the investigation for taking it to logical end. Hence, Custodial Interrogation of Manish Sisodia is need of the hour to unearth this multi crore scam, since the same is more elicit in nature.”
“Hence, on the basis of the investigation conducted so far and on the basis of material available it is clearly indicated that Sh Manish Sisodia is actually involved in the process and connected with the proceeds of crime and therefore, Manish Sisodia is guilty of the offence of money laundering. Further, he has withheld information which is in his exclusive knowledge and extremely relevant to the investigation. Accordingly, Sh. Manish Sisodia, is arrested under the provisions of Section 19 of the PMLA, 2002 at 06:20 PM on 09.03.2023 in Jail no 01, Tihar Prisons, New Delhi in the interest of investigation and after following due process of law,” the ED remand note read.
The ED claimed in its application for a 10-day remand of Sisodia that the vast digital/physical records recovered during 189 search operations conducted by this Directorate under Section 17 of the PMLA, 2002, must be confronted with Manish Sisodia. Also, he must be questioned about additional associates/entities participating in the Cartelization and Kickbacks, among other things.
Furthermore, he must be questioned in order to determine the entire extent of the offence and to unearth the complete Proceeds of Crime involved. As a result, the federal agency stated that it is critical in the interest of the inquiry that ED is granted 10 days of custody of the AAP leader.
After hearing the matter, a Delhi court, on March 10 remanded former deputy chief minister of Delhi Manish Sisodia to Enforcement Directorate (ED) custody till 17th March 2023.
