Delhi Excise policy formulated with deliberate loopholes, reflects mala fide intentions of policymakers: ED chargesheet

The Enforcement Directorate (ED) in its chargesheet (Prosecution Complaint) clearly stated that the Prevention of Money Laundering Act (PMLA) investigation revealed that the Delhi Excise Policy, 2021-22 was a device created by the leaders of Aam Aadmi Party (AAP), some of whom are part of the Delhi government, to generate illegal funds.

It is stated in the chargesheet that, the policy was formulated with deliberate loopholes, an inbuilt mechanism to facilitate illegal activities and is marred with inconsistencies which when looked at deeply, reflect the mala fide intentions of the policymakers.

ED chargesheet further stated that this policy though on the face of it had promising and laudable objectives of stopping cartelization and encouraging fair trade practices, in reality, it promoted cartel formations through back door, awarded exorbitant wholesale (12 per cent) and huge retail profit margin of 185 per cent and incentivized other illegal activities on account of a criminal and political conspiracy of leaders of AAP. The 12 per cent profit margin to the wholesalers was devised to extract a portion of it (6 per cent) as a kickback to the AAP leaders.

"The device through which the political leaders of AAP received kickback functioned at three levels. The policy was made restrictive to force the manufacturers to select only one L1 wholesaler as their sole distributor. The licence granted to L1 wholesalers was on an application basis and the same could be granted to anyone who was eligible as per the terms and conditions of the L1 wholesalers. Though it appears fair and open opportunity that any entity qualifying the criterion could operate as an L1 wholesaler, the financial feasibility of the business depended on the manufacturers who would choose them as their distributor," the ED chargesheet stated.

Thus the manufacturers were in a dominant position to direct the unprecedented and exorbitantly high-profit margin of 12 per cent towards any select wholesaler. Further, the manufacturers seemingly were supposed to take this crucial decision on their own as per their choice, but, this investigation has revealed that Pernod Ricard, one of the biggest manufacturers in the country, also a subject of the ongoing investigation,was in fact coerced/ directed by Vijay Nair (who used to introduce himself as OSD to the Excise department), to give their wholesale distribution business to the accused M/s Indo Spirits (L1 wholesaler), said the ED.

ED further alleged that Vijay Nair, in fact, has also arm-twisted a few wholesalers to surrender their licenses and then coerced the manufacturers through that license to choose the wholesalers of his choice and favour to direct the profit margins to those persons.

"Vijay Nair, on behalf of leaders of AAP, has received kickbacks to the tune of Rs 100 crore from a group, for convenience, we may call it the South Group (as termed in the statements of various persons recorded during the investigation), whose prominent persons are Magunta Srinivasulu Reddy, Raghav Magunta, Sarath Reddy and K Kavitha," it said.

These kickbacks were paid in advance to the AAP leaders through Vijay Nair by the South Group as a part of an agreement between the South Group and the AAP leaders. Against the kickbacks paid, the south group secured uninhibited access, undue favours and attained stakes in established wholesale businesses and multiple retail zones (over and above what was allowed in the policy). To recover/ recoup the kickbacks given by the South Group, partners of the South group were given 65 per cent stakes in Indo Spirits in collusion with the accused Sameer Mahandru.

This partnership formation was directed by Vijay Nair on the assurance of giving the wholesale business of Pernod Ricard to Indo Spirits of Sameer Mahandru. The South group controlled these stakes in Indo Spirits, through false representation, concealment and proxies i.e. Arun Pillai and Prem Rahul. The partnership was through the proxies and was not genuine.

Sameer Mahandru had never met one of his partners, Prem Rahul (32.5 per cent in Indo Spirits). Ostensibly, they brought the capital into this business which can be traced back to the South group. Further, the partners belonging to this group were allowed to withdraw from the profits of Indo Spirits.

There is evidence to show that this withdrawal can be linked to the money that was paid to Vijay Nair. In order to create a device for continuous payment of kickbacks to Vijay Nair, an unheard-of margin of 12 per cent was provided to the private wholesalers (L1s) contrary to the recommendations of the Expert Committee headed by Ravi Dhawan, IAS and then Excise Commissioner which as detailed below, suggested for a single government entity as wholesaler for Delhi.

On this account, the government lost a revenue of 12 per cent Rs. 581 crore that would have accrued to it in case the Expert Committee recommendations were accepted by the government, which in the subject policy was assigned to the Pvt. Players, only to fill the personal coffers of the leaders of AAP.This loss to the Govt exchequer actually got illegally diverted into ostentatious profits to the wholesalers including the accused M/s Indo Spirits, which was used to recoup the kickbacks paid in advance by the South Group.The South Group, directly and indirectly, controlled 9 retail zones including the 2 L7 zones of the accused M/s Khao Gali. In some cases, the control was via the financing of the EMD (Earnest Money Deposit) for the L7 tender process, ostensible investments, relatives/dummies/proxies.

Apart from the direct profits accruing from the wholesale business of Indo Spirits, the modus operandi for recovering the kickback paid in advance by the South group, monies in the form of outstanding from the ostensible sales from the wholesale of Indo Spirit to Retail of the South group with an understanding that the outstanding was not to be recovered and the amount will be shown as recoverable in the books of account.Special Judge MK Nagpal on Tuesday took cognizance of the offence of money laundering as defined U/S 3 r/w Section 70 of the PMLA, 2002 and as made punishable U/S 4 of the said Act is hereby taken by this court and since sufficient grounds exist for proceeding further in the matter against all the five accused, they are directed to be summoned to appear and face trial before this court for the above said offence, though some further investigation with regard to the other persons/entities involved in the case and to trace out the balance proceeds of crime is still stated to be pending.

"It was alleged in the said case that huge kickbacks through hawala channels were paid by a few persons in liquor business from South India to some public servants of the ruling AAP and that of Excise Department of the GNCTD to achieve the objectives of monopoly and cartelization between three components of the said policy, i.e. liquor manufacturers, wholesalers and retailers, by violating provisions and breaking the spirit of the said policy and these kickbacks were to be returned back to the above persons from South, either out of profit margins of the wholesalers or through credit notes issued by the wholesalers to the retail vends owned or controlled by such persons from South," the court noted.

According to the ED, among the accused public servants are Delhi Deputy Chief Minister Manish Sisodia, the then Excise Commissioner Arva Gopi Krishna, Deputy Commissioner Anand Tiwari and Assistant Commissioner Pankaj Bhatnagar.

Other accused are Manoj Rai, a former employee of Pernod Ricard; Amandeep Dhal, director of Brindco Sales; director of Buddy Retail Amit Arora, and Dinesh Arora; authorised signatories of Mahadev Liquors Sunny Marwah, Arun Ramchandra Pillai and Arjun Pandey.

The ED and the CBI have alleged that irregularities were committed while modifying the Excise Policy, undue favours were extended to licence holders, the licence fee was waived or reduced and the L-1 licence was extended without the competent authority's approval. The beneficiaries diverted "illegal" gains to the accused officials and made false entries in their books of account to evade detection.

The FIR in the case was instituted on a reference from the Union Home Ministry following a recommendation from Delhi Lieutenant-Governor Vinai Kumar Saxena.

( With inputs from ANI )

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