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Manish Sisodia’s arrest: Read how the Delhi liquor scam unfolded

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Delhi Deputy CM Manish Sisodia‘s arrest by the CBI on Sunday comes after months-long ongoing investigation into the Delhi liquor scam by several Central government agencies. The Aam Aadmi Party (AAP) leader is accused of irregularities in the framing and implementation of the now-withdrawn excise policy 2021-22 in which several officials, businesspersons and politicians too are under probe. Sisodia has been sent to the CBI remand till March 4.However, the AAP has denied all allegations of a scam in the excise policy. Calling the investigation politically motivated, it has launched huge protests against the BJP.

How it all started

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In July last year, Lieutenant governor VK Saxena had recommended a CBI investigation into Delhi Excise Policy 2021-22 after a report by Delhi chief secretary established prima facie violations of various acts and rules in addition to “deliberate and gross procedural lapses” to provide “undue benefits” to liquor licensees. The excise department is headed by Sisodia.The LG reportedly found substantive indications of “financial quid pro quo” at the top political level. Sisodia was accused of undue financial favours to the liquor licensees much after the tenders had been awarded and thus caused huge losses to the exchequer

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Citing sources in the government, a TOI report said the Excise Department allowed a waiver of Rs 144.36 crore singularly to the liquor cartel on the tendered license fee under the excuse of Covid-19 pandemic. The department also refunded earnest money of Rs 30 crore to the lowest bidder of the licence of Airport Zone, when it failed to obtain NOC from the airport authorities.

Another allegation was that the excise department in its 8 November 2021 order revised the formula of the calculation of rates of foreign liquor and removed the levy of import pass fee of Rs 50 per case on beer without approval of the L-G and the Cabinet, thus making it cheaper for retailers causing loss of revenue to the state exchequer. The chief secretary, according to the TOI report, also found lapses in the process of awarding licence for two liquor vends in each ward.

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Some of the decisions, it was alleged, were taken by Sisodia without due approval and these were attempted to be legalized by getting the stamp of a post-facto Cabinet decision.

The report by the chief secretary to the LG was said to be in accordance with Rule 57 of the Transaction of Business Rules 1993, which mandates the former to flag any deviation from laid down procedures to latter and the chief minister.

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The probe agencies have levelled several kinds of allegations, from violating government rules and procedures to money laundering. They have arrested several persons, including a few allegedly close to Sisodia who were accused of channeling the kickbacks. Businessman Dinesh Arora, alleged to be Sisodia’s aide, has turned approver in the case.

The link to Goa elections
Early this month, the Enforcement Directorate (ED) accused the AAP government in Delhi of using a part of the kickbacks from the liquor scam to fund AAP’s campaign for Goa assembly election. The ED alleged that AAP’s media head Vijay Nair in connivance had received kickbacks on behalf of leaders of AAP amounting to Rs 100 crore from the so-called “South Group”. These funds were used in the election campaign of the AAP for Goa assembly. Cash payments to the tune of Rs 70 lakh were made to the volunteers who were part of the survey teams, the ED alleged.

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The ED alleged the kickbacks were paid in advance to the AAP leaders through Nair by the South Group as part of an understanding. “Against the kickbacks paid, the South Group secured uninhibited access, undue favours, attained stakes in established wholesale businesses and multiple retail zones (over and above what was allowed in the policy),” the ED alleged. To recover the kickbacks paid in advance, the partners of the South Group were given 65% stake in IndoSpirits, the company which controlled the liquor distribution in Delhi, in collusion with the accused Sameer Mahendru, the managing director of the company, the ED alleged.

What is the South Group?
According to the ED, prominent members of the South Group are 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.

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Two weeks ago, the ED arrested Magunta Raghava Reddy after prolonged questioning. Raghava’s name had cropped up in the initial inquiry into the scam several months before his arrest. However, his father had denied his involvement. The Magunta family has been in the liquor business for several decades now. They have been the South India distributors for the UB Group, which is based in Karnataka.

Early this month, the CBI arrested a Hyderabad-based chartered accountant, Butchibabu Gorantla, for his alleged role in the formulation and implementation of the Delhi Excise Policy. Butchi Babu was formerly the chartered accountant of K. Kavitha. The CBI has accused Butchi Babu of causing wrongful gain to Hyderabad-based wholesale and retail licensees and their beneficial owners.

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The Auribindo Pharma and Pernod Ricard angle
In November last year, the ED arrested P. Sarath Chandra Reddy of the Hyderabad-based Aurobindo Pharma group and Binoy Babu of wine and spirits company Pernod Ricard under the Prevention of Money Laundering Act. Reddy is accused of being instrumental in alleged cartelisation of suppliers and playing a key role in routing of alleged kickbacks. Babu is also said to be a party to the alleged cartelisation process.

According to the ED, Trident Chemphar Ltd, a group company of Aurobindo Pharma, controlled two zones in Delhi for liquor distribution, besides two zones by Avantika Contractors Pvt Ltd and one zone by Organomix Ecosystems, all controlled by Sarath. “Sarath Reddy Penaka is a key partner of the South Group. The other partners are Magunta Srinivasulu Reddy, Raghav Magunta, Sarath Reddy and K Kavitha. The group gave Rs 100 crore kickbacks in advance to the AAP leaders through Vijay Nair,” the ED has alleged in its chargesheet filed in a special PMLA court.

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“He was effectively controlling five retail zones through his group company Trident Chemphar Pvt Ltd and proxy entities namely, Organomix Ecosystems and Sri Avantika Contractors in violation of the excise policy, which barred any person from controlling more than two retail zones,” the ED claimed.

The ED alleged that Sarath Reddy was a key partner in the South Group, which had Sameer Mahendru, who owns liquor manufacturing units along with Pernod Ricard (PRI), as a partner. “PRI had made Indo Spirits its wholesale distributor, wherein Indo Spirits was owned by Sameer Mahendru, Arun Ramachandra Pillai and Prem Rahul Manduri. Sarath Reddy along with others had financial interests in this entity through proxies. It has also been revealed that Sarath Reddy was putting the investment in Indo Spirits,” the ED claimed. South Group controlled mine retail zones through a web of proxies and benami entities, according to the ED.

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