Allegation That Liquor Group Paid Rs 100 Crores To Manish Sisodia Debatable; But Few Distributors Made Profits Of Rs 338 Crores: Supreme Court

In the judgment denying bail to former Delhi Deputy Chief Minister Manish Sisodia in relation to the alleged Delhi liquor policy scam, the Supreme Court observed that the allegation of the Central Bureau of Investigation (CBI) and the Directorate of Enforcement (ED) that kickback of Rs.100 crores were received from the liquor group, and used by the associates of Sisodia and other leaders of AAP is "somewhat a matter of debate."

The further allegation was that out of the Rs 100 crores kickbacks, Rs 45 crores were transferred to the Aam Aadmi Party (AAP) through hawala route for Goa elections. However, the Court noted that AAP is not being prosecuted. Hence, the Court said that it cannot be alleged that Sisodia is vicariously liable under Section 70 of the Prevention of Money Laundering Act 2002.

"the assertion in the complaint filed with the DoE that kickback of Rs.100,00,00,000 (rupees one hundred crore only) was actually paid by the liquor group is somewhat a matter of debate. However, there is an assertion, and the DoE has relied on evidence and material, that a portion thereof, that is, Rs. 45,00,00,000 (rupees forty five crores only) was transferred through Hawala for the Goa election and used by AAP, a political party, which is a juristic person. AAP is not being prosecuted. The charge that the appellant – Manish Sisodia is vicariously liable in terms of Section 70 of the PML Act cannot be alleged and has not been argued."

The Court also said that there is no specific allegation regarding the involvement of Sisodia in the transfer of Rs 45 crores to AAP for Goa elections.

"Prima facie, there is lack of clarity, as specific allegation on the involvement of the appellant – Manish Sisodia, direct or indirect, in the transfer of Rs. 45,00,00,000 (rupees forty five crores only) to AAP for the Goa elections is missing."

At the same time, the Court observed that the allegation that new liquor policy enabled few wholesale liquor distributors to make windfall gains to the tune of Rs 338 crores was tentatively established. 

"In the analysis, there are certain aspects, which we said are doubtful. But one aspect, with regard to transfer of money, Rs 338 crores, is tentatively established. We have therefore dismissed the application for bail," Justice Sanjiv Khanna orally said today morning while pronouncing the judgment.

In the judgment which was uploaded later, the Court explained the aspects of the case which it found doubtful and probable.

Sisodia is facing two cases over the alleged case - one under the Prevention of Corruption Act 1988 and the second under the Prevention of Money Laundering Act 2002, with the former being investigated by the Central Bureau of Investigation (CBI) and the latter by the Directorate of Enforcement (ED).

The gist of the allegations of the CBI & ED is that the new excise policy of 2021 was formulated with the motive of enabling few wholesale distributors to rake in exorbitant profits. The annual license fee was hiked from Rs 5 lakhs under the old policy to Rs 5 crores, allegedly to ensure that only a handful of wholesale distributors can apply. The profit commission of distributors was hiked from 5% to 12% of the ex-distillery price declared by the manufacturer. Also, while the manufacturers were mandated to enter into agreement with a single wholesale distributors, the wholesale distributors could form agreements with multiple manufacturers. Therefore, it was alleged that the policy paved the way for cartelisation. It was also alleged that one distributor, who had 20% market share, was forced to surrender its license as it was not ready to give kickbacks.

Though the bench comprising Justices Sanjiv Khanna and SVN Bhatti framed five questions of law for consideration, it did not answer them in view of the preliminary nature of adjudication in bail applications.

The Court clarified in its judgment that its findings are tentative in nature, only for the purpose of deciding the bail applications and that its findings will not have any bearing on the trial.

ED's allegation of bribe of Rs 2.20 crore being paid to Sisodia not accepted by the Court

The ED had alleged that an amount of Rs. 2,20,00,000 (rupees two crores twenty lakhs)  was paid as bribe to Manish Sisodia by Amit Arora, through middleman Dinesh Arora. However, the Court did not accept this amount as "proceeds of crime" under the PMLA as this allegation was not there in the chargesheet filed by the CBI in the predicate offence. It may be recalled that during the hearing also, the Court had orally observed that ED cannot fall back on an allegation which is not present in the predicate offence.

"First, the assertion that Rs. 2,20,00,000 (rupees two crores twenty lakhs only) was paid as bribe to the appellant – Manish Sisodia by Amit Arora, through middleman Dinesh Arora, is not a charge or an allegation made in the chargesheet filed by the CBI. It may be difficult to regard the alleged payment as a ‘proceed of crime’ under the PML Act."

The ED also asserted that Rs. 45 lakh crores was transferred to the Aam Aadmi Party (AAP) for being used in Goa elections. During the hearing, the bench had asked why the political party has not been added as an accused, though alleged to be the beneficiary. In response, the ED told the Court in its written submission that it will take a decision on making AAP an accused once the quantum of amount used in the election in Goa is ascertained.

The Court also expressed certain doubts about the proposition advanced by the ED that the generation of the proceeds of crime will by itself become an offence of 'money laundering' as per Section 3 of the PMLA, even without any extra act. However, the Court refrained from making any definite pronouncement on this issue and left it open.

Regarding the ED's allegation that Sisodia destroyed two mobile phones used by him to obstruct the investigation, the bench said that it is not a relevant consideration for deciding the question of bail.

'Rs 338 Crores' : One clear ground which has been tentatively established

At the same time, the Court observed that there is one clear ground in the case against Sisodia which has been tentatively established. This is with regard to the alleged illegal profits to the tune of Rs.338 crores earned by the wholesale distributors with the aid of the new liquor policy.

It was alleged that in a period of about ten months, during which the new excise policy was in operation, the wholesale distributors had earned Rs. 581,00,00,000 (rupees five hundred eighty one crores only) as the fixed fee. 

The one time licence fee collected from 14 wholesale distributors was about Rs.70,00,00,000 (rupees seventy crores only). Under the new policy, the commission percentage was increased from 5% to 12%.

According to the CBI, the excess amount of 7% commission/fee earned by the wholesale distributors of Rs.338,00,00,000/- (rupees three hundred thirty eight crores only) constitute an offence  defined under Section 7 of the PoC Act, relating to a public servant being bribed. As per the ED, these are proceeds of crime.

The proceeds of crime were allegedly acquired, used and were in possession of the wholesale distributors who have unlawfully benefitted from illegal gain at the expense of the government exchequer and the consumers/buyers.

The CBI alleged that the existing excise policy was changed to facilitate and get kickbacks and bribes from the wholesale distributors by enhancing their commission/fee from 5% under the old policy to 12% under the new policy. It was alleged that the commission was increased to 12% after meetings between Vijay Nair- a close associate of Sisodia- with the liquor group. Vijay Nair had assured the liquor group that they would be made distributor of Pernod Ricard, one of the biggest players in the market. This did happen.

Regarding the offences under the Prevention of Corruption Act, the CBI  submitted that conspiracy and involvement of Manish Sisodia is well established.

The Court extracted the CBI allegation as : "A conspiracy was hatched to carefully draft the new policy, deviating from the expert opinion/views to create an eco-system to assure unjust enrichment of the wholesale distributors at the expense of government exchequer or the consumer. The illegal income (proceeds of crime, as per the DoE) would partly be recycled and returned in the form of bribes."

As per the term in the new excise policy - each manufacturer could appoint only one wholesale distributor, through whom alone the liquor would be sold. At the same time, the wholesale distributors could enter into distribution agreements with multiple manufacturers. This allegedly facilitated getting kickbacks or bribes from the wholesale distributors having substantial market share and turnover.

The CBI's allegation was reproduced in the judgment as follows :

"The excess amount of 7% commission/fee earned by the wholesale distributors of Rs.338,00,00,000/- (rupees three hundred thirty eight crores only) constitute an offence as defined under Section 7 of the PoC Act, relating to a public servant being bribed. (As per the DoE, these are proceeds of crime). This amount was earned by the wholesale distributors in a span of ten months. This figure cannot be disputed or challenged. Thus, the new excise policy was meant to give windfall gains to select few wholesale distributors, who in turn had agreed to give kickbacks and bribes."

ED alleged that Sisodia was in "constructive possession" of the proceeds of crime though not in actual possession. Regarding this, the Court observed :

"The stand of the DoE as to the constructive possession, will be satisfied only if the dominion and control criteria is satisfied. If the proceeds of crime are in dominion and control of a third person, and not in the dominion and control of the person charged under Section 3, the accused is not in possession of the proceeds of the crime. It would be a different matter, when an accused, though not in possession, is charged for use, concealment or acquisition of the proceeds of the crime, or projects or claims the proceeds of crime as untainted property. The involvement of an accused may be direct or indirect. Prima facie, there is lack of clarity, as specific allegation on the involvement of the appellant – Manish Sisodia, direct or indirect, in the transfer of Rs. 45,00,00,000 (rupees forty five crores only) to AAP for the Goa elections is missing."

Nevertheless, having regard to the findings related to Rs 338 crores, the Supreme Court denied Sisodia bail. The Court directed that the trial be completed within 6-8 months and clarified that Sisodia will be entitled to apply for bail afresh after three months if the trial is proceedings sloppily.

Case Title : Manish Sisodia v. Central Bureau of Investigation

Citation : 2023 LiveLaw (SC) 934

Click here to read the judgment