Everyone is worked up about the role of the BJP. But the unprecedented arrest of a Chief Minister reveals the high price of an anti-corruption law that may keep him in jail—without bail or evidence of his guilt.
Written by: Samarth Bansal. Samarth is an independent journalist and writer. His work has appeared in the Hindustan Times, The Hindu, Mint, HuffPost India, and The Atlantic. Follow him on Twitter @PySamarth, email at samarthbansal@pm.me, and sign up for his mailing list for latest updates. You can learn more about him and his work here.
March 21, 9:05 PM.
Arvind Kejriwal, the Chief Minister of Delhi, is arrested by the Enforcement Directorate.
A sitting chief minister, behind bars. Unprecedented.
Politicians being arrested is nothing new—the public often sees them as crooks—but this case is different. Kejriwal, the man who rose to power on an anti-corruption plank, accused of laundering money?
Those following the Delhi liquor scam might be less shocked about a case that is now over two years in the making. In November 2021, investigators alleged that the AAP government crafted a 2021 liquor policy favouring certain wholesalers in exchange for kickbacks. The first arrests were made in September 2022. The Deputy Chief Minister Manish Sisodia, has been in jail since February 2023 without bail.
So, when the news broke of Kejriwal’s arrest, I wondered: after months of investigation, the ED must have finally found something big on him. A smoking gun.
Kejriwal, of course, called the arrest ‘illegal’. The Aam Aadmi Party cried political vendetta. Yes, it's no secret that those in power often weaponise investigative agencies against political opponents. But if there was no wrongdoing, why was Sisodia's bail application rejected by the trial court, High Court, and Supreme Court?
Is this a dark conspiracy? Are the CBI, ED, bureaucrats, and judges at all levels working together to frame AAP and its leaders? Surely not.
What's going on?
To find answers, I dug up any documents I could access on the case built by the ED and CBI against AAP leaders. I pored over court judgments denying Sisodia bail. (Here are all the links: one, two, three, four, five, six.)
What I discovered was a revelation—at least for me although legal experts have been raising alarm for years. At the heart of this tangled web is a single, potent thread: the Prevention of Money Laundering Act. The PMLA.
It is the hero that spares no villain, or the villain that spares no opposition. How one sees it often depends on where they stand on the political spectrum.
Once you grasp the reach of this law, you realise Kejriwal is dead wrong. There's nothing "illegal" about his arrest. Everything that transpired, no matter how unprecedented, followed the rule of law. It was all legal. And that’s the problem.
Let me walk you through what I discovered.
In the beginning…
The story begins with the AAP-led government’s plan to solve long-standing issues with the city's alcohol industry.
The problems were numerous: the 864 liquor shops—55% of which were government-run—were unequally distributed across the city, with some areas having too many and others with none. Where shops were scarce, illegal retailers supplied booze under the counter—which were often counterfeit.
Delhi also started losing revenue to its neighbour, Haryana, which imposed lower taxes and, therefore, offered cheaper liquor. As a result, many people went to Gurgaon to buy their booze, resulting in a loss for Delhi.
To address these situations, the government introduced a new excise policy in 2021 to privatise the liquor trade. The government planned to entirely exit the liquor business. State-run shops would shut down, and the government would instead charge a licence fee from private retailers. Stores were to be evenly distributed across each municipal ward. Pricing controls were removed, allowing individual stores to offer discounts as they pleased.
The policy was rolled out in November 2021. As with any significant change, there were losers and winners, pros and cons. The new system solved some old problems, and created new ones. But the allegations soon became more serious. They claimed that a powerful cartel was taking control of Delhi’s liquor market—with the support of the AAP government.
Lieutenant Governor VK Saxena—appointed by the union government and a political nemesis of the AAP government—believed the accusations to be true. In July 2022, he wrote a report laying out a number of irregularities in the framing and implementation of the liquor policy.
Things moved quickly soon after. The Ministry of Home Affairs ordered an inquiry, and in less than a month, on August 17, 2022, the CBI registered a corruption case against a number of people, including Manish Sisodia—Kejriwal's deputy and Delhi's excise minister at the time.
Soon after, the Enforcement Directorate initiated its own money laundering investigation. This marks the beginning of the back story for Kejriwal’s eventual arrest.
The accusation against AAP
There are many nerdy details pointing to specific provisions in the policy that are said to be ‘scammy’, where scammy means they exist solely to offer advantage to favoured players.
But at the heart of the allegation is one key change in policy: the decision to increase the profit margin for wholesalers from 5% to 12%.
The investigative agencies claim this jump of 7% was the benefit offered to a group of businessmen who would return the favour with kickbacks to government officials. This was a textbook case of quid pro quo.
Law enforcement agencies call this so-called cabal the ‘South Group’—because its members are based in South India. The Enforcement Directorate claims that this group earned an additional Rs 3.38 billion (338 crores) in just ten months thanks to the new policy.
As the allegations spread and grew, Sisodia scrapped the policy. But the damage was done.
Twenty months after the LG’s report became public, the ED arrested the Chief Minister as the "the kingpin and key conspirator of the Delhi Excise Scam". Three specific accusations were levelled against him: he tweaked the policy to favour a select group; he demanded kickbacks of around Rs 1 billion (100 crore) in exchange for this favour; he used the illicit funds to finance AAP's 2022 Goa Assembly election campaign.
These are all big claims.
The evidence against AAP
From here on, the story of this scam is the story of the evidence—and the story of PMLA.
How does ED make this case? You can read all the specific allegations here, but for brevity's sake, let me lay down a few key points .
First, let’s make two things clear: 18 months since the investigation began, there is no documented money trail linking Kejriwal or Sisodia to this scam. Nothing has been recovered.
To be fair, documenting a trail and drawing direct connections is very hard in financial investigations. But the lack of it—from the lens of due process—makes the agencies’ case look weak. That’s my reading. (And also of the court, to which I will return below).
In the absence of a documented financial trail, the ED's case largely rests on testimonies of individuals. These are three key ones:
A secret meeting at Kejriwal's residence: Sisodia's former secretary claims that the big provision—establishing the controversial 12% profit margin—was never discussed in official meetings. It first appeared at a meeting at the CM's house where Sisodia suddenly handed him a draft report—with this clause included. Sisodia told him to use this report to formulate the liquor policy. The secretary insists this happened in front of Kejriwal. Hence, the ED says, Kejriwal was clearly involved. He was in the know.
The South Group influence: Among the four key members of this cabal is the Telangana politician K Kavitha (who has also been arrested). Her CA, Buchi Babu, alleged that Vijay Nair, who was handling AAP's communications, actively offered policy favours to Kavitha on the CM's behalf. He was the middleman acting as a channel for the back and forth.
As evidence, the ED points to WhatsApp messages found on Babu's phone, which contained parts of the final excise policy—just days before it became official. The agency argues that Kejriwal was pulling the strings behind the scenes—using Nair as his proxy.
Kejriwal's demand for kickbacks: The ED claims Kejriwal did more than direct policy changes to benefit others. He personally demanded kickbacks from the South Group in exchange for favours.
This claim relies on the statement of Magunta Reddy, a member of this South Group. In a meeting on March 16, 2021, Kejriwal allegedly told Reddy that Kavitha had already offered Rs 1 billion (100 crores) to AAP. So he needs to talk to her if he wants to get a share of the action in Delhi's liquor trade.
Kavitha, the story goes, later met with Reddy and asked him to shell out half of the Rs 1 billion (100 crores) promised to AAP. Reddy then delegated this task to his son, Raghav Magunta—who later confessed to the ED that he paid Rs 250 million (25 crores) in cash to Kavitha's associates in two instalments, with Vijay Nair acting as the coordinator.
Now, let’s hit ‘pause’.
These are all damning statements. But as I read through them, I wondered: are these statements reliable? Have they been verified with evidence from other sources? The answer: no, not really.
In his bail applications to courts, Sisodia claimed the statements were coerced—witnesses were bullied into changing their testimony:
The statements of co-accused or other witnesses…were extracted and forced by a threat of arrest, as in the case of Magunta Sreenivasulu Reddy, Butchi Babu and Manoj Rai. Raghav Magunta, son of a Member of Parliament of the ruling party in Andhra Pradesh, was forced to make the statement dated 27.07.2023, which is contrary to his earlier statement dated 16.09.2022.
At this moment, we don’t know if that is true. But the ED has offered very little evidence to corroborate the allegations made by these witnesses.
Show me the money (trail)…
What we have so far is the first part of the ED case against Kejriwal—how he allegedly got the money. But what did he do with it?
According to the agency, a sum of Rs 45 crore was set aside to finance AAP's election campaign in Goa. The money, it claims, was moved through a hawala network from Delhi. The ED claims to have identified several such operators whose statements confirm the transfers.
In Goa, the funds were allegedly used to pay for AAP's election-related activities. The ED has a list of payments made to various vendors and other individuals—some of which were done in cash to mask the trail. The evidence is a mix of seized documents and statements from those involved—as in, hawala operators, vendors, and campaign finance managers.
However—again—the bulk of their case relied on statements from involved individuals. There isn’t a damning, unbroken money trail linking election expenditure in Goa to the alleged kickbacks from the Delhi liquor barons.
Moreover, there is no evidence that directly links Kejriwal or Sisodia to these transactions. They are solely guilty by association. As the Chief Minister of Delhi, Kejriwal had to approve the liquor policy. As the National Convenor of AAP, Kejriwal had to be fully aware of how the Goa campaign was funded. So even if there is no direct link, he is the man in power—and who benefits the most. Hence, he must be the “kingpin.” That’s the sum of ED’s rationale for Kejriwal’s arrest.
To be fair, establishing a money trail is hard in any corruption case—and more so with the use of hawala transactions that are designed to hide the link between the source of funds or their destination.
So what do we make of these claims? As citizens, what can we be assured of?
This is tricky. We can treat ED's findings as hard facts. Or we can outright reject all allegations because there is no money trail. The facts of the case will ultimately be determined in court—whose job is to assess the ED’s evidence. So we will have to wait for the final judgement.
For now, however, we do have one guidepost—statements of a Supreme Court judge that give us some insight into the strengths of the ED case.
How strong is the evidence?
On October 5, 2023, a two-member bench of the Supreme Court was hearing the bail plea of Sisodia. Live Law live-tweeted the proceedings. (You can read it here.)
The most noteworthy bit is this exchange between the bench and the representative of the Enforcement Directorate. It offers the only glimpse into how the evidence will fare in court. Here are three points flagged by Justice Sanjiv Khanna.
One: Much of this case hinges on positioning Vijay Nair as the middleman who dealt with the South Group. The agencies extrapolated the evidence they have on Nair’s involvement to assign guilt to Kejriwal and Sisodia—but purely by association.
The court isn't buying it. When the ED claimed that an approver's statement suggested Vijay Nair was working on behalf of Sisodia, Justice Khanna fired back:
Manish Sisodia is not involved in all this. Vijay Nair is there but Manish Sisodia is not in this part. How will you bring him under the money laundering act?
Have you seen them (co-accused Vijay Nair or Sisodia) discussing this? Will it be admissible? Isn't the statement (by an approver) hearsay? It is an inference but has to be based on evidence. In cross-examination this will fall flat in two minutes.
Two: The bench also grilled the ED on the alleged Rs 1 billion (100 crore) kickback, demanding a money trail—witness statements alone wouldn’t cut it. Justice Khanna didn't mince words:
How do you say that the kick back was given? That's entirely on the basis of approver statements. You have taken two figures, 100 crores and 30 crores. Who paid them this? There can be so many people paying the money—not necessarily connected to liquor."
He hammered home the need for a clear money trail:
You have to establish a chain. The money has to flow from the liquor lobby to the person. We agree with you that it's difficult to establish the chain because everything is done under cover. But that's where your competence comes in.
Three: As for using the money to fund the Goa campaign, the bench called out the lack of specific allegations against Sisodia. Once again, Justice Khanna pulls no punches:
[P]rima facie there is lack of clarity, as specific allegation on the involvement of …Sisodia, direct or indirect, in the transfer of Rs 45 crore to AAP for Goa elections is missing.
How will you establish money laundering by Sisodia factually and legally? ... He may be aware it may be used, as per your case, but he never came in actual physical possession.
The exchange is an important reminder of a crucial yet easily overlooked fact: an arrest does not establish guilt. It is merely a procedural part of the investigation process, allowing law enforcement to formally question or detain the person suspected of a crime. Guilt or innocence is determined by the court after the trial phase, where evidence is presented and evaluated.
Here's the kicker: just three weeks after that exchange, the court denied bail to Sisodia. But why?
So why no bail for Sisodia?
According to my interpretation, the court’s decision to deny bail to Sisodia had little to do with the investigations by the CBI and ED.
Their ruling makes clear that the court's justification was primarily based on the answer to the key question: Who benefits? In this case, the primary beneficiaries were the businessmen who made a 12% profit—of about Rs 3.38 billion (338 crore).
None of the other allegations were a strong enough reason to keep Sisodia in prison. The decision to deny bail does not also mean that the court thinks Sisodia is guilty. The court is only saying that given how the profit numbers add up—and an overview of the evidence—they can't ignore the possibility that Sisodia just may have done something wrong.
And that's why Sisodia is behind bars for close to a year now. And why Kejriwal is in custody.
This seems bonkers, but then, that's PMLA for you.
Guilty until proven innocent…
Take a step back. Introduced in 2002, the original intent of the PMLA was to fight money laundering. Money laundering—which ‘cleans’ dirty money—is often linked to serious crimes like terrorism and drug trafficking. These cases are also hard to make since it is often very easy to move money without leaving a trail. The agencies, therefore, need more power to act.
So the PMLA lets officials take big steps, like arresting someone or freezing their assets, with very slim proof of money laundering. The evidence just needs to suggest money laundering could have happened. It is also hard to get bail for a PMLA offence. It ensures the accused does not flee, tamper with evidence, or influence witnesses. All of that is applicable in other crimes as well, but higher stakes in money laundering cases call for tougher norms.
FYI: This law is one of the strictest on the books—in some ways, even harsher than terror laws.
But the law’s immense power is also its weakness—especially when you throw politics into the mix. It is easy to use the PMLA to arrest people with less evidence, and then make it hard to get bail even if the case against them isn't strong.
As a result of a 2019 amendment, the accused in a PMLA case is considered "guilty until proven innocent"—an astonishing reversal of the rule for other crimes, including murder. You are innocent until proven guilty—unless you are arrested under the PMLA.
This shift in the presumption of guilt has serious implications for the rights of the accused. They now have to prove their innocence—as opposed to the prosecution establishing their guilt. They have to show that their money is clean.
And then, you have the peculiar conditions for bail. Under PMLA, judges must be convinced that absolutely no case can be made against the accused. And think about it: How can anyone be so sure in the early stages?
This is what's happening with AAP leaders. Kejriwal may be denied bail just because the numbers suggest something may be off. If the judges aren’t sure no offence has been committed, it is reason enough to keep someone behind bars—even without a trial.
The low bar for denying bail was struck down by the Supreme Court, but was brought back through a money bill in 2019 by the government. When this move was challenged again in 2022—along with other provisions of the law—the Supreme Court upheld the validity of all PMLA provisions, including strict bail conditions. Its reason: the offences are grave and there are enough internal checks on the agencies—to limit the misuse of such unrestrained power.
The fallout?
People can stay in jail for a long time without bail, even for crimes that carry lighter sentences—say, from two to seven years. The arrest itself becomes the punishment—but without being proven guilty in a court of law.
An Indian Express investigation revealed that between 2014 and September 2022, 121 prominent leaders came under ED radar, and 115 of them—95%—were opposition leaders.
This selective targeting is entirely legal—but does it fit the definition of justice?
The high-stakes drama around Kejriwal’s arrest—and its timing, a month before the Lok Sabha election—serves as a stark reminder of the price of the PMLA. The price of ceding great power to the State in exchange for the promise of ‘clean’ governance. The Supreme Court, in upholding the PMLA, placed its faith in the integrity and accountability of those enforcing it. The Kejriwal case, regardless of its eventual outcome, will serve as a litmus test of this faith.
Reading list
You can read more about the Delhi liquor scam in our Big Story. Indian Express looks at the money laundering law and how Arvind Kejriwal was charged under it. Read Kejriwal’s remand application and the evidence presented against him by the ED here. Mint has more details on the ‘South Group’. The Hindu traces how Kejriwal rose to power by riding the anti-corruption sentiment in the country. Abhinav Sekhri in Supreme Court Observer analyses how investigative agencies have been using the PMLA differently in the past decade.
