A Delhi court on Thursday sent P Sarath C Reddy and Binoy Babu to seven days of the Enforcement Directorate (ED) custody in connection with a money laundering case involving the now scrapped Delhi Excise Policy Case 2021-22.
Special CBI Judge MK Nagpal, after hearing the arguments, sent both the accused to seven days of ED custody.
The ED arrested Babu of Pernod Ricard and Reddy of Aurobindo Pharma after several hours of questioning.
While arguing in court, ED’s counsel said that Babu was a part of the cartelisation. He had given 29 out of 31 licences to retail, ED said. The ED also said that the financial probe agency also got the draft final policy of the Excise Policy from Babu’s email.
Meanwhile, the counsel for Babu questioned the ED’s action against Babu after he turned CBI witness a day ago.
The ED counsel informed the court that the liquor licence had been given only to a select group of people deliberately and some of the panel submissions had been illegally leaked.
Highlighting the role of Reddy, ED said that he is one of the kingpins and major beneficiaries in the entire Delhi Excise policy scam.
The ED argued that Reddy was effectively controlling five retail zones through his group company, Trident Chemphar Pvt Ltd and proxy entities, namely Organomixx Ecosystems and Sri Avantika Contractors in violation of the Excise Policy, which barred any person from controlling more than two retail zones.
The ED said that Reddy was controlling these entities through his investments in the proxy entities. “Employees of Reddy have disclosed that he was handling all operation-related matters for these three L7 companies on the directions of Reddy,” it said.
It was also alleged that Reddy was a key partner in the biggest cartel (named the South Group by Dinesh Arora in his statement) of manufacturers, wholesalers and retailers.
“Partners of this cartel, such as Sameer Mahendru, own liquor manufacturing units along with Pernod Ricard (PRI), which is one of the biggest manufacturers in the country. PRI had made IndoSpirits its wholesale distributor, wherein Indo Spirits was owned by Sameer Mahendru, Arun Pillai and Prem Rahul Manduri.
“Reddy, along with others, had financial interests in this entity through proxies. It has also been revealed that Reddy was putting the investment in Indospirits,” the ED alleged.
The ED further claimed that the South Group, led by Reddy, controlled nine retail zones through a web of proxies and benami entities.
“This is in clear contravention of the objectives of the Delhi Excise Policy, 2021-22. Reddy had direct control of 5 retail zones (Trident Chemphar Pvt Ltd and proxy entities namely, Organomixx Ecosystems and Sri Avantika Contractors) and along with other members of the cartel, he also collectively controlled 4 zones,” ED said.
“This cartel effectively controlled about 30 per cent of the Delhi liquor market through a series of illegal activities involving giving kickbacks, using benami and proxy entities and conspiring with various stakeholders in the liquor industry,” the ED said.
“Reddy and others led South Group cartel gave kickbacks to the tune of ₹100 crores through Vijay Nair and through the web of multiple retail zones and Indospirits as the wholesaler, was recovering the payments made in advance,” the ED alleged.
The ED also alleged that it was found that attempts were made by employees of the retail group of Reddy to shift the servers located in the offices of these retail zones. “On analysis of these servers, it was found that the data of 2 retail zones (Avantika and Trident) was there in these servers,” it said.
It also claimed that an employee of Reddy revealed that, on his directions, critical digital infrastructure was being removed for these entities from their office location.
“This was a deliberate attempt to destroy evidence. It is stated that though Reddy has denied owning retail zones other than Trident, he was giving directions to shift the servers of Avantika and Trident. Analysis of these servers has revealed that there is incriminating digital data stored in them,” the ED alleged.
ED also said that during the probe, excess credit notes were issued to Reddy’s entities or firms by IndoSpirits on its own, i.e., without receiving the same from the manufacturers.
“In other words, these credit notes were not issued by the manufacturers to IndoSpirits for onward transmission to these 3 L7 firms (Trident, Avantika and Organomix). This is not a normal or fair trade practice. These credit notes, worth ₹4.35 crores to these 3 L7 firms were issued by IndoSpirits in a conspiracy to pass on undue profits/benefits to the retail zones of Reddy.
“Therefore, it is apparent that the excess 7 per cent margin given to the wholesalers was being transferred in lieu of the bribe given by these persons,” it alleged.
The ED also argued that to mislead the investigation, the majority of these credit notes were shown reversed on paper in August 2022 as an afterthought, after the investigation was started by the central investigating agencies in the case.
“This is further strengthened by the fact that the present outstanding (as per the data seized during the search) is more than ₹60 crore pertaining to retail zones of Trident Chemphar Pvt Ltd, Organomixx Ecosystems and Sri Avantika Contractors towards IndoSpirits. This pattern of outstanding is unusual and disproportionately high when compared to the non-cartel retail zones,” the ED alleged.
ED also stated that there were clear instructions from Mahendru to his finance team to not follow up with the outstanding retail groups of Reddy, which indicates that this outstanding amount was of no relevance, being part of the bigger cartel. “Therefore, this unusual outstanding of ₹60 crore and Credit notes mentioned above amounting to ₹4.35 crore were nothing but proceeds of crime,” it said.
ED said that Reddy had actively planned and conspired with various business owners and politicians and indulged in unfair market practices to gain an undue advantage in the Delhi Excise Policy, 2021–2022, and that he led a nexus controlling a huge market share by way of cartelisation.
The ED also charged Reddy with conspiring with others and facilitating kickbacks through Vijay Nair. By way of cartelisation, corrupt practices and conspiracy by Reddy have generated the proceeds of crime of a huge amount of at least ₹64.35 crores, the ED said.