Delhi High Court: In a matter of two bail applications filed by Kalvakuntla Kavitha in cases registered against her by the Directorate of Enforcement (‘ED’) and the Central Bureau of Investigation (‘CBI’) arising out of similar facts, a Single Judge Bench of Swarana Kanta Sharma, J. denied bail to K. Kavitha and held that no case could be made out for the grant of a regular bail.
Background
The CBI had registered a case on 17-08-2022 for offences under Sections 120-B read with 477-A of the Indian Penal Code, 1860 (‘IPC’) and Section 7 of the Prevention of Corruption Act, 1988 (‘PC Act’) on the premise that during the formulation of the Delhi’s Excise Policy of 2021-22, K. Kavitha had entered into a criminal conspiracy, thereby intentionally creating or leaving loopholes in the policy to be exploited later on.
It was claimed that kickbacks totaling around Rs. 90-100 crores were paid in advance to Vijay Nair, Manish Sisodia, and other co-accused persons by individuals in the South Indian liquor business (‘South group’). The criminal conspiracy allegedly resulted in the formation of a cartel among three components of the policy: Liquor manufacturers, wholesalers, and retailers.
After the filing of charge sheets, the CBI conducted further investigation and on 20-02-2024, issued a notice to K. Kavitha under Section 41-A of the Code of Criminal Procedure, 1973 (‘CrPC’) for joining the investigation but because she did not do so, she could not be examined by CBI.
Subsequently, K. Kavitha was arrested by the ED on 15-03-2024 after which the CBI sought permission from the Trial Court to interrogate her as she was in judicial custody. The investigation by CBI revealed that K. Kavitha was a partner in Indo Spirits through her proxy i.e., co-accused Arun Ramchandran Pillai.
K. Kavitha was arrested by the CBI on 11-04-2024 for her active involvement in the Delhi liquor policy case and was then remanded to the custody of CBI by the Trial Court vide order dated 12-04-2024.
ED alleged that the Delhi Excise Policy 2021-22 was crafted by top leaders of the Aam Aadmi Party (‘AAP’) to continuously generate and channel illegal funds to themselves, with deliberate loopholes left in the policy to facilitate criminal activities. It was also alleged that Vijay Nair was appointed as a mediator by leaders of AAP and he proposed to K. Kavitha as well as other members of the South group to fund the party in exchange for profitable business opportunities.
As alleged, Rs. 100 crores were received as advance kickbacks from the South group which led to the formation of a special-purpose vehicle i.e. Indo Spirits where K. Kavitha and Raghav Magunta, through proxies, held a 65 percent partnership. ED alleged that Indo Spirits was used to launder money by employing various methods.
K. Kavitha argued that there had been a grave violation of Articles 21, 22(1) of the Constitution as well as the principles of natural justice in her case. It was also argued that Section 50 of CrPC had not been complied with by the investigating agency since no information regarding the arrest was given to her.
K. Kavitha also contended that she was the only woman accused in the present case and that Section 45 of the Prevention of Money Laundering Act, 2002 (‘PMLA’) states that the case of a woman accused is to be treated on a different footing and that she could be enlarged on bail without having to satisfy the twin conditions under Section 45(1).
Analysis and Decision
The Court noted that during the investigation, Magunta S. Reddy revealed that the Chief Minister of Delhi, Arvind Kejriwal, had informed him that K. Kavitha met him earlier and offered to pay Rs. 100 crores to AAP for doing liquor business in Delhi and also informed him that K. Kavitha would follow up regarding the same.
Further, the Court noted that K. Kavitha had arranged a meeting with Magunta S. Reddy at her Hyderabad residence after which payments were made in furtherance of the arrangement and this resulted in Magunta S. Reddy’s son Raghav Magunta acquiring a 32.5 percent partnership in Indo Spirits.
The Court noted that evidence in the form of chats retrieved from the phone of K. Kavitha’s chartered accountant revealed her partnership in Indo Spirits. The investigation also revealed that Sarath Chandra Reddy’s participation in Delhi’s liquor business under the new Excise Policy was influenced by K. Kavitha’s assurances. The Court also noted that in the bidding for retail zones, a total amount of Rs. 14 crores were paid to K. Kavitha under a sham land deal.
Thus, the Court opined that, given the material collected by the investigating agency, K. Kavitha was prima facie one of the main conspirators in the criminal conspiracy hatched for the formulation and implementation of the Delhi Excise Policy 2021-22.
Further, the Court noted that Sarath Reddy had disclosed that Arun Pillai had informed him about a lucrative opportunity in the Delhi liquor business and that K. Kavitha was discussing the upcoming Excise Policy with Arvind Kejriwal and Manish Sisodia who told her that if she gives Rs. 100 crores, the policy would be amended in her favour. In furtherance of this, Sarath Reddy had agreed to contribute a part of the amount, once the business began.
The Court said that it was important to note that Indo Spirits was a vehicle that was created to recoup the advance kickbacks paid by the South group, and it had earned profits of Rs. 193 crores within 10 months, which was termed as proceeds of crime by the ED.
Therefore, the Court opined that, given the material collected by ED, K. Kavitha was prima facie involved in the payment of kickbacks, establishing Indo Spirits for recoupment of kickbacks, and in various other processes and activities relating to proceeds of crime.
The Court opined that the argument that the statements of the approvers recorded under Section 164 of CrPC and other statements under Section 50 of the PMLA could not be relied on, was devoid of merit since, in a criminal trial, at the stage of arrest and remand of an accused, only the statements of the witnesses and the material collected which corroborates with such statements are placed before the Court of law.
The Court referred to Rohit Tandon v. Directorate of Enforcement (2018) 11 SCC 46 to state that the statements recorded under Section 50 of PMLA had been held to be admissible and these statements could make out a formidable case about the involvement of the accused in the offence of money laundering.
Thus, the Court held that as per the existing law, the Courts have to rely upon the statements of the witnesses, etc. to make out a prima facie view regarding the involvement of an accused and the extent thereof to exercise discretion to grant or deny bail.
Further, the Court mentioned the twin test as has been provided in Section 45 of PMLA and concluded that the twin conditions were not fulfilled since a prima facie case of commission of money laundering was made out against K. Kavitha. Hence, she was not entitled to the grant of bail in the case registered by ED.
The Court noted that K. Kavitha had presented nine mobile phones which were found to be formatted. When she was questioned as to who had deleted the data, she was evasive and could not provide any explanation. The Court also found it crucial to note that the forensic examination of the phones revealed that they had been formatted after K. Kavitha had been summoned on 11-03-2023.
Therefore, the Court said that it could not rule out the possibility of K. Kavitha tampering with evidence if she is released on bail since the investigation had not been concluded and thus, the Court opined that the applicant did not fulfill the triple test for the grant of bail.
The Court also held that K. Kavitha could not be equated to a vulnerable woman who may have been misused to commit an offence, which is the class of women for whom the proviso to Section 45 of PMLA had been incorporated as per Saumya Chaurasia v. Directorate of Enforcement 2023 SCC OnLine SC 1674, and she was not entitled to the benefit of the proviso to Section 45 of PMLA.
Lastly, the Court held that no case for regular bail was made out at the present stage and accordingly dismissed the applications.
[Kalvakuntla Kavitha v. CBI, 2024 SCC OnLine Del 4459, Decided on 01-07-2024]
Advocates who appeared in this case :
For Petitioner — Sr. Advocate Vikram Chaudhari, Advocate Nitesh Rana, Advocate Mohith Rao, Advocate Deepak Nagar, Advocate Arveen, Advocate Muskan Khurana, Advocate Shaik Sohil Akhtar
For Respondent — SPP D.P. Singh, Advocate Manu Mishra, Advocate Shreya Dutt, Advocate Imaan Khera, SC Zoheb Hossain, Advocate Vivek Gurnani, Advocate Vivek Gaurav, Advocate Kartik Sabharwal, Advocate Abhipriya Rai, Advocate Sachin Sharma, Advocate Samarvir, Advocate Radhika Puri, Advocate Dipanshu Gaba
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