Delhi Excise Ruling: Arvind Kejriwal, Audit Findings and a Failed Case
Delhi Excise case: How the probe against Arvind Kejriwal moved from audit findings to conspiracy charges and ended in court discharge and questions on proof.
Delhi Excise Case: Liquor, Law and the Limits of Conspiracy
The Rouse Avenue Court on February 27 delivered one of the sharpest judicial rebukes to the Central Bureau of Investigation in recent memory on the Delhi excise policy case. In a sweeping order, Special Judge Jitendra Singh cleared former Delhi Chief Minister Arvind Kejriwal, former Deputy Chief Minister Manish Sisodia, and BRS leader K. Kavitha of all charges, concluding that the prosecution had failed to establish even the basic ingredients of conspiracy or criminal intent in the formulation of the 2021–22 excise policy. In total, 23 people have been discharged in the Delhi excise case.
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Far from validating years of political allegations, the judgment dismantled the very foundation of the case, observing that the investigation relied more on conjecture than on verifiable evidence. More striking than the acquittals themselves was the court’s pointed criticism of the CBI. The judge flagged internal contradictions within the agency’s chargesheet and warned against the growing investigative practice of converting accused persons into “approvers” to compensate for evidentiary gaps — a method the court suggested could undermine constitutional safeguards.
By ordering a departmental inquiry against the CBI officer handling the probe, the ruling raises uncomfortable but necessary questions about investigative accountability, the weaponisation of criminal law in high-stakes political battles, and the long-term consequences such prosecutions have for democratic institutions.
Outside the Rouse Avenue Court, Arvind Kejriwal struck an emotional note, breaking down while addressing supporters and the media. Visibly moved, he described the court’s order as vindication after what he called a prolonged “test by fire” for both him and the Aam Aadmi Party, asserting that the ruling had helped remove the stigma created by years of investigation and allegations against the party’s leadership.
How the Delhi Excise Saga Unfolded from Reform to Audit Indictment to Courtroom Collapse
The Delhi excise case or the liquor policy “scam” is no longer just a political shouting match or a criminal prosecution headline. It is now a layered institutional story involving four different domains: executive reform, audit scrutiny, criminal investigation, and judicial review.
The Delhi excise policy was projected by the then Arvind Kejriwal led Delhi government as a reform that promised higher revenue, cleaner retailing, and elimination of the liquor mafia. The CAG audit later described deep structural flaws and quantified revenue implications running into over ₹2,000 crore. Investigative agencies alleged an overarching conspiracy involving kickbacks and political funding. And finally, the Rouse Avenue Court discharged all accused in the CBI case, holding that serious allegations cannot rest on conjecture or approver-driven narratives without cogent material evidence.
The Delhi excise case now compels a closer examination of each stage of its evolution: the policy’s genesis, the CAG’s performance audit findings, the criminal conspiracy theory advanced by CBI and ED, the judicial reasoning rejecting that theory at the threshold stage, the alleged role of a politician from Telangana, and the uncertain future before the Delhi High Court.
The Reform That Rewired Delhi’s Liquor Economy
When the Government unveiled the Delhi Excise Policy 2021–22 under the then Chief Minister Arvind Kejriwal, it was presented as a structural reform aimed at reshaping Delhi’s liquor economy. The State would exit retail liquor vending, the city would be divided into zones, and private players would operate vends. The stated goals were ambitious: increase revenue, eliminate black marketing, improve consumer experience, prevent monopoly, and create transparency.
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The design was radical. Instead of collecting excise duty per bottle sold - the traditional model - the policy introduced a structure where a substantial part of excise revenue was embedded into the zonal licence fee. Retailers paid large fixed licence amounts upfront. Once paid, their marginal incentive shifted toward pushing volumes.
The reform lasted less than a year. On 1 September 2022, it was withdrawn.
What followed was not administrative review–it was a criminal investigation.
The Personal and Political Price Paid by Arvind Kejriwal
The Delhi excise case imposed an unmistakable personal cost on Arvind Kejriwal, transforming what began as a policy controversy into a defining moment of political survival. Arrested by the ED in March 2024 and later formally arrested by the CBI while in custody, Kejriwal spent nearly five months in Tihar Jail — an unprecedented situation for a sitting Chief Minister.
He initially chose not to resign and governed from prison, a first in Indian political history, signalling political defiance as well as institutional strain. His eventual resignation in September 2024, days after securing bail from the Supreme Court of India, was framed by him as a moral decision: he declared he would return to office only if the people of Delhi granted him a “certificate of honesty.” The resignation was thus both symbolic and compelled — shaped by corruption allegations, restrictive bail conditions that limited administrative functioning, and the need to reclaim political legitimacy outside the courtroom.
For the AAP, the excise policy case extracted a sustained political price even before judicial scrutiny reached its conclusion. The arrest of its national leader allowed the BJP to anchor a powerful corruption narrative against a party built on an anti-corruption plank. Governance in Delhi entered a prolonged phase of uncertainty, culminating in leadership transition to Atishi Marlena in September 2024.
The Delhi Assembly elections were held on February 5, 2025, bringing Atishi’s brief caretaker tenure to an end and marking a decisive turning point in the national capital’s politics. The results, declared days later, delivered a clear mandate to the BJP, which returned to power in Delhi after 27 years by winning 48 of the 70 seats. The Aam Aadmi Party suffered a massive electoral setback, its strength in the Assembly falling from 62 seats in 2020 to 22, with Arvind Kejriwal losing the New Delhi constituency to BJP leader Parvesh Verma, even as Atishi emerged among the few senior leaders to retain her seat.
Following the victory, the BJP chose first-time MLA Rekha Gupta from Shalimar Bagh as its surprise Chief Ministerial pick, and she was sworn in as Delhi’s ninth Chief Minister on February 20, 2025, formally ending a decade of AAP rule in the national capital. Much of the AAP’s electoral rout has been widely attributed to the political fallout from the Delhi excise policy controversy.
The CAG Audit: A Damaging Administrative Indictment
Before the conspiracy narrative hardened in public, an institutional document quietly landed: Report No. 1 of 2024–Performance Audit on Regulation and Supply of Liquor in Delhi, prepared by the Comptroller and Auditor General of India (CAG). The report was tabled in the Delhi Legislative Assembly on 25 February 2025.
This report did not investigate bribery in the Delhi excise policy case. It did not pronounce on conspiracy. It performed what audit institutions do best–test systems, approvals, controls, revenue logic and compliance. And its findings were not mild.
Structural Revenue Design Concerns
The CAG observed that the Delhi excise policy introduced under the Arvind Kejriwal government replaced per-bottle excise duty collection with a model that subsumed “presumptive excise duty” within licence fees calculated on past sales and projected growth.
Audit pointed out that once licence fee was fixed and paid, increased retail sales would not proportionately increase government revenue. This created an incentive asymmetry: higher sales could benefit private operators without equivalent public gain.
This was not framed as corruption. It was framed as a flawed fiscal design.
Estimated Financial Implications
CAG quantified the impact of implementation decisions and exemptions, estimating a revenue implication of approximately ₹2,002.68 crore attributable to the 2021–22 policy framework. Across the broader audit observations, total financial implications reached around ₹2,026.91 crore.
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The number was politically explosive. But numbers in an audit do not automatically become proof of criminal intent. We have the experience of allegations of criminal conspiracy failing to have been sufficiently established in CBI investigations into ‘presumptive losses’ and ‘windfall gains’ emanating out of the ‘famous’ CAG’s reports on 2G spectrum and coal blocks allocations to support this view.
Governance and Approval Lapses
CAG recorded that certain relaxations and decisions did not obtain necessary approvals or were not routed through appropriate Cabinet procedures. It noted risks of monopolisation due to zonal concentration and exclusivity patterns.
Crucially, CAG recorded that replies to several audit observations were not provided by the Government during audit finalisation. That weakened the executive’s ability to place its defence within the audit record itself.
This report became a political ammunition. But it is essential to understand its constitutional role: a performance audit identifies weaknesses and fiscal implications; it does not assign criminal liability.
From Audit to FIR: The Criminal Conspiracy Narrative
Following a report by the Delhi Chief Secretary to the Lieutenant Governor in July 2022, the matter was referred to the Central Bureau of Investigation (CBI).
Parallelly, the Enforcement Directorate initiated proceedings under the Prevention of Money Laundering Act (PMLA).
The prosecution narrative evolved into something far more dramatic than the audit findings. It alleged:
• Policy “tweaking” to favour selected players.
• A so-called “South Group” that allegedly paid kickbacks of around ₹100 crore.
• Routing of proceeds for political purposes.
Apart from Arvind Kejriwal and Manish Sisodia, the chargesheets named BRS leader K. Kavitha, who was alleged to have links to the 'South Group.' She denied any wrongdoing and described the action as politically motivated.
The leap from audit irregularities to criminal conspiracy required proof of three elements:
Illegal decision-making
Mens rea (intent)
Quid pro quo (exchange of favour for gratification)
That bridge had to be built with admissible evidence.
The Rouse Avenue Court Discharge: Where the Bridge Collapsed
On 27 February 2026, the Special Judge (PC Act), Rouse Avenue Court, discharged Arvind Kejriwal, Manish Sisodia and 21 others in the CBI case.
The court held that serious allegations require material evidence. It found that the overarching conspiracy theory did not survive scrutiny at the threshold stage.
The court criticised reliance on approver statements to fill investigative gaps and observed that statements of pardoned accused cannot be used to construct a case where independent evidence is lacking.
More strikingly, the court recommended departmental action against the investigating officer for naming a public servant as accused No. 1 without material evidence.
A discharge is not an acquittal after trial. It is a judicial finding that the material does not even justify framing charges.
This is a critical legal threshold moment.
Audit Failure vs Criminal Conspiracy: The Crucial Distinction
Here lies the intellectual centre of this saga.
The CAG report documents systemic weaknesses and revenue implications. It questions fiscal prudence and approval discipline.
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But criminal conspiracy requires evidence of agreement to commit illegal acts and evidence of benefit exchanged.
A flawed revenue design can cause possible fiscal loss without bribery. Administrative exemptions may reflect poor governance without quid pro quo. Monopoly risk does not automatically imply corruption.
The trial court’s discharge suggests that the investigative agencies failed to convert audit findings into legally sustainable conspiracy proof.
That does not invalidate audit findings. It clarifies that audit and criminal law operate on different evidentiary planes.
What Happens to the ED Case?
The ED case under PMLA is premised on existence of a scheduled offence generating proceeds of crime.
If the predicate offence collapses and that collapse is upheld, the ED case faces structural stress. However, the ED may argue that its evidence of money trail and proceeds can independently sustain proceedings pending appellate outcomes.
The fate of the ED case will depend significantly on what happens before the Delhi High Court.
The CBI’s Next Move: Delhi High Court
The CBI has indicated it will challenge the discharge order before the Delhi High Court.
The grounds likely include:
• The trial court applied an incorrect threshold at chargesheet stage.
• Material was prematurely evaluated.
• Evidence ignored or misappreciated.
However, appellate courts generally do not re-appreciate evidence unless there is glaring perversity. Revisional jurisdiction is limited. New evidence cannot simply be inserted at appellate stage without following statutory procedure for further investigation and supplementary report.
The High Court battle is therefore less about drama and more about threshold standards.
Political Repercussions
For the Aam Aadmi Party and Arvind Kejriwal, the discharge is a narrative victory: it reinforces claims of political targeting.
For the BJP and the central agencies, the appeal is essential to avoid institutional embarrassment.
For federal politics, the inclusion and discharge of the political leader from Telangana broadened the case beyond Delhi into inter-state opposition dynamics.
But perhaps the most profound consequence is institutional: when courts publicly question investigative integrity, public trust in enforcement machinery is strained.
Way Forward: Lessons for Institutions
This episode offers hard lessons.
For Governments: bold reforms in high-rent sectors like liquor must be backed by impeccable documentation, Cabinet discipline, revenue modelling transparency, and conflict safeguards. Policy design must anticipate audit scrutiny.
For Audit Institutions: performance audits must continue to be rigorous but must communicate clearly the distinction between systemic weakness and criminal culpability.
For Investigative Agencies: converting administrative lapses into conspiracy charges demands evidentiary precision. Approver-centric cases without corroboration are judicially fragile.
For Courts: discharge orders that clearly articulate evidentiary thresholds reinforce constitutional balance.
For Legislatures: tabling audit reports promptly and debating them meaningfully strengthens democratic oversight.
The Delhi excise saga is not a simple morality play. It is a cautionary tale about how reform, audit, politics, and prosecution intersect.
The CAG report exposed fiscal and governance vulnerabilities. The report is with the Delhi Legislative Assembly, which is the final arbiter. The investigative agencies alleged conspiracy. The trial court demanded evidence.
Between policy ambition and criminal accusation lies a narrow bridge called proof. In this case, at least at the trial court stage, that bridge was found missing.
Whether the High Court rebuilds it–or confirms that it was never structurally sound–will determine the future of this case.
P. Sesh Kumar is a retired Indian Audit and Accounts Service (IA&AS) officer of the 1982 batch who served in senior audit roles under the Comptroller and Auditor General of India, including as Director General of Audit. He has made significant contributions to public sector auditing, governance, and financial accountability, and is the author of several books on public audit and governance, including CAG: Ensuring Accountability Amidst Controversies—An Inside View.
