Author: Kotapothula Venkat Rao, LLM student, Damodaram Sanjivayya National Law University
Introduction
Money laundering, the process of concealing the origins of illegally obtained funds, poses a significant challenge to financial integrity and governance worldwide. In India, the Prevention of Money Laundering Act (PMLA), enacted in 2002, serves as a cornerstone in combating this crime. The legislation empowers agencies like the Enforcement Directorate (ED) to investigate and prosecute individuals suspected of laundering money, even in the absence of direct recovery of illicit proceeds. One high-profile case that has brought the PMLA into sharp focus is that of Arvind Kejriwal, the former Chief Minister of Delhi and national convenor of the Aam Aadmi Party (AAP).
The Allegations: Unpacking the Delhi Excise Policy Scam
The controversy surrounding Arvind Kejriwal stems from the Delhi excise policy of 2021-22, which aimed to reform the liquor trade in the national capital by shifting from government-run outlets to a privatized licensing system. Critics, including the Bharatiya Janata Party (BJP), allege that the policy was designed to favor specific private players, facilitating corruption and the generation of illicit funds. The ED, tasked with investigating money laundering aspects of the case, claims that Kejriwal played a pivotal role in orchestrating the scheme, with the AAP emerging as a “major beneficiary” of the proceeds.
According to the ED, the policy enabled kickbacks worth hundreds of crores, which were allegedly guided into AAP’s treasury for political campaigns, including the 2022 Goa assembly elections. While no cash has been directly recovered from Kejriwal, the agency argues that under the PMLA, evidence of involvement in the laundering process rather than physical possession of proceeds is sufficient for prosecution. This stance was articulated in court proceedings, where the ED asserted that Kejriwal “took advantage” of his position as Delhi’s Chief Minister to facilitate these activities.
Kejriwal and the AAP have denied these allegations, framing them as a politically motivated attack by the BJP-led central government to undermine their credibility. The party points to the absence of concrete evidence, such as recovered funds, as proof of their innocence. However, the ED’s legal position hinges on the PMLA’s broad definition of money laundering, which includes any act of concealing, possessing, or using proceeds of crime, irrespective of immediate recovery.
In Kejriwal’s case, the ED invoked Section 19 of the PMLA, which allows arrests based on “material in possession” that provides reasonable grounds to believe an individual is guilty. The Supreme Court’s ruling in Arvind Kejriwal v. Directorate of Enforcement (2024) further clarified this power, emphasizing that arrests must be backed by evidence and that grounds for arrest must be communicated to the accused. On July 12, 2024, the Supreme Court granted Kejriwal interim bail in the excise policy case, referring broader questions about the “need and necessity of arrest” to a larger bench. This decision highlighted the judiciary’s ongoing effort to curb arbitrary enforcement while upholding the PMLA’s intent.
The Delhi High Court’s upcoming hearing on March 17, 2025, will determine whether Kejriwal’s bail holds, as the ED challenges the lower court’s decision to release him. The outcome could set a precedent for how the PMLA is applied in politically sensitive cases, raising questions about the balance between enforcement and potential misuse.
Kejriwal’s Political Journey and the Timing of Allegations
Arvind Kejriwal rose to prominence as an anti-corruption crusader during the 2011 India Against Corruption movement, led by Anna Hazare. His transition from activism to politics culminated in the formation of the AAP, which promised transparent governance and an end to crony capitalism. The party’s landslide victories in the 2015 and 2020 Delhi assembly elections solidified Kejriwal’s image as a reformist leader. However, the excise policy scam allegations have tarnished this reputation, especially following AAP’s defeat in the 2025 Delhi elections, where the BJP ended the party’s decade long rule.
The timing of the ED’s actions has fuelled AAP’s narrative of political vendetta. Kejriwal was first arrested in March 2024, ahead of the 2024 Lok Sabha elections, and the renewed legal scrutiny in 2025 coincides with AAP’s efforts to regroup after its electoral loss. Critics, including AAP spokespersons, argue that the BJP is leveraging central agencies to target opposition leaders, a charge echoed in other cases involving figures like Maharashtra’s Uddhav Thackeray and Jharkhand’s Hemant Soren.
Conversely, the BJP contends that Kejriwal’s legal troubles stem from his own actions. The party has highlighted lavish expenditures, such as the renovation of Kejriwal’s official residence dubbed “Sheesh Mahal” and the alleged misuse of public funds for hoardings, as evidence of corruption. A Delhi court’s order on March 11, 2025, to register an FIR against Kejriwal for the latter issue has added another layer to his woes, though it falls under the Delhi Prevention of Defacement of Property Act rather than the PMLA.
Abstract
This article examines the intersection of money laundering prevention and the high-profile case of Arvind Kejriwal, former Delhi Chief Minister and Aam Aadmi Party leader. It explores allegations tied to the Delhi excise policy scam, where the Enforcement Directorate (ED) accuses Kejriwal of facilitating illicit fund flows under the Prevention of Money Laundering Act (PMLA). The piece analyses the legal framework, political context, and public perception surrounding the case, alongside broader challenges in India’s anti-money laundering efforts. With upcoming court decisions poised to shape Kejriwal’s fate, the case tests the balance between enforcement and potential political misuse of financial crime laws.
The Broader Context: Money Laundering Prevention in India
Kejriwal’s case is a microcosm of India’s broader struggle to combat money laundering. The country’s cash-dependent economy, coupled with weak oversight in sectors like real estate and political funding, creates fertile ground for financial crime. The PMLA has been instrumental in high-profile convictions, such as that of former Jharkhand Chief Minister Madhu Koda in 2017, but its application has also drawn criticism for alleged overreach.
The Financial Action Task Force (FATF)’s evaluation of India praised the PMLA’s effectiveness in disrupting terror financing but flagged concerns about its use in non-terror cases, particularly against political figures. The Kejriwal case exemplifies this tension, while the ED aims to uphold financial integrity, the lack of recovered proceeds and the political context raise doubts about the agency’s impartiality. This has sparked calls for reforms, including clearer guidelines on arrests and greater transparency in investigations.
Political and Public Perception
Public perception of the Kejriwal case is sharply divided. AAP supporters view him as a victim of a vindictive central government, pointing to his track record of delivering free electricity, water, and healthcare in Delhi. Critics, including BJP leaders like Manjinder Singh Sirsa, argue that Kejriwal’s “common man” persona was a facade, as evidenced by his alleged extravagance and legal entanglements. Sirsa’s claim in February 2025 that Kejriwal “will spend most of his time in jail” reflects the BJP’s aggressive stance.
The AAP’s electoral loss in Delhi has intensified scrutiny of Kejriwal’s leadership. Former allies like Swati Maliwal have publicly criticized the party’s failures, while Anna Hazare, Kejriwal’s mentor, attributed AAP’s downfall to a shift from idealism to materialism. Meanwhile, Kejriwal’s 10-day Vipassana retreat in Punjab, beginning has sparked speculation about his next political move possibly a bid to reclaim AAP’s stronghold ahead of the 2027 Punjab elections.
Legal Battles and Future Implications
As of now, Kejriwal’s legal fate hinges on multiple fronts. The Delhi High Court’s decision on the ED’s bail challenge will determine whether he remains free or faces renewed detention. Simultaneously, the FIR over hoardings and the Central Vigilance Commission’s probe into “Sheesh Mahal” signal a multi-pronged assault on his credibility. The Supreme Court’s eventual ruling on the PMLA’s arrest provisions could also reshape the case’s trajectory.
For India’s money laundering prevention framework, the Kejriwal saga underscores the need for balance. Strengthening the PMLA’s safeguards such as mandating judicial oversight for arrests or requiring tangible evidence of proceeds could mitigate perceptions of misuse. Enhanced political funding regulations, such as those proposed in the 2019 Electoral Bonds verdict, could also address the root causes of alleged laundering in politics.
Conclusion
The Arvind Kejriwal case is more than a legal battle; it is a litmus test for India’s anti-money laundering regime and its democratic institutions. Whether Kejriwal emerges as a symbol of resistance against political persecution, or a cautionary tale of corruption depends on the evidence, judicial outcomes, and public sentiment. As the ED and courts navigate this high-stakes drama, the broader challenge remains ensuring that the fight against money laundering upholds justice without being weaponized for political ends. In a nation striving for transparency and accountability, the resolution of this case will reverberate far beyond Delhi’s borders.
FAQS
How can policies be designed to minimize the risk of corruption and misuse of power?
Ans: Policies can be crafted to reduce corruption and misuse of power by focusing on transparency, accountability, Whistleblower Protection, Regular Audits, Public participation and strict penalties.
How did the policy aim to modernize alcohol sales in Delhi?
Ans: The Delhi Excise Policy 2021-22 aimed to modernize alcohol sales by introducing consumer experience, private sector investment, quality assurance and revenue optimization
