ED Names AAP Accused In Delhi Liquor Policy Case: Can A Political Party Be Prosecuted For Money Laundering?

In its supplementary chargesheet filed in Delhi’s Rouse Avenue court in the alleged liquor policy case, ED on Friday named the national political party – and its national convenor Arvind Kejriwal. The federal probe agency has been probing the money laundering angle in the case since August 2022. This is the eighth chargesheet it has filed in the case. Special Judge Kaveri Baweja has taken cognisance and issued summons to Kejriwal for July 12.

The Delhi Chief Minister was arrested on March 21 by the ED, becoming the third senior AAP leader to be taken into custody in the alleged scam. His former deputy Manish Sisodia and Rajya Sabha MP Sanjay Singh were arrested earlier. Meanwhile, AAP’s former communication head Vijay Nair, as well as Bharat Rashtra Samithi leader K Kavitha have also been arrested in the case. Sanjay Singh won a bail in April.

AAP’s name as an accused in the Delhi excise policy case not only opens a brand new chapter in India’s jurisprudence but also leaves many questioning what happens next to AAP.

Can a political party be held in a money laundering case?

This is the first time ever that a political party in India has been named an accused in a money laundering case. As a result, the laws around it are uncharted territory. 

The question of AAP being named as an accused was raised first during the Supreme Court hearing in October last year, where the bench asked the ED to clarify why the party was not being named if it had, as claimed, benefited from the alleged kickbacks in the liquor policy case. Additional Solicitor General (ASG) SV Raju had told the court that it was “contemplating” naming the party by invoking Section 70 of the Prevention of Money Laundering Act (PMLA).

According to Section 70 of PMLA, which deals with offences by a company, “Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to the company, for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.”

An explanation under the provision clarifies further that a company is a separate entity independent from its members or individuals who operate it and can be prosecuted independently. 

While, AAP or any other political party is not a company as per the Company Act, 2013, in April this year, while dismissing Kejriwal’s plea challenging his arrest, Justice Swarana Kanta Sharma noted that Section 70 of PMLA can be applied to a political party. 

"The definition of political party as per Section 2(f) of the Representation Of The People Act is that a political party means an 'association or body of individuals'. As per Explanation 1 of Section 70 of PMLA, a company also means an 'association of individuals’," she had said. 

This is perhaps what the ED will argue.

Repercussions for AAP

The latest development is bad news for the Delhi-based national party, analysts believe. AAP has already been troubled by the arrests of its key leaders and a controversy surrounding its Rajya Sabha MP Swati Maliwal, the repercussions of which were visible in Lok Sabha election results. 

The new allegations have kicked up a political storm now with the party accusing ED of functioning as a “political wing” of the Bharatiya Janata Party (BJP) and wanting to “finish off” AAP. 

In a statement, the party claimed that the ED was on a mission to "cripple AAP and stop its functioning" and that it would now proceed to "seize" all properties and bank accounts of Delhi Chief Minister Arvind Kejriwal and AAP.

Over the last two years of this investigation, the ED and the CBI have framed a false case in the courts while the BJP has run a false narrative in public against AAP and its leaders, the party alleged. Despite probing into the case for two years, conducting 500 raids and submitting charge sheets, they could not show recovery of even one rupee from any party leader, it added.

The Aam Aadmi Party also noted that naming it accused was a "huge harassment and injustice" to a national party. Prosecution under the PMLA could gravely impact AAP’s assets and legal status, though its position as a national party can be affected only based on electoral performance.

Since AAP is also the current government in Delhi and a political party has never been accused as an entity before, it is also unclear what will happen to the government if things go south for the party.