Massive Scam Revealed In New Excise Policy Of Delhi

In a much controversy mired Excise Policy that is applicable from 2021-22 onwards for the retail sale of liquor in Delhi, not unsurprisingly a scam worth hundreds if not thousands of crores seems to have been executed with fine precision between the Balaji Group of Companies of Andhra Pradesh/Tamil Nadu and the Indospirit Group of Companies of Delhi, to cartelise the retail liquor trade in Delhi by winning 5 Retail zones; all under the watchful eye of the Government of Delhi.

The Excise Policy among other things, specifically bars; whether directly or indirectly; a manufacturer or wholesaler of liquor or a Black-listed entity to participate in the bidding for the Retail L-7Z licenses. The Policy also bars a single entity (including related entities) from being allotted more than 2 zones. There are 32 zones in Delhi and each zone consists of 27 vends/shops. The reserved license fee for each zone was at an average of Rs. 225 crore per zone.

The Balaji Group is a large group of inter-twined companies run under the auspices and control of Mr. Magunta Srinivasalu Reddy, a Member of Parliament from Nellore, Andhra Pradesh. The group has several interests in the liquor trade including distilleries that manufacture and bottle liquor in Tamil Nadu namely -Enrica Enterprises that is a manufacturer and exclusive franchise of United Spirits Ltd. with a Distillery located at Poonamallee, Chennai, and ; Pearl Distillery located in Prakasam District, Andhra Pradesh is one of the largest distilleries in Andhra Pradesh and has exclusive franchise of United Spirits Ltd for manufacturing of various brands of IMFL. Two companies (related) from the Balaji Group – Magunta Agro Farms Pvt. Ltd. and Pixie Enterprises Pvt. Ltd. have been allotted 3 zones (Zones 4,23 and 32) by the Government of NCT of Delhi.

Magunta Agro’s, partner-in-crime in winning another 2 zones (Zone 2 & 3) in Delhi, seems to be the Indospirit Group of companieswho’s promoters are Sameer and Geetika Mahandru (“Mahandrus”). The Indospirit group of companies are in the business of Distribution (through Indospirit Distribution Pvt. Ltd.& Indospirit Marketing Pvt. Ltd.) and in the business of manufacturing (through Indospirit Beverages Pvt. Ltd. and Bubbli Beverages) as well as wholesale business. The Mahandrus (promoters of Indospirit Barshala) have also been black-listed by the Excise Department for a period of 3 years till 2022.Zones 2 and 3 have been allotted by the Government of Delhi to an entity by the name of Khao Gali Restaurants Pvt. Ltd. which is owned by the Father, mother and brother of Geetika Mahandru – promoter of Indospirit group of companies.

The unholy nexus between the Balaji group and the Indospirit group is unravelled not only from a perusal of the data available for the large web of related parties and entities from Ministry of Corporate Affairs website, but also from the Earnest Money Deposits (EMDs)furnished by the Balaji group and Khao Gali, for the bidding process.

(a) The EMDs to the tune of Rs. 60 crore furnished by Magunta Agro (retail bidder for Zone 4 and 23) reveal that Rs. 25 crore EMD has been furnished by Bubbly Enterprises (manufacturer of Indospirit group and black-listed entity), Primus Enterprises (Rs. 30 crore) and Hiwide Enterprises (Rs. 5 crore), the last two being part of Balaji Group that has manufacturing interests.

(b) The money trail for the successful bidderof Zone 2and 3 – Khao Gali seems to reveal that the funds for the EMDsfurnished by Khao Gali to the tune of 20 crores have been received from Indospirit Marketing and Geetech Dynamic (Geetika Mahandru of Indospirit group was a part of Geetech Dynamic from June 2016 to July 2021). Rs. 25 crore EMD has been furnished by Zainab Trading Pvt. Ltd. A review of MCA records of Zainab and its shareholders shows that Zainab is a related party to and is under the Balaji Group. Its ultimate ownership is traced back to Raghav Magunta, the owner of liquor manufacturer company Enrica Enterprises. Khao Gali’s remaining funding for EMDs seems to have possibly come from a major liquor manufacturer.

The cartelization between Balaji group companies and Indospirit group companies is writ large from the fact that Bubby Beverages (Indospirit company) has provided an EMD for Magunta Agro and Zainab Trading (of Balaji group) has provided the EMD for Khao Gali (Indospirit company).

Not only have the Balaji group of the Reddys and the Indospirit group of the Mahandrus sought to hoodwink the Government of NCT of Delhiby suppressing material disclosures regarding related entities and black-listed entities that the bidders were required to make on affidavit, but more interestingly it appears that the Evaluation Committee that scrutinizes the bids, in not deep-diving to find out details about the bidder and its ‘funders’ seems to have sabotaged the Government’s own Policy by colluding with the Balaji Group and the Indospirit group of companies.

Another seasoned liquor manufacturer’s successful arrival in the retail liquor trade in Delhi is – Som Group of Companies from Madhya Pradesh. The Som group has deep-rooted interests in the manufacture of liquor, owns distilleries, is a distributor and retailer. Over the years several of its related group companies and directors have also been black-listed by the Madhya Pradesh Excise Department. It manufactures and owns brands such as Hunter Beer, Black Fort, Power Cool which have sales of over one million cases per year. The Som group of companies has won Zone 13 in Delhi through an entity called Raisen Marketing Pvt. Ltd. which has been seemingly created to help Som Group of Companies by-pass scrutiny for being a manufacturer as well as for having been black-listed on several occasions. Shri Jagdish Kumar Arora is the Chairman & Managing Director of Som Distilleries. He is the promoter of the company. In 2018 and 2019, 97.9% shares in Raisen Marketing were owned by Aryavrat Retail LLP. Jagdish Kumar Arora owned 70% shares in Aryavrat Retail LLP, while the rest were owned by his family members. It appears that as a response to the blacklisting of certain Som companies, the Som Group consolidated all its retail operations in Raisen Marketing and started retail operations in Raisen Marketing in 2019. On 24 February 2020, the shares were transferred from Aryavrat Retail LLP to Avinash Chalana & Co, a partnership firm which is also part of the Som Group. As of date Avinash Chalana & Co who has also been black-listed by the Madhya Pradesh Excise Department, is the majority shareholder of Raisen Marketing.

The substantial compromise of 6 zones by the Balaji group, Indospirit group and Som group of companies, seems to have been undertaken under the watchful and protective eye of the powers that be in the state of Delhi with a mutually beneficial agenda.

There are now, many a questions that the Arvind Kejriwal government of Delhi will have to answer…..