Sanchayita Lahkar

The High Court of Andhra Pradesh Single Bench of Justice T. Mallikarjuna Rao, on 07 May 2025, dismissed the anticipatory bail petitions filed by the accused in connection with an alleged ₹3200 crore liquor syndicate scam. The Court held that the nature and gravity of the accusations warranted custodial interrogation, and no extraordinary circumstances had been established to merit anticipatory bail. Accordingly, the petitions were dismissed, allowing the investigation to proceed without interference.

The present criminal petitions, filed under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023, sought anticipatory bail in Crime No. 21 of 2024 registered at CID Police Station, Mangalagiri. The offences invoked included Sections 409, 420, 120-B read with Sections 34 and 37 IPC, and Sections 7, 7A, 8, 13(1)(b), and 13(2) of the Prevention of Corruption Act, 1988.

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The genesis of the case dates back to a report received from the Principal Secretary to the Government of Andhra Pradesh on 23.09.2024, raising concerns about irregularities in Andhra Pradesh State Beverages Corporation Limited (APSBCL) operations from October 2019 to March 2024. Allegations involved suppression of popular brands, preferential allocation of orders to new brands, and manipulation of the Order for Supply (OFS) system.

The prosecution alleged that a syndicate, led by senior political figures and officials, manipulated liquor procurement and sales processes. Digital evidence, including hard disks, laptops, and documents seized during raids, revealed a shift from automated OFS to a manual process, facilitating illicit commissions. Witnesses detailed the coercion of distilleries to comply and the channeling of kickbacks through shell companies and bullion traders.

According to the CID, ₹50–60 crore was collected monthly through kickbacks, with estimated total illicit gains reaching ₹3200 crore. Statements of key witnesses, including CID officials and APSBCL functionaries, supported claims of favoritism towards brands like Adan and Leela, while established brands suffered drastic market share declines.

The petitioners, however, refuted these allegations. K. Dhananjaya Reddy, a former Secretary to the Chief Minister, argued that he neither dealt with excise matters nor played any policy-making role. P. Krishna Mohan Reddy, a retired Deputy Collector and former Officer on Special Duty, maintained that his role was limited to coordination without involvement in liquor policy. Balaji Govindappa, a Director at Bharathi Cement Corporation Pvt. Ltd., emphasized his private role and lack of governmental connection.

Senior Counsel for the petitioners relied on the Competition Commission of India's ruling in Case No. 45 of 2021, which found no arbitrariness in APSBCL's operations during part of the period under investigation. They also referred to precedents such as Manju Surana vs. Sunil Arora and P.S. Rajya vs. State of Bihar, asserting that mere presence or departmental exoneration should negate criminal proceedings.

The State opposed this stance, citing State (NCT of Delhi) vs. Ajay Kumar Tyagi, to argue that exoneration in departmental proceedings does not preclude criminal prosecution. It was further contended that the CCI's findings pertained only to the period up to 2021, while the alleged criminal conspiracy spanned until 2024.

The State stressed the seriousness of the allegations, involvement of political figures, and the ongoing nature of the investigation. Records, including OFS manipulations and large-scale illicit financial flows, were cited to establish the need for custodial interrogation.

Justice T. Mallikarjuna Rao observed, “Anticipatory bail can be granted only in exceptional circumstances where the court is prima facie convinced that the applicant has falsely been enroped and would not misuse his liberty.”

The Court recorded, "This Court views that the investigating officer deserves a free hand to take the investigation to its logical conclusion in a case containing severe allegations." It noted the large-scale financial irregularities and prima facie involvement of the petitioners.

Referring to the decision in Ashok Kumar v. State of Union Territory Chandigarh, it was stated, "It is equally true that just because custodial interrogation is not required that by itself may also not be a ground to release an accused on anticipatory bail if the offences are of a severe nature."

The Court took note of “the serious allegations leveled by the prosecution and the evidences collected during the course of investigation.” It further stated, “The material placed on record, its face, suggests the petitioners' involvement in the offence in question.”

On the issue of confessional statements, the Court remarked, “It is erroneous to say that confessional statement made by the accused during interrogation cannot be considered or looked into to connect the other co-accused.”

In conclusion, the Bench recorded, “Given these circumstances, custodial interrogation is deemed essential to confront the petitioners with the gathered evidence and to unravel a broader conspiracy implicating the accused in the implementation of the Excise Policy.”

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Dismissing the petitions, the Court stated: “Taking into account the overall facts and circumstances, this court concludes that the petitioners are not entitled to leniency in the grant of anticipatory bail. Consequently, the petitions, lacking merit, are dismissed.”

The Bench further directed: “Nothing stated above shall be construed as a final expression of opinion on the merits of the case, and the observations made in the present cases are only for adjudicating the present bail applications.”

It also recorded: “Miscellaneous applications pending, if any, in these Criminal Petitions, shall stand closed.”

Advocates Representing the Parties

For the Petitioners: Vivekananda Virupaksha, P Shashi Vardhan, Tanusha Venkata Lakshmi Kurapati

Case Title: K. Dhananjaya Reddy & Ors. v. State of Andhra Pradesh

Neutral Citation: APHC010230002025

Case Number: Criminal Petition Nos. 4837, 4838, and 5009 of 2025

Bench: Justice T. Mallikarjuna Rao

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