The Enforcement Directorate (ED) on Friday arrested Bharat Rashtra Samithi (BRS) legislator K Kavitha in connection with alleged kickbacks paid to leaders of the Aam Aadmi Party (AAP) ahead of the formulation of Delhi’s controversial 2020-21 excise policy, and booked the senior leader on charges of money laundering.

Her family and senior BRS leaders, however, said the arrest was in contempt of court, arguing that the Supreme Court is due to hear an appeal in the case on March 19.

Kavitha, who is former Telangana chief minister K Chandrashekar Rao’s daughter, is the third high-profile leader to be arrested in the case, after the former Delhi deputy CM Manish Sisodia and Rajya Sabha MP Sanjay Singh — both senior AAP leaders — were arrested at different points last year.

The arrest comes even as ED is pushing to question Delhi chief minister Arvind Kejriwal, who has so far skipped eight of the agency’s summons. He is due to appear before a magistrate’s court in Delhi on March 16, following a complaint by ED against him for skipping their summons, after a sessions court on Friday refused to stay the judicial proceedings. There has been intense speculation over Kejriwal’s possible arrest, including from the AAP itself, which in December held a referendum asking residents of the Capital whether he should continue as chief minister if he is jailed.

Kavitha was arrested under dramatic circumstances on Friday from her home in Banjara Hills in Hyderabad, hours after an ED team searched the premises and interrogated her.

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“K Kavitha has been arrested under sections of the Prevention of Money Laundering Act (PMLA) as there is substantial evidence of her involvement in the case. She is being brought to Delhi and will be produced before the court,” said an ED officer who asked not to be named.

The officer also accused BRS leader and Kavitha’s brother KT Rama Rao of obstructing the ED team on Friday.

A video filmed by one of Rama Rao’s associates that was circulated on social media showed the former Telangana minister telling ED officials that their warrant was illegal.

“You have given an undertaking in the Supreme Court and now you are violating it. You are in serious trouble,” Rama Rao was seen telling an ED officer. “You came prepared with an arrest warrant. How can you do that when her appeal is slated to come up before the Supreme Court on March 19. This is nothing but a blatant contempt of court,” he added.

The Supreme Court was due to hear Kavitha’s plea against the ED summons on Friday, but adjourned the matter to March 19.

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A member of legislative council (MLC) from Nizamabad constituency, Kavitha was arrested at 5.20pm. “K Kavitha is found guilty of offence of money laundering defined under section 3 of the PMLA and punishable under section 4 of PMLA,” said the agency’s arrest memo.

The Delhi government’s 2021-22 excise policy aimed to revitalise the city’s flagging liquor business by replacing a sales-volume based regime with a license fee one for traders, and promised swankier stores and a better customer experience.

It, however, came to an abrupt end after Delhi’s lieutenant governor VK Saxena recommended a probe into alleged irregularities in the regime. This resulted in the policy being scrapped and being replaced by the previous policy.

Kavitha has not been named as an accused in any of the six charge sheets the agency has filed in the case since November in 2022.However, in court documents, ED has referred to her as a key person in irregularities surrounding the excise policy.

ED’s primary allegation against Kavitha is that she was part of a cartel known allegedly as the “South Group”, which paid ₹100 crore in kickbacks to AAP leaders, in exchange for being assigned nine retail zones under the Delhi excise policy.

Watch | Kavitha’s brother KTR argues with ED officials: ‘You are in serious trouble’

The other members of this group, according to ED, were YSR Congress MP Magunta Srinivasulu Reddy, his son Raghav Magunta, Sarath Reddy (promoter of Aurobindo Group), and Delhi businessman Sameer Mahendru.

Kavitha has in the past maintained her innocence and accused the Bharatiya Janata Party (BJP) of using ED to strong-arm the BRS.

She is under the Central Bureau of Investigation’s (CBI) scanner as well. The agency is conducting a parallel corruption probe in the case and issued summons to her last month, which she skipped, citing an exemption granted by the Supreme Court.

ED has alleged that Kavitha was in touch with the AAP’s then communication in-charge Vijay Nair. Citing her former chartered accountant Butchibabu Gorantla’s statement recorded before it in February last year, ED has claimed she was part of a conspiracy to pay kickbacks to AAP leaders to get retail liquor business in Delhi.

Rama Rao, who is currently the BRS’s working president, claimed ED had not produced any transit warrant from a court in Delhi to arrest Kavitha and take her to the national capital.

He also sought to know whether the agency had informed Telangana legislative council chairperson Gutha Sukhender Reddy, which is mandatory before arresting a council member.

However, later in the evening, a BRS spokesperson said Kavitha and her family would cooperate with the investigating officers. “We will fight the case legally and politically in a peaceful and democratic manner,” said the spokesperson.

BRS MLA Vemula Prashant Reddy alleged that the federal agency had acted against the law in arresting Kavitha, under the directions of the central government. “It is a clear case of intimidating our party just ahead of the Lok Sabha elections,” he said.

BJP state president and Union minister G Kishan Reddy, however, said there was no political vendetta behind Kavitha’s arrest. “The ED has questioned her a couple of times in the past and summoned her several times, but she continued to dodge. If she is really innocent, she can face the inquiry and come out clean,” Reddy said.