The Federal Police of India has arrested Delhi Deputy Chief Minister Manish Sisodia on charges of corruption.
The arrest came after hours of questioning regarding alleged irregularities in the city’s liquor policy.
The policy – which allowed new liquor shops to open – was scrapped after police launched an investigation.
Mr Sisodia and his Aam Aadmi Party denied the allegations, accusing the ruling BJP of playing “dirty politics”.
Questions of corruption are a sensitive issue for the Aam Aadmi Party (AAP), which emerged from a major anti-corruption movement more than 10 years ago.
It is trying to establish itself as a major opposition force to Prime Minister Narendra Modi’s Hindu nationalist BJP, and has already taken control of Punjab state and the capital region of Delhi.
India’s Central Bureau of Investigation (CBI) said Mr Sisodia was arrested in connection with an investigation into Delhi’s liquor regulations.
“He responded evasively and did not cooperate with the investigation despite being confronted with evidence to the contrary,” it said.
“That’s why he’s been arrested.”
AAP claimed that the arrest was due to “political enmity” and that it was a “fake case”.
AAP party leader and Delhi Chief Minister Arvind Kejriwal said Mr Sisodia was innocent and the arrest was “dirty politics”.
Kejriwal tweeted, “People are very angry with Manish’s arrest. People are watching everything. People will respond.”
“This will strengthen our spirit. Our struggle will be stronger.”
