The 53-year-old Khaira, a former Congressman who had joined the Aam Aadmi Party in December 2015 -- nearly a year before the last Punjab assembly polls, sent his resignation to AAP national convener Arvind Kejriwal.
"I am constrained to forward my resignation from the primary membership of AAP as the party has totally deviated from the ideology and principles on which it was formed post the Anna Hazare movement," the Bolath MLA said in his resignation letter, copies of which have been released to the media.
"Although you have already rewarded our good work by humiliatingly suspending me and Kanwar Sandhu from the party but still I want to formalise the disconnection with you and AAP, by quitting its primary membership," Khaira said.
The rebel leader has been a vocal critic of AAP leadership since he was removed as leader of opposition in Punjab assembly in July last year.
Khaira, along with Sandhu, was also suspended from AAP for indulging in "anti-party" activities in November last year.
Launching a no-holds-barred attack on Kejriwal, Khaira said, "I am saddened to state that your dictatorial attitude has shattered the dreams of Indians and Punjabis for a clean alternative to the decayed and rotten system."
He said, "As a result, almost all prominent leaders of the party, beginning from Prashant Bhushan to H S Phoolka, have either quit the party or you have thrown them out."
The "current political culture of traditional parties of the country stands badly decayed, due to which immense hope was generated by the formation of AAP," Khaira said in his letter.
"..unfortunately after joining the party I realised that the hierarchy of AAP was no different from the traditional centralised political parties. The turn of events into the run up of 2017 Punjab elections further confirmed my belief, that there was no inner party democracy," he said.
"We in Punjab aspire to turn the dream of a clean political alternative into a reality, which is impossible as long as I am a part of your highly centralised high command culture," he added.
In December last year, Khaira, along with suspended AAP MLA from Patiala Dharamvira Gandhi and Lok Insaaf Party, formed Punjab Democratic Alliance, "a political formation of like-minded leaders".
Khaira alleged that no action was taken when he brought to Kejriwal's notice "reports of money exchange, favouritism and nepotism" in distribution of tickets in the run up to Punjab assembly polls two years ago.
He accused the AAP chief of listening only to couple of trusted lieutenants he had appointed to run Punjab and never bothering about the sentiments of AAP volunteers on the ground.
"The saddest part is that a party which vouched for transparency and accountability never bothered to hold any person or persons accountable for the shameful defeat (in Punjab assembly polls)," Khaira said.
The AAP, which had emerged a strong contender to wrest power from Punjab's ruling Shiromani Akali Dal-Bharatiya Janata Party coalition in 2017 assembly polls, managed to win just 20 seats in the 117-member state assembly.
"You have blatantly gone back on the most important promise of 'swaraj', by centralising all powers..You have also thrown to winds the constitution of the party merely to remain convenor and continue your grip on the party," Khaira said in his letter to Kejriwal.
"Your hobnobbing and flirting with the Congress is yet another example of sheer political opportunism, that has left the people of India bewildered," he added.
Following his removal as LoP, Khaira, along with seven supporters, formed a rebel group which sought autonomy for AAP's Punjab unit.
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