The Central Bureau of Investigation (CBI) Special Judge Sanjeev Aggarwal awarded the imprisonment to Rajan S. Lala, 67, who was found guilty of dealing with criminal conspiracy under the Indian Penal Code and criminal misconduct under the Prevention of Corruption Act.
The court also fined Lala Rs 75,000.
"Let this be not forgotten that we the people of India are the government. It is not alien or superpower hovering over us," the court said.
"The ultimate rulers in the democracy are not the parliamentarians or ministers or the government servants, but the people of this country, who have right to demand a just government which nourishes them with love and affection of a mother."
However, Lala was grant bail on furnishing a personal and surety bond of Rs 50,000, allowing his plea to challenge the order in the higher court and suspended his sentence for a period of 60 days effective September 5.
The case dates back between 1991 and 1994 when Kaul was the minister for urban affairs and employment. He irregularly allotted government shops in south Delhi.
The court, however, acquitted Asha Yadav, Virender Arora, Sant Lal Yadav and Sanjeev Saluja who were allotted shops.
The court held that there was a "clear cut conspiracy" between Lala, then minister Kaul, her then additional private secretary D.D. Arora and assistant private secretary S.L. Yadav.
Kaul, Arora and Yadav have died and proceedings against them have been abated.
The court has fixed the matter for September 5 for order on quantum of punishment.
The CBI had chargesheeted the four government officials, nine private persons in the graft case.
Out of the nine, two died during trial, one was declared proclaimed offender, two were discharged and four acquitted by the court.
The CBI had alleged that Kaul and another accused Tara Chaudhary, who was declared proclaimed offender, had entered into conspiracy between October 1991 and November 1994 to dishonestly or fraudulently obtain undue pecuniary advantage in allotment of shops on economic licence fee basis in contravention of rules.
It said there was a huge pecuniary loss to the state exchequer and led to pecuniary advantage to private persons without any public interest.
"Such act of illegal allotments without looking after the interest of the state, which Kaul was obliged to look after being the Urban Development Minister, as the repository of the power of the people was bound to protect which people had given by electing her," it said.
It said that allotment of shops made by these public servants was "totally arbitrary, unfair, unreasonable and in violation of Article 14 of the constitution".
The court said the convict followed the norms of favouritism and nepotism while allotting shops.
