SRIVIDYA C G v. SERIOUS FRAUD INVESTIGATION OFFICE

Judgment

2. SRI K RAVI NEDUNGADI S/O LATE A K P NEDUNGADI AGED ABOUT 60 YEARS D3/103, PRESTIGE ACROPOLIS NO.20, HOSUR ROAD BENGALURU-560 029. SRI A HARISH BHAT S/O LATE A CHANDRA BHAT AGED ABOUT 64 YEARS NO.28, 4TH MAIN SHANKARANAGAR MAHALAXMI LAYOUT BENGALURU-560 096. - 8 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018

SRI A RAGHUNATHAN S/O LATE A SUBBA RAO AGED ABOUT 65 YEARS 604, 2-B, WALLACE APARTMENTS NAUSHER BARUCHA ROAD GRANT ROAD MUMBAI-400 007. SRI BHARATH VEERARAGHAVAN S/O P R VEERARAGHAVAN AGED ABOUT 53 YEARS NO.3/6, VIVEKANAND COOP. HOUSING SOCIETY T H KATARIA MARG, MAHIM (WEST) MUMBAI-400 016. ...PETITIONERS (BY SRI S. MAHESH, ADVOCATE FOR SRI R. NAGARAJA, ADVOCATE) AND THE SERIOUS FRAUD INVESTIGATION OFFICE GROUND FLOOR, CORPORATE BHAVAN NO.29, RAJAJI SALAI, CHENNAI-600 001 REP. BY N BALASUBRAMANIAN SR. ASST. DIRECTOR. …RESPONDENT (BY SRI PRABHULING K. NAVADAGI, SENIOR COUNSEL FOR SRI MADHUKAR DESHPANDE, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA R/W SECTION 482 OF CODE OF CRIMINAL PROCEDURE, PRAYING TO QUASH THE CONGNIZANCE ORDER AND ARREST WARRANTS ISSUED DATED 28.12.2017 BY THE LEARNED SESSIONS JUDGE AGAINST THE PETITONERS IN SPL.C.C.NO.12/2018 PENDING ON THE FILE OF LEARNED COURT OF LIX ADDL. CITY CIVIL AND SESSIONS JUDGE AND SPECIAL COURT UNDER CONPANIES ACT, 2013 BENGALURU - 9 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 VIDE ANNEXURE-B AND ALL ITS CONSEQUENT PROCEEDINGS AND ETC. IN W.P.NO.4381 OF 2018: BETWEEN: DARSHANA KADAKIA D/O SRI RASIKLAL KADAKIA AGED ABOUT 51 YEARS RESIDING AT B/43, TARABAUG ESTATE RAJARAM MOHAN ROY ROAD MUMBAI-400 004. (BY SRI UDAY HOLLA, SENIOR COUNSEL FOR SRI AMAR CORREA, ADVOCATE) AND: ...PETITIONER SERIOUS FRAUD INVESTIGATION OFFICE (THROUGH N BALASUBRAMANIUM SR. ASST. DIRECTOR) GROUND FLOOR, CORPORATE BHAVAN NO.29, RAJAJI SALAI CHENNAI-600 001. …RESPONDENT (BY SRI PRABHULING K. NAVADAGI, SENIOR COUNSEL FOR SRI MADHUKAR DESHPANDE, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA R/W SECTION 482 OF CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO DECLARE SECTION 212(6) AND 217 OF THE COMPANIES ACT, 2013 AS UNCONSTITUTIONAL; QUASH THE ORDER DATED 28.12.2017 AT ANNEXURE-A TAKING COGNIZANCE AND ISSUING ARREST WARRANT BY THE LEARNED SPECIAL JUDGE AGAINST THE PETITIONER IN SPL.CC.NO.12/2018 PENDING ON THE FILE OF THE LIX ADDL. CITY CIVIL AND SESSIONS JUDGE AND SPECIAL COURT UNDER THE COMPANIES ACT, 2013 AND ALL ITS CONSEQUENT PROCEEDINGS AND ETC. - 10 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 IN W.P. NO.4671 OF 2018: BETWEEN: MR. RAJESH C JAIN S/O MR. C L JAIN, AGED ABOUT 54 YEARS, NO. 253, A KALPATARU HORIZON, S.K. AHIRE MARG, WORLI, MUMBAI - 400 018. (BY SRI UDAY HOLLA, SENIOR COUNSEL FOR SRI GURUPRASANNA S., ADVCOATE) AND: SERIOUS FRAUD INVESTIGATION OFFICE GROUND FLOOR, CORPORATE BHAVAN, NO.29, RAJAJI SALAI, CHENNAI - 600 001. REPRESENTED BY ITS SENIOR ASSISTANT DIRECTOR, MR. N BALASUBRAMANIAN. ...PETITIONER (BY SRI PRABHULING K. NAVADAGI, SENIOR COUNSEL FOR SRI MADHUKAR DESHPANDE, ADVOCATE) …RESPONDENT THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA R/W SECTION 482 OF CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASHING THE IMPUGNED ORDER DATED 28.12.2017 PASSED BY THE LEARNED LIX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AND SPECIAL COURT UNDER THE COMPANIES ACT, 2013 IN THE COMPLAINT BEARING SPECIAL CC NO.12 OF 2018 AT ANNEXURE-A AND ALL FURTHER PROCEEDINGS AND ETC. - 11 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 IN W.P. NO.6074 OF 2018: BETWEEN MR. SUJAL SHAH S/O MR. ANIL SHAH AGED ABOUT 49 YEARS "ARJUN", 1ST FLOOR, V.P. ROAD, ANDHERI (W), MUMBAI-400 058. (BY SRI NIKHILESH RAO M., ADVCOCATE) ...PETITIONER AND: THE SERIOUS FRAUD INVESTIGATION OFFICE (THROUGH MR. N. BALASUBRAMANIAN, SR.ASST. DIRECTOR), GROUND FLOOR, CORPORATE BHAVAN, NO.290, RAJAJI SALAI, CHENNAI-600 001. …RESPONDENT (BY SRI PRABHULING K. NAVADAGI, SENIOR COUNSEL FOR SRI MADHUKAR DESHPANDE, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA 1950 R/W SECTION 482 OF CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE IN SPL.C.C.NO.12/2018 IMPUGNED ORDER DATED 28.12.2017 PASSED BY THE HON'BLE COURT OF THE LIX ADDL. CITY CIVIL AND SESSIONS JUDGE AND SPECIAL COURT UNDER THE COMPANIES ACT AT BENGALURU CITY [CCH-60] ANNEXURE-A AND ALL FURTHER PROCEEDINGS AND ETC. IN W.P. NO.11889 OF 2018: BETWEEN: RISHABH MISHRA AGED ABOUT 37 YEARS - 12 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 ...PETITIONER HAVING HIS ADDRESS AT B-203 JULIAN ALPS, BHAKTI PARK WADALA (EAST), MUMBAI-400 037. (BY SRI C.V. NAGESH, SENIOR COUNSEL FOR SRI S. MAHESH, ADVOCATE) AND: THE SERIOUS FRAUD INVESTIGATION OFFICE (THROUGH N BALASUBRAMANIAN SR. ASST. DIRECTOR) GROUND FLOOR, CORPORATE BHAVAN NO.29, RAJAJI SALAI CHENNAI-600 001. (BY SRI PRABHULING K. NAVADAGI, SENIOR COUNSEL FOR SRI MADHUKAR DESHPANDE, ADVOCATE) …RESPONDENT THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA R/W SECTION 482 OF CODE OF CRIMINAL PROCEDURE, PRAYING TO QUASH THE COGNIZANCE ORDER AND ARREST WARRANTS DATED 28.12.2017 ISSUED BY THE LEARNED SESSIONS JUDGE AGAINST THE PETITIONER IN SPL.C.C. NO.12/2018 PENDING ON THE FILE OF LEARNED COURT OF LIX ADDL. CITY CIVIL AND SESSIONS JUDGE AND SPECIAL COURT UNDER COMPANIES ACT, 2013 VIDE ANNEXURE-B BENGALURU AND ALL ITS CONSEQUENT PROCEEDINGS AS THE SAME ARE UNCONSTITUTIONAL FOR BEING VIOLATIVE OF ARTICLE 20(1) OF THE CONSTITUTION OF INDIA AND ETC. THESE WRIT PETITIONS COMING ON FOR FURTHER HEARING THIS DAY, THE COURT MADE THE FOLLOWING: - 13 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 ORDER The proceedings before the LIX Additional City Civil and Sessions Judge, Special Court, under the Companies Act, 2013, Bengaluru City, for offenses punishable under Sections 36 read with Section 448 and 447 of the Companies Act, 2013, and Section 68 read with Section 628 of the Companies Act, 1956, are challenged in these petitions. Hence, they are collectively addressed and resolved through this common order.

2. The Serious Fraud Investigation Officer (SFIO) filed a complaint under Section 439 read with Section 212 of the Act, 2013, and under Section 621 read with Sections 235 and 624 of the Act, 1956, along with Section 193 of the Criminal Procedure Code.

3. The prosecution's case is as follows: a) The Ministry of Corporate Affairs, based on the Registrar of Companies' report dated 27.05.2015 highlighting irregularities by Kingfisher Airlines Limited, assigned the investigation to SFIO under Section 212(1)(c) of the Act, 2013. SFIO submitted a report dated 30.08.2017 under Section 212(12) of the Act, 2013. b) Kingfisher Airlines Limited (KFAL) was established in 2004under the Companies Act, 1956, under the control of accused No.5 (Mr. Vijay Mallya), primarily engaged in domestic civil aviation. The Government of India introduced the 5/20 Rules, requiring Airlines Companies to have five years of domestic commercial operation and a fleet of 20 aircraft to fly overseas. c) KFAL, not meeting the requirements, aimed to acquire Deccan Aviation Limited (DAL), controlled by accused No.10. Accused No.5, recognizing the potential capital gain from the acquisition of DAL and considering KFAL's existing loss of Rs.1,234 crore, collaborated with other accused to cheat, produce fraudulent documents, cause loss to - 14 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 shareholders and stakeholders of DAL, and violate various provisions of the Companies Act and the Income Tax Act. d) and post-merger. The process involved three stages: pre-merger, merger, e) In the pre-merger stage, the accused decided on an artificial de-merger, creating two non-existing undertakings to fulfill the condition for demerger. f) In the merger stage, a scheme of arrangement under Sections 391(2), 394 of the Act, 1956, was presented to de-merge airline business from KFAL and merge it with DAL. The fabricated documents aimed to avoid taxation of capital gain. g) Post-merger, KFAL losses, which were not transferred to the accused No.2 - Company, but retained by KFAL, renamed as Kingfisher Training and Aviation Services Limited (accused No.1). This was done to portray the accused No.2 - Company as a profitable venture to secure additional finance. incurred h) After the merger, accused No.5 and his associates manipulated asset valuation and goodwill to control the allocation of shares. i) In the post-merger stage, accused No.5 gained control of DAL, renamed as KFAL, allowing him to secure additional finance based on the brand value of the resultant entity.

4. The charges and roles of each accused, as per SFIO's investigation, are detailed as follows: CHARGES: i) Liability for fraudulent conduct of business of a company, liable to be prosecuted U/S 542 of the Companies Act, 1956 - Recommendation to Central Government to advise OL for initiating action. - 15 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 ii) Proper accounts not kept in respect of erstwhile KFAL, KFAL (Combined) and DAL - liable to be prosecuted U/S 541 of the Companies Act, 1956. The SFIO has not initiated prosecution against the accused on charge Nos.1 and 2. iii) Failure to show a true and fair view of profit and loss account and balance sheet and non-compliance/non-disclosure liable to be prosecuted U/S 628 read with Section 211 and 211(3C) of the Companies Act, 1956 and U/S. 477A of the Indian penal Code, 1860. The further investigation in respect of charge No.3 is being undertaken and the SFIO is in the process of submitting a supplementary investigation report. iv) Concealment of material facts and inducing the then existing shareholders of DAL to agree for demerger of Airline Division of DAL with that of erstwhile KFAL and acquiring the control of KFAL, liable to be prosecuted U/S. 68 of the Companies Act, 1956. v) Fraudulent inducement of banks to convert part of the debt into preference shares by deceptive projections and non-existing collateral securities by concealment of material facts, liable to be prosecuted U/S. 68 of the Companies Act, 1956. vi) Misrepresentation in filing of returns with ROC., Bengaluru regarding allotment of equity shares to promoter VJM in erstwhile KFAL liable to be prosecuted US. 628 read with Section 75 of the Companies Act, 1956. vii) Failure to show a true and fair view of profit and loss account and balance sheet and non-compliance/non-disclosure as required under accounting standard for the year 2006-07 in respect of DAL - liable to be prosecuted U/S. 628 read with Section 211 and - 16 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 211(3(C) of the Companies Act, 1956 and U/S. 477A of the Indian Penal code, 1860. The Central Government has sought certain clarifications regarding this charge. The SFIO is in the process of submitting a supplementary report. viii) Failure to show the related party transactions in audited financials for the financial years 2008-09 to 2011-12 - liable for prosecution under Section 628 read with Section 211(3C) of the Companies Act, 1956 read with Section AS-18 of Accounting Standards. Charges No.9 to 11 are related to various other offences committed, the SFIO has not initiated any action on the basis of the transactions. ix) Contravention of provisions of the Companies Act, 1956 by statutory auditors of the DAL and KFAL (Combined) - liable for prosecution under Section 227 read with Section 233 of the Companies Act, 1956.

5. ROLE OF EACH ACCUSED:

5.1 Accused No.1: Kingfisher Training and Aviation Services Ltd., original KFAL company, represented by its Director, Mr. A Raghunathan, which participated in the merger process. The fraudulent activity commenced in this company.

5.2 Accused No.2: Kingfisher Airlines Ltd., erstwhile Deccan Aviation Ltd., represented by its Chairman and Managing Director, Mr. Vijay Mallya (Accused No.5), which participated in the merger process and caused loss to the Banks, its employees and Government exchequer.

5.3 Accused No.3: Deccan Charters Ltd. (WP 3642/2018) (Para No.15 of the Complaint) - 17 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 i) Originally Accused No.3 was known as Kingfisher Aviation Training Ltd., and the same was promoted by UB Group. ii) Later, this particular company was renamed as Deccan Charters Ltd. The Deccan Charters Ltd., (Accused No.3) was recipient of capital and reserves from UB group through circular transactions (round-robin) which was used to pay the slump sale consideration (Rs.69.00 crores) in the scheme of arrangement. iii) The slump sale consideration is in reference to an undertaking, which was not merged with the resultant company, remained with the demerged company and acquired by the Deccan Charters Ltd., (Accused No.3) as per the scheme of arrangement. iv) [Chapter IV of Investigation report Volume-I & II deals with the factual matrix of Accused No.1 (till merger) and 2 (post merger). Para 4.30, page No.147 speaks about slump sale consideration. Para 4.30.3 speaks about payment of slump sale consideration. Diagram provided at page 150 provides a circular transaction(round-robin).] Page 147-156 are relevant pages. v) Accused No.3 in WP No.3642/2018. The Accused No.3 is represented by Captain G R Gopinath(Accused No.10) in this writ petition. the petitioners is one of

5.4 Accused No.4: United Breweries (Holding) Ltd., United Breweries (Holding) Ltd., represented by its Director Mr.Vijay Mallya, is the holding/promoter company of Accused No.1 & 2 which played a major role in movement of funds to Accused No.2 and gave corporate guarantee in favour Accused No.2.

5.5 Accused No.5: Mr. Vijay Mallya Mr. Vijay Mallya, Chairman of Accused No.1 entity until merger and thereafter Chairman of Accused No.2 entity has conspired with the other accused in creating fraudulent documents and non-existing divisions for the demerger process with DAL. He conspired with other accused in - 18 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 borrowing additional finances from banks using the falsely valued brand as collateral security and conversion of part of existing loan from banks into shares in DRP. He conspired with A-6 and 8 to conceal the payments made by Accused No.1 and 2 entities to Force India Formula One Team Limited (controlled by Accused No.5 and 6) in the financials as related party transactions.

5.6 Accused No.6: Mr. A K Ravi Nedungadi (WP No. 3943- 3947/2018) Mr. A K Ravi Nedungadi, Group Chief Financial Officer of UB Group and Director in Accused No.2, played a role in all key events like demerger, raising funds through DRP and false valuation of brand.

5.7 Accused No.7: Mr. A Harish Bhat (WP No. 3943- 3947/2018) Mr. A Harish Bhat, Treasurer of UB Group and Director in Accused No.4 Company, played a major role in coordinating with the valuers for Share Swap Ratio at the time of merger, false valuation of brand for obtaining funds from the banks on the basis of false projections.

5.8 Accused No.8: Mr. A Raghunathan (WP No. 3943- 3947/2018) Mr. A Raghunathan, Chief Financial Officer of KFAL and Director of KTASL, presented financials in fraudulent ways with an intent of getting funds from banks and coordinated with Accused No.6 and 7 for the entire financial operations.

5.9 Accused No.9: Mr. Bharath Veeraraghavan (WP No. 3943- 3947/2018) Mr. Bharath Veeraraghavan, Company Secretariat of Accused Nos.1 and 2, who conspired for creating documents with back date during demerger. (Page No. 52 and 53 of Executive Summary, Para No. 2.34 - 19 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 speaks about creation of artificial division on paper. In this executive summary, the role played by Accused No. 9 is explained).

5.10 Accused No.10: Captain G R Gopinath (WP 3642/2018) Captain G R Gopinath, one of the promoters of DAL, who took the non- compete fee and conspired with Accused no.5 in the merger process, obtained illegal gratification and gained the control of Deccan Charters Ltd., in the scheme of arrangements.

5.11 Accused No.11: Ambit Private Ltd. (WP 3624/2018) Ambit Private Ltd., engaged by KFAL and DAL to oversee the entire merger process carried out fraudulently.

5.12 Accused No.12: Mr. Ashok Wadhwa (WP 3625/2018) Mr. Ashok Wadhwa, Chartered Accountant and Director of Accused No.11, suggested the methodology to carry forward the merger process in a fraudulent way.

5.13 Accused No.13: Mr. Vinod Wadhwani (WP 3632/2018) Mr. Vinod Wadhwani, Director of Accused No.11, who suggested the demerger of KFAL by creating non-existing business divisions and coordinated with Accused No.5 and 10 with respect to payment of non- compete fee.

5.14 Accused No. 14: Mr. Rishabh Mishra (WP 11889/2018) Mr. Rishabh Mishra, Chartered Accountant in Accused No. 11 company who carried out activities connected with fraudulent demerger process of KFAL with DAL.

5.15 Accused No.15: Rajesh C Jain (WP 4671/2018) Rajesh C Jain, valuer in KPMG India Ltd who carried out the valuation process in fraudulent demerger without reviewing the historical financials and market data along with the projections given. He was also privy to - 20 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 the share allotment in Accused No.1 at nominal rate of Rs.30 per share just before the demerger.

5.16 Accused No.16:Mr. Sujal A Shah(WP 6074/2018) Mr. Sujal A Shah, valuer in Dalal & Shah who carried out the valuation process in fraudulent demerger without reviewing the historical financials and market data along with the projections given. He was also privy to the share allotment in Accused No.1 at nominal rate of Rs.30 per share just before the demerger.

5.17 Accused No.17: Ms. Srividya C G (WP 4380/2018) Ms. Srividya C G, partner in Grand Thornton who valued the brand at superficial value of Rs.3406 crore at the time of additionalborrowings by Accused No.2 in 2008 and at Rs.4111 crores during DRP in 2010.

5.18 Accused No.18: Ms. Darshana Kadakia (WP 4381/2018) Ms. Darshana Kadakia, partner at Grand Thornton who valued the brand at superficial value of Rs.3406 crore at the time of additional borrowings by Accused No.2 in 2008 and at Rs.4111 crores during DRP in 2010.

5.19 Accused No.19: Mr. Supratim Sarkar (WP 3829/2018) i) He is the Executive Vice President of SBI Capital Markets Ltd., and group head of project advisory and structured finance, who approved projections of future profitability of the company. The Information Memorandum paved the way for getting additional bank borrowings and conversion of part of existing loans into shares of Accused No.2 entity. Information Memorandum which contained ii) Charge No.5 deals with fraudulent inducement of banks. Para 5.28 (page No.345) states that IM was placed before Accused No.19 and he ordered for release of IM for use by the consortium leader - 21 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 bank SBI and other banks. He failed to examine serious shortcomings in the IM.

6. Therefore, the accused are said to have committed the following offences under:

6. 1 Section 68 of the Companies Act, 1956: Vijay Mallya and others concealed material facts and induced the shareholders of DAL to agree for demerger of airlines division with KFAL, thereby the shareholders of DAL lost the value of shares and the shareholders of erstwhile KFAL gained higher value on demerger. The accused persons fraudulently induced the bankers to convert part of the loan into preference shares at the time of DRP by presenting false projections of future profitability in the Information Memorandum and valuing the brand using inflated projections.

6.2 Section 628 r/w 211 and 211(3C) of the Companies Act, 1956: Accused No.5, 6 and 8 failed to show "related party transactions" in the audited financials of Accused No.2 during the period 2008-2012, in respect of payments made to FIFOTL, a related entity of Accused No.2 KFAL.

6.3 Section 628 r/w 75 of the Companies Act, 1956: Accused No.5 received the remittance of Airbus SAS into his account and invested the same as his equity contribution in the erstwhile KFAL. The remittance from Airbus SAS was on account of credits/incentives - 22 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 offered by it for placing the orders for purchase of aircrafts. The remittance, if had come in the normal course, would have gone for reduction in purchase price of the aircraft or accounted as miscellaneous income in the books of erstwhile KFAL. Knowing fully well about the nature of remittances, Accused No.5 utilized the amount as his equity contribution and the officials of UB Group/erstwhile KFA i.e., Accused No. 6 and 8 also accounted the same as the equity contribution. They filed form 2 on 07.07.2006 for the equity shares allotted, knowing fully well that they were filing the return containing materially false particulars.

7. Submissions of Sri C V Nagesh, learned Senior Counsel representing the petitioner's counsel in WP Nos.3684, 3625, 3632 11889 of 2018 are as hereunder: a) The Special Court constituted under Section 435 of Act, 2013 lacked jurisdiction to take cognizance of the offence alleged to have been committed and made penal under the provisions of Act, 1956, since the Special Court constituted can try an offender, who is said to have committed an offence, which is made penal under the provisions of Act,

2013. In support, the decision of the High Court of Judicature of Bombay in the case of Manish Rangari -vs- Union of India (2020) SCC OnLine Bombay 3226 is cited. b) Proceeding is hypothesis that the Special Court has the jurisdiction to take cognizance of the offences complained of, Section 621(1) of Act, 1956 which is in parimateria with Section 439(2) of Act, 2013 postulates that the Special Court can exercise such power of cognizance only with the complaint is filed by (i) Registrar, (ii) Shareholder, and (iii) a person authorized by the Central Government in - 23 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 that behalf. The present complaint is not filed by a person enumerated in Section 621(1) of the Act, 1956. c) The accused No.13 is a resident of Thane which places certainly beyond territorial jurisdiction the Special Court. Therefore, the Special Court before issuing process against him should have conducted an enquiry or directed an investigation as contemplated under Section 202(1) of Cr.PC. Therefore, the issuance of process stands vitiated for non-compliance of mandatory provision contained in Section 202(1) of Cr.PC. In support, reliance is placed on the decisions of the Apex Court in the case of Vijay Dhanuka -vs- Najima Mamatha and others (2015) 1 SCC (Crime) 479 and in the case of Ajith Pawar -vs- Hemant Madhukar Nimbalkar and another - (2017) 2 SCC (Crime) 192. d) Section 204 of Cr.PC mandates that the Special Court before the issuing process is required to examine the materials on record and record of finding that there are sufficient grounds to proceed against the accused. In the instant case, said requirement has been given a go- by. In support, he placed reliance on the following decisions: M/s GHCL Employees Stock Option Trust vs M/s India 1) Infoline Limited 2013 (3) Supreme 151 : (2013) 2 SCC (Cri) 414 Sunil Bharati Mittal vs Central Bureau Investigation: (2015) 2) 4 SCC 609 3) Sunil Todi vs State of Gujarat: 2021 SCC Online SC 1174. Rabindranath Bajpe vs Mangalore Special Economic Zone 4) Ltd.: 2021 SCC Online SC 806 - 24 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 5) Lalankumar Singh and others -vs- State of Maharashtra : 2022 (7) Supreme 899. e) Section 2(29)(iii) of the Companies, 2013 inter alia states that the `Court’ means the Court of Sessions having jurisdiction to try any offence under this Court or under any previous Companies law. Therefore, the court of sessions as stated in Section 2(29)(iii) means a Court established by the State Government under Section 9(1) of the Cr.PC, and the Special court under Section 435 of the Act, 2013 to establish by the Central Government for providing speedy trial of the offences under this Act. Therefore, the contention of the SFIO irrespective of the quantum of punishment, the Court of sessions had the jurisdiction under Section 2(29) of the Act, 2013 is without any substance. f) The allegations against the petitioners - accused No.13 in a nutshell is that the methodology adopted by him as a professional cost accountant for the purpose of preparation of his report is not correct and that he ought to have adopted a popular method. The statute that governs the preparation of the report by a chartered/cost account does not prescribe a particular method that ought to be adopted for and in connection with the preparation of the report, and also does not prescribe to adopt a popular method. Therefore, the allegation does not satisfy the essential element to constitute the commission of offence alleged against him.

8. Submissions by Sri Amit K Desai, learned Senior Counsel representing the petitioner in W.P. No. 3625/2018 are as below: - 25 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 a) The alleged offense in the complaint pertains to the period between 2005 to 2012, predating the commencement of the Companies Act, 2013. Section 465 of the Act, 2013, which deals with the repeal of certain enactments and savings, was enforced from 30.01.2019. Therefore, at the time when the Special Court took cognizance of the offenses, the Companies Act, 1956, was in force. Consequently, the Special Court established to try offenses under the Act, 2013, lacked jurisdiction to try offenses under the Act, 1956. b) Section 2(29) of the Act, 2013, defines the term "Court," which includes a Magistrate having jurisdiction to try offenses under this Act or under any previous company law. Therefore, the Judicial Magistrate of First Class was competent to try offenses under the Act, 1956, as per the proviso to the unamended Section 435 of the Act, 2013. c) The legislative intent is clear from the usage of the term "previous Companies Law" in various provisions of the Act, 2013. Therefore, when the language is clear and unambiguous, the Court is bound to give effect to its meaning, irrespective of the consequences. The power of the Special Court, which is a Sessions Court, is limited to taking cognizance of offenses specified under Sub-Section (1) of Section 435 of the Act, 2013. Therefore, offenses not specified in Section 435(1) are subject to the bar under Section 193 of the Criminal Procedure Code (Cr.PC). d) Furthermore, Section 212(16) of the Act, 2013, stipulates that investigations initiated under the provisions of the Act, 1956, shall continue under the said Act as if the Act, 2013, had not been passed. - 26 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 Hence, the Special Court lacked jurisdiction to take cognizance of offenses under the Act, 1956. e) Section 435 provides for the establishment of a Special Court for trying offenses under the Act, 2013, and not for trying offenses under the Act, 1956. Therefore, the provision contained in Section 435(1) cannot be retrospectively applied to try offenses under the Act, 1956.The scheme of the Companies Act, 1956, and the Companies Act, 2013, differs significantly. The essential elements to constitute offenses under these Acts are distinct, as are the provisions for prosecution. f) The charge No.10, along with other charges, has been dropped, yet the petitioner continues to be charged under charge No.4 for the same act. Therefore, dropping various charges undermines the prosecution's case, even in relation to charge No.4. g) The provisions regarding the scheme of arrangement are contained in Sections 391 to 394 of the Companies Act, 1956. Therefore, Section 68 of the Act, 1956, is not applicable. h) The allegations against the petitioners are the same as objections raised by the Regional Director before this Court during the sanction of the scheme, which were not pressed. Therefore, the Special Court cannot reconsider issues previously raised before this Court and not pursued. If the SFIO alleges that the order was obtained by fraud, the proper recourse is to challenge the scheme sanction order before this Court, not to file a complaint before the Special Court. i) Cognizance of an offence under Section 68 of Companies Act, 1956, is only upon a written complaint as enumerated in - 27 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 Sub-Section (1) or by the Securities and Exchange Board of India (SEBI) as stated under the second proviso. As the offense under Section 68 relates to the issuance of shares by DAL under the scheme, the power to administer Section 68 lies with SEBI, barring a Court from taking cognizance of a complaint not authorized by SEBI. j) Accused No.11 was not an Officer of Kingfisher Airlines Limited but a mere Service Provider. Therefore, the sanction should be restricted to directors or officers of the Company and not extended to the petitioner, who is neither an officer nor a director. 1) (Nathi Devi -vs- Radha Devi Gupta, (2005) 2 SCC 271 (paras-13-15, 18); 2) Bharat Aluminium Company -vs- Kaiser Aluminium Technical Services Inc. & Others, (2012) 9 SCC 552 (paras-80, 81); 3) United Treasures Private Limited - (1955) 2 SCC 303 (para-39). Insurance Company Ltd. India -vs- Orient

9. Submissions of Sri Udaya Holla, learned Senior Counsel representing the petitioner in WP No.4671/2018 are as below: a) The allegation against the petitioner in WP No.4671/2018 is that he did not carry out due diligence by verifying the correctness of the information provided by KAL and DAL, and he used only certain valuation methodologies. The validation or due diligence was not part of the scope of the petitioner, KPMG. The use of methodology is a professional decision based on facts/circumstances in each case. The petitioner is a professional and cannot be criminally prosecuted for an opinion which may not be acceptable, and the use of one valuation method instead of another does not constitute an offence. The - 28 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 inducement to enter into an agreement in respect of share of debenture is an essential element of Section 68. The decision to undertake the merger was already taken by the parties to the merger, and the petitioner was engaged merely to recommend the swap ratio; therefore, the question of inducement does not arise (CBI -vs- K Narayanrao (2012) 9 SCC 512 (paras-20, 31), and Sunil Kumar Agarwal and others -vs- Mukhopadhyay (2009) SCC OnLine CAL 239). b) The scheme of arrangement prepared by KFAL and DAL was sanctioned by this Court in Co.P No.45/2008 after considering the swap ratio, and the merger sanctioned by the High Court cannot be sought to be reopened through criminal proceedings. c) (Dilip S. Dahanukar -vs- Pradam Kumar Khaitan, 1995 SCC OnLine Raj 222 at paras - 23, 26, 29 at Judgments Compilation pages 34-35). Deccan Charters Limited -vs- Nil (CoP No.45/2018);Dilip S Dahanukar -vs- Padam Kumar Khaitan (1995 SCC OnLine Raj 222);Pepsi Foods Limited -vs- Special Judicial Magistrate (1998) 5 SCC 749;Inder Mohan Goswami -vs- State of UP (2007) 12 SCC 1Sunil Kumar Agarwal & Ors. -vs- G Mukhopadhyay (2009) SCC OnLine Cal 2391; Bhupinder Kaur Singh -vs- Registrar of Companies (2007) SCC OnLine Del 252; Wartsila India Limited -vs- Janak Mathuradas (2010 SCC OnLine Bom. 1715)Central Bureau of Investigation, Hyderabad -vs- K Narayana Rao (2012) 9 SCC 512; Mohamed Arif -vs- State of Madhya Pradesh (2016 SCC OnLine MP 1736); Kishan Singh -vs- Gurpal Singh (2010) 8 SCC 775; Manoj Kumar Sharma -vs- State of Chhattisgarh ORDER i) The Writ Petitions are allowed; - 55 - NC: 2024:KHC:14889 WP No. 4380 of 2018 C/W WP No. 3624 of 2018 WP No. 3625 of 2018 WP No. 3632 of 2018 WP No. 3642 of 2018 WP No. 3829 of 2018 WP No. 3943 of 2018 WP No. 4381 of 2018 WP No. 4671 of 2018 WP No. 6074 of 2018 WP No. 11889 of 2018 ii) The impugned proceedings on the file of 59th Additional City Civil and Sessions Judge and Special Court under the Companies Act, 2013 in C.C.No.12/2018 stands quashed, and the complaint filed by the respondent SFIO consequently stands dismissed. Sd/- JUDGE BKM