Karnataka High Court quashes SFIO case against Vijay Mallya, Captain R Gopinath and others

The prosecution also alleged that losses incurred after the merger were retained by Kingfisher Training and Aviation Services, not Kingfisher Airlines, to portray the latter as profitable. It was also alleged that Vijay Mallya and his associates manipulated asset value and goodwill to manipulate share allocation, while he had also obtained additional finance based on the value of the post-merger company.

The bench questioned the initiating of proceedings under the Companies Act, 2013, whereas, at the alleged time, the Companies Act, 1956, was in force. The bench observed, “The petitioners cannot be prosecuted for actions that were not deemed punishable under the provisions of the 1956 Act. This purported action violates Article 20, SubClause 1 of the Constitution of India, which safeguards against retrospective criminalization”.

The bench added, “The learned Judge of the Special Court while taking cognizance simultaneously issued an arrest warrant against the accused… The Court must very carefully examine whether the complaint or FIR has not been filed with an oblique motive. The personal liberty is paramount and therefore the Courts at the first and second instance should refrain from issuing non-bailable warrants.”

The bench also pointed out that the Special Court hearing the matter only had jurisdiction to hear cases under the Companies Act, 2013.

Quashing the complaint, the Karnataka High Court stated, “It is evident that the cognizance taken by the learned judge of the special court… lacks legal authority. Furthermore, since this court has already approved the scheme of arrangement, the matter of whether the merger process was tainted by fraud cannot be revisited through the initiation of criminal prosecution. Therefore, allowing the criminal proceedings to proceed would constitute an abuse of legal process”.