Bombay HC Reinstates Discharge of Adani Promoters in Long-Standing Fraud Case

In a significant judicial development for corporate litigation, the Bombay High Court has set aside orders that sought to revive criminal proceedings against Adani group promoters. The judgment, delivered by Justice R.N. Laddha, effectively reinstates the original discharge orders passed by the Magistrate in 2014 and 2015, dismissing the Serious Fraud Investigation Office (SFIO)’s attempts to continue prosecution under charges of cheating and criminal conspiracy.

The Genesis of the Legal Dispute

The controversy originated from a 2012 complaint filed by the Union of India through the SFIO, alleging that the Adani group, in collusion with "KP entities" (linked to Ketan Parekh), manipulated the capital market to inflate share prices of Adani Exports Limited (now Adani Enterprises Limited). The prosecution contended that promoters offloaded shares at peak prices and reacquired them during troughs, allegedly causing Rs. 388.11 crore in wrongful gains to promoters and corresponding losses to public investors.

Following the filing of these charges under Sections 420 and 120B of the Indian Penal Code (IPC), the trial court granted a discharge to the accused, citing a lack of prima facie evidence. While the Sessions Court initially set aside these discharges, the High Court’s intervention now corrects that path, emphasizing procedural adherence and jurisdictional boundaries.

Arguments on Jurisdiction and Evidence

The petitioners, represented by Senior Advocates Amit Desai and Vikram Nankani, mounted a robust defense centered on two pillars: the scope of investigative authority under the Companies Act, 1956, and the legal requirements for a charge of "cheating."

The petitioners argued that under the 1956 Act, the SFIO was not empowered to initiate prosecutions for non-corporate criminal offenses like cheating under the IPC. They contended that, unlike the more expansive powers granted under the 2013 Companies Act, the 1956 framework strictly limited the SFIO’s prosecutorial reach. Furthermore, the defense pointed out that there was no record of a single public complaint alleging individual financial loss—a vital ingredient to sustain a Section 420 IPC charge.

Conversely, the Union of India maintained that the SFIO’s comprehensive investigation revealed a nexus between the entities and that the prosecution was well within the purview of general criminal law. They argued that the trial court erred by failing to examine the investigation report before granting discharge.

Court’s Analysis: A Narrow Path for Revision

Justice R.N. Laddha’s ruling focused heavily on the distinction between the roles of the trial court and the revisional court. The High Court observed that the trial court had acted properly under Section 245(2) of the Code of Criminal Procedure (CrPC) as there was no evidence of deception presented.

Critically, the High Court found that the Sessions Court had exceeded its jurisdiction under Section 397 of the CrPC. The Revisional Court had erroneously presumed the contents of an investigation report that was not part of the trial court record. By doing so, the Sessions Court essentially conducted a roving and fishing inquiry into evidence that had not been formally introduced.

Key Observations

Highlighting the essential failings of the prosecution's case, the Court noted:

• "A fundamental requirement for an offence under Section 420 IPC is the presence of an element of deception, which leads to the victim suffering from loss while the accused gains wrongfully."
• "In the present case, there is a conspicuous absence of any such allegations from an affected party."
• "In the absence of any substantive findings, error, or legal infirmity in the discharge orders, the interference by the revisional Court was unwarranted and beyond its jurisdictional mandate."
• "The Magistrate can discharge the accused even when the accused appears, in pursuance of the summons or a warrant and even before the evidence is led under Section 244 CrPC."

Final Verdict and Implications

By setting aside the revisional orders, the High Court has reaffirmed that the power of discharge at a pre-trial stage is a vital safeguard against groundless criminal litigation. For corporate entities, this ruling serves as a reminder that criminal prosecution cannot be sustained on conjecture or in the absence of demonstrable victim injury. The decision highlights that unless the foundational charges of deception are clearly evidenced, ancillary charges like criminal conspiracy under Section 120B IPC cannot survive, effectively closing this chapter of procedural contestation.

The Court promptly rejected a request from the respondents to suspend the operation of the order, signaling a definitive end to this particular chain of litigation at the High Court level.