Thiruvananthapuram: The Serious Fraud Investigation Office (SFIO) on Thursday filed a prosecution complaint in the CMRL (Cochin Mineral Rutile Limited) bribery case in front of the Economic Offences Court, Kochi. The prosecution complaint is akin to a police chargesheet and the accused will be summoned for trial once the court accepts the complaint.

The SFIO has lined up 27 accused, and among them are Chief Minister Pinarayi Vijayan's daughter Veena Vijayan and her company Exalogic Solutions. A large chunk of the accused list is made up of top CMRL officials including its MD Sasidharan Kartha.

Veena and her company have been charged with section 447 of the Companies Act in the 160-page SFIO chargesheet. This section deals with the punishment of fraud committed by a person or entity, and applies to fraud involving at least Rs 10 lakh or 1 per cent of a company's turnover, whichever is lower. The punishment under this section is imprisonment ranging from six months to 10 years.

It was on the basis of a Registrar of Companies (RoC) report on the scandal that the SFIO, under the Ministry of Corporate Affairs, began a detailed probe in January 2024.

The RoC report had said that Veena should not be condoned and action should be initiated against her for fraud under the Companies Act 2013.

The RoC probe was not based on the findings of the Income Tax (IT) Interim Settlement Board but the investigation team had placed the Board's findings before Veena. Her responses to the board's findings, the RoC report had said, were "evasive".

The Board had found that Veena individually and her company received Rs 5 lakh and Rs 3 lakh a month respectively for three years from 2017. It said that Exalogic had signed an agreement with CMRL to provide marketing consultancy and software services. However, the Interim Settlement Board investigation revealed that no such services were rendered.

The service level agreement between Exalogic and CMRL showed that the software services were to be given only through the company. So, here are some questions that will be put to Veena if she is called for trial.

How come she, the director of Exalogic Solutions Private Limited, received Rs 55 lakh from CMRL in an individual capacity? Was she providing services in an individual capacity other than through Exalogic Solutions? And if so, what was the purpose and where is the documentation?

The RoC had earlier asked Veena to explain why action should not be initiated against her under section 447 of the Companies Act (punishment for fraud) for diversion of amounts to the personal account of the director.

Veena had then relied on a technicality to stave off questions. The RoC had not mentioned that it had got the information from the report of the Interim Settlement Board. It just said "reports available in the public domain". Veena told the RoC that she could have responded had the RoC told her specifically which report it had relied on. The RoC in its report had termed Veena's reply "evasive".

Veena will also be asked why she failed to disclose that her service deal with CMRL came under the "related party" transaction. This was because the government-run KSIDC had a 13.4 per cent stake in CMRL.

One of the 'related parties' is: "any person on whose advice, directions or instructions a director or manager is accustomed to act. A description that fits the Chief Minister. Veena, however, is expected to deny any role for her family in the running of KSIDC. In fact, the Chief Minister is not in the KSIDC director board.

Exalogic's decision to file for 'dormancy status' in November 2022 will also be put to her. (The advantage of being in dormant mode is that a company's compliance burden will be low).

Under Section 455 of the Companies Act, a firm filing for dormancy should not have conducted any business in the preceding two years. But by Exalogic's own admission and the chartered accountant's certification, the company had significant transactions till May 1, 2021. Therefore, Exalogic had to wait for at least five months before filing for dormancy.

Veena will also be asked why she had failed to reveal the inquiries against her company while filing for dormancy status.

Rule 3 of Companies (Miscellaneous) Rules 2014 states that a company cannot apply for dormancy if an inspection, inquiry or investigation has been ordered or taken up or carried out against the company.

Veena and Exalogic were issued notice under Section 206(4) of the Companies Act on January 29, 2021. There were further correspondences, including directions for a personal hearing, dated November 22, 2021.

When she went before the RoC on July 22, 2022, she had submitted a declaration form saying that no inspection, inquiry, or investigation had been ordered or taken up or carried out against her company.

During the probe, SFIO discovered that Veena’s firm had actually received ₹2.70 crore from CMRL. Meanwhile, the Income Tax Interim Settlement Board, in its 2023 report, cited that CMRL had paid ₹1.72 crore to Exalogic Solutions. The board submitted its report after recording statements from CMRL employees. In its chargesheet, referred to as a prosecution complaint, SFIO concluded that Veena had misappropriated funds from Empower India Capital Investments, a subsidiary of CMRL.