Firstly, I wouldn't be surprised if this is a rumour, I feel that this just a public gimmick to get more TRPs. Moreover, Nitin himself had posted some behind the screen pics of Billu at gun point.
Secondly, if Arjun is sent to jail for no crime of his, it would mean an insult to the entire law system of our country.
Lastly, the dialouge between Arjun and Rajveeer in jail where Arjun boldly said that he knows he will win the case because he has faith in his love will all be nonsense then. If this happens then the real criminal will never be punished.
So no, I don't think KMH2 will have such a pathetic ending. Indian television always beleives that truth wins and the audience will not accept anything else.
It might have an abrupt ending, but not a sad ending!
In fact, at this point of time, I wouldn't even be surprised if the whole thing of KMH coming to an end is a rumour!
Ah! How I wish it is!!