The Kerala High Court has stayed the Enforcement Directorate (ED) show-cause notice issued in connection with the KIIFB masala bond transaction, granting temporary relief to Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac, and the Kerala Infrastructure Investment Fund Board (KIIFB). The stay will remain in force for three months.
The ED had issued the notice citing alleged violations of the Foreign Exchange Management Act (FEMA) in the KIIFB masala bond issue, following an investigation that lasted over three years. The notice was issued by the ED’s adjudicating authority.
Hearing the petition filed by KIIFB challenging the ED action, a single bench of the High Court stayed further proceedings. Justice V.G. Arun observed that the matter requires detailed examination, and hence granted the interim stay. The court also allowed both parties to file affidavits and said a final decision would be taken after considering them.
According to the ED, the funds raised through masala bonds were allegedly used for infrastructure projects in violation of FEMA rules. KIIFB had raised ₹2,150 crore by issuing masala bonds on the London Stock Exchange in 2019 at an interest rate of 9.72 per cent. The decision to proceed with the bond issue was taken at a KIIFB board meeting chaired by the Chief Minister on January 17, 2019.
As part of the investigation, the ED had issued summons to Thomas Isaac twice last year. The agency said its findings were based on documents submitted by KIIFB.
KIIFB has contended that the ED notice is politically motivated and maintained that it has not violated any FEMA provisions. The board argued that the funds raised through masala bonds were lawfully utilised for development and infrastructure projects, and approached the High Court seeking relief.
