KIIFB Masala Bond case: CM Vijayan too moves Kerala High Court against ED notice

Kochi, Dec 17 Chief Minister Pinarayi Vijayan on Wednesday approached the Kerala High Court, challenging the Enforcement Directorate’s (ED) show-cause notice alleging violations of the Foreign Exchange Management Act (FEMA) in funds raised through Masala Bonds by the Kerala Infrastructure Investment Fund Board (KIIFB).

The ED had recently served notices to Vijayan, former Finance Minister Thomas Isaac, KIIFB CEO Dr K.M.Abraham, and the KIIFB.

With the Chief Minister directly entering the legal fray, the controversy has escalated into a high-stakes political and legal battle with significant financial implications for the state.

In his petition, Vijayan has denied any violation of FEMA provisions and sought the quashing of the notices issued to both himself and the KIIFB.

The plea alleges that the ED’s action is politically motivated and intended to derive electoral advantage.

The state government and the KIIFB have consistently maintained that the overseas fundraising exercise was carried out in full compliance with applicable laws and regulatory norms.

The confrontation intensified on Wednesday after the ED moved a division bench of the High Court challenging a single bench order that stayed further proceedings against the KIIFB.

Justice V.G. Arun, while admitting KIIFB’s writ petition on Tuesday, had granted a three-month stay on the ED’s show-cause notice, observing that the issues raised required detailed examination.

The ED has contended that the single bench exceeded its jurisdiction in granting the stay and has sought its reversal.

According to the ED, serious irregularities were detected in the utilisation of funds raised through Masala Bonds. Of the Rs 2,672 crore mobilised, Rs 467 crore was allegedly used for purchasing land, which the agency claims constitutes a violation of FEMA provisions.

The ED has argued that the utilisation deviated from the stated purpose for which the overseas funds were raised and warrants regulatory action.

The KIIFB, however, has maintained that the funds were deployed strictly for development and infrastructure projects and that land acquisition formed an integral component of such projects.

The Chief Minister’s petition asserts that all Reserve Bank of India norms governing foreign borrowings were adhered to and that there was no breach of foreign exchange regulations at any stage.

The Division Bench is expected to take up the ED plea on Thursday and will decide whether to uphold the interim stay. Vijayan’s plea is also likely to be heard on Thursday.

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