Masala Bond case: KIIFB moves Kerala HC for stay on ED action

Kochi, Dec 11 The Kerala Infrastructure Investment Fund Board (KIIFB) on Thursday approached the High Court seeking to quash the Enforcement Directorate’s adjudication notice issued in connection with alleged violations in its 2019 Masala Bond transaction.

After hearing preliminary arguments, the court posted the matter to Tuesday for consideration of an interim stay.

In its plea, KIIFB urged the court to suspend all proceedings under the ED notice until a final decision is taken.

The agency’s objection stems from its finding that KIIFB diverted Masala Bond funds for real estate purchases -- an allegation the state funding agency firmly disputes.

KIIFB argued that the money raised through the Masala Bond was deployed strictly for state development projects, including land acquisition for infrastructure initiatives.

It maintained that this process did not amount to engaging in real estate activity, as alleged by the ED.

The agency, however, insists that funds raised under Masala Bonds can only be utilised on projects built on land already owned by the government or on land acquired using non-Masala Bond resources.

According to submissions made by the Additional Solicitor General, using the bond proceeds to purchase land -- even for government projects -- violates the usage restrictions attached to such internationally raised funds.

The ED contends that KIIFB used Rs 467 crore out of the Rs 2,672 crore raised to acquire land, thereby breaching FEMA provisions.

Notices were also issued to Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac and several senior officials who were involved in the bond mobilisation exercise.

The ED’s adjudication process follows its earlier report that foreign fundraising for the KIIFB Masala Bond involved procedural violations under FEMA.

The controversy surrounding the KIIFB Masala Bond has resurfaced at a politically sensitive time, with the state government calling the ED’s findings “misinformed and misplaced”, while maintaining that all transactions were transparent, audited and aligned with internationally accepted infrastructure financing norms.

With the High Court set to examine the plea for interim relief on Tuesday (December 16), the outcome of the case is poised to have wider implications for the state’s flagship infrastructure-funding model.

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