KIIFB moves Kerala High Court against ED notice in masala bond case
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Kochi: The Kerala Infrastructure Investment Fund Board (KIIFB) has petitioned the Kerala High Court seeking to quash an adjudication notice issued by the Enforcement Directorate (ED) regarding alleged irregularities in its 2019 Masala Bond transaction. Following preliminary arguments on Thursday, the court scheduled the matter for Tuesday, 16 December, to consider the plea for an interim stay on the proceedings.
In its petition, the state funding body urged the court to suspend all actions related to the ED notice until a final verdict is reached. The core of the dispute lies in the ED’s finding that KIIFB diverted funds raised through the bonds for “real estate purchases”, a claim the board vehemently denies. KIIFB maintains that the capital was strictly deployed for state development initiatives, including land acquisition essential for infrastructure projects, which it argues does not constitute commercial real estate activity.
However, the central agency holds that funds mobilised via Masala Bonds are subject to strict usage restrictions. The Additional Solicitor General submitted that utilising these proceeds to purchase land, even for government projects, is a violation of the rules. The ED contends that the funds can only be applied to projects constructed on land already owned by the government or acquired using non-bond resources.
Specifically, the ED alleges that KIIFB breached Foreign Exchange Management Act (FEMA) provisions by using Rs 467 crore out of the total Rs 2,672 crore raised to acquire land. The investigation has also seen notices issued to Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac, and other senior officials involved in the bond issuance.
The state government has rejected the ED's assertions as “misinformed and misplaced”, asserting that the transactions were transparent, audited, and aligned with international financing norms. With the High Court set to examine the request for interim relief next week, the outcome is expected to have significant implications for the state’s flagship infrastructure funding model.
(Inputs from IANS)