KIIFB moves Kerala HC seeking to quash ED notice in masala bond issue

The Kerala Infrastructure Investment Fund Board (KIIFB) has approached the Kerala High Court seeking to quash a notice issued against it by the Directorate of Enforcement (ED) in connection with the alleged violations in its 2019 masala bond transaction.

The KIIFB, in its petition, contended that there are no curbs on spending the funds for purchasing land for infrastructure development and that everything is being done in adherence with Reserve Bank of India (RBI) norms.

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After hearing preliminary arguments of both the ED and KIIFB, a single bench of Justice V G Arun on Thursday reserved an order on the maintainability of the petition.

The counsel for the ED opposed KIIFB’s plea, claiming that it was not maintainable as the Board has to go to the appropriate forum under the Foreign Exchange Management Act (FEMA).

The Enforcement Directorate (ED) has slapped Chief Minister Pinarayi Vijayan, former state Finance Minister T.M. Thomas Isaac and KIIFB Chief Executive Officer K.M. Abraham with a show-cause notice over the alleged violation of Foreign Exchange Management Act (FEMA) rules linked to the masala bond issue by the KIIFB in 2019.

The ED claimed that the use of Rs 466.91 crore from masala bonds to purchase land was against the RBI guidelines. The ED said that there was a clear violation of FEMA and RBI guidelines. However, the KIIFB pointed out that the money raised through masala bonds was used for development projects. KIIFB said that it did not purchase land but acquired it for development projects.