KIIFB approached High Court seeking suspension of ED proceedings over alleged Masala Bond misuse amid sharp legal and political dispute.
Kochi
The Kerala Infrastructure Investment Fund Board (KIIFB) on Thursday approached the High Court seeking to quash the Enforcement Directorate’s adjudication notice issued in relation to alleged violations in its 2019 Masala Bond transaction. After hearing initial arguments, the court posted the matter for further consideration on Tuesday, when it will examine the request for an interim stay.
In its petition, KIIFB urged the court to suspend all proceedings arising from the ED’s notice until a final decision is reached. The notice stems from the agency’s objection that KIIFB diverted Masala Bond funds for real estate purchases an allegation the state financing body strongly disputes.
KIIFB argued that the funds raised were strictly deployed for state development projects, including land acquisition required for infrastructure expansion. It contended that such land purchases did not constitute real estate activity, as claimed by the ED.
The Enforcement Directorate, however, maintains that funds raised via Masala Bonds must be used only for projects constructed on land already owned by the government or land acquired through non-bond resources. According to submissions made by the Additional Solicitor General, using bond proceeds for any form of land purchase even for government infrastructure violates the usage restrictions governing internationally raised funds.
The ED alleges that KIIFB used ₹467 crore of the ₹2,672 crore raised through the Masala Bond to acquire land, thereby breaching provisions of the Foreign Exchange Management Act (FEMA). In addition to KIIFB, notices have also been issued to Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac and several senior officials involved in the bond mobilisation exercise. The adjudication process follows the ED’s earlier report claiming that the Masala Bond fundraising involved procedural violations under FEMA.
