Kochi: The Kerala High Court Thursday stayed the Enforcement Directorate’s (ED) notices issued in connection with funds raised through Masala Bonds by the Kerala Infrastructure Investment Fund Board (KIIFB), granting interim relief to Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac, KIIFB CEO K.M. Abraham and the KIIFB.
The relief came a day after the Chief Minister directly approached the High Court, challenging the ED’s notices that alleged violations of the Foreign Exchange Management Act (FEMA) in the overseas fundraising exercise.
With CM Vijayan entering the legal fray in his personal capacity, the controversy has escalated into a high-stakes legal and political confrontation with significant financial implications for the state.
Staying further proceedings, the court posted the matter for a detailed hearing in the new year.
The interim order extends protection not only to the Chief Minister but also to Isaac, Abraham and the KIIFB, all of whom had been recently served notices by the central agency.
In his petition, Vijayan has categorically denied any violation of FEMA provisions and sought the quashing of the notices issued to him and the KIIFB.
The plea alleges that the ED’s action is politically motivated.
The state government and the KIIFB have consistently maintained that the Masala Bonds were raised and utilised in full compliance with prevailing laws and regulatory norms.
The legal confrontation intensified earlier this week after the ED moved a division bench of the High Court challenging a single bench order that had stayed further proceedings against the KIIFB.
Justice V.G. Arun, while admitting KIIFB’s writ petition Tuesday, had granted a three-month stay on the ED’s show-cause notice, observing that the issues raised warranted detailed judicial scrutiny.
The ED has argued that the single bench exceeded its jurisdiction in granting the stay and has sought its reversal.
According to the agency, serious irregularities were detected in the utilisation of the funds.
Of the Rs 2,672 crore mobilised through Masala Bonds, Rs 467 crore was allegedly used for land acquisition, which the ED claims amounts to a violation of FEMA provisions and a deviation from the stated purpose of the borrowing.
The KIIFB, however, has countered that land acquisition is an integral component of infrastructure development projects and that the funds were deployed strictly for developmental purposes.
CM Vijayan’s petition further asserts that all Reserve Bank of India norms governing foreign borrowings were adhered to, and that no foreign exchange regulations were breached at any stage.
