Masala Bonds case: Kerala HC stays ED notice against CM Pinarayi Vijayan

Kochi: The Kerala High Court on Thursday granted significant interim relief to Chief Minister Pinarayi Vijayan, staying the Enforcement Directorate’s (ED) notices issued in connection with the KIIFB Masala Bonds case. The stay order also covers former Finance Minister Thomas Isaac, KIIFB CEO K.M. Abraham, and the Kerala Infrastructure Investment Fund Board (KIIFB) itself, effectively halting the central agency's proceedings for the time being.

The court’s intervention came just a day after Chief Minister Vijayan approached the High Court in his personal capacity, challenging the notices that alleged violations of the Foreign Exchange Management Act (FEMA). By entering the legal fray directly, Vijayan escalated the long-standing controversy into a high-stakes political and legal battle. The court has stayed further proceedings and posted the matter for a detailed hearing in the new year.

In his petition, Vijayan categorically denied any violation of FEMA provisions and sought the quashing of the notices, terming the ED’s actions as politically motivated. The state government and KIIFB have consistently maintained that the funds raised through Masala Bonds were utilised in full compliance with Reserve Bank of India (RBI) norms and prevailing laws.

The legal confrontation had intensified earlier in the week when the ED moved a division bench to challenge a single-bench order by Justice V.G. Arun. On Tuesday, Justice Arun had granted a three-month stay on the ED’s show-cause notice against KIIFB, observing that the issues raised warranted detailed judicial scrutiny. The ED argued that the single bench had exceeded its jurisdiction and sought a reversal.

The central point of contention lies in the utilisation of the funds. The ED alleges serious irregularities, claiming that of the Rs 2,672 crore mobilised, Rs 467 crore was used for land acquisition. The agency argues this violates FEMA provisions and deviates from the stated purpose of the borrowing.

Countering this, KIIFB asserts that land acquisition is an integral component of infrastructure development projects and that the funds were deployed strictly for developmental purposes. The Chief Minister's petition reinforces this stance, stating that no foreign exchange regulations were breached at any stage of the fundraising or utilisation process.

(Inputs from IANS)