The Kerala high court on Tuesday refused to stay the summons issued to the Kerala Infrastructure Investment Development Fund Board (KIIFB) by the Enforcement Directorate (ED) for alleged violations of the Foreign Exchange Management Act (FEMA).
The ED registered a case against KIIFB two weeks back, and served notices to its officials and former state finance minister Thomas Isaac, who is the ex-officio vice chairman of the body. The case relates to alleged FEMA violations while raising ₹2,150-crore masala bonds in London Stock Exchange in 2019.
Masala bonds are bonds issued outside the country, and denominated in Indian rupees instead of normally preferred US dollars. In 2021, the Comptroller and Auditor General of India had questioned the move, saying that masala bonds caused a liability worth several crores of rupees to the exchequer.
In the plea questioning the ED move, KIIFB said notices were issued with mala fide intensions and to obstruct the ongoing infrastructural projects. It also said that masala bonds were raised with the permission of the Reserve Banks of India and the ED has no jurisdiction to register a case against it.
The ED sought more time to furnish a detailed reply and the court posted the petition for hearing on September 2. However, it refused to stay summons till then.
Last week, the court pulled up ED officials over why Isaac was asked to furnish details of his assets at the preliminary stage of the case, and directed the central probe agency not to question him till next week.
Justice VG Arun raised the question while hearing a petition filed by Isaac, in which he said that the ED sought details about his properties and family members’ assets.
Isaac claimed that the ED issued two summons to him under FEMA, Income Tax Act and Code of Civil Procedure, seeking details of his role in the KIIFB with respect to issuing masala bonds.