Chief Minister Pinarayi Vijayan Moves High Court against ED notice in KIIFB Masala Bonds case

Kochi: Kerala Chief Minister Pinarayi Vijayan on Wednesday moved the Kerala High Court challenging the Enforcement Directorate’s show cause notice related to the use of funds raised through KIIFB Masala Bonds, terming the proceedings legally untenable and detrimental to the state’s development initiatives.

Former finance minister Thomas Isaac, Pinarayi Vijayan’s chief principal secretary and KIIFB CEO K M Abraham have also approached the High Court seeking similar relief. Vijayan is the chairman of the Kerala Infrastructure Investment Fund Board (KIIFB), the state’s flagship institution for financing large-scale infrastructure projects.

The ED had issued show cause notices in November alleging violations under the Foreign Exchange Management Act (FEMA) in connection with the utilisation of Masala Bond funds for land acquisition linked to infrastructure projects. The petitioners have sought the quashing of the notices and an interim stay on further proceedings.

Earlier, KIIFB itself had approached the High Court seeking identical relief. Acting on the plea, the High Court on Tuesday stayed all proceedings arising from the show cause notice for a period of three months, offering interim protection to the state-backed institution and its office-bearers.

The Enforcement Directorate has since challenged the interim order, arguing that the petition was premature and that FEMA provides a comprehensive adjudicatory mechanism. However, the single judge, while granting the stay, observed that under the RBI’s External Commercial Borrowings framework, infrastructure-related activities are not categorised as real estate, a key point of contention in the case.

The ED has issued a show cause notice amounting to Rs 466.91 crore, alleging contravention of FEMA provisions. KIIFB, meanwhile, maintains that all actions were in conformity with RBI guidelines and were undertaken solely to advance public infrastructure projects.

KIIFB is the Kerala government’s principal agency for financing major infrastructure works. In 2019, it successfully raised Rs 2,150 crore through its debut Masala Bond issue as part of a long-term plan to mobilise Rs 50,000 crore for roads, healthcare, education and other critical public infrastructure.

The state government has consistently maintained that the case is a calculated move by the central government to target Kerala’s development model and obstruct its infrastructure- led growth. The legal challenge, officials say, is aimed at safeguarding the state’s constitutional rights and protecting institutions that have played a crucial role in Kerala’s development trajectory.