Chief Minister Pinarayi Vijayan, in his capacity as chairman of the Kerala Infrastructure Investment Fund Board (KIIFB), has approached the Kerala High Court seeking to quash the notice issued by the Enforcement Directorate (ED) on the use of funds raised through masala bonds by KIIFB for infrastructure projects.
The notice was issued under the provisions of the Foreign Exchange Management Act of 1999 (FEMA). In his plea, Mr. Vijayan claimed that the ED complaint did not warrant any judicial process and that it was vitiated by “malafides”. The resulting litigation will be a clear abuse of process and if allowed, will degenerate into a weapon of harassment or persecution of the petitioner, directors and officers (KIIFB). The interests of justice require that the notification be quashed.
Refuting the allegation against KIIFB that the proceeds of External Commercial Borrowing (ECB) through masala bonds were used in violation of the mandate, he argued that the acquisition of the property is an exercise of the government’s right of prerogative and on the basis of the same compensation is paid to the deprived landowner. There is no transfer of land in favor of KIIFB. Moreover, it is not a speculative activity for commercial gain. The notification in this regard will reveal that acquisition of land for the infrastructure sector is not a prohibited end use of ECB proceeds, he said, adding that there was no violation of FEMA provisions and RBI norms.
He further contended that KIIFB is entitled to borrow any amount required for the purpose of the KIIF Act with the prior approval of the Government. For this purpose, KIIFB is authorized to issue any financial instrument, including general debentures, revenue debentures or any other suitable financial instruments, or to raise funds through any financial structures, including revenue bonds, structured repayment facility, land bonds and any other suitable financial instruments or through agreements with banks, multilateral financial agencies or institutions approved by the Government. Masala bonds are a special category of bonds denominated in Indian rupees and issued to finance permitted uses under existing guidelines, including infrastructure projects.
The Kerala High Court on Tuesday issued a three-month interim stay on the notice issued by the ED to KIIFB on the utilization of funds raised through masala bonds for the board. The ED filed an appeal with the court challenging the preliminary detention order. The agency argued that the suit (KIIFB) is premature and not maintainable.
Published – 17 Dec 2025 20:34 IST
