Chief Minister Pinarayi Vijayan, in his capacity as Chairperson of the Kerala Infrastructure Investment Fund Board (KIIFB), has approached the Kerala High Court seeking to quash a notice issued by the Directorate of Enforcement (ED) on the utilisation of funds raised through masala bonds by KIIFB for infrastructure projects.
The notice had been issued under the provisions of the Foreign Exchange Management Act, 1999 (FEMA). In his plea, Mr. Vijayan contended that the ED complaint does not warrant any adjudication proceedings, and that it has been vitiated by ‘malafides.’ The resultant adjudication proceedings will be a clear abuse of the process, and if permitted, will degenerate into a weapon of harassment or persecution of the petitioner, directors and officials (of KIIFB). The interests of justice warrant quashing of the notice.
Rebutting the allegation against KIIFB that the proceeds from External Commercial Borrowings (ECB) through masala bonds were used contrary to the mandate, he contended that the acquisition of property is an exercise by the government of its right of eminent domain and by virtue of the same compensation is paid to the deprived landowner. No transfer of land is made in favour of KIIFB. Moreover, it is not a speculative activity for commercial profiteering. Notifications 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 contravention of FEMA provisions and RBI norms.
He further contended that KIIFB is authorised to borrow any sum required for the purposes of the KIIF Act, with the previous sanction of the government. Towards this purpose, KIIFB is empowered to issue any financial instrument, including General Obligation Bonds, Revenue Obligation Bonds or any other appropriate financial instruments, or raise funds through any financial structures, including Revenue Bonds, with structured repayment mechanism, Land Bonds and any other appropriate financial instruments or by making arrangements with banks, multilateral funding agencies or Institutions approved by the government. Masala bonds are a special category of bonds denominated in Indian Rupees, and issued for funding permissible uses under extant guidelines, including for infrastructure projects.
The Kerala High Court had on Tuesday issued a three-month interim stay on a notice issued by the ED to KIIFB on the utilisation of funds raised through masala bonds for the board.
Published – December 17, 2025 08:34 pm IST
