Show-cause notice on KIIFB masala bonds based on false figures, misrepresentation: CEO

K.M. Abraham, chief executive officer of the Kerala Infrastructure and Investment Fund Board (KIIFB), has slammed the Enforcement Directorate (ED) stating that the allegations in the show-cause notice issued in connection with the KIIFB masala bond “are based on false figures, misrepresentation of facts and a flawed understanding of applicable regulations.”

In a sharp rejoinder to the show-cause notices issued to him, Chief Minister Pinarayi Vijayan and the former Finance Minister T.M. Thomas Isaac, Mr. Abraham said that the timing of the show-cause notice ahead of impending elections “raises unsettling questions and misgivings on the bona fides of the whole process of issuing this Show Cause Notice.”

Mr. Abraham said that not a single rupee from the masala bond proceeds has been used for any purpose that violates the provisions of the Foreign Exchange Management Act (FEMA) provisions or the guidelines of the Reserve Bank of India (RBI). According to him, masala bond proceeds were deployed in strict compliance with FEMA and RBI’s external commercial borrowing (ECB) guidelines as they stood in 2019.

“As CEO, I wish to state categorically and unequivocally: KIIFB has not violated any provision of the Foreign Exchange Management Act (FEMA) or any other law,” he said.

The accusation in the notice that ₹466 crores was spent on land purchase is completely false, he said. According to him, “Perhaps the most disturbing aspect of the ED’s notice is the gross misrepresentation of facts” in this regard. The actual spending for land acquisition was only ₹66 crore, all for legitimate infrastructure purposes, he said.

“The Show Cause Notice alleges that ₹466 crore of Masala Bond proceeds have been deployed for land purchase, citing a table in the complaint filed by the Assistant Director (ED), Kochi. Such a Table was not filed by KIIFB as evidencing the actual deployment of funds mobilised through the Masala Bond. Thus, this statement was entirely devised to make it appear that these were the end uses of the funds so raised. This is shocking and nothing short of fabrication,” he said.

Mr. Abraham said there is a clear distinction between land acquisition for public infrastructure and commercial land purchase, which has been recognised by authorities including the Comptroller and Auditor General of India (CAG). KIIFB has deployed the proceeds exclusively for land acquisition as part of infrastructure projects. Not a single rupee has been spent on commercial land purchase or real estate investment, which is what the RBI’s ECB guidelines seek to restrict.

In what he described as a “disturbing pattern,” Mr. Abraham observed that the ED had issued the first set of notices and summons in early 2021, just months before the Legislative Assembly elections. Another summons was issued to Dr. Isaac just before the 2024 Lok Sabha elections. And now, the show-cause notices have come ahead of the 2026 Assembly polls, he said.

On the future course of action, he said KIIFB will file a “comprehensive and detailed response” to the notice. “KIIFB will also pursue appropriate legal remedies against the procedural improprieties, including the use of materials gathered through summons that are subject to judicial challenge and the deliberate leak of confidential notices to the media,” he said.