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Quash ED complaint, show cause notice: KIIFB to Kerala HC
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....uash ED complaint, show cause notice: KIIFB to Kerala HC<BR>FEMA / RBI<BR>Dated:- 11-12-2025<BR>PTI<BR>Kochi, Dec 11 (PTI) The KIIFB on Thursday urged the Kerala High Court to quash the ED complaint and show cause notice against it in connection with the use of the funds generated through Masala Bonds for acquisition of land for infrastructure projects. Justice V G Arun heard the Enforcement Dir....
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....ectorate (ED) and the Kerala Infrastructure Investment Fund Board (KIIFB) and reserved order on the maintainability of the petition, advocate Jaishankar V Nair, who appeared for the agency, said. Nair said that ED opposed KIIFB's plea, claiming that it was not maintainable as the Board has to go to the appropriate forum under the Foreign Exchange Management Act (FEMA). He said that the court a....
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....lso reserved order on the Board's plea seeking stay of the ED notice. In its plea, KIIFB has claimed that the complaint against it and the notice issued to it by the agency were "unsustainable in law" and prima facie "do not warrant any adjudication proceedings". It said that the allegation against it was that the use of External Commercial Borrowings (ECB) through Masala Bonds for acquisition....
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.... of land for infrastructure projects was contrary to the master direction and circular issued by the RBI prohibiting real estate activities and purchase of land through such funds. KIIFB has claimed that the 'real estate activities or purchase of land', mentioned in the said "end use prescriptions" in the RBI master direction and circular of 2015-16, "cannot in any way relate to acquisition of p....
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....roperty for infrastructural developments". "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 land owner. No transfer of land is made in favour of KIIFB. The same is not a speculative activity for commercial profiteering. "In the said circumstances, the restrictions in the end use prescriptio....
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....ns in the master direction and circular cannot relate to acquisition of land for infrastructural developments," the Board contended in its petition. The Board further contended that the probable adjudication proceedings will have severe detrimental effects on the ability of KIIFB to fund various welfare projects in Kerala. It said that the rate of interest at which investors are willing to len....
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....d funds to KIIFB depends on its ratings and currently, its bonds are rated at AA for the domestic market. "The probable adjudication proceedings practically destroy the possibility of a rating upgrade for KIIFB. But more detrimental is the fact that it sullies the image of KIIFB and mars the due diligence done by prospective investors," the petition said. It also said that due to the ED compla....
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....int and notice there is considerable reluctance on the part of financial institutions to advance funds to the Board till the proceedings are concluded. The Board said that it has approved projects worth over Rs 90,000 crore and out of that works worth Rs 21,881 crore have been completed. Besides that, projects worth Rs 42,765 crore have been tendered and are at different stages of construction....
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...., it said. "This (the probable adjudication proceedings) will jeopardize the functioning of KIIFB and will make it impossible for KIIFB to honour legally valid claims of contractors who are executing the infrastructure projects. The cloud of uncertainty caused by the present proceedings, will lead to a financial crisis of unprecedented magnitude in the state. In the light of the above, the sta....
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....te of Kerala will in short be crippled by the continuance of the proceedings initiated," the petition has claimed. The ED had in November issued a Rs 467-crore FEMA contravention show cause notice to Chief Minister Pinarayi Vijayan, former finance minister Thomas Issac, and the CM's chief principal secretary K M Abraham in the KIIFB Masala Bond case. Abraham is also the CEO of KIIFB. The not....
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....ice pertains to the alleged contravention of FEMA provisions and the RBI master direction by KIIFB and its authorities, amounting to Rs 466.91 crore. KIIFB is the primary agency of the state government for financing large and critical infrastructure projects. It had raised Rs 2,150 crore in 2019 through its debut masala bond issue as part of its plan to mobilise Rs 50,000 crore to fund large a....
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....nd critical infrastructure projects in the state. PTI HMP ROH<BR> News - Press release - PIB....