In a significant development, the Kerala High Court has put a temporary halt to the Enforcement Directorate's (ED) proceedings against Chief Minister Pinarayi Vijayan and other officials. The court issued a three-month stay on the show-cause notices served by the federal agency concerning the issuance of Masala Bonds by the Kerala Infrastructure Investment Fund Board (KIIFB).
Court Grants Interim Relief to CM and Former Finance Minister
Justice V G Arun passed the interim order on Thursday while considering a petition filed by Pinarayi Vijayan in his capacity as the chairman of KIIFB. The other petitioners in the case are the board's former vice-chairman and ex-finance minister T M Thomas Isaac, and the CEO of KIIFB, K M Abraham. They had collectively challenged the legal notices issued by the ED.
The court noted that it had previously granted a stay on an identical notice issued to KIIFB as an entity. Observing that the current petitioners were also entitled to similar relief, Justice Arun adjourned the matter to January 20. The case will be considered alongside KIIFB's petition at the next hearing.
The ED's Allegations on Land Purchase Violations
The controversy stems from show-cause notices issued by the ED's Special Director. The agency alleges that funds raised through External Commercial Borrowings (ECB) via Masala Bonds were used by KIIFB to purchase land for infrastructure projects. According to the ED, this action violates specific directives from the Reserve Bank of India (RBI).
The agency's case is based on the RBI's master direction dated January 1, 2016, and a circular from September 29, 2015. These regulations explicitly prohibit the use of such external borrowing for real estate activities, which includes the purchase of land. The ED's Kochi zonal assistant director had filed a formal complaint leading to these notices on June 27.
KIIFB's Defense and Upcoming Legal Battle
The petitioners have firmly denied all allegations presented in the ED's notices. Their central argument is that the acquisition of land for public infrastructure development cannot be equated with commercial real estate activity. They contend that the land acquisition is an exercise of the government's power of eminent domain, where compensation is paid to landowners, and no transfer of land title is made to KIIFB itself.
They further asserted that such acquisition is a sovereign function for public purpose and is not a speculative activity aimed at commercial profiteering, which is what the RBI guidelines seek to prevent. Meanwhile, the legal tussle is set to continue. The ED has filed an appeal challenging the earlier stay granted on the notice issued to KIIFB. This appeal is scheduled to be considered by a division bench of the High Court on Friday.
