Kerala High Court Stays ED Proceedings on KIIFB Masala Bonds

The Kerala High Court has issued a three-month stay on proceedings against the Kerala Infrastructure Investment Fund Board (KIIFB) by the Enforcement Directorate (ED) concerning the Masala Bonds issue. The interim order was issued following a dispute about the use of funds for infrastructure projects.

The Kerala High Court has temporarily halted proceedings initiated by the Enforcement Directorate (ED) against the Kerala Infrastructure Investment Fund Board (KIIFB) concerning the Masala Bonds issue. This stay will last for three months, as the court examines the allocation of funds towards infrastructure projects.

The ED's investigation revolves around the potential misuse of funds generated through Masala Bonds for acquiring land, labeled by the agency as real estate activity, which contravenes regulations. However, the court noted that infrastructure activities, as defined by the RBI's External Commercial Borrowings framework effective from January 16, 2019, should not be deemed real estate activities.

KIIFB argues that these proceedings could significantly impair their ability to finance welfare projects in Kerala. The case highlights ongoing tensions between state development initiatives and regulatory compliance, as KIIFB challenges the ED's allegations while highlighting the importance of continued investment in potential projects exceeding Rs 90,000 crore.

(With inputs from agencies.)