Kerala High Court Reviews ED's Appeal in KIIFB Masala Bonds Controversy

The Kerala High Court has reserved its judgement on the Enforcement Directorate's appeal against the stay on its proceedings involving a show cause notice to the Kerala Infrastructure Investment Fund Board (KIIFB) concerning the Masala Bonds case. The case involves alleged contravention of FEMA provisions amounting to Rs 466.91 crore.

The Kerala High Court has put on hold its decision regarding the Enforcement Directorate's appeal against a stay on the proceedings tied to a show cause notice for the Kerala Infrastructure Investment Fund Board (KIIFB). This case centers on the alleged non-compliance with FEMA regulations within the context of KIIFB's Masala Bonds, initially valuing Rs 466.91 crore.

During the hearing, a bench of justices scrutinized the Enforcement Directorate's pre-emptive specification of a Rs 467 crore penalty within the notice, questioning the justice behind such a prompt move, given no formal adjudication had yet occurred. Meanwhile, the Kerala Infrastructure Investment Fund Board argued that responding to the notice might poorly affect its market standing.

The issue traces back to December 16, when a stay was initially placed on further actions following the show cause notice. The case draws focus to discrepancies regarding whether Masala Bond funds can be utilized for specific real estate activities connected to infrastructure projects, a point of contention between the RBI guidelines and current legal interpretations.

(With inputs from agencies.)