Kerala High Court Puts Masala Bonds Case on Hold

The Kerala High Court stayed the enforcement of an order that paused proceedings against KIIFB concerning a FEMA violation in the Masala Bonds case. This decision follows the ED's appeal questioning the interim order, which allegedly misinterpreted statutory regulations related to infrastructure project financing.

In a significant legal development, the Kerala High Court has temporarily halted proceedings against the Kerala Infrastructure Investment Fund Board (KIIFB) in the controversial Masala Bonds case. The bench stayed the single judge order, pending a hearing in January 2026, in response to an appeal from the Enforcement Directorate (ED).

In the court's initial judgment, KIIFB was advised to reply to the show cause notice instead of halting proceedings. The bench criticized both sides for prematurely escalating the situation without sufficient dialogue or examination of underlying regulatory frameworks.

The Enforcement Directorate contends that the initial order was grounded in a flawed interpretation of laws governing infrastructure financing. As the case continues, it highlights significant challenges in navigating India's complex financial and regulatory landscape.

(With inputs from agencies.)