KIIFB masala bond case: ED issues notice to Kerala CM Pinarayi Vijayan

Thiruvananthapuram: Kerala Chief Minister Pinarayi Vijayan and two others have been served show-cause notices by the adjudication wing of the Enforcement Directorate (ED) in connection with suspected violations of the Foreign Exchange Management Act (FEMA) in the utilisation of funds raised through masala bonds by the Kerala Infrastructure Investment Fund Board (KIIFB).

Notices were also issued to former finance minister and CPM leader Thomas Isaac and KIIFB chief executive officer KM Abraham. Issued on November 12, the notices seek a response within 30 days.

The development has triggered a political row, with the CPM alleging that it is yet another instance of the BJP-led central government misusing agencies against non-BJP-ruled states. Congress leaders, meanwhile, claimed the ED notices were part of a ploy to cover up a CPM-BJP nexus in the Kerala local body polls and to divert attention from the ongoing probe into the Sabarimala gold heist, in which CPM leaders are accused.

According to the show-cause notice, KIIFB violated FEMA rules in connection with Rs 466.91 crore that was used for land purchases. The notices were issued on the basis of an ED report citing irregularities in the use of funds raised through masala bonds on the London and Singapore stock exchanges for land purchases.

In 2019, KIIFB had issued masala bonds (rupee-denominated bonds sold outside India) to raise Rs 2,150 crore. Vijayan remains chairman of KIIFB, while Thomas Isaac serves as vice chairman.

The CM, currently on a visit to the UAE, has yet to comment on the development. Isaac said the masala bonds were issued with the nod of the Reserve Bank of India and described the ED’s move as a political ploy timed with Kerala’s local body polls.

KIIFB chief executive officer Abraham added in a statement that the land was purchased for infrastructure development and therefore could not be considered a violation of masala bond norms.

Opposition leader VD Satheesan said that although the party had earlier flagged corruption in connection with the masala bond, the latest move was nothing more than a political ploy. “Action by central agencies against the Kerala CM and those close to him has been limited to issuing notices, whereas other political opponents of the BJP are being hounded,” he said.