The Enforcement Directorate (ED) has issued a show cause notice for a ₹467 crore contravention under the Foreign Exchange Management Act (FEMA) to Kerala Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Issac, and the CM's Chief Principal Secretary KM Abraham in connection with the KIIFB Masala Bond case, officials confirmed on Monday.
The notice was issued on November 12 by the designated ED Adjudicating Authority established under FEMA.
The notice pertains to the alleged contravention of FEMA provisions and the RBI master direction by the Kerala Infrastructure Investment Fund Board (KIIFB) and its authorities, with the quantified amount of the violation totalling ₹466.91 crore.
The individuals served with the notices also include Thomas Issac, as the board's Vice Chairman, and KM Abraham, in his role as the KIIFB CEO.
The institution itself, KIIFB, has also been issued a notice. The state has consistently denied any wrongdoing in this matter.
KIIFB, which serves as the primary agency for the Kerala government in financing large infrastructure projects, floated a ‘Masala Bond’ — a Rupee-denominated bond — on the London and Singapore stock exchanges in 2019. The bond was intended to raise ₹2,672.80 crore under External Commercial Borrowing (ECB) to create infrastructure following the devastating 2018 floods.
ED officials allege that a portion of these funds — specifically ₹466.91 crore — was used for purchasing land, which is "specifically prohibited" and constitutes a contravention of the master direction and circular issued by the Reserve Bank of India (RBI).
The ED filed the FEMA complaint in this case on June 27th this year. Under FEMA, a show cause notice is issued where the contravention quantified is equivalent to a penalty. The ED investigation focused on the end-use of the ₹2,000 crore raised by KIIFB through the bonds and its compliance with FEMA norms.
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