Masala Bonds Case: ED Summons to Thomas Isaac, KIIFB Officials Withdrawn, Kerala HC Told

In 2022, both the Kerala Infrastructure Investment Fund Board and Isaac had moved petitions challenging the ED summons in relation to its probe into the alleged violations of the Foreign Exchange Management Act in the issuance of ‘Masala Bonds’.

Kerala high court. Credit: Wikimedia Commons

New Delhi: The Enforcement Directorate (ED) on Thursday (December 14) informed the Kerala high court of its decision to withdraw summons issued to former State finance minister Thomas Isaac and Kerala Infrastructure Investment Fund Board (KIIFB) officials regarding the Masala Bonds case.

Masala bonds are rupee-denominated bonds issued in foreign markets, allowing Indian entities to raise funds from international investors. These bonds are an instrument for Indian companies to tap into global capital markets without exposing themselves to the risk of currency fluctuations since the issuance is in Indian Rupees.

In 2022, both KIIFB and Isaac had moved petitions challenging the summons by the Enforcement Directorate (ED) in relation to its probe into the alleged violations of the Foreign Exchange Management Act (FEMA) in the issuance of ‘Masala Bonds’.

The petition moved by Isaac challenged the summons issued by the ED seeking his personal documents as well as those of his family members in connection with the same probe, LiveLaw reported.

Similarly, the KIIFB challenged the repeated issuance of summons by the ED to KIIFB officers, including its CEO, K.M. Abraham, the report noted.

The Reserve Bank of India (RBI) confirmed to the high court that it had issued a Non-Objection Certificate (NOC) to the KIIFB under the Foreign Exchange Management Act (FEMA) for raising funds through masala bonds abroad.

Following an interim order on October 10, 2022, preventing further ED summons for two months, Justice Ramachandran allowed the ED to issue fresh summons on November 24. This decision was challenged by Isaac and KIIFB officials, leading to a stay on December 7.

Subsequently, on December 14, the court was informed of the withdrawal of the summons.

Earlier in 2022, Isaac had termed the ED notice to him as a ‘political move’ by the Bharatiya Janata Party government at the Centre, alleging it was misusing all investigation agencies for its political gains.

“KIIFB is the primary agency of the state government for financing large and critical infrastructure projects and had last year raised Rs 2,150 crore through its debut masala bond issue as part of its plan to mobilise Rs 50,000 crore to fund large and critical infrastructure projects in the southern state,” Isaac had written on his Facebook page, reacting to the first ED notice.