ED issues show-cause notice to Kerala CM over infrastructure investment fund’s masala bonds

The Enforcement Directorate has issued show-cause notices to Kerala Chief Minister Pinarayi Vijayan, former state finance minister TM Thomas Isaac and Kerala Infrastructure Investment Fund Board Chief Executive Officer KM Abraham in connection with alleged foreign exchange violations by the board, The Hindu reported on Monday.

Isaac said the agency has filed its report with the special director (adjudication) in Delhi, and that he, Vijayan and Abraham have been asked to give their explanations to the adjudicator.

The central agency is investigating whether about Rs 2,150 crore raised through masala bonds issued in 2019 and listed on the International Securities Market in London were used to purchase land in alleged violation of Foreign Exchange Management Act norms, The Hindu reported.

Masala bonds are bonds that are issued outside India but are denominated in Indian rupees. They allow Indian companies to raise capital from foreign investors in Indian currency, and are usually used to fund infrastructure projects.

Isaac described the Enforcement Directorate's action as a politically motivated gimmick ahead of local body elections in Kerala, Manorama News reported. He claimed that the bonds were issued in compliance with Reserve Bank of India norms.

“A portion of the funds was utilised only to acquire land for a KIIFB project,” he said. “As per the rules, masala bonds should not be used for land purchase. We did not do that – we only acquired land.”

Further, Isaac claimed that the RBI restriction on land purchase did not apply when the masala bond was issued, according to Manorama News.

“The ED only wants to create political sensation during the local body elections,” he alleged. “This is part of the BJP's conspiracy.”

Local body polls in the state are due to be held in two phases on December 9 and December 11, with votes scheduled to be counted on December 13.

Source: Scroll
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