Violation of law in masala bond: ED issues show cause notice to Pinarayi Vijayan, ex-finance minister and KIIFB CEO

KOCHI: The Enforcement Directorate (ED) has issued a show cause notice to Chief Minister Pinarayi Vijayan, alleging that the amount raised from abroad through Masala Bonds was used by KIIFB to purchase land, in violation of the Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) guidelines. The CM will not have to appear before the ED office, but will have to provide an explanation through KIIFB officials or lawyers.

Rs 466.91 crore out of the Rs 2,672.80 crore collected in 2019 was spent on land purchase. This is a violation of the condition that it should not be used for purposes such as land purchase. Former Finance Minister Dr. Thomas Isaac, KIIFB CEO and Special Principal Secretary to the Chief Minister K.M. Abraham have also been served with notices. The notice to the Chief Minister is as KIIFB Chairperson and to Thomas Isaac as Vice Chairperson.

The notice was issued by Rajnish Dev Burman, Special Director, who handles cases under the Foreign Exchange Management Act (FEMA). Further action will be decided after receiving the explanation. The information about the notice sent on November 12 came to light yesterday. The notice states that the main guideline issued by the Reserve Bank as number 5 in 2015-16 and the circular issued as number 17 on September 29, 2015 were not followed, and the guideline issued by the Reserve Bank on June 1, 2018 was also not followed.

Masala Bond in 2019

👉Masala Bond is a debt instrument sold outside India at a face value of Indian Rupees. It was named Masala Bond by the International Finance Corporation.

👉The decision to raise funds through Masala Bond was taken at the KIIFB Board of Directors meeting on January 17, 2019.

👉The bond was issued on March 26, 2019 through the London Stock Exchange and the Singapore Stock Exchange. The government provided the security.

👉The ED started an investigation in 2021. The statements of Dr. Thomas Isaac, K.M. Abraham and top officials of KIIFB were recorded. A case of FEMA violation was filed on June 27.

KIIFB denies

"It is not true that land was purchased for Rs 466.19 crore from the amount raised through Masala Bonds and that this is against the provisions. The Rs 2150 crore received through Masala Bonds was spent on 339 projects."