ED issues FEMA notice to Kerala CM Vijayan, ex-minister Thomas Isaac in Masala Bond case

The Enforcement Directorate has issued a Rs 466-crore FEMA show cause notice to Kerala CM Pinarayi Vijayan, former finance minister Thomas Isaac, and the CM's chief principal secretary KM Abraham in the KIIFB Masala Bond case, officials said on Monday (December 1).

The notice, which does not require a personal appearance, was issued about 10-12 days ago by the federal probe agency under the provisions of the Foreign Exchange Management Act (FEMA).

A show cause notice is issued after the end of the investigation in a FEMA investigation, and the contravention quantified in it is akin to a penalty.

The ED filed a complaint before the adjudicating authority after a prolonged investigation for more than three years. The agency claims that the funds raised through the bonds were used to purchase land, allegedly in violation of RBI rules.

The probe is related to the end-use of Rs 2,000 crore raised by Kerala Infrastructure Investment Fund Board (KIIFB) through masala bonds, and its compliance with the FEMA norms.

‘Part of an election stunt’: Thomas Isaac

Thomas Isaac, confirming receipt of the ED notice, called it part of an election stunt.

“This is nonsense. We never used the fund for purchasing land. Land acquisition for KIIFB projects was conducted strictly in accordance with norms. The ED notice is part of an election stunt,” said Isaac.

Also Read: Kerala govt is in the dock over 'Masala bonds'. What are they anyway?

The ED launched its probe in 2021. It summoned former finance minister Thomas Isaac in 2024, but he ignored two ED summons and also skipped the interrogation in the case.

Isaac had approached the Kerala High Court questioning the enforcement agency’s probe.

‘Large-scale financial irregularities’: Congress

Congress leader Ramesh Chennithala alleged that Chief Minister Pinarayi Vijayan and others had indulged in large-scale financial irregularities through the masala bonds.

Chennithala also alleged that a company linked to the Lavalin case was involved.

Also Read: ED summons ex-Kerala minister again in KIIFB masala bonds case

KIIFB is the primary agency of the state government for financing large and critical infrastructure projects and had raised Rs 2,150 crore in 2019 through its debut masala bond issue as part of its plan to mobilise Rs 50,000 crores to fund large and critical infrastructure projects in the state.

(With agency inputs)