The Enforcement Directorate has issued showcause notices to Kerala chief minister Pinarayi Vijayan and two others for alleged violations of the Foreign Exchange Management Act (Fema) in the issue of masala bonds by the Kerala Infrastructure Investment Fund Board (KIIFB).
Besides Vijayan, who is the KIIFB chairman, notices have been issued to former state finance minister and KIIFB vice-chairman T.M. Thomas Isaac and chief executive officer K.M. Abraham.
A masala bond is an instrument used by Indian entities to raise money
internationally.
The KIIFB had floated a masala bond at the London and Singapore stock exchanges to raise funds through rupee-denominated bonds to the tune of ₹2,672.8 crore in 2019, the ED officials said. The state government did so to create infrastructure following the devastating floods that hit the state in 2018.
A part of the funds — ₹466.91 crore — was used to purchase land which was “specifically prohibited”, and this was in contravention of the master direction and circular issued by the RBI, officials said.
The ED had filed the Fema complaint on June 27.
The ruling CPM on Monday called the ED’s notices a “political game,” claiming it was a challenge to the people of the state.
As elections are round the corner in the state, the ED is campaigning for the ruling BJP at the Centre, Isaac told reporters in Pathanamthitta.
Party state secretary M.V. Govindan said the notice was part of a “political game” and that the people of Kerala would understand it clearly.
The ED notice came despite the Kerala government submitting its final report claiming innocence before the agency’s adjudicating authority in Chennai three months ago. The trio can reply to the notices in person or through their representative
or lawyers.
“Up to 300 per cent penalty from the acquired KIIFB funds can be charged by the ED if it finds any discrepancies,” an ED source said.