The Enforcement Directorate (ED) on Wednesday served a fresh sixth summon to the ex-finance minister of Kerala Dr. Thomas Issac in connection with the “Masala Bond” case. The agency had asked him to appear before it on April 1st, Monday. Thomas Issac is the Lok Sabha Candidate for the Communist Party of India(Marxist) in the Pathanamthitta constituency.
The high court suggests the former finance minister and KIIFB officials respond to the Enforcement Directorate summons in the Masala Bond case for once. A bench of Justice Devan Ramachandran posted the case for Feb19, as the councils requested time to seek instructions from the petitioners.
Issac responded to the Enforcement Directorate summon and said, “The ED should not forget that this is Kerala and not north India. The Enforcement Directorate is not going to cut my nose if I don’t appear. Anyway, I am approaching the Kerala High Court on Monday.”
According to previous reports, Thomas Issac has been refusing to appear before the court stating that the summons couldn’t clearly mention the allegations against him. He announced that he would be appearing in court only if the summons set out the allegations against him clearly.
Through KIIFB that is Kerala Infrastructure Investment Fund Board raised a total of Rs 2,150 crore from the masala bonds in 2019 when Issac was the Finance Minister in the first Pinarayi Vijayan government(2016-21).
As per Enforcement Directorate’s statement in February , Issac was the main person who knows everything about the masala bond case and is bound to appear. The agency also informed the court that he will not be arrested and the entire questioning will be filmed and will be brought to the court.
KIIFB is the topmost agency of the state government for financing large and critical infrastructure projects in the state. In 202, it raised Rs 2,150 crore through its debut masala bond as part of ts plan to mobilize Rs 50,000 crore to fund large and critical infrastructure projects in the southern state.
What is this Masala Bond Case that Enforcement Directorate is referring to?
A masala bond refers to a “rupee dominated ” bond issued to foreign investors and is settled in US dollars and is subjected to the financial regulations of the respective jurisdiction. These bonds allows Indian entities to raise funds from international investors. These bonds are an instrument for Indian companies to tap into the global capital markets without exposing themselves to the risk of currency fluctuations since the issuance is in Indian Rupees. The first Masala Bond was issued by the World Bank which was backed by the International Finance Corporation in November 2014 when it raised Rs 1,000 crore to fund long-term infrastructure projects in India.
Why did Issac and KIIFB challenged ED?
Back in 2022, both the Karnataka Infrastructure Investment Fund Board (KIIFB) and Dr. Issac had moved petitions challenging the Enforcement Directorate summons in relation to its probe into the alleged violations of the Foreign Exchange Management Act (FEMA) in the issuance of “Masala Bond”.
The petition moved by Issac challenged the summons issued by the Enforcement Directorate seeking his personal documents a well as those of his family members in connection with the same robe. Similarly KIIFB challenged the repeated issuance of Enforcement Directorate summons to the KIIFB officers, including its CEO, K.M. Abraham.
The RBI confirms high court that it had issued a Non-Objection Certificate(NOC) to the KIIFB under Foreign Exchange Management Act(FEMA) for raising funds through Masala Bonds abroad.
A massive setback was received by the finance minister on October 10 2022, as the Kerala High Court refused to issue an interim order against the summons issued him by Enforcement Directorate. Justice Ramachandran allowed the Enforcement Directorate to issue fresh summons on November 24 preventing further Enforcement Directorate summons for two months. This decision was challenged by Issac and KIIFB officials, leading to a stay on December 7.
