KIIFB masala bond case: ED serves fresh summons to Thomas Isaac

Thomas Isaac. Photo: Manorama

Thiruvananthapuram: Weeks after withdrawing summons against former minister Thomas Issac in KIIFB Masala Bond case, the Enforcement Directorate has served a fresh summons to him on Saturday. He has been asked to appear before the central agency in its Kochi office on January 12. 

The summons have been issued for violations under the Foreign Exchange Management Act (FEMA), 1999. In 2022, ED argued that Section 37 of the FEMA (search and seizure powers) arms it with enough ammunition to issue summons when violations are suspected or brought to its notice.

In Isaac's and KIIFB's case, the ED, without any evidence or even a complaint to think along those lines, was probing whether the money mobilised from 'masala bonds' had gone into real estate and other activities mentioned in the negative list of the External Commercial Borrowing (ECB) framework drawn up by the RBI. 

ED had withdrawn its summons on December 14 after Isaac approached the High Court alleging political conspiracy.  The veteran CPM leader has maintained that the ED was wrongly accusing KIIFB of violating the regulations under the Foreign Exchange Management Act (FEMA) over the issue of 'masala bonds'.

Masala bonds are rupee-denominated bonds issued by Indian entities to source funds from a foreign market for infrastructure development. It is denominated in rupees but settled in US dollars. Since interest rates in developed markets are lower, borrowers can obtain funds at lower interest rates compared to prevailing rates in India. As for those issuing the bond, the currency risk is borne by investors.

KIIFB borrowed Rs 2,150 crore by floating 'masala bonds' on the London Stock Exchange. The amount to be repaid is Rs 3,195.23 crore.

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