KIIFB trying to stagnate probe into ‘masala bond’ case, ED tells Kerala High Court

KIIFB's decision to mop up Rs 2,150 crore through 'masala' bonds has always been a matter of dispute.

Kochi: The Directorate of Enforcement (ED), which is probing the alleged rule violations in the financial dealings of the Kerala Infrastructure Investment Fund Board (KIIFB), has told the Kerala High Court that the government agency was trying to stagnate its investigation.

The ED made the statement in an affidavit filed before the court challenging a petition moved by KIIFB officials seeking to quash a summons issued to them by the agency in what is reported as the ‘masala bond’ case. Former state finance minister T M Thomas Isaac is among those who have been summoned by the central agency.

In its affidavit, ED said the petitioners did not approach the high court with "clean hands, clean mind and clean intent" and the petition is "nothing but a gross abuse of the process of law."

The agency said its investigation is at its crucial stage and KIIFB has filed the petition with the intention to stagnate the probe under the Foreign Exchange Management Act (FEMA).

The investigation agency said the KIIFB officials’ claim on violation of rights is not legally sustainable and issue of summons to record evidence in an ongoing investigation is the procedure embedded under Sec 37 of FEMA 1999. “By no stretch of imagination such legitimate exercise of powers can be deemed to be violation of fundamental rights,” it said.

It said the summons was issued for production of authenticated documents and recording oral evidence for further investigation. At this juncture, it would be pertinent to note that in the absence of any summons, investigation and collection of evidence will be completely stalled, the affidavit stated.

“Instead of appearing before the investigation agency and cooperating with the investigation, the petitioners are making false allegations into the investigation and making irrelevant submissions. As the investigation is in its final sage and recording of evidence the agency is not bound to disclose every single aspect of the probe to all who have been summoned. The petitioners were highly non cooperative in the investigation in spite of accommodating their requests for adjournments and time for appearances which extended for more than 10 months,” ED told the court.

ED filed its affidavit a day after Isaac addressed questions regarding the role he had held as its vice chairman during his tenure as state finance minister in the previous Left government. The FEMA case is linked to a probe into the alleged violations in the financial dealings of KIIFB during Isaac's tenure as the finance minister in the previous LDF government.

Isaac had not appeared before the ED on January 22 as sought by the agency. He was earlier asked to appear before it on January 12, but he had not turned up then also. Isaac on Tuesday said that he was willing to appear before the agency and give an explanation if the ED can point out what law has been violated. "But, I am not going to appear before them so that they can question me and find out if any laws were violated. That amounts to self-incrimination and I will not do that," he said. Moreover, the KIIFB has already submitted all accounts and records to the ED, he said.

The 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 crore to fund large and critical infrastructure projects in the southern state. The ED suspects contravention of the FEMA here and hence initiated a probe.

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