Masala Bonds Case: HC disposes ED appeal as stay on show-cause notice to KIIFB expires
The court raised concern about whether it would be appropriate to challenge the order when it has expired.
The court raised concern about whether it would be appropriate to challenge the order when it has expired.
The court raised concern about whether it would be appropriate to challenge the order when it has expired.
Kochi: A division bench of the Kerala High Court on Wednesday disposed of the appeal by the Enforcement Directorate (ED) against the single judge interim order in the Kerala Infrastructure Investment Fund Board (KIIFB) Masala Bond case. The interim order had stayed the show-cause notice issued against KIIFB in the case.
The Division Bench comprising Justice Sathish Ninan and Justice P Krishna Kumar disposed of the appeal, noting that the interim order challenged had since expired.
“The order of stay was passed on December 16, 2025. The period of the interim order has since expired. Accordingly, the challenge against the interim order does not survive,” the court noted.
The show-cause notice was issued against the Kerala Infrastructure Investment Fund Board (KIIFB) under the Foreign Exchange Management Act, 1999 (FEMA). The complaint filed by the ED before the Adjudicating Authority alleged that KIIFB violated the Reserve Bank of India (RBI) guidelines governing External Commercial Borrowings (ECBs). According to the complaint, KIIFB allegedly used the proceeds from Masala Bonds for land acquisition, which the ED claimed was a prohibited end use amounting to real estate activity or purchase of land.
KIIFB had sought the quashing of this complaint, along with the consequential show-cause notice proposing adjudication under Section 13 of FEMA, which deals with penalties for contravention of the Act's provisions.
The Single Judge on December 16, 2025, issued an interim stay of the ED's show-cause notice against KIIFB for a period of three months. The court had also observed that there is prima facie merit in the contention that the infrastructure activities undertaken by KIIFB cannot be termed real estate activities, and that the adjudicating authority has no power to initiate proceedings against the petitioner (KIIFB).
This interim stay was challenged before the Division Bench, which vacated it by an order dated December 19, 2025.
When the matter was taken up today, the court raised concerns about whether it would be appropriate to challenge the order when it has expired. This led to the dismissal of the appeal as infructuous.
The court left all contentions of both sides open and requested that the Single Judge list the writ petition for Thursday's list.
(With LiveLaw inputs)