Today, On 24th July, The Kerala High Court noted that it would have been simpler for the Kerala Infrastructure Investment Fund Board (KIIFB) and former State Finance Minister Thomas Isaac to comply with the Enforcement Directorate’s (ED) summons rather than filing petitions to delay the investigation.
Kerala: The Kerala High Court, On Wednesday, reserved its decision on petitions filed by the Kerala Infrastructure Investment Fund Board (KIIFB) and former State Finance Minister Dr. TM Thomas Isaac, a CPI(M) leader. The petitions seek to nullify the summons issued by the Enforcement Directorate (ED) concerning the masala bonds case.
Masala bonds are bonds denominated in Indian rupees but issued outside India by Indian entities. The ED is investigating alleged irregularities and violations of the Foreign Exchange Management Act of 1999 (FEMA) related to KIIFB’s issuance and use of these bonds.
During the hearing, KIIFB’s counsel argued that the structure and processes of the organization, in terms of approvals and fund disbursement, ensured there was no possibility of FEMA violations.
Justice TR Ravi noted that if KIIFB’s claims were accurate, it would have been simpler for the officials to comply with the ED’s summons rather than challenge them in court. The judge highlighted that the investigation had been delayed for nearly four years due to numerous writ petitions contesting the ED’s summons.
Justice Ravi questioned,
“Then why are you here fighting this (summons)? If that alone is there you can go and say that. Is it not easier? It is not in your own interest that it is over at the earliest? For four years this has gone on and much of it can be attributed to the several writ petitions that have come here. How many writ petitions came here? How much time did it take? This is the second round. When did it start and when did it end?”
In 2022, KIIFB officials and Isaac initially filed petitions before the High Court to challenge the ED summons issued at that time in relation to the central agency’s investigation. However, in December 2023, the ED informed the High Court of its decision to withdraw those summons. The Court, while noting this, clarified that the ED was still at liberty to continue its investigation.
In January this year, the ED issued new summons to Isaac and KIIFB officials, prompting them to file a fresh set of petitions challenging these summons. The primary argument from Isaac and the KIIFB officials was that the summons did not specify the transactions under investigation or provide details on alleged FEMA violations.
The petitioners argued that, according to Section 37 of FEMA, the RBI, the appropriate authority to investigate any contraventions. If contraventions mentioned in Section 13 of the Act are found, the RBI should approach the adjudicating authority, which can then direct the ED to investigate. They contended that the ED lacked jurisdiction to conduct the probe at this stage.
Read Also: [Masala Bonds Case] “Why only Kerala being probed by ED?”: KIIFB to Kerala HC
Both the ED and the RBI opposed this argument. After several weeks of hearings, the Court reserved its verdict on the petitions.
Additional Solicitor General of India ARL Sundaresan and Central Government Counsel Jaishankar V Nair represented the ED.
Isaac represented by Senior Advocate Jaideep Gupta, along with advocates N Raghuraj, Nandagopal S Kurup, Sayuja, Vivek Menon, and Rance R.
KIIFB represented by Senior Advocate Arvind Datar and Kerala Advocate General Gopalakrishna Kurup K.