[Masala Bonds Case] Respond To ED Summons: Kerala High Court Tells KIIFB

Justice Devan Ramachandran stated that the Court cannot micromanage the proceedings and directed the KIIFB to respond to the summons.

“You respond to the summons, that is all that is required…Either say that I will not produce it or say I will produce it. It is for you to respond to the summons….I don't really understand why everybody should be scared of summons”, the Court stated orally.

The Counsel appearing for KIIFB submitted that the documents have already been submitted and there was no requirement for submission of fresh documents. They stated that the summons had been issued at least six times and all the documents had been already submitted before the ED. They stated that the issuance of summons again and again would amount to harassment. It was further argued that there were no pending proceedings under the Foreign Exchange Management Act (FEMA) and thus investigation could not be conducted.

At this juncture, the Court remarked that ED is only carrying out a preliminary investigation. 'Can I stop the ED from even doing a preliminary investigation', stated the Court.

On perusing the summons, the Court stated that there was hardly any controversy in it. “The question is how can I interdict the investigation….You respond to the summons in any manner that you want. You can make available the documents…”, the Court stated orally.

The Counsel for KIIFB added that they would provide further clarifications on the documents if that was needed. They also sought time to file a reply.

The Court granted time for the KIIFB to file a reply and posted the matter to February 01, 2024.

Last week, the Court had directed KIIFB to submit authenticated copies of documents sought by the ED for conducting the investigation.

Background

KIIFB and former minister Dr Thomas Issac had filed separate petitions before the High Court challenging the issuance of the summons by the ED alleging violations of provisions under the Foreign Exchange Management Act (FEMA) for raising funds by issuing rupee-denominated bonds (masala bonds) abroad. In October 2022, Justice V.G. Arun had stayed further issuance of summons against KIIFB and Dr Thomas Issac for a period of two months.

Then, Justice Ramachandran permitted the issuance of fresh summons to Isaac and KIIFB, subject to further orders of the Court. This was later set aside by a Division Bench citing technical grounds, that that such a modification of an earlier Interim Order could not have been issued.

Justice Devan Ramachandran observed that the ED cannot conduct a roving inquiry and had noted that investigation can be conducted even without issuance of summons.

In December last year, the ED withdrew the summons issued to the KIIFB and Dr Thomas Issac. On the above submission, Justice Ramachandran left open all the other issues since there were no pending proceedings.

Case title: Kerala Infrastructure Investment Fund Board V Director

Case number: WPC 1377/2024