ED's Probe On Masala Bonds Affecting Infrastructure Development Plans In Kerala: KIIFB To High Court

The Kerala Infrastructure Investment Fund Board (KIIFB) has told the High Court that the Enforcement Directorate's protracted investigation into the issuance of Masala bonds is detrimentally affecting infrastructure development plans in the state.The submission is part of a rejoinder filed by the KIIFB in response to a counter affidavit of the central agency. ED is probing the alleged violations of Foreign Exchange Management Act (FEMA) in issuance of Masala Bonds in 2019. KIIFB had challenged the summons issued by Enforcement Directorate. In the Rejoinder Affidavit moved through Advocates B.G. Harindranath, Amith Krishnan, Sutapa Jana, and Gopikrishnan M, the KIIFB said the ED investigation is without any reasonable suspicion.Responding to ED's submission that the probe has been initiated on the basis of a report submitted by the Comptroller and Auditor General (CAG) in March 2019, KIIFB has said same is impermissible in law and the entire investigation deserves to be set aside on this ground alone."The CAG Report is subject to scrutiny by Parliament/Legislature of the State and the Central/State Government can always offer its views on the report of the CAG or even in certain situations reject the same," the board said in the rejoinder.The allegations in the CAG report "are incorrect" and a mere afterthought and could not be made basis for the investigation, the KIFFB said further. "Kerala Legislative Assembly had rejected the said remarks pertaining to KIIFB in the Report of the CAG dated 19.01.2021," it has told the court.KIIFB has also said that the ED has been unable to make out any material reasons or suspicion for initiating the investigation. "...the present investigation is a roving inquiry which suffers from non-application of mind", it has submitted.Alleging that the investigation has been going on for a prolonged period of time, the KIIFB has said the same has detrimentally affected the infrastructure development plans of the State and also "violated" the fundamental rights of the petitioner."Cumulatively, the Adjournments/Extensions sought by the Petitioners amount to merely 77 days, out of which 59 days were on account of reasons not within the control of the Petitioners herein. Furthermore, adjournments were sought by the Petitioners only for justifiable reasons alone," it has told the court.KIIFB has also contended that the delay amounts to violation of the Foreign Exchange Management Act, 1999 (FEMA), and the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, which impose strict timelines within which the the inquiry and the complaint filed ought to be adjudicated.The board has also said that the "inordinate delay" in the investigation by the ED has detrimentally affected the borrowing plans of KIIFB and the execution of crucial infrastructure projects in the State.A total of 993 current infrastructure projects, four major projects proposed by the NHAI, and several other vital projects including the establishment of 4 Science Parks, 3 IT Parks, and 4 stretches of IT Corridor seem to be affected by the delay and protracted investigation, the KIIFB has claimed. It has also said that there now appears to be significant reluctance on the part of Financial Institutions to advance funds to it, which "is likely to bring all current operations of KIIFB to a halt.""KIIFB has not been able to close a single term loan with any of its existing lending banks with which it has built very good business relationships this financial year. This inability to source additional funds, on account of the cloud of uncertainty caused by the present investigation, will lead to a financial crisis of unprecedented magnitude in the State," the board has said.The court has also been told that while Masala Bonds had been issued by various PSUs, including the National Highways Authority of India, Indian Renewable Energy Development Agency Limited and National Thermal Power Corporation Limited, KIIFB alone has been singled out by the ED."In spite of the specific direction by the High Court of Kerala asking ED to specifically state in its Counter Affidavit as to whether the issuance of Masala Bonds by any other entity was being enquired into by it, the same has been left unanswered by it, further fortifying the contention that arbitrary treatment has been meted out to KIIFB," the rejoinder contends.KIIFB has further submitted that it had issued Masala Bonds for Rs. 2,672.8 Crores under the extant RDB framework and that it had also appointed a reputed Authorised Dealer to advise, guide and assist it in the issuance of Masala Bonds.The Authorised Dealer had not found any irregularities, and that the proceeds from Masala Bonds issued by KIIFB have only been used for the purposes of financing infrastructure projects within the State of Kerala as approved by KIIFB's Board, the government body has submitted to the court. KIIFB has also been diligently reporting all actual ECB transactions...

ED's Probe On Masala Bonds Affecting Infrastructure Development Plans In Kerala: KIIFB To High Court

Navya Benny

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