Kerala HC stays further proceedings on ED show cause notice to CM Vijayan, others

Kochi, Dec 18 The Kerala High Court on Thursday stayed for three months any proceedings pursuant to the show cause notice issued to Chief Minister Pinarayi Vijayan by the ED in connection with the KIIFB Masala Bonds issue.

Justice V G Arun also extended the same interim relief to former state finance minister Thomas Isaac and Vijayan's Chief Principal Secretary and KIIFB CEO K M Abraham.

The order came on the joint plea moved by Vijayan, Isaac and Abraham seeking quashing of the Enforcement Directorate (ED) show cause notices issued to them in November in connection with the use of the Masala Bond funds by the Kerala Infrastructure Investment Fund Board (KIIFB) for the acquisition of land for infrastructure projects.

The court said that since further proceedings pursuant to the notice were stayed against KIIFB on its plea, the petitioners - CM, Isaac and Abraham -- "were also entitled to a similar interim relief". The court admitted the joint plea and issued notice to the ED seeking its stand on the contentions in the petition.

With the direction, the court listed the matter on January 23, 2026, along with the petition moved by KIIFB.

While giving an interim relief to KIIFB, a single judge had on December 16 observed that according to the RBI's External Commercial Borrowings (ECB) framework, which came into effect from January 16, 2019 and governed the Masala Bonds, the definition of real estate activity does not include activities related to the infrastructure sector.

However, according to the central probe agency, the acquisition of land for infrastructure projects was a real estate activity and cannot be carried out using Masala Bond funds.

The ED had in November issued a Rs 467-crore FEMA contravention show cause notice to Vijayan, Isaac, and Abraham in the KIIFB Masala Bond case.

The notice pertains to the alleged contravention of FEMA provisions and the RBI master direction by KIIFB and its authorities, amounting to Rs 466.91 crore.

KIIFB is the primary agency of the state government for financing large and critical infrastructure projects. It 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 state.