ED rejects Isaac’s contention on masala bonds issued by KIIFB

The Enforcement Directorate rejects former Finance Minister's claim of not being solely responsible for issuing masala bonds.

The Enforcement Directorate (ED) is reported to have rejected former Finance Minister T.M. Thomas Isaac’s contention that he was not solely responsible for the decision taken by the Kerala Infrastructure Investment Fund Board (KIIFB) to issue masala bonds.

The agency, it is reported, claimed that Dr. Isaac took a position in favour of issuing the masala bonds though the then Chief Secretary had expressed doubts about its higher interest rates. But Dr. Isaac spoke in favour of the masala bonds, pointing out that it would turn beneficial for the board in the future. The ED claimed that the discussions were held at a director board meet of KIIFB in January 2019, which decided to issue the masala bonds. Chief Minister Pinarayi Vijayan chaired the meeting.

The agency issued four summons to Dr. Isaac as part of its probe into the alleged violations in the issue of the masala bonds under the Foreign Exchange Management Act (FEMA). It stated that the bonds must comply with the guidelines under external commercial borrowings (ECB) and trade credit under FEMA. Dr. Isaac countered the agency’s arguments by alleging that the probe was politically motivated ahead of the Lok Sabha elections.

The ED’s investigation is in an advanced stage, according to an affidavit filed by it before the Kerala High Court. The affidavit was filed in response to a writ petition filed by KIIFB and its chief executive officer K.M. Abraham challenging the summons issued to them by the ED. The affidavit said it was premature at this stage to state that the acts of the petitioners were done in good faith. Instead of appearing before the investigation agency and cooperating with the probe, the petitioners were making false allegations against the investigation.

The contention of the petitioners that the ED could not investigate the violation of FEMA was baseless. FEMA empowered the ED to investigate any violation of the provisions of the Act.

It was for the petitioners to cooperate with the investigation. However, they were not cooperating with it despite accommodating all their requests for adjournments. The petitioners had deliberately chosen not to cooperate with the investigation and tried to stagnate the investigation in all possible means.