Kerala High Court Disposes of ED's Appeal in KIIFB Masala Bond Case
The Kerala High Court has disposed of the Enforcement Directorate's (ED) appeal against the single judge interim order in the Kerala Infrastructure Investment Fund Board (KIIFB) Masala Bond case.
- The ED had challenged the single judge's interim order that stayed the show-cause notice issued against KIIFB.
- A division bench comprising Justices Sathish Ninan and P Krishna Kumar disposed of the appeal, noting that the interim order had since expired.
Reason for Disposal: The Division Bench noted that the order of stay was passed on December 16, 2025, and the period of the interim order has since expired.
Background of the Case: The ED had issued a show-cause notice against KIIFB under the Foreign Exchange Management Act, 1999 (FEMA) alleging that the latter violated the Reserve Bank of India (RBI) guidelines governing External Commercial Borrowings (ECBs).
- The ED claimed that KIIFB used the proceeds from Masala Bonds for land acquisition, which is a prohibited end use amounting to real estate activity or purchase of land.
- KIIFB had sought the quashing of the complaint, along with the consequential show-cause notice proposing adjudication under Section 13 of FEMA.
Previous Developments: The Single Judge had issued an interim stay of the ED's show-cause notice against KIIFB for a period of three months on December 16, 2025, observing that there is prima facie merit in the contention that the infrastructure activities undertaken by KIIFB cannot be termed real estate activities.
Recent Developments: The Division Bench had vacated the interim stay by an order dated December 19, 2025. When the matter was taken up today, the court raised concerns about whether it would be appropriate to challenge the order when it has expired, leading to the dismissal of the appeal as infructuous.
Next Steps: The court has left all contentions of both sides open and has requested that the Single Judge list the writ petition for tomorrow's list.