The Kerala High Court has extended the interim stay on all proceedings initiated by the Enforcement Directorate (ED) against Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac, and KIIFB CEO K.M. Abraham until April 6. The case pertains to a show-cause notice issued by the central agency regarding alleged FEMA violations in the issuance of Masala Bonds by the Kerala Infrastructure Investment Fund Board (KIIFB).
Justice Bechu Kurian Thomas granted the extension of relief during a recent hearing, ensuring that no further action is taken pursuant to the ED’s notices until the next court date. This follows a previous three-month stay granted by the court on December 18, 2025.
The legal battle centers on the ED’s allegation that KIIFB diverted funds raised through Masala Bonds for “real estate activities,” which is prohibited under the Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) guidelines.
In November last year, the ED issued a show-cause notice amounting to ₹466.91 crore (approximately ₹467 crore) for alleged contraventions. The agency contends that the acquisition of land for infrastructure projects constitutes “real estate activity” and therefore cannot be funded using Masala Bond proceeds.
However, the petitioners—Chief Minister Vijayan, Thomas Isaac, and K.M. Abraham—moved a joint plea to quash these notices. They argue that KIIFB, as the state’s primary agency for financing critical infrastructure, operated within the legal framework.
On December 16, 2025, a single-judge bench of the High Court observed that the RBI’s External Commercial Borrowings (ECB) framework, which has governed Masala Bonds since January 2019, specifically excludes activities related to the infrastructure sector from the definition of “real estate activity.” This observation serves as a pivotal point in the petitioners’ challenge against the ED’s jurisdiction and interpretation of the rules.
KIIFB is tasked with mobilizing ₹50,000 crore to fund large-scale infrastructure projects across Kerala. In 2019, it raised ₹2,150 crore through its debut Masala Bond issue. The ED’s investigation targets the alleged misuse of a portion of these funds, specifically focusing on the ₹467 crore used for land acquisition.
With the High Court extending the stay, the state government and the central probe agency will now present further arguments when the matter is taken up again on April 6.
