[Masala Bonds Case] Kerala High Court Directs Dy. General Manager, Other Officers From KIIFB To Appear Before ED For Preliminary Inquiry

Justice Devan Ramachandran observed that this is only a preliminary inquiry and there will be no arrest, no interrogation and the proceedings will be video graphed and protected.

“Resultantly, as an interim measure I permit the DGM (Institutional Finance), KIIFB along with two or three officers to appear before the competent authority and answer to the impugned summons…”, stated the Court

The Court made this observation in a plea filed by the KIIFB challenging the summons issued by ED in connection with the masala bonds case. A separate plea was also filed by former Finance Minister Dr Thomas Isaac challenging the summons by the ED stating that he was only an individual and no specific allegations were made against him in the summons for taking oral evidence. The Court had not stayed the summons issued by ED against KIIFB and Dr Isaac.

On the last hearing, the Court had suggested both the KIIFB and Dr Isaac to answer the summons issued by the ED only once since this was only a preliminary enquiry.

Senior Advocate Arvind Datar appearing on behalf of the KIIFB submitted that the Court may permit the DGM along with two or three officers of the KIIFB to appear before the ED to answer the summons. It was argued that Dr Kandathil Mathew Abraham, (Chief Executive Officer, KIIFB), against whom the summons was issued had already appeared before the ED once and all documents were also submitted.

Senior Advocate Jaideep Gupta appeared on behalf of Dr Isaac and submitted that the summons does not indicate any allegations against Dr Isaac and for the time being, officers of the KIIFB could appear before the ED. It was submitted that for the time being, Dr Isaac may not be called for an oral enquiry vide the summons since he has no awareness of the utilization of the funds in connection with the masala bonds post his retirement as the Finance Minister in 2021. It was argued that the ED cannot conduct a roving enquiry by issuing summons without any pending proceedings.

Additional Solicitor General of India (ASGI) A.R.L.Sundaresan, instructed by Standing Counsel Jaishankar V.Nair appeared on behalf of the ED and submitted that DGM along with two or three officers of the KIIFB could appear before the ED for honouring the summons issued by them for the time being. They also requested the Court to keep the proceedings pending as the inquiry was only in its preliminary stage.

Considering the arguments, the Court thus permitted the (DGM) (Institutional Finance) of the KIIFB to appear along with two or three officers for giving information to the ED and for vouching the authenticity of the documents submitted.

The Court thus stated that the summons issued against the KIIFB could be answered first and then it would take a decision against the summons issued to Dr Isaac.

Background

KIIFB and former minister Dr Thomas Isaac had filed separate petitions before the High Court challenging the issuance of the summons by the ED alleging violations of provisions under the Foreign Exchange Management Act (FEMA) for raising funds by issuing rupee-denominated bonds (masala bonds) abroad. In October 2022, Justice V.G. Arun stayed further issuance of summons against KIIFB and Dr Isaac for two months.

Then, Justice Ramachandran permitted the issuance of fresh summons to Dr Isaac and KIIFB, subject to further orders of the Court. This was later set aside by a Division Bench citing technical grounds, that that such a modification of an earlier Interim Order could not have been issued.

In December last year, the ED withdrew the summons issued to the KIIFB and Dr Isaac. On the above submission, Justice Ramachandran left open all the other issues since there were no pending proceedings.

The matter has been posted for further hearing on March 07, 2024.

Case title: Kerala Infrastructure Investment Fund Board V Director, Thomas Issac v Deputy Director

Case number: WPC 1377/2024 & WPC 3719/2024