[Masala Bonds Case] Kerala High Court Seeks Explanation From ED On Fresh Summons Issued To Fmr Finance Minister Dr Thomas Isaac

Justice Devan Ramachandran stated that the ED shall submit an explanation before the Court explaining the reasons behind issuing the new summons to Dr Issac.

“…Obviously, the ED must inform why Ext P19 has been issued though I make it clear that its validity may or may not be considered by this Court in this writ petition depending upon the contentions to be taken by the parties at the relevant time.”

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.

Pursuant to the directions of the Court, the officers of the KIIFB answered the summons and appeared before the ED for co-operating with the investigation. It stated that the ED has sought more documents from the KIIFB and stated that the KIIFB was willing to produce those documents. It thus granted more time for the KIIF to furnish the additional documents sought by the ED for carrying out the investigation.

Senior Advocate Jaideep Gupta appeared on behalf of Dr Isaac and submitted that a new summons was issued against Dr Isaac without explaining why his presence was required since he has no awareness of the utilization of the funds in connection with the masala bonds post his retirement as the Finance Minister. It was further argued that the new summons was issued by the ED without explaining the reasons for seeking the appearance of Dr Isaac. Thus, a stay was sought against the new summons issued to Dr Isaac.

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 before the Court that the new summons was issued based on the documents produced by the KIIFB pursuant to the orders of the Court. It was also contended that there were no interim orders barring the ED from issuing summons. The Counsel for ED submitted before the Court that they were willing to explain the reasons behind the issuance of a new summons to Dr Isaac.

The Court added that it was not staying the summons issued to Dr Isaac and stated that the party could decide whether to appear or not before the ED.

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 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 18, 2024.

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

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