[KIIFB vs ED] Repeated summons for same documents seem to indicate lack of application of mind: Kerala High Court

The Kerala High Court on Tuesday observed that the repeated issuance of summonses by the Enforcement Directorate (ED) to the Kerala Intrastructure Investment Fund Board (KIIFB), for procuring the same documents, indicated lack of application of mind on the part of the Central agency [Kerala Infrastructure Investment Fund Board v Director, Directorate of Enforcement].The KIIFB had approached the Court challenging the summons issued by the ED in connection with alleged violations of the Foreign Exchange Management Act (FEMA) when it issued 'Masala Bonds', i.e, rupee denominated bonds issued outside India by Indian entities. Justice VG Arun noted that the ED had issued repeated summons for obtaining the same documents relating to the usage of the funds collected through the bonds.He opined that the petitioners may be right in contending that the same indicates a lack of application of mind."Why is this officer asking repeatedly for the same documents? I feel that this would indicate a lack of application of mind, like it is system-generated," the judge orally remarked. .The Court also differentiated the petition by KIIFB from the plea filed by former State Finance Minister Dr. Thomas Issac challenging the ED summons issued to him in the KIIFB probe"Unlike the other case, as Mr. Datar (KIFFB's counsel) pointed out, there are various levels at which this is being scrutinised," Justice Arun observed..The Court further noted that apart from the summons to KIIFB, the ED had also issued summonses to its officers, requiring, among other things, copies of their income tax returns and details of their family members' properties."What is the reason for asking the officers to provide these," the judge queried..Senior Advocate Arvind Datar, appearing for the KIIFB and two of its officers who had been issued summons, submitted that the masala bonds were floated after securing all the necessary permissions from the Reserve Bank of India (RBI)He said that the KIIFB had provided all the documents which had been sought several times since the first summons was issued in March, 2021."This started in Feb 2021 and it is now August 2022. there seems to be no time limit. I am not the World Bank, I only have 10-12 infrastructure projects. I have given the details several times....After 19 months, we are at square one," Datar said.He further pointed out that the KIIFB undergoes examination every six months by an independent body consisting of a former Comptroller and Auditor General of India, a former RBI director and a former Chairman of Canara Bank.However, the summons kept coming without any information being provided as to what contravention of FEMA was being investigated or on what basis the investigation was initiated, he submitted.Regarding the summons issued to KIIFB officers, including CEO KM Abraham, Datar said that the documents sought from them denies their right to privacy, as also their families'.The investigation by ED has also impacted the credibility of the KIIFB in the eyes of its investors which could lead to stalling of several scheduled infrastructure projects within the State, he concluded..On the other hand, Central Government Counsel Jaishankar V Nair, submitted that the summons were issued under Section 37 of FEMA to find out if there is a contravention under Section 13. He said that only if a contravention is found, the ED is bound to file a complaint before the adjudicating authority under Section 16(3).He further submitted that there have been reports from the Comptroller and Auditor General of India that there have been FEMA violations and that he would place the same on record..The matter will be taken up next on September 2, by which time the ED is expected to submit detailed response to the plea. .The ED's probe into the financial transactions of the KIIFB has recently been the subject matter of two other petitions before the Kerala High Court.On August 11, five members of the Kerala Legislative Assembly approached the Kerala High Court by way of a public interest litigation (PIL) petition against the ongoing probe.Dr. Thomas Issac, former Kerala Finance Minister and member of the Communist Party of India (Marxist), also approached the Court with a separate plea challenging the summons issued by the ED in the same case.Both petitions argued that the ED is conducting a fishing and roving exercise to discredit the KIIFB, which in turn would discourage its investors.