Was easier for KIIFB, Thomas Isaac to answer ED summons instead of filing petitions delaying probe: Kerala High Court

The Kerala High Court on Wednesday reserved its verdict in the petitions moved by the Kerala Infrastructure Investment Fund Board (KIIFB) and former State Finance Minister and CPI(M) leader Dr. TM Thomas Isaac seeking to quash the summons issued to them by the Enforcement Directorate (ED) in connection with the masala bonds case. .Masala bonds are rupee-denominated bonds issued outside India by Indian entities. The ED is probing alleged irregularities and contraventions of the Foreign Exchange Management Act of 1999 (FEMA) in KIIFB's issuance and utilisation of masala bonds..During today's hearing, counsel representing KIIFB submitted that because of the way the organisation was set up in terms of getting approvals and disbursing funds, there is absolutely no possibility of there being any contravention of FEMA. Justice TR Ravi pointed out that if this was the case, it would have been easier for all concerned if KIIFB officials had just answered the ED summons instead of moving the Court.The judge also remarked that the investigation has been stalled for nearly four years due to the many writ petitions filed before the Court challenging the ED's summons."Then why are you here fighting this (summons)? If that alone is there you can go and say that. Is it not easier? It is not in your own interest that it is over at the earliest? For four years this has gone on and much of it can be attributed to the several writ petitions that have come here. How many writ petitions came here? How much time did it take? This is the second round. When did it start and when did it end?", Justice Ravi said. .KIIFB officials and Isaac first filed petitions before the High Court in 2022 challenging the ED summons issued to them at that point in connection with the central agency's probe in the case. However, in December 2023, the ED informed the High Court that it had decided to withdraw those summons.At the time, the Court had clarified that the ED was free to continue its probe in the case.In January this year, the ED issued fresh summons to Isaac and KIIFB officials following which Isaac and KIIFB filed this fresh round of petitions challenging the same.The primary ground raised by both Isaac and the KIIFB officials was that the summons issued to them contained no mention of what transactions were being investigated. They also argued that the summons don't contain any information about the alleged contraventions of FEMA. According to both petitioners, as per Section 37 of the FEMA, it is the RBI that is the appropriate authority to investigate if there is any contravention. If any contraventions that are mentioned in Section 13 of the Act are detected, the the RBI can approach the adjudicating authority which can then direct the ED to investigate the case. Effectively, their argument was that the ED did not have the jurisdiction to conduct probe at this stage. Both the ED and the RBI were united in their opposition to this contention. .After hearing all parties over the course of several weeks, the Court reserved its verdict on the petitions today. .Additional Solicitor General of India ARL Sundaresan and Central Government Counsel Jaishankar V Nair appeared for the ED.Isaac was represented by Senior Advocate Jaideep Gupta and advocates N Raghuraj, Nandagopal S Kurup, Sayuja, Vivek Menon and Rance R.KIIFB was represented by Senior Advocate Arvind Datar and Kerala Advocate General Gopalakrishna Kurup K..[Read Live Coverage of the Hearing].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.