KOCHI: The High Court on Tuesday asked the state, Centre, Kerala Infrastructure Investment Fund Board (KIIFB) and RBI to file an affidavit in response to a petition challenging the constitutional validity of issue of Masala bonds to overseas investors by the state government and listing them on the London Stock Exchange.
A Division Bench comprising Chief Justice S Manikumar and Justice Shaji P Chaly issued the notices to the Centre, the state government and RBI on a petition filed by M R Ranjith Karthikeyan, a chartered accountant from Thiruvananthapuram, challenging the government’s decision. The petitioner said KIIFB was under the control of the state government.
The government had no legislative competence to enact laws for borrowing from outside the territorial limits of the country as the Centre could alone take loans from abroad.
The issue of bonds by the state government under the Kerala Infrastructure Investment Fund Act of 1999 had violated Article 293(1), which stipulates that state governments could borrow only within the country.
In fact, the Article makes it clear that the executive power of the state to borrow money upon the security of the Consolidated Fund extended only up to the territory of the country.
The petitioner had earlier withdrawn a similar plea when the bench said the investment was canvassed not by the state government but by KIIFB. Later, he moved a petition seeking to declare that KIIFB is not entitled to issue Masala bonds in a foreign country.