KOCHI: The Kerala High Court on Tuesday declined the KIIFB’s plea to stay the Enforcement Directorate’s (ED) summons on charges of Foreign Exchange Management Act (FEMA) violations in the issuance of masala bonds. However, the court orally instructed the central agency not to take coercive steps pursuant to its impugned summonses.
The petitioners were at liberty to circulate a letter for adjournment in case a summons was served on them, Justice V G Arun observed while hearing a petition filed by the KIIFB, its chief executive officer, and joint fund manager, challenging the ED summons to them. The court posted the petition for next hearing on September 2.
Counsel for the petitioners sought an interim stay on the summons. The court, however, said it did not intend to pass any interim order, and directed the ED to file a counter affidavit on the next hearing date.
Counsel for the petitioners contended that the ED had been issuing repeated summonses to its executive officer and joint fund manager. He said there was no violation of any provisions of FEMA in the case. The Reserve Bank of India (RBI) had given specific authorisation to KIIFB in 2018 for issuing Rupee Denominated Bonds for Rs 2,672.8 crore. The RBI had also issued a loan registration number to the KIIFB.
The court asked whether the RBI nod also permitted payment in dollars. Counsel for KIIFB replied that there was permission. The petitioners also said the ED issued repeated summonses without citing any reason. The court asked what was the reason for asking the officers to provide all such details.
The repeated issuance of the summonses for producing the same documents indicated a lack of application of mind on the part of the investigating officer, observed the court. “Why this officer is asking repeatedly for the same document? That would indicate lack of application of mind.” The petitioners submitted it was for the RBI and not the ED to enquire whether FEMA was violated. The ED’s actions were politically motivated and they began harassing the officials since the assembly elections were declared in the state early last year.
AGENCY’S SUBMISSION
ED’s counsel submitted the investigation was based on the CAG report that there was a violation of the FEMA by the KIIFB. The summonses were issued as part of the investigation to collect details and to examine whether there was a contravention. There was nothing illegal, counsel said. ED’s counsel requested a short adjournment for filing a detailed counter affidavit touching up on the legal and factual contention made on behalf of the petitioners.