ED Issues Show-cause Notice to Kerala CM Vijayan, Former Minister Thomas Isaac in KIIFB Masala Bond Case

Following the finding that the Foreign Exchange Management Act (FEMA) was violated in the KIIFB Masala Bond transaction, the ED's Adjudicating Authority has sent a show-cause notice to Chief Minister Vijayan and former Finance Minister Thomas Isaac.

Thiruvananthapuram: The Enforcement Directorate (ED) has issued show-cause notices to Kerala Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac, and other officials, including KIIFB CEO K.M. Abraham, concerning alleged violations in the Masala Bond deal conducted by the Kerala Infrastructure Investment Fund Board (KIIFB) for fundraising. The notices pertain to claimed breaches of the Foreign Exchange Management Act (FEMA) related to the end-use of approximately Rs 2,000 crore, primarily alleging that funds were diverted for land acquisition, which contravenes RBI and FEMA guidelines.

The ED's investigation, which began in 2021 following Comptroller and Auditor General (CAG) concerns, culminated in a report submitted to the Adjudicating Authority in Chennai in September 2025. This authority, a three-member panel, has now issued notices asking the accused parties to respond within 30 days. The Chief Minister and others may respond in person or through legal representation. If the allegations are upheld, KIIFB faces fines potentially up to 300% of the misused amount. Legal challenges to the authority's decisions are possible, including appeals to the Appellate Tribunal.

Political debate

Pinarayi Vijayan and Thomas Isaac have denied any wrongdoing, with Isaac calling the case an "election stunt" and politically motivated, especially given the timing ahead of local elections. Opposition parties have accused the ruling CPI(M) government of financial irregularities linked to the Masala Bond transactions. The ED's probe and notice have intensified political debate around the issue, underscoring the complex interface between regulatory enforcement and electoral politics.