Kochi: In a significant relief to the LDF government, the Kerala High Court on Tuesday stayed further proceedings in connection with the Enforcement Directorate’s (ED) notice over the alleged misuse of funds raised through masala bonds for infrastructure development in the state.

The interim stay has been granted for a period of three months.

The development comes a few days after the ED issued show-cause notices amounting to ₹466 crore under the Foreign Exchange Management Act (FEMA) to Chief Minister Pinarayi Vijayan, former state finance minister Thomas Isaac and the Chief Minister’s former principal secretary K M Abraham in connection with the Kerala Infrastructure Investment Fund Board (KIIFB) masala bond case.

According to officials, the notices, which do not require personal appearance, were issued around 10 to 12 days ago after the completion of the FEMA investigation. Under FEMA, a show-cause notice is issued after quantifying the alleged contravention and, if upheld by the adjudicating authority, could lead to the imposition of a financial penalty.

The ED probe pertains to the end-use of funds raised through masala bonds by KIIFB and whether the transactions complied with FEMA provisions.

Opposing the ED action, KIIFB told the court that such notices were often issued during election periods and maintained that there are no restrictions on using masala bond proceeds for land acquisition for infrastructure projects. It also asserted that all transactions were carried out in strict compliance with Reserve Bank of India (RBI) norms.