Kochi: Chief Minister Pinarayi Vijayan moved the Kerala High Court on Wednesday, challenging the show-cause notice issued by the Enforcement Directorate (ED) in connection with the KIIFB Masala Bonds case.

Vijayan’s plea comes after the High Court on Tuesday granted interim relief to the Kerala Infrastructure Investment Fund Board (KIIFB) by staying, for three months, any proceedings pursuant to the ED’s show-cause notice related to the alleged misuse of funds raised through Masala Bonds.

The case pertains to the utilisation of funds generated through Masala Bonds for the acquisition of land for infrastructure projects, which the ED has claimed amounts to impermissible “real estate activity” under the applicable rules.

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While passing the interim order, Justice V G Arun observed that under the Reserve Bank of India’s External Commercial Borrowings (ECB) framework, which came into effect on January 16, 2019 and governed the Masala Bonds issued by KIIFB, the definition of real estate activity does not include activities related to the infrastructure sector.

The court also issued notice to the ED and posted KIIFB’s petition challenging the show-cause notice for further hearing on January 20, 2026.

The ED had issued the notice alleging that KIIFB used the funds raised through the bonds for acquiring land for infrastructure projects, which it claimed was barred as real estate activity. However, the High Court noted that there was no allegation in the ED’s complaint that KIIFB had utilised the funds for infrastructure activities outside those listed in the Union Finance Ministry’s notification specifying eligible infrastructure projects.

In its petition, KIIFB argued that the ED’s complaint and the notice issued to it were “unsustainable in law” and prima facie “do not warrant any adjudication proceedings”. The Board said any such proceedings would have severe adverse effects on its ability to fund welfare and infrastructure projects in Kerala.

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KIIFB also pointed out that due to the ED notice, there is “considerable reluctance” among financial institutions to extend funding until the proceedings are concluded.

The Board informed the court that it has approved projects worth over Rs 90,000 crore, of which works worth Rs 21,881 crore have been completed, while projects worth Rs 42,765 crore have been tendered and are at various stages of execution.

In November, the ED had issued a Rs 467-crore FEMA contravention show-cause notice to Chief Minister Pinarayi Vijayan, former finance minister Thomas Isaac, and the CM’s chief principal secretary K M Abraham, who is also the CEO of KIIFB. The notice relates to alleged violations of FEMA provisions and RBI directions amounting to Rs 466.91 crore.

KIIFB, the state government’s primary agency for financing large infrastructure projects, had raised Rs 2,150 crore in 2019 through its debut Masala Bond issue as part of its plan to mobilise Rs 50,000 crore for critical infrastructure development in Kerala.