Kochi: The interim stay on the single-bench order that halted further proceedings on the notice issued by the Enforcement Directorate’s (ED) Adjudicating Authority against the Kerala Infrastructure Investment Fund Board (KIIFB) in connection with the masala bonds case, has been extended by another week.

The extension comes in the wake of directions by a Division Bench of the High Court to retain the ED as a respondent in the list of parties to the appeal and to move the Adjudicating Authority to the array of parties.

The Advocate General pointed out a technical issue arising from the same lawyer appearing for both the ED and the Adjudicating Authority. Following this, the petitioners sought one week’s time to make the necessary changes. The appeal was heard by a Bench comprising Justice Sushrut Arvind Dharmadhikari and Justice PV Balakrishnan.

What is the KIIFB masala bonds case?

The Kerala Infrastructure Investment Fund Board (KIIFB), the state government’s main agency for financing major infrastructure projects, had raised Rs 2,150 crore in 2019 via its first masala bond issue. This was part of its broader plan to mobilise Rs 50,000 crore to fund large and critical infrastructure projects across Kerala.

Masala bonds allow Indian entities to raise funds from foreign investors in rupees while the investment is settled in US dollars.

The ED probe focused on the end-use of Rs 2,000 crore raised by KIIFB through masala bonds and whether the transactions complied with the Foreign Exchange Management Act (FEMA) regulations. Allegations include possible misuse of funds, such as land acquisitions, which may contravene RBI regulations regarding fund utilisation.

After a three-year investigation, the ED had issued Rs 466-crore show-cause notices to Chief Minister Pinarayi Vijayan, former Finance Minister Thomas Isaac and KIIFB CEO K M Abraham in November 2025. The ED claimed that funds raised through the bonds were allegedly used to purchase land, thereby violating FEMA regulations. The single bench had stayed further proceedings based on these notices in December.

Challenging that order, the ED filed an appeal, following which the Division Bench stayed the single-bench order.