(MENAFN- IANS) Thiruvananthapuram, Dec 1 (IANS) In a significant development with political and financial implications, the Enforcement Directorate's (ED) Adjudicating Authority has issued show-cause notices to Kerala Chief Minister Pinarayi Vijayan, former Finance Minister Dr T.M. Thomas Isaac, KIIFB CEO K.M. Abraham and other senior officials over alleged violations of the Foreign Exchange Management Act (FEMA) in the issuance and use of Masala Bonds by the Kerala Infrastructure Investment Fund Board.

The CPI(M) was quick with its response, which said this was nothing but a "politically motivated move".

The ED's preliminary findings indicate that KIIFB violated FEMA norms in 2019 when it mobilised Rs 2,150 crore through Masala Bonds listed on the London Stock Exchange at an interest rate of 9.72 per cent.

The probe agency has alleged that funds raised abroad through external borrowing instruments were used for domestic infrastructure projects, which, according to them, constituted a violation of FEMA guidelines.

The decision to proceed with the bond issuance was finalised at a KIIFB Board meeting chaired by the Chief Minister on January 17, 2019.

The ED submitted its final report to the Adjudicating Authority in Chennai three months ago, leading to the issuance of the notices last week.

Sources indicate that further proceedings will follow after explanations are sought from the respondents.

The Delhi-based Adjudicating Authority will now examine the ED's findings, hear arguments from all four parties, and determine if FEMA violations occurred. If proven, the authority can impose penalties up to 300 per cent of the total amount mobilised.

While speculation has surfaced over possible arrest proceedings against the Chief Minister, legal experts say such a move is unlikely immediately, as the case is still at the adjudication stage. Those served with notices can respond directly, or through legal representatives or attorneys.

Following hearings, KIIFB will have the right to challenge any adverse decision before the Appellate Tribunal.

The ED had earlier summoned Dr Thomas Isaac twice during its three-year-long investigation.

Officials familiar with the case said the financial documents and procedural approvals submitted by KIIFB were thoroughly scrutinised before the notices were issued.

The developments mark one of the most high-profile financial scrutiny cases involving a state-run agency.

The Adjudicating Authority's decision is expected to have far-reaching legal, administrative and political ramifications in Kerala. And those served notices have been given 30 days to reply.

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