Money & Banking

Kerala HC orders govts, KIIFB, RBI to file affidavit

KC Gopakumar Kochi | Updated on February 18, 2020

A division Bench of the Kerala High Court on Tuesday asked the State and Central governments, the Kerala Infrastructure Investment Fund Board (KIIFB) and the Reserve Bank of India to file an affidavit in response to a writ petition challenging the constitutional validity of issue of masala bonds by the State to overseas investors and their listing on the London Stock Exchange.

The Bench comprising Chief Justice S Manikumar and Justice Shaji P Chali also passed the order after issuing notice to the respondents.

According to petitioner MR Ranjith Karthikeyan, a chartered accountant from Thiruvananthapuram, the issue of bonds by the State government under Kerala Infrastructure Investment Fund Act of 1999 had violated Article 293(1), which stipulates that State governments could borrow only within the country.

In fact, the Article makes it clear that the executive power of the State to borrow money upon the security of the Consolidated Fund extended only to the territory of the country.

Thus, the Article had been violated by issuing rupee-denominated bonds to overseas investors. The petitioner pointed out that KIIFB was under the control of the State government.

The government had no legislative competence to enact laws for borrowing from outside the territorial limits of the country as the Centre alone could take loans from abroad. The petitioner sought to declare that the KIIFB is not entitled to issued masala bonds in a foreign country.

Published on February 18, 2020

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