New Delhi, June 19 (IANS) The Supreme Court on Friday agreed to examine a public interest litigation (PIL) seeking a court-monitored investigation by the Enforcement Directorate (ED), the Serious Fraud Investigation Office (SFIO) and the Reserve Bank of India (RBI) into an alleged banking fraud involving over Rs 1,500 crore of public sector bank funds and the role of asset reconstruction companies (ARCs) in facilitating debt settlements at a fraction of the outstanding dues.
A Bench of Chief Justice of India (CJI) Surya Kant and Justice N. Kotiswar Singh issued notice on the plea and made it returnable in four weeks.
The PIL, filed through advocate-on-record Ashwani Kumar Dubey, alleged that loans and accrued dues amounting to Rs 1,537.59 crore owed by JKM Infra Projects Ltd were ultimately settled through two ARCs — Prudent ARC Ltd. and Phoenix ARC Pvt. Ltd. — for just Rs 73.50 crore, resulting in a loss of more than 95 per cent of public funds.
According to the petition, JKM Infra Projects, a Noida-based infrastructure company controlled by the Jalan family, obtained loans aggregating around Rs 912 crore from a consortium of public sector banks led by the State Bank of India (SBI) between 2012 and 2015.
The plea contended that the loans were sanctioned against collateral valued at only Rs 60-72 crore and that the company began defaulting within a short period of receiving the funds.
Relying on a forensic audit conducted by Ernst & Young (EY) and submitted on May 23, 2018, the petition alleged that more than Rs 902 crore was diverted through shell companies, struck-off entities, non-existent vendors and other red-flagged entities using forged documents, fake invoices, and undisclosed bank accounts.
“The forensic audit itself recorded that the findings satisfied every criterion for classifying the account as a fraud under RBI Master Directions. Despite this, the account was never declared fraudulent and no meaningful action was taken to recover the diverted public funds,” the plea stated.
The PIL alleged that despite the findings of the forensic audit, the consortium banks did not initiate criminal proceedings, refer the matter to enforcement agencies or classify the account as a fraud account under applicable RBI norms.
It further claimed that SBI subsequently assigned the debt to Prudent ARC in 2020 at a substantial discount and that the debt was later transferred to Phoenix ARC in 2025.
According to the plea, Phoenix ARC entered into a settlement on October 31, 2025, accepting Rs 73.50 crore against an outstanding debt of over Rs 1,537 crore. The petitioner alleged that throughout the process, no assets were attached, no bank accounts were frozen, and no coordinated investigation was undertaken by the competent authorities.
The plea referred to two FIRs registered in connection with the matter — FIR No. 53/2021 by the Economic Offences Wing (EOW), Delhi, and FIR No. 43/2026 at Phase-1 Police Station in Gautam Budh Nagar, Uttar Pradesh. It stated that a closure report filed in the EOW case was rejected by a competent court in January 2026, which directed further investigation into the findings of the forensic audit.
The petition further claimed that representations highlighting the alleged fraud were submitted to the ED, the RBI, the Income Tax authorities, and the Union Ministry of Corporate Affairs, but no effective action has been taken till date.
Referring to a CBDT press release issued in December 2021, the plea argued that the JKM case reflects a broader pattern in which ARCs allegedly acquire non-performing assets using funds linked to borrower groups and later settle debts at steep discounts, causing substantial losses to lender banks.
The PIL has sought directions for a comprehensive investigation by the ED under the Prevention of Money Laundering Act (PMLA), an SFIO probe into the affairs of the company and associated entities, and RBI action to examine the role of banks and ARCs in the transactions. It has also sought measures to prevent defaulting promoters from regaining control of stressed assets through backdoor settlements and to ensure accountability for alleged diversion of public funds.
–IANS
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