A fresh public interest litigation (PIL) filed before the Supreme Court has brought renewed attention to the functioning of India’s banking recovery and distressed asset resolution ecosystem. The petition seeks a court-monitored investigation into an alleged ₹1,537 crore banking fraud involving a consortium of lenders led by the State Bank of India (SBI) and two Asset Reconstruction Companies (ARCs).
The plea alleges that a series of decisions taken over several years enabled a heavily indebted infrastructure company to settle massive liabilities at a fraction of their original value, resulting in significant losses for public sector banks and, ultimately, taxpayers.
According to the petition, the controversy traces back to loans sanctioned between 2012 and 2015 by a consortium of seven banks to Noida-based JKM Infra Projects Limited. The total lending reportedly reached approximately ₹912 crore. Petitioners claim that the credit facilities were approved against security values that were substantially lower than the sanctioned exposure, raising questions about risk assessment practices and lending controls followed during the approval process.
The matter gained further significance after the company allegedly defaulted on its repayment obligations within a relatively short period. As the accounts turned into non-performing assets (NPAs), lenders commissioned a forensic review to examine the financial activities of the borrower.
The petition points to findings from a forensic audit conducted in 2018, which reportedly identified large-scale fund diversion and irregular financial transactions. Allegations include the use of fake invoices, undisclosed banking arrangements, questionable vendor relationships, and movement of funds through entities that allegedly lacked genuine commercial operations.
A key concern raised in the PIL is that despite the audit findings, the account was allegedly not classified as a fraud under applicable regulatory norms. The petitioners argue that the failure to take stronger enforcement action at that stage may have weakened accountability mechanisms that are intended to protect public funds and maintain confidence in the banking system.
Financial experts note that cases involving alleged diversion of borrowed funds often highlight the importance of robust internal controls, transparent reporting mechanisms, and independent reviews. In such situations, strong auditing services in india play a critical role in identifying red flags, strengthening governance frameworks, and helping institutions detect irregularities before financial damage escalates.
The PIL further challenges the subsequent handling of the distressed debt. According to the filing, the loan exposure was transferred through the asset reconstruction process at substantial discounts before eventually reaching a settlement stage. The petition alleges that the final resolution resulted in the extinguishment of liabilities amounting to approximately ₹1,537 crore through a settlement payment of around ₹73.50 crore.
Petitioners contend that the sequence of transactions raises larger questions about whether distressed debt mechanisms can sometimes be used in ways that disproportionately benefit defaulting entities while imposing losses on lenders. They have urged the Supreme Court to examine whether existing safeguards within the asset reconstruction framework are sufficient to prevent potential misuse.
The litigation also references investigations already initiated by law enforcement authorities in connection with aspects of the dispute. However, the petitioners argue that a coordinated, multi-agency investigation is necessary to fully assess the flow of funds, decision-making processes, and the role of all entities involved.
Among the key reliefs sought is the formation of a high-level committee or judicial commission comprising representatives from major regulatory and investigative bodies, including the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Serious Fraud Investigation Office (SFIO), Enforcement Directorate (ED), and Central Bureau of Investigation (CBI).
The matter is expected to draw attention from banking professionals, regulators, policymakers, and investors alike, as it touches upon broader issues of corporate accountability, loan recovery mechanisms, forensic investigations, and the protection of public money within India's financial system.
As the case progresses, the Supreme Court’s response could have significant implications for future handling of large-value corporate defaults and the governance standards expected from both lenders and distressed asset resolution entities.