New Delhi, June 19: The Supreme Court agreed on Friday to consider a public interest petition (PIL) demanding an investigation into alleged fraud exceeding ₹1,500 crore involving public sector banks. The petition also seeks to examine the role of Asset Reconstruction Companies (ARCs), which reportedly assist in settling only a small fraction of outstanding debts. The investigation is requested to be conducted by the Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO), and the Reserve Bank of India (RBI).
A bench led by Chief Justice D.Y. Chandrachud and Justice N. Kotiswar Singh issued a notice on the petition and sought a response within four weeks.
Filed by Advocate Ashwani Kumar Dubey, the PIL alleges that JKM Infra Projects Limited settled outstanding loans and liabilities totaling ₹1,537.59 crore for just ₹73.50 crore through Prudent ARC Limited and Phoenix ARC Private Limited, resulting in a loss of over 95% of public funds.
According to the petition, the Noida-based infrastructure company JKM Infra Projects, controlled by the Jalan family, borrowed approximately ₹912 crore from a consortium of public sector banks led by the State Bank of India (SBI) between 2012 and 2015.
The petition states that these loans were approved against collateral valued at only ₹60-72 crore, and the company ceased loan repayments shortly after receiving the funds.
Based on a forensic audit report conducted by Ernst & Young (EY) and submitted on May 23, 2018, the petition claims that over ₹902 crore was misappropriated using forged documents, fake invoices, and undisclosed bank accounts through shell companies, defunct firms, and dubious entities.
The petition notes, “The forensic audit itself recorded that the findings met all criteria under RBI’s master directions for classifying the account as fraudulent. Yet, the account was never declared fraudulent, and no concrete action was taken to recover the diverted public funds.”
The PIL alleges that despite the forensic audit’s findings, the consortium of banks did not initiate any criminal proceedings, did not refer the matter to enforcement agencies, nor classified the account as fraudulent under applicable RBI regulations.
It further claims that SBI transferred the loan to Prudent ARC at a significant discount in 2020, and later in 2025, the loan was transferred to Phoenix ARC.
According to the petition, Phoenix ARC accepted a settlement of ₹73.50 crore against outstanding debts exceeding ₹1,537 crore on October 31, 2025. The petitioner alleges that throughout this process, no assets were seized, no bank accounts were frozen, and no coordinated investigation was conducted by competent authorities.
The petition references two FIRs related to the case: FIR No. 53/2021 filed by the Economic Offences Wing in Delhi and FIR No. 43/2026 filed at the Phase-1 police station in Gautam Buddh Nagar, Uttar Pradesh. It states that a competent court rejected the closure report filed by the Economic Offences Wing in January 2026 and directed further investigation based on the forensic audit findings.
The petition also claims that information regarding the alleged fraud was provided to the ED, RBI, income tax officials, and the Ministry of Corporate Affairs, but no concrete action has been taken so far.
Citing a press release from the CBDT issued in December 2021, the petition argues that the JKM case exemplifies a larger pattern in which ARCs allegedly acquire non-performing assets (NPAs) using funds linked to borrower groups and subsequently settle debts at significant discounts, causing substantial losses to lending banks.
The public interest petition requests a comprehensive investigation by the ED under the Prevention of Money Laundering Act (PMLA), an SFIO inquiry into the operations of the company and its associated entities, and actions by the RBI to investigate the roles of banks and ARCs in the transactions. It also seeks measures to prevent defaulting promoters from regaining control over stressed assets through backdoor settlements and to hold accountable those responsible for the alleged diversion of public funds.
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