The Supreme Court on Friday agreed to examine a public interest litigation (PIL) seeking a comprehensive investigation into an alleged bank fraud involving more than ₹1,500 crore of public sector bank funds. The petition alleges that large loans extended to an infrastructure company were eventually settled for a fraction of the outstanding amount, resulting in substantial losses to the banking system. The petitioner has sought a court-monitored probe by the Enforcement Directorate (ED), the Serious Fraud Investigation Office (SFIO) and the Reserve Bank of India (RBI).
Asset Reconstruction Transfers and Complicit Haircut Arbitrages
A Bench headed by the Chief Justice issued notice on the petition and directed the concerned parties to respond within four weeks. According to the PIL, total dues and accumulated liabilities owed by JKM Infra Projects Ltd. had risen to ₹1,537.59 crore, but the debt was ultimately settled through two Asset Reconstruction Companies (ARCs) for only ₹73.50 crore.
The petition states that Noida-based JKM Infra Projects obtained loans worth approximately ₹912 crore between 2012 and 2015 from a consortium of public sector banks led by the State Bank of India (SBI). It alleges that the loans were sanctioned against collateral assets whose value was significantly lower than the amount borrowed and that the company began defaulting shortly after receiving the funds.
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Forensic Audit Trajectories and Shell Conduit Verifications
The PIL also relies on findings from a forensic audit, which allegedly identified transactions involving more than ₹902 crore routed through shell entities, struck-off companies, questionable vendors and other red-flagged organisations. The petition claims that forged documents, fabricated invoices and undisclosed bank accounts were used in the movement of funds.
According to the petitioner, the forensic audit findings met the criteria for classification as a fraud account under RBI guidelines. However, it is alleged that the account was never formally categorised as fraudulent and that no effective action was taken to recover the allegedly diverted public funds.
SARFAESI Act Structural Failures and Backdoor Promoter Arrangements
The petition further contends that the debt was later assigned to an Asset Reconstruction Company at a substantial discount before eventually being transferred to another ARC. It alleges that in October 2025, a settlement was reached for only ₹73.50 crore against outstanding dues exceeding ₹1,537 crore.
The PIL raises concerns over the manner in which the debt resolution process was handled. According to the allegations, no assets were attached, no bank accounts were frozen and no coordinated investigation was undertaken by enforcement authorities despite the findings highlighted in the forensic audit.
Multi-Jurisdiction FIR Rejections and Commercial Wisdom Borders
The petition also refers to two criminal cases already registered in relation to the matter. One case was reportedly registered by Delhi’s Economic Offences Wing, while another was filed in Gautam Buddh Nagar, Uttar Pradesh. According to the petitioner, a closure report submitted in one of the investigations was rejected by a competent court, which subsequently directed further investigation into the issues flagged by the forensic audit.
Legal observers note that if the allegations are substantiated, the matter could extend beyond a conventional loan default case and raise wider questions about banking oversight, debt recovery mechanisms, asset reconstruction processes and the handling of suspected financial irregularities involving public funds.
The PIL seeks a detailed investigation into alleged fund diversion, possible money laundering violations and the role of various entities connected to the transactions. It also calls for scrutiny of the debt assignment and settlement process to determine whether any irregularities occurred during the restructuring and recovery stages.
In addition, the petition requests measures to prevent defaulting promoters from indirectly regaining control of stressed assets through backdoor arrangements and seeks stronger accountability mechanisms for cases involving large-scale losses to public sector banks.
At this stage, the Supreme Court has not expressed any view on the merits of the allegations and has only sought responses from the concerned parties. The case is expected to return before the court after four weeks, when further arguments and submissions may determine the future course of action in what could become a significant banking and financial fraud investigation.
