Supreme Court Flags ₹2,983 Crore ADAG Claims Settled for ₹26 Crore

The observation came during a hearing in a petition seeking an investigation into alleged loan fraud of more than ₹40,000 crore by companies linked to the group. The court did not pronounce on the truth of those allegations. But in its comments from the bench and in the language of its order, it conveyed unmistakable unease with both the underlying transactions and the pace at which investigative agencies had moved.

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Hearing the matter, a bench led by Chief Justice Surya Kant, and including Justice Joymalya Bagchi and Justice Vipul Pancholi, pressed the Enforcement Directorate and the Central Bureau of Investigation to pursue what it described as a fair, transparent, dispassionate and time-bound inquiry. Solicitor General Tushar Mehta, appearing for the Union government, told the court that a Special Investigation Team had been formed within the Enforcement Directorate and that efforts would be made to complete the investigation within four weeks.

The hearing unfolded against a backdrop of widening scrutiny of debt resolution processes, especially where steep write-downs, related-party transactions and hurried insolvency filings have raised questions about whether the architecture of the Insolvency and Bankruptcy Code is being used for genuine resolution or for strategic erosion of creditor claims.

A Court Focused on the Numbers

The most striking detail before the court came from the Enforcement Directorate’s affidavit, which, according to the bench, described a set of eight cases already under investigation. In those cases, some documents had been seized, and investigators had begun examining a structure referred to as “Project Help,” which the court said purportedly revealed how insolvency petitions had been deliberately initiated through unrelated lenders.

The bench noted that all funding for the acquisitions under these insolvency proceedings had allegedly been arranged through a cluster of eight non-banking financial companies. On an illustrative basis, the court recorded, claims of approximately ₹2,983 crore had been settled for only ₹26 crore.

That ratio — a near-total extinguishment of debt for a fraction of its face value — appeared to animate the court’s concern. The judges stopped short of drawing definitive conclusions from the material before them. Even so, their remarks suggested that the numbers themselves warranted a far more searching inquiry than what had so far been visible in public.

In an earlier hearing, counsel for the petitioner, the advocate Prashant Bhushan appearing for EAS Sarma, had argued that Reliance Communications had been sold to a company associated with a family member at a tiny fraction of the dues owed. In that context, the Chief Justice had remarked that the insolvency framework was being “misused like anything” through undervaluation of assets and sales to proxy entities.

That earlier observation cast a long shadow over Monday’s proceedings. By the time the matter was called again, the court’s attention had turned not only to the allegedly distressed assets themselves, but also to the institutional pathways through which those assets were moved, valued and resolved.

Investigators Under Pressure to Show Progress

A substantial part of the hearing centered on whether the country’s top investigative bodies were acting with sufficient seriousness. The court had previously criticized what it called “unexplained delay” in probing the matter, and on Monday it returned to that theme with visible impatience.

According to the Enforcement Directorate’s affidavit, the newly constituted Special Investigation Team includes an Additional Director, two Deputy Directors, and four Assistant Directors or investigating officers. It also includes forensic analysts and two staff members from Bank of Baroda. Investigations, the court was told, have commenced in eight cases.

The Central Bureau of Investigation, in its own affidavit, said that seven cases were under investigation and that the role of public servants was also being examined. That aspect appeared especially significant to the bench, which framed the controversy not merely as a matter of corporate conduct, but as one potentially involving institutional complicity.

In its order, the court said this was a case in which senior functionaries of investigating agencies must “join hands” and make “vigorous attempts” to uncover irregularities, illegalities or the connivance of public functionaries, especially within financial institutions, if any existed. The judges emphasized that they were expressing no opinion on the merits of the allegations. But they added that it was imperative for the CBI and ED to take the ongoing investigations to their logical conclusion in an independent and credible manner.

The Chief Justice also made a broader point that extended beyond this single case. Investigations, he said in open court, must inspire confidence not only in judges but in all stakeholders. What the court appeared to be demanding was not simply progress, but visible seriousness — a process that would withstand scrutiny because it was both prompt and impartial.

The Insolvency Process Comes Under Scrutiny

At the center of the dispute is a familiar but increasingly contentious question in India’s financial and legal landscape: when a company enters insolvency, how does one distinguish an aggressive but lawful commercial resolution from a manipulated process that transfers assets at artificially depressed values?

The material referenced in court suggested that this distinction may lie at the heart of the present case. The mention of “Project Help,” coupled with allegations that insolvency petitions were initiated through unrelated lenders and funded through a specific network of NBFCs, appeared to point investigators toward a coordinated structure rather than isolated transactions.

That matters because the Insolvency and Bankruptcy Code was designed to maximize value, preserve viable businesses and distribute losses through a transparent legal framework. It was not meant to become a mechanism by which debt could be stripped away while underlying assets or benefits remained within a familiar ecosystem of influence.

The court’s concern was sharpened by the dramatic difference between admitted claims and settlement figures. Though insolvency law does permit creditors to take substantial haircuts in distressed cases, the court’s remarks suggested that where those haircuts appear implausibly deep — and especially where lenders, acquirers and funding pathways raise questions — investigators must look closely at whether commercial justifications truly explain the outcome.

The issue, then, is not simply whether the numbers appear unfavorable. It is whether the process itself was engineered to produce those numbers.

That is why the court’s order directed all concerned agencies, financial institutions and other persons to extend full cooperation to the Enforcement Directorate and make available the necessary information. It also said that if there were reluctance, resistance or delay, the ED should report the matter back to the court.

Competing Narratives in Court

Monday’s hearing also revealed the competing narratives that are likely to shape the case as it moves forward.

For the government, represented by the Solicitor General, the emphasis was on process and progress. Mehta told the court that the investigation was underway, that a Special Investigation Team had been formed, that three transaction auditors had been appointed by the CBI, and that properties worth ₹15,000 crore had already been attached. He also disputed claims that there had been no meaningful coercive action, saying that four arrests had been made so far and warning against the idea of arrest as a performative act detached from investigative sequence.

For the petitioner, represented by Mr. Bhushan, the concern was that the case still had not reached those allegedly most responsible. He argued that despite a SEBI report describing a fraudulent scheme orchestrated by Anil Ambani and managed by key personnel of Reliance Home Finance Limited to siphon public funds through structured loans, there had been no substantial accountability at the top. When he said that only low-level officials had been arrested, the Solicitor General pushed back.

The bench declined to enter that contest directly. “We may not say who should and should not be arrested,” the Chief Justice said, signaling a preference to supervise the integrity of the investigation rather than dictate its targets.

Appearing for Mr. Ambani, Senior Advocate Mukul Rohatgi urged the court to note that a representation had been made to banks in the hope of exploring some form of resolution, and that banks were hesitant to engage while the litigation remained pending. The Chief Justice’s response was edged with skepticism. The court, he said, had not prevented anyone from talking, and banks would likely be eager to engage — perhaps too eager, he implied, if dialogue became another means of escaping consequences.

That exchange captured the larger tension in the courtroom: between those urging continued scrutiny of a system they say enabled the stripping of public and institutional funds, and those pressing for room to negotiate within the established channels of finance and resolution.

For now, the Supreme Court has chosen neither exoneration nor indictment. Instead, it has done something that may prove more consequential in the near term: it has placed the investigative process itself under close judicial watch, set a four-week horizon for visible progress, and signaled that the credibility of both the insolvency system and the agencies examining it may be on trial together.

Case Title: EAS Sarma v. Union of India and others | W.P.(C) No. 1217/2025