PIL In Supreme Court Seeks Court-Monitored Probe Into JKM Infra's ₹1,537 Crore Debt Settlement Through ARCs

A public interest litigation has been filed in the Supreme Court seeking a court-monitored investigation into allegations of large-scale diversion of bank funds by Noida-based JKM Infra Projects Ltd. The plea also seeks a probe into the assignment and settlement of the company's debt through Asset Reconstruction Companies (ARCs).

The petition, filed by three advocates, seeks directions to the Reserve Bank of India (RBI), Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO), Central Bureau of Investigation (CBI) and Securities and Exchange Board of India (SEBI). It seeks investigation into alleged fund diversion, money laundering, ARC transactions, and regulatory lapses.

According to the petition, JKM Infra obtained credit facilities aggregating Rs. 912 crore from a consortium of seven banks led by State Bank of India between 2012 and 2015.

Relying on an Ernst & Young forensic audit dated May 23, 2018, the petition alleges that more than Rs. 902 crore was routed through shell companies, struck-off entities, non-existent vendors, and undisclosed bank accounts. It further alleges that the audit findings satisfied RBI criteria for classifying the account as fraud. However, the account was not classified as a fraud account.

The plea states that JKM availed loans from a consortium comprising SBI, Canara Bank, Union Bank of India, Bank of India, State Bank of Hyderabad, State Bank of Patiala, and Standard Chartered Bank. It alleges that the loans were sanctioned against collateral valued at only Rs. 60 crore to Rs. 72 crore.

According to the petition, the EY forensic audit documented payments to red-flagged entities, shell companies and struck-off entities. It also allegedly identified fake invoices, revenue discrepancies and routing of transactions through undisclosed bank accounts.

The petition further alleges that despite the forensic findings, SBI did not classify the account as fraud. Instead, it assigned the debt to Prudent ARC. According to the plea, Prudent ARC acquired the debt at a substantial discount and later accepted a settlement proposal from JKM.

The petition claims that the debt was subsequently transferred to Phoenix ARC in 2025. It alleges that Phoenix ARC settled debt amounting to Rs. 1,537 crore for Rs. 73.50 crore.

The plea refers to two FIRs connected to the dispute—one registered by the Economic Offences Wing in Delhi and another in Gautam Budh Nagar.

According to the petitioners, representations highlighting the alleged irregularities were submitted to the ED, RBI, Income Tax authorities and the Ministry of Corporate Affairs. However, they contend that no coordinated or meaningful action has been taken.

The petition also raises broader concerns regarding the functioning of Asset Reconstruction Companies. It questions whether the ARC mechanism is being misused to facilitate heavily discounted settlements with defaulting borrowers, resulting in substantial losses to public sector banks and the public exchequer.

Among the questions raised in the PIL is whether “the ARC framework under the SARFAESI Act, 2002 is being systematically misused by large corporate defaulters to acquire their own distressed debt through ARCs, at a fraction of its value, thereby causing large-scale loss to public sector banks and public exchequer.”

The petition further contends, "A total debt of Rs. 1537 crores owed to public sector banks has been settled, through two complicit Asset Reconstruction Companies, Prudent ARC Ltd. and Phoenix ARC Ltd., for a mere Rs. 73.50 Crores. It is a loss of over 95% of public money.”

The PIL seeks the constitution of a Judicial Commission or an Expert Committee comprising officials of the RBI, SEBI, SFIO, ED and CBI. The proposed body would investigate the alleged fraud and examine the role of the various entities involved.

In the alternative, the petition seeks directions to the ED, SFIO and CBI to investigate suspicious transactions identified in the Ernst & Young forensic audit.

The plea also seeks directions to RBI and SEBI to examine compliance with fraud-classification norms and ARC settlement guidelines. It further seeks civil, criminal, and regulatory action against promoters, directors and other persons or entities allegedly involved in diversion of funds and financial irregularities. The petition also seeks cancellation of licences and registrations of entities found to have participated in the alleged wrongdoing.

The PIL has been filed by advocates Prateeksha, Mohit Pandey, and Shweta Mehra through Advocate-on-Record Ashwani Kumar Dubey.

The matter is yet to be listed before the Supreme Court.