Lending Public Money Without Efforts To Recover It Is 'Not Acceptable'; SC Issues Notice On Plea Seeking Probe Into JKM Infra

Calling it a "deep-rooted nexus" between banks, Asset Reconstruction Companies (ARCs), and borrowers, the Supreme Court on Friday said it was "not acceptable" for public money to be lent and then not effectively recovered.

The remarks came as the Court issued notice on a PIL seeking a court-monitored probe into the settlement of JKM Infra Projects Ltd's ₹1,537 crore debt for ₹73.50 crore through the ARC route.

A vacation bench of Chief Justice Surya Kant and Justice V. Mohana heard the matter and sought responses within four weeks from the Union government, the Reserve Bank of India (RBI), the Enforcement Directorate (ED), the Serious Fraud Investigation Office (SFIO), the Central Bureau of Investigation (CBI) and the Securities and Exchange Board of India (SEBI).

The plea also seeks an investigation into allegations that more than ₹902 crore was diverted from bank loans availed by the Noida-based company.

During the hearing, Chief Justice Kant expressed concern over the manner in which stressed loans were being assigned and settled. "This is a deep-rooted nexus between the ARC, the bank, and the borrower," he observed.

The Chief Justice further remarked, "But this is the commercial wisdom that you collect the taxpayers' money, public money, and you recklessly release it, give them on loan, and then you don't make any effort to recover it. This kind of conduct is not acceptable."

Appearing for the petitioners, Advocate Ashwani Kumar Upadhyay argued that the JKM transaction was not an isolated case but part of a broader pattern involving banks, ARCs and corporate borrowers.

He alleged that loans worth thousands of crores were being transferred at steep discounts, causing significant losses to the public exchequer.

Referring to the JKM matter, Upadhyay submitted that debt of around ₹1,537 crore had ultimately been settled for ₹73.50 crore. He urged the Court to direct a wider investigation by agencies such as the SFIO and ED.

"This is not only a single case model, it is a tip of the iceberg," he submitted.

Senior Advocate Meenakshi Arora, appearing for JKM Infra Projects Ltd and its promoter, opposed the plea. She submitted that substantially similar allegations had already been raised before various forums, including the Economic Offences Wing, the Delhi High Court and the National Company Law Tribunal (NCLT).

According to her, several proceedings had either been dismissed or withdrawn.

Arora argued that the assignment of stressed assets to ARCs was a routine banking process and that borrowers had no role in such assignments.

"At that stage, the borrower is not involved at all. It has nothing to do with that assignment," she submitted.

The court, however, observed that the issues raised were not confined to JKM alone and could potentially affect a large number of transactions. While expressing some reservations about the background of the litigation, the bench said it could not ignore allegations of fraud involving public funds.

"But if fraud having been brought to the notice of the Court, and if we shut our eyes, this will be again perpetuating danger," the Court observed.

Taking note of the rival submissions and the larger concerns, the court issued notice and sought responses from the concerned authorities.