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Informist, Thursday, Sept. 24, 2026

 

NEW DELHI – The Supreme Court Thursday rejected a public interest litigation that allegd misuse of asset reconstruction company framework under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by corporate defaulters to re-acquire their own distressed debt at deep discounts. The petitioner, Prateeksha, had alleged there was a pattern of asset reconstruction companies acquiring bad loans using borrowers' own siphoned-off funds and settling with the same borrower groups at a fraction of the outstanding value. The petitioner had alleged that a debt of INR 15.37 billion owed to public sector banks was settled through two asset reconstruction companies for a mere INR 735 million. 

   

The Bench led by Chief Justice of India Surya Kant rejected the petitioner's allegation of massive loss of public money through steep haircuts in bank debt routed through asset reconstruction companies. The petitioner had sought a probe by the Serious Fraud Investigation Office, the Enforcement Directorate, Securities and Exchange Board of India, and Reserve Bank of India into transactions concerning JKM Infra Projects Ltd. 

 

The petitioner said that JKM Infra had obtained loans worth approximately INR 9.12 billion from a consortium of seven banks led by State Bank of India between 2012 and 2015. The petitioner alleged that a forensic audit conducted in 2018 by Ernst & Young found evidence suggesting that more than INR 9.02 billion had been diverted through shell companies, non-existent vendors, undisclosed bank accounts and suspected fraudulent transactions.

 

However, State Bank of India did not classify the account of JKM Infra as fraud, instead appointed a second auditor, who diluted Ernst & Young's findings, it said. Thereafter, the loan was auctioned to Prudent ARC Ltd. at a steep discount. The debt was further transferred to Phoenix ARC Pvt. Ltd. and settled for INR 735 million against an outstanding amount of INR 15.37 billion, a discount the petitioners describe as exceeding 95% of the public money. 

 

At 1313 IST, shares of State Bank of India traded 1.0% lower at INR 984.20 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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