New Delhi: The Supreme Court of India has expressed serious concern over the manner in which public sector bank loans are assigned to Asset Reconstruction Companies, pointing to a deep-rooted nexus operating between borrowers, financial institutions, and recovery agencies. A Bench led by Chief Justice of India Surya Kant and Justice V Mohana stated that the reckless handling of taxpayers’ money, which should otherwise be spent on public welfare, is entirely unacceptable.
The Apex Court issued formal notices to the Union Government, the Reserve Bank of India, the Securities and Exchange Board of India, and the Serious Fraud Investigation Office. Prominent financial institutions including the State Bank of India, Canara Bank, and Union Bank of India have also been served notices alongside specific recovery firms. The judicial intervention comes in response to a petition alleging that debts worth 1,537 crore rupees owed to public sector banks were settled through two separate agencies for a mere 73.50 crore rupees.
During the proceedings, the Bench clarified that while the judiciary recognizes its limitations regarding the commercial wisdom of banking institutions, it cannot overlook structural negligence where loans are released recklessly without adequate recovery efforts or proper collateral valuation. The Court observed that transferring substantial loan liabilities to recovery firms for peanuts represents a highly coordinated mechanism where the ultimate beneficiary remains the defaulting borrower, who effectively wriggles out of massive liabilities by paying a small fraction of the total debt.
The legal petition filed by public interest litigants has sought the constitution of an expert committee or a judicial commission comprising top investigators from the RBI, SFIO, Enforcement Directorate, and Central Bureau of Investigation to probe the systemic corporate fraud. Highlighting the gravity of the issue, the petitioners cited a specific case involving a Noida-based infrastructure firm that secured a 912 crore rupee loan from an SBI-led consortium, where subsequent forensic audits uncovered massive fund diversions through shell companies and fraudulent transactions. The matter has been scheduled for a detailed hearing in four weeks.
