New Delhi, Jun 19 (PTI) Flagging a deep-rooted nexus between banks, asset reconstruction companies and borrowers, the Supreme Court on Friday said that taxpayers' money being given as loans and then no effective efforts were taken to recover the amount was not acceptable.

A bench of Chief Justice Surya Kant and Justice V Mohana said it was only concerned about the misutilisation of public money, which should have been spent for the welfare of people.

The top court issued notice to the Centre, the Reserve Bank of India (RBI) and others seeking their responses on a plea which alleged that a debt of Rs 1,537 crore owed to public sector banks was settled through two asset reconstruction companies (ARCs) for a mere Rs 73.50 crore.

During the hearing, the bench raised concerns over the manner in which stressed loans were being settled.

"This is a deep-rooted nexus between the borrowers, ARCs and banks," the bench said.

The top court observed that it was aware of the limitation in entering into the arena of commercial wisdom of the banks.

"But if this is the commercial wisdom that you collect taxpayers' money, public money and you recklessly release it and give loans and then you don't make any effort or try to recover it, this kind of conduct is not acceptable," the bench observed.

Advocate Ashwini Kumar Upadhyay, who appeared for the petitioners, said huge loan amounts were being transferred at discount which causes significant loss to the exchequer.

"This is not a single case. I am saying it is a tip of the iceberg," Upadhyay said, adding that the petitioners were seeking a probe into this nexus between the banks, ARCs and borrowers.

The bench also observed that there was a dire need to look into the functioning of the ARCs.

It posted the matter for hearing after four weeks.

The plea, filed through advocate Ashwani Kumar Dubey, has sought a probe into the alleged banking frauds involving ARCs, public sector banks and a Noida-based infrastructure firm.

It has sought a direction to the Centre "to constitute a judicial commission or an expert committee including officers of the RBI, SEBI, Serious Fraud Investigation Office (SFIO), ED and the CBI to investigate the corporate and banking fraud facilitated by the asset reconstruction companies (ARCs)".

According to the plea, the infrastructure firm obtained loans worth approximately Rs 912 crore from a consortium of seven banks led by the State Bank of India (SBI) between 2012 and 2015.

It alleged that a forensic audit conducted in 2018 found evidence suggesting that more than Rs 902 crore had been diverted through shell companies, non-existent vendors, undisclosed bank accounts and suspected fraudulent transactions.

The plea, filed by Muzaffarnagar-based Prateeksha and two others, sought a probe into the alleged banking fraud facilitated by the ARCs. PTI ABA ABA KSS KSS

Banking fraud and stressed loan settlements draw scrutiny over alleged nexus among banks, asset reconstruction companies and borrowers. Concerns were raised over an alleged nexus between banks, asset reconstruction companies and borrowers in the settlement of stressed loans, with emphasis on misuse of public money and inadequate recovery efforts. A plea sought a probe into alleged banking frauds involving public sector banks, asset reconstruction companies and a Noida-based infrastructure firm, including diversion of loan funds through shell companies, non-existent vendors, undisclosed bank accounts and suspected fraudulent transactions.