Pour the milk and chicken stock in a medium pot over medium-high heat and bring to a boil.
Slowly whisk the grits into the pot. When the mixture comes to boil, reduce the heat to medium-low and add half teaspoon salt and half teaspoon cayenne pepper and cook until water is absorbed, and the mixture becomes thickened about 15 minutes.
Remove from heat and stir in butter and cheese until melted and set aside.
In a large skillet, cook bacon over medium heat until crisp—about 10 minutes.
Rinse shrimp and pat dry. Season the shrimps with salt and pepper and cook in the bacon fat until pink—about 3 minutes on each side.
Add the bacon, bell peppers, diced onions, minced, garlic, red chili flakes, black pepper, and salt to taste and cook for another two minutes.
Add chicken stock and leave to simmer for another 3 to 5 minutes.
Remove from heat and serve over the prepared grits.
Garnish with scallions on top, if desired.