ABG Shipyard Scam: India’s Biggest Bank Fraud

 

Source: thetripurapost

Incorporated in March 1985, ABG Shipyard Ltd., the shipbuilding and ship repair flagship company of the ABG Group, with its shipyards located in Dahej and Surat in Gujarat has allegedly defrauded a consortium of 28 banks and is reportedly the biggest bank fraud case registered by the Central Agency. 

Any alleged fraud cannot be committed instantly, especially in the case of a bank fraud of such a huge amount. The case of ABG Shipyard Ltd. is no different, it took loans from a lender consortium in early 2001 which was led by ICICI and followed by IDBI and SBI. 

In the Initial years

After the scrutiny of the records of the company, it was found that the censorious period was 2005-12 as according to a statement by the Central Agency the major disbursement in the form of Cash Credit Loan, Term Loan, Letter of Credit, Bank Guarantee, etc. took place between this period. 

On the report of a complaint by SBI who had been conducting business with the company since 2001, the bank account of ABG Shipyard had been labelled as Non-Performing Asset in November 2013. The loan account was restructured in 2014 under the Corporate Debt Restructuring (CDR) mechanism but still, the company could not be revived. The same year in September, the company went under a stock audit by NV Dand & Associates which observed several faults on the part of the accused company in its submitted report in April 2016. Subsequently, the company’s account was declared an NPA in July 2016 w.e.f. November 2013.

Audit aided a clear picture of fraud

The lead bank in the consortium, ICICI Bank referred the company for Corporate Insolvency Resolution Process (CIRP) to National Company Law Tribunal (NCLT), Ahmedabad in August 2017. In April 2018, Ernst & Young was appointed as a forensic auditor by the lenders in order to conduct the forensic audit of the company's accounts for the period between 2012-17, it submitted the report in January 2019, which was placed before the Fraud Identification Committee.

It was found that the fraud is chalked up to diversion of funds, misappropriation, and criminal breach of trust. All of this prompted SBI to approach CBI the same year in November.

Source: Businessinsider

From the above table, we can note the exposure each bank in the consortium has to ABG Shipyard Ltd.

Although the leading banks were ICICI followed by IDBI as the second leading bank, it was preferred that SBI lodges the complaint with CBI for it being the largest PSB lender.

The Complaint filed

The first complaint was then filed with CBI in November 2019.

According to a CBI Statement, between April 2019 to March 2020, the account of M/s ABG Shipyard Ltd. was declared a fraud by various banks of the consortium.

The company made huge transfers using as many as 98 related entities, invested in the overseas subsidiary, and all this was performed by diverting the bank loans and subsequently making the adjustment entries.

The complaint filed in 2019 was returned by CBI to seek an internal investigation by the bank. In September 2020, a fresh complaint was filed by SBI informing the CBI that staff accountability had been dealt with.

Withdrawals creating difficulty

According to the central agency, there had been withdrawals of general consent for the CBI investigation by some states like West Bengal, Kerala, Maharashtra, Punjab, Rajasthan, Jharkhand, Chattisgarh, and Mizoram, this made the registration of this bank fraud case more difficult. Thus,  the CBI has to reach out to the state governments individually on a case-to-case basis seeking permission for inquiry.

The company booked by CBI

On 7 February 2022, the CBI finally registered the case and booked ABG SL and ABG International Pvt. Ltd. along with its former MD Rishi Kamlesh Agarwal, Executive Director Santhanam Muthaswamy, the directors - Ashwini Kumar, Sushil Kumar Agarwal, and Ravi Vimal Nivetia. They have been charged for criminal conspiracy, abuse of official position, criminal breach of trust, and cheating under the IPC and Prevention of Corruption Act

On 12 February 2022, the central agency conducted the search at 13 locations and took hold of the incriminating documents like share registers, various contract files, minutes of meetings of the board, purchase and sales details, etc.

Written by: Devangi Sharma