The Central Bureau of Investigation (CBI) has booked ABG Shipyard Ltd along with its former chairman & MD Rishi Kamlesh Agarwal and others for allegedly cheating a consortium of banks led by SBI of over Rs 22,842 crore. Sources told the CNBC-TV18, the CBI has issued a Look Out Circular (LOC) against the accused in the case.

The case is being described as India’s biggest bank fraud. In five years between 2012 and 2017, ABG Shipyard, a Gujarat based ship-building firm, allegedly defrauded 28 banks. As a result of this revelation, the Modi dispensation is under fire, with the Opposition accusing the government of aiding the culprits and delaying the uncovering of this loot that occurred in the BJP-ruled state.

Also Read: ABG Shipyard bank fraud: CBI books former management for Rs 22, 842 cr scam

Recently, Finance Minister Nirmala Sitharaman had to defend the government for the delay in initiating an inquiry since the filing of the first complaint for the CBI probe. According to her, the time taken was less than normal.

FM Sitharaman said the loans were issued under the Congress-led UPA regime. She said the account became a non-performing asset (NPA) in 2013 and the debt was restructured in 2014 by all lenders but it could not be recused, Mint reported.

Sitharaman said that banks take almost 52-54 months to complete such intensive work, and of late it is taking far less time to detect such scams.

ABG Shipyard’s Rise & Fall

Incorporated on March 15, 1985, ABG Shipyard Limited (ABGSL) has a registered office in Gujarat’s Ahmedabad. It is a flagship company of the ABG Group that provides services in shipbuilding and ship repair. The company’s shipyards are located at Dahej and Surat in Gujarat

With Rishi Agarwal as a promoter, the ABG Group became a major player in the country’s shipbuilding industry.

According to India Today, ABGSL in the past 16 years, has completed the construction of more than 165 vessels, with 46 for the export market.

Also Read: VIEW | ABG Shipyard scam: RBI must bring in asset-based funding to foil diversion of funds

ABGSL uncompromising quality had helped it obtain class approval from major international classification societies such as Lloyds, Bureau Veritas, American Bureau of Shipping, DNV and IR.

But after 2012, the finances of the company started dwindling. In a forensic audit report conducted by Ernst & Young, it was found that the accused have colluded in committing fraud, including diversion of funds, misappropriation and criminal breach of trust, and used the funds for purposes other than for which the funds are released by the Bank.

CBI books ABG Shipyard

Recently, CBI booked ABG Shipyard Ltd, its chairman and MD Rishi Kamlesh Agarwal and several others for the alleged bank fraud.

Apart from Agarwal, CBI has named former executive director Santhanam Muthaswamy, former directors Ashwini Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia as well as another company ABG International Pvt Ltd. The accused have been charged for offences of alleged criminal conspiracy, cheating, criminal breach of trust and abuse of official position under the various sections of IPC and the Prevention of Corruption Act.

Also read: Banking frauds to surge over next two years: Deloitte Survey

CBI also raided the locations, including office premises and residences of the directors in Surat, Bharuch, Mumbai and Pune, on February 12-13, which led to the recovery of incriminating documents, according to the probe agency’s statement.

Forensic audit unravelled the fraud

A forensic audit launched by SBI with the help of Ernst and Young was conducted in January 2019, in which it was found that the fraud took place over a period of five years from April 2012 to July 2017.

According to the FIR filed by SBI, the findings of the audit report showed that fraud was executed through “diversion of funds, misappropriation and criminal breach of trust, with an objective to gain unlawfully at the cost of the bank’s funds.”

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As per the complaint, ABGSL now owes Rs 22,842 crore to the banks. The troubled shipping company owes Rs 7,089 crore to ICICI Bank, Rs 2,925 crore to SBI, Rs 3,639 crore to IDBI Bank, Rs 1,614 crore to Bank of Baroda, Rs 1,244 crore to Punjab National Bank, Rs 1,327 crore to Exim Bank, Rs 1,244 crore to Indian Overseas Bank, and Rs 719 crore to Bank of India. Apart from this, ABGSL also owes small amounts to other banks.

Diversion of funds and money laundering

According to the SBI complaint, ABGSL routed the loan money by paying it to related parties. Also, the money borrowed from the banks was used to repay loans and pay for other expenses of group companies and for letters of credit.

According to reports, CBI suspects that the company allegedly diverted the money to tax havens.

Delay in flagging the fraud

The fraud was identified in June 2019 by a Fraud Identification Committee of SBI, but the first complaint was made to the CBI in November 2019. However, in a statement, the SBI said there was “no effort to delay the process.”

Also read: Vijay Mallya, Nirav Modi & Mehul Choksi all coming back to face law: Nirmala Sitharaman

Meanwhile, the Opposition, led by the Congress party, accused the Narendra Modi government of complicity in "India's biggest bank fraud” of Rs 22,842 crore, which is bigger than the PNB scam of Rs 14,000 crore by Nirav Modi and Mehul Choksi.

(Edited by : Shoma Bhattacharjee)

First Published:Feb 15, 2022 7:41 PM IST