The Central Bureau of Investigation (CBI) on Wednesday, September 21, arrested ABG Shipyard Group's founder and ex-chairman Rishi Kamlesh Agarwal for allegedly cheating the consortium of banks of over Rs 22,842 crore, sources privy to the developments told CNBC-TV18.

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Back in February, CBI had booked Rishi Kamlesh Agarwal, along with others for allegedly cheating a consortium of banks led by State Bank of India (SBI) of over Rs 22,842 crore.

It had also named the then executive director Santhanam Muthaswamy, directors Ashwini Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia and another company, ABG International Pvt Ltd, for alleged offences of criminal conspiracy, cheating, criminal breach of trust and abuse of official position under the Indian Penal Code (IPC) and the Prevention of Corruption Act.

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The CBI FIR came after SBI first filed a complaint on November 8, 2019, following which the agency sought some clarifications on March 12, 2020. The bank filed a fresh complaint in August that year. After 'scrutinising' the complaint for over one-and-a-half years, the CBI filed an FIR on February 7.

The company was sanctioned credit facilities from 28 banks and financial institutions, led by ICICI Bank, with SBI having an exposure of Rs 2,468.51 crore.

A forensic audit by Ernst and Young showed that between 2012-17, the accused colluded together and committed illegal activities, including diversion of funds, misappropriation and criminal breach of trust, the CBI had said.

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The CBI had said in a statement that the funds (bank loans) were used by the company and its promoters for purposes other than for which they were released by banks. The loan account was declared a non-performing asset (NPA) in July 2016 and fraud in 2019.

In its complaint, SBI said ABG Shipyard Ltd (ABGSL) is the flagship company of the ABG Group, which is engaged in the business of shipbuilding and ship repair.

ABGSL, being a major player in the Indian shipbuilding industry, operates from shipyards that are located at Dahej and Surat in Gujarat, with a capacity to build vessels up to 18,000 dead weight tonnage (DWT) at Surat Shipyard and 1,20,000 dead weight tonnage (DWT) at Dahej Shipyard.

The company has constructed over 165 vessels, including 46 for the export market, in the last 16 years, including specialised vessels like newsprint carriers, self-discharging and loading bulk cement carriers, floating cranes etc, with class approval of all international classification societies like Lloyds, American Bureau of Shipping, Bureau Veritas, IRS, DNV, the complaint said.

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"Global crisis has impacted the shipping industry due to fall in commodity demand and prices and subsequent fall in cargo demand. The cancellation of contracts for few ships and vessels resulted in piling up of inventory. This has resulted in paucity of working capital and caused significant increase in the operating cycle, thereby aggravating the liquidity problem and financial problem," the SBI complaint said.

It added there was no demand for commercial vessels, as the industry was going through a downturn even in 2015 which was further aggravated due to lack of defence orders, making it difficult for the company to maintain its re-payment schedule.

The company has already been referred to the NCLT, Ahmedabad, by ICICI Bank for corporate insolvency resolution process, it said.

(Edited by : Shoma Bhattacharjee)