The Central Bureau of Investigation (CBI) has booked ABG Shipyard Limited, its former Chairman and Managing Director Rishi Kamlesh Agarwal, along with several others including Executive Director Santhanam Muthaswamy, Directors Ashwini Kumar, Ravi Vimal Nevetia, and Sushil Kumar Agarwal for allegedly cheating a consortium of banks led by State Bank of India of over Rs. 22,842 crore, making it India’s biggest case of bank fraud.
“Searches were conducted on Saturday at 13 locations in the premises of accused including private company, directors at Surat, Bharuch, Mumbai, Pune, etc which led to the recovery of incriminating documents,” said the CBI in a statement.
The SBI bank filed the first-ever complaint in 2019 on November 8th on which the CBI had sought some explanations on March 12, 2020. A fresh complaint was again filed in the month of August in the same year. After investigating the case for one and a half years, the CBI acted on the complaint filing an FIR on February 7, 2022.
According to figures from the forensic audit that were included in the CBI complaint, ABG Shipyard owed 70.89 billion rupees to ICICI Bank, 36.34 billion rupees to IDBI Bank, 29.25 billion rupees to the State Bank of India, 16.14 billion rupees to Bank of Baroda, 12.44 billion rupees to Punjab National Bank and 12.28 billion rupees to Indian Overseas Bank.
ABOUT ABG SHIPYARD?
It was March 15, 1985, when ABG Shipyard Limited (ABGSL) was incorporated with its registered office in Ahmedabad, Gujarat. It is a flagship enterprise of the ABG Group, originally promoted by Rishi Agarwal. It is engaged in the business of shipbuilding and ship repair. It has shipyards located at Surat and Dahej in Gujarat with the capacity to build vessels up to 18,000 deadweight tonnage (DWT) at Surat Shipyard and 1,20,000 deadweight tonnage (DWT) at Dahej Shipyard.
Since the establishment of the company, it has constructed over 165 vessels in the last 16 years including specialized vessels like newsprint carriers, interceptor boats, floating cranes, loading bulk cement carriers, pusher tugs, dynamic positioning diving support vehicles, etc.
ABG SHIPYARD FRAUD: WHAT EXACTLY HAPPENED?
ABG Shipyard experienced huge success for some years but ran into hard times from the year 2012. The loans were given to the company between 2005-2010 by the banks.
- The company’s loan account was first declared as NPA in July 2016. NPA refers to Non-Performing Asset; it is a loan for which the principal or interest payment is overdue for 90 days.
- The audit by Ernst and Young mentioned that between 2012-2017, “the accused have colluded together and committed illegal activities including diversion of funds, misappropriation and criminal breach of trust and for purposes other than for the purpose for which the funds are released by the Bank.”
- In April 2019, the National Company Law Tribunal (NCLT) ordered the liquidation of the company under the Insolvency & Bankruptcy Code (IBC).
- In November 2019, SBI filed its first complaint against the company.
“From the initial investigation, it appears that the loans were sanctioned between 2005 and 2010. It appears that the money was given out without due diligence from the banks. The fraud amount under investigation could be more or less than what is reflected right now,” said a CBI source.
Financial statements revealed that the company diverted the loans it took from various Indian banks to purchase preference shares in ABG Singapore worth $43.5 million.
A loan restructuring exercise started when ABG Shipyard started at bankruptcy. However, as per the complaint filed by SBI, ABG Shipyard still owed a huge amount of money to various Indian private and public sector banks.
The complaint by SBI said “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 complaint also mentioned that the lack of commercial vehicles in the industry since 2015, along with the absence of new defense orders, made it extremely difficult for the company to fulfill its debt obligations.
ABG Shipyard scam is much higher than the one perpetrated by Nirav Modi along with his uncle Mehul Choksi. ABG Shipyard has been referred to the National Company Law Tribunal (NCLT) of the Ahmedabad bench by ICICI Bank for Corporate Insolvency Resolution Process (CIRP). The investigation of the scam is underway.