On February 7th, Central Bureau of Investigation (CBI) has filed FIR against the ABG Shipyard Ltd officials who have defrauded the consortium of 28 banks to the tune of Rs.22842 crores. This is the biggest fraud in the history of bank frauds filed with CBI.
ICICI biggest lender
ABG Shipyard owes Rs.7089 crores to ICICI Bank which is leading the consortium, 3639 to IDBI Bank, Rs.2925 crores to SBI, Rs.1614 crores to BOB, Rs.1327 crores to Exim Bank, Rs.1244 crores to PNB, Rs.1228 crores to IOB, Rs.719 Crores to BOI apart from 20 other Banks.
Belated action of CBI
SBI identified the fraud in January 2019 but filed complaint only in November 2019 and again in December 2020 based on which CBI has initiated action so belatedly. In April 2019 NCLT ordered for liquidation of the company under IBC. CBI has issued lookout notices (LOCs) against Rishi Agarwal, MD and eight others to prevent them from leaving the country after 37 months of identification of the fraud. CBI has named 5 of the company directors including Rishi Kamlesh Agarwal, Santhanam Muthuswamy, Ashwini Kumar, Sushil Kumar Agarwal, Ravi Vimal Nevetia besides others. Searches were conducted by CBI in 13 premises of the company in various cities in India and seized many incriminating documents.
Forensic audit was entrusted to Earnest and Young for the period between April 2012 to July 2017 which revealed that the ABG Shipyard had carried out a number of illegal activities. ABG Shipyard had diverted funds by subscribing 43.50 million USD worth shares in ABG Singapore. Investments were made through an overseas subsidiary with the funds transferred by ABG Shipyard and properties were purchased using those funds. It also received payments from clients an amount of 97.90 crores in accounts outside ABG Shipyard which is breach of trust with the Banks.
ABG Shipyard Ltd is a flagship company of ABG Group promoted by Rishi Kamlesh Agarwal with its registered office at Ahmedabad. It had supplied and repaired ships to Indian Navy and supplied many private ships for many countries. So far it has built 165 vessels for companies in India and abroad. The company has got class approval from international approvers like Lloyds, American Bureau of Shipping etc. The company was constructing and supplying ships until 2012 and later the financial position got deteriorated.
The company states in its report stated that the cancellation of contracts and the lesser demand for commercial vessels after 2015 affected the company’s business financials. But in reality, the top executives of the company indulged in fraudulent activities by diverting funds to its subsidiaries.
NPA from November 2013
The Company had violated terms of Corporate Debt Restructuring arrangement extended as a relief mechanism. Diversion of funds, misappropriation and criminal breach of trust, with an intention to gain unlawfully, were the main reasons for the failure of the company. It is suspected that the defrauded amounts were diverted to tax havens.
The lending banks had tried unsuccessfully to restructure the loans in 2014 and again through strategic debt restructuring scheme in 2015 to convert the debt into shares of the company and to sell it to potential buyers. It was classified as NPA in July 2016 with effect from November 2013.
SBI has denied the allegations of delayed action in the process. Finance Minister also defended the delay on the part of SBI and CBI by stating that “usually while it takes 52 to 54 months to detect the fraud, banks in this case have taken lesser time than the average”.
It is pity that the frauds perpetuated since 2012 is detected only in 2019. It gives rise to the suspicion about the collusion and involvement of the people at the helm of the affairs. It is very clear that the public money is allowed to be looted and plundered by the present Union Government with the pliable officials at the top. This kind of fraud, if unchecked, will seriously tell upon the stability and sustainability of the banks and ultimately ruin the economy of the country. The Government should take serious and timely action to punish the guilty and recover the money fully. They should also take steps to prevent such frauds in future.