The Central Bureau of Investigation (CBI) has booked Gujarat-based ABG Shipyard Limited, its directors and others for allegedly causing a loss of ₹22,842 crore to a consortium of 28 banks. It is the biggest ever case of bank fraud registered by the agency.
Among those named as accused in the First Information Report (FIR) are Rishi Kamlesh Agarwal, Santhanam Muthaswamy, Ashwini Kumar, Sushil Kumar Agarwal, Ravi Vimal Nevetia and ABG International Private Limited. The case has been registered on a complaint from the State Bank of India alleging criminal conspiracy, cheating, criminal breach of trust and abuse of official position.
“Searches have been conducted on 13 premises of the accused persons in Surat, Bharuch, Mumbai and other places. Further legal proceedings are being initiated,” said a CBI official.
The alleged fraud came to light during a forensic audit of the loan account’s transactions from April 2012 to July 2017. According to the complaint lodged by the bank, the account was declared a fraud in June 2019. The account had become non-performing asset in July 2016 with effect from November 30, 2013.
According to the FIR, the forensic audit revealed diversion of funds, misappropriation and criminal breach of trust. The funds were allegedly used for unstated purposes, investments were made through a Singapore-based subsidiary and there were payouts running into hundreds of crores to related parties. Properties were also bought from the funds provided by ABG Shipyard.
The auditor also detected evidence of circular transactions. The total fair market value of the securities provided by the company against the credit facilities was $8,608.35 crore, said the FIR.
ABG Shipyard, a flagship company of the ABG Group, is in the business of ship building and repair. Promoted by Mr. Rishi Agarwal, it is a major player in the Indian ship building industry. Its shipyards are located at Dahej and Surat in Gujarat. The company has the capacity to build vessels up to 18,000-dead weight tonnage at the Surat shipyard and 1.20-lakh dead weight tonnage at the Dahej unit.
The company has constructed over 165 vessels, including 46 for export market, in the past 16 years. They included specialised vessels such as newsprint carriers, self-discharging and loading bulk cement carriers, floating cranes, interceptor boats, dynamic positioning diving support vessels, pusher tugs and flotilla for leading companies in India and abroad. The ships have got class approval of all the international classification societies.
The FIR notes that a global crisis impacted the shipping industry due to fall in the commodity demand and prices and subsequent fall in cargo demand. The cancellation of contracts for few ships/vessels resulted in piling up of inventory. This resulted in paucity of working capital and caused significant increase in the operating cycle, thereby aggravating the liquidity/financial problem.
There was no demand of commercial vessels as the industry was going through downturn even in 2015. Further, there were no fresh defence orders release in 2015. The company was finding it difficult to achieve the milestones as envisaged in the Corporate Debt Restructuring and, therefore, it was unable to service the interest and instalments on due dates.
The company was referred to the National Company Law Tribunal (NCLT), Ahmedabad, by ICICI Bank for the Corporate Insolvency Resolution Process. Accordingly, a Resolution Professional was also appointed. The Professional had earlier filed an application before the NCLT alleging preferential/undervalued transactions and fraudulent/wrongful trading by the company, which was confirmed by the Tribunal in 2019, as alleged.
