In one of the biggest bank fraud case registered by the Central Bureau of Investigation (CBI), the agency has charged ABG Shipyard Ltd, its then Chairman and Managing Director Rishi Kamlesh Agarwal, and others with defrauding a consortium of banks led by ICICI bank of over Rs 22,842 crore.
CBI also named the former Executive Director Santhanam Muthaswamy, Directors Ashwini Kumar, Sushil Kumar Agarwal, and Ravi Vimal Nevetia, as well as another company ABG International Pvt Ltd, for alleged criminal conspiracy, cheating, criminal breach of trust, and abuse of official position under the IPC and the Prevention of Corruption Act.
Mumbai headquartered ABG Shipyard is part of ABG Group and is in the business of building ships. The company has shipbuilding facilities in Dahej and Surat in Gujrat, and operates a ship maintenance facility in Goa.
According to reports, among the 22-bank consortium, State Bank of India (SBI), ICICI Bank, and IDBI Bank had the lion’s share of exposure, in excess of 50 per cent in the shipping company. SBI was the first to classify the account as ‘fraud’, followed by ICICI Bank and then IDBI Bank. The bank-wise breakup of the exact exposure has been made available by journalist Arvind Gunasekar on Twitter.
ABG Shipyard owes 22,842 crore to 28 banks, the biggest bank fraud booked by CBI 👇🏻
— Arvind Gunasekar (@arvindgunasekar) February 12, 2022
More @ndtv pic.twitter.com/txyXo2Zcwi
Meanwhile, CBI alleged in its FIR that, “the Forensic Audit report dated 18.01.2019 submitted by M/s. Ernst & Young LP for the period April 2012 to July 2017 revealed that 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.”
“Global crisis has impacted the shipping industry due to fall in commodity demand & prices and subsequent fall in cargo demand. The cancellation of contracts for a few ships/vessels resulted in piling up of inventory. This has resulted in a paucity of working capital and caused a significant increase in the operating cycle, thereby aggravating the liquidity problem & financial problem. There was no demand for commercial vessels as the industry was going through a downturn even in 2015. Further, there were no fresh defence orders released in 2015. The company was finding it very difficult to achieve milestones as envisaged in CDR. Thus, the company was unable to service the interest and instalments on the due date,” the CBI FIR added.
On November 8, 2019, the bank filed a complaint, and on March 12, 2020, the CBI requested an explanation.
In August of that year, the bank lodged a new complaint. The CBI acted on the complaint on February 7, 2022, after “scrutinising” it for almost a year and a half and opening an FIR.
They stated the company received credit from 28 banks and commercial institutions, with the SBI having a Rs 2468.51 crore exposure.
According to the forensic audit, between 2012 and 2017, the accused conspired and committed illicit actions such as money laundering, misappropriation, and criminal breach of trust.
It may be noted that the Reserve Bank of India (RBI) had classified AGB Shipyard among the ‘dirty dozen’ to be taken up under the Insolvency & Bankruptcy Code (IBC). OpIndia had reported how 11 NPA cases which were referred to by the RBI contain a total of 25% of India’s bad loans. All these 11 cases comprise of the companies which owe the banks more than Rs 5000 crore. These 11 cases belong to Bhushan Power & Steel, Essar Steel, Jaypee Infratech, Lanco Infratech, Monnet Ispat & Energy, Jyoti Structures, Electrosteel Steels, Amtek Auto, Era Infra Engineering, Alok Industries and ABG Shipyard, who owe the banks about Rs 1.75 lakh crore.
