ABG Shipyard case: All you need to know about India's biggest bank fraud

The CBI has booked ABG Shipyard Limited, its former chairman and managing director Rishi Kamlesh Agarwal and others for allegedly cheating a consortium of banks led by the State Bank of India (SBI) of over 228.42 billion Indian rupees ($3.03 billion).

Besides Agarwal, the agency has 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 IPC and the Prevention of Corruption Act, they said.

“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 recovery of incriminating documents,” CBI said in a statement.

According to figures from the forensic audit that were included in the CBI complaint, the company 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 bilion rupees to Punjab National Bank and 12.28 billion rupees to Indian Overseas Bank.

State Bank of India, where the accounts of ABG Shipyard were maintained, had filed the forensic audit in a report to the CBI.

That report, included in the CBI complaint posted on Sunday, said the fraud took the form of diversion of funds, "misappropriation and criminal breach of trust with an objective to gain unlawfully at the cost of the Bank's funds".

"The money was used for purposes other than the purpose for which the funds were released by the Bank", it said.

The SBI had first filed a complaint on November 8, 2019 on which the CBI had sought some clarifications on March 12, 2020.

The bank filed a fresh complaint in August 2020. After "scrutinising" the complaint for a year and and a half, the CBI acted on the complaint, filing an FIR on February 7 this year.

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

The ABGSL being a major player in the Indian shipbuilding industry operates from shipyards are located at Dahej and Surat 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.

The company has constructed over 165 vessels (including 46 for the export market) in the last 16 years including specialized vessels like the 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.

“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 a few ships and vessels resulted in piling up inventory. This has resulted in a paucity of working capital and caused a significant increase in the operating cycle. thereby aggravating the liquidity problem and financial problem,” the complaint said.

The SBI said there was no demand of 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 repayment schedule, it said.

(With inputs from agencies)