- ABG Shipyard Limited has become bankrupt and SBI has lodged a complaint with the CBI regarding a fraud that amounts to ₹22,842 crores.
- E&Y was appointed as the forensic auditor and the first complaint was filed with CBI in November 2019. ABG Shipyard Limited is undergoing liquidation under an NCLT driven process.
- ABG Shipyard has been accused of diversion of funds, criminal breach of trust and misappropriation by the consortium of banks which included the SBI, ICICI Bank and the IDBI.
ABG Shipyard Limited, a Gujarat based ship-building company has become bankrupt and the CBI (Central Bureau of Investigation) has booked former top executives including Rishi Kamlesh Agarwal, its former chairman in a bank fraud case that amounts to ₹ 22,842 crores.
ABG Shipyard has been accused of diversion of funds, criminal breach of trust and misappropriation by the consortium of banks which included the SBI, ICICI Bank and the IDBI.
ABG Shipyard’s loan account became NPA in 2013
“Financed under consortium arrangement over 2 dozen lenders led by ICICI Bank. Due to poor performance, the account became NPA in Nov 2013. Several efforts were made to revive company operations but couldn’t succeed.” SBI said.
In March 2014, all lenders restructured its account under the CDR Mechanism. The shipping industry was going through a downturn, one of the worst ever seen, and the operations of the company could not revive.
ABG Shipyard was incorporated on 15th March 1985 and has been under banking arrangements since 2001. “As the restructuring failed, the account was classified as NPA in July 2016 with backdated effect from November 30, 2013,” SBI said. E&Y was appointed as the forensic auditor by the consortium.
ICICI Bank was the lead banker, yet SBI lodged the complaint
It was preferred that the SBI being the largest PSB lender would lodge the complaint with the CBI, although ICICI Bank was the lead lender and IDBI was the second lead. “The first complaint was filed with CBI in November 2019. There was a continuous engagement between CBI and Banks and further information was getting exchanged,” SBI said.
The fraud is much higher than recent frauds
The ABG Shipyard Fraud is much higher than the fraud committed by Nirav Modi and Mehul Choksi, who allegedly cheated the Punjab National Bank (PNB) of around ₹ 14,000 crores through the issuance of fraudulent Letters of Undertaking (LoUs).
Congress’s comments
“Why did the Modi government refuse to take note of the allegations made on February 15, 2018, by the Congress, warning of a scam in ABG Shipyard, and why no FIR was lodged and criminal action was taken despite their accounts having been declared as a fraud on June 19, 2019?” asked Congress general secretary Randeep Singh Surjewala.
“In a few cases, when substantial additional information is gathered, a second complaint incorporating full and complete details is filed which forms the basis for the FIR. At no point in time, there was an effort to delay the process. The lender’s forum diligently follows through with CBI in all such cases,” SBI said in response.
“The first complaint was filed with CBI in November 2019. There was a continuous engagement between CBI and Banks and further information was getting exchanged,” the bank’s statement said.
“Typically when fraud is declared, an initial complaint is preferred with CBI and based on their enquiries further information is gathered. In a few cases, when substantial additional information is gathered, a second compliant incorporating full and complete details is filed which forms the basis for the FIR,”. “At no point in time, there was an effort to delay the process. The lender’s forum diligently follows through with CBI in all such cases,” SBI added.
How is fraud declared by banks?
When fraud is declared, the initial complaint is preferred with the CBI and based on their enquiries, further information is gathered. A fraud is declared on the basis of the Forensic Audit report findings that are discussed thoroughly in joint lenders meetings. Once substantial information is gathered with full and complete details, a second complaint is lodged, which forms the basis for the FIR.
The company is undergoing liquidation
ABG Shipyard Limited is undergoing liquidation under an NCLT driven process.
“The circumstances of the fraud, as well as CBI requirements, were further deliberated in the various meetings of Joint Lenders and a fresh and comprehensive second complaint was filed in December 2020. The account is presently undergoing liquidation under an NCLT driven process,” SBI said.
