ABG Shipyard: India’s Biggest Bank Fraud Case of Rs 23,000 cr

The Central Bureau of Investigation registered an FIR against ABG Shipyard Ltd and its directors, including chairman and managing director Rishi Kamlesh Agarwal, in what could be the biggest bank fraud case in the history of India.

ABG Shipyard, one of the most prominent private sector shipbuilding and ship repair companies, was on Saturday booked for allegedly defrauding 28 banks to the tune of ₹22,842 crore.

Apart from Agarwal, Santhanam Muthuswamy, Ashwini Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia have also been named in the case.

As per CBI sources, ABG SL took loans from these banks and then diverted them. It allegedly made investments in overseas subsidiaries from the loan amounts, bought assets in the names of affiliated companies, and also transferred money to several related parties.

It is also alleged that the company, whose account became a Non-Performing Asset (NPA) in 2013, violated terms of its arrangement for Corporate Debt Restructuring (CDR) — a relief mechanism in which lender banks either reduce the interest rates on the loans or increase the tenure of the repayment.

Let’s take a look at some of the case’s key facts:

1. ABG Shipyard, founded on March 15, 1985, has been under financial arrangements since 2001. It is one of India’s largest shipbuilding and ship repair companies.

2. The company has funding arrangements with nearly a dozen lenders as part of a consortium. ICICI Bank was the Consortium’s leader.

3. On November 30, 2013, the account declared NPA due to poor performance. Several attempts were made to resurrect the company’s operations, but none were successful.

4. In March 2014, all lenders restructured the company’s loan account using the CDR process.

5. Following the failure of the restructuring, the company’s account was designated as NPA in July 2016, with retroactive effect from November 30, 2013.

6. E&Y was recruited as forensic auditor by lenders in April 2018, and their report was due in January 2019.

7. According to the forensic audit, the accused conspired and committed illegal actions such as financial diversion, misappropriation, and criminal breach of trust between 2012 and 2017. Funds were also used to purchase assets for the company’s affiliated partners. Some of the loans were allegedly also invested in the company’s offshore affiliate.

8. SBI initially filed a complaint with the CBI on November 8, 2019, and the CBI requested explanation on March 12, 2020. In August of that year, a new complaint was filed. After “scrutinising” the allegation for almost a year and a half, the CBI acted on it by registering a FIR on February 7.

9. SBI further notified the CBI that the competent authority had dealt with and closed the issue of staff responsibility, and that its employees were not implicated in the alleged fraud.

10. The SBI consortium of 28 banks and commercial institutions was reportedly defrauded of a huge amount of Rs.22,842 crore, making it the largest alleged bank fraud case.

11. The CBI has now filed a FIR against ABG Shipyard Ltd and its directors, as well as conducted a search of the company’s facilities.