Rs 22,000 crore loan fraud: CBI issues lookout circulars against ABG Shipyard directors

The CBI has issued look-out circulars (LoC) against the accused in the over Rs 22,000 crore bank loan fraud case allegedly perpetrated Gujarat-based ship-building company ABG Shipyard Ltd. The agency has also found that the company allegedly diverted funds using as many as 98 related entities.
The agency on February 7 booked ABG Shipyard Ltd and its former chairman and managing director Rishi Kamlesh Agarwal along with 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.
The company is alleged to have diverted loan funds through subsidiaries in Singapore and other means between 2012 and 2017. The FIR has been regered based on a 2019 complaint from the State Bank of India, one of the lenders to the company.

The agency on Tuesday sought to dispel the perception that there was delay on part of the banks to report fraud and on part of the agency to reger a case.
While the loan sanctioned to the company turned non-performing asset (NPA) in 2013 and a debt-restructuring effort failed to revive it, leading to a second NPA declaration in 2016, a complaint of fraud the company was made to the CBI only in 2019. The agency, which received a second complaint in August 2020, has only now regered an FIR.

The CBI sought to explain the delay through complexity of the case, involvement of multiple banks (28), close to 100 associated companies of ABG being involved, and even withdrawal of consent various states. It also emphasized that the company has been in business with the SBI since 2001 and majority of the defaulted loan was disbursed between 2005 and 2012.
“It may also be mentioned that the withdrawal of General Consent to CBI investigation certain states has made the regration of bank fraud cases more challenging. There are around 100 high-value bank-fraud cases that could not be regered due to non-accordance of specific consent u/s 6 of DSPE Act State Governments where the general consent has been withdrawn,” the CBI said in a statement.
According to the agency, ABG loan account was restructured under the CDR mechanism on March 27, 2014. However, the operations of the company could not be revived. On September 10 that year, N V Dand & Associates was deputed to conduct a stock audit of the company.
“The Audit Firm submitted its report on 30.04.2016 and observed various faults on the part of the accused company. Subsequently, the account of M/s ABG Shipyard Ltd was declared NPA on 30.07.2016 w.e.f. 30.11.2013,” the CBI said.

In April 2018, Ernst and Young was hired to conduct a forensic audit of the company’s accounts for the period of 2012 to 2017. The company had already been referred to National Company Law Tribunal, Ahmedabad in August 2017 the ICICI Bank, the lead bank in the consortium, for Corporate Insolvency Resolution Process (CIRP).
“In between April 2019 to March 2020, various Banks of the consortium declared the account of M/s ABG Shipyard as fraud. The fraud is primarily on account of huge transfer M/s ABG Shipyard Ltd to its related parties and subsequently making adjustment entries. It is also alleged that huge investments were made in its overseas subsidiary diverting the bank loans and funds to purchase huge assets in the name of its related parties. During the perusal of records and initial investigation, it is seen that the critical period was 2005-2012,” the CBI statement said.
According to the CBI, after the SBI made a comprehensive complaint in August 2020, answering all its queries on the 2019 complaint, the agency began verifying the claims made in the complaint.
“There are 28 banks… different nature of bank loans including CC Loan, Term Loan, Letter of Credit, Bank Guarantee etc. that were given as advance the banks. After analysis of basic facts of the case, scrutiny, discreet verification, and the issues mentioned in the complaint and verification of the addresses of the accused persons, an FIR was regered,” the CBI statement said.

On February 12, the CBI conducted searches at 13 locations and claimed to have recovered “incriminating documents such as books of accounts of the accused borrower company, purchase/sales details, minutes of meetings of Board, share regers, various contract files, etc.”
“Also, bank account details of the accused as well as related parties have been obtained. The accused have been located in India. Subsequently, Look Out Circulars (LOCs) against the accused have already been opened the CBI. Earlier, the State Bank of India had also opened LOCs against the main accused in 2019. Further correspondences are being made with the consortium banks to provide details including documents with regard to sanction of loan and its disbursal,” the CBI statement said.