On Wednesday, investigators of the Central Bureau of Investigation (CBI) arrested Rishi Kamlesh Agarwal, founder and chairman of ABG Shipyard Limited, for allegedly executing a bank fraud of more than Rs 22,842 crore. 

In February this year, the central investigation agency filed a case against him and a few others, and within days of filing the case, they conducted searches at 13 places. 

Under the Indian Penal Code (IPC) and the Prevention of Corruption Act, the CBI has accused Agarwal and others of criminal conspiracy, cheating, and criminal breach of trust. The State Bank of India (SBI) filed the complaint that led to this case. 

In a statement published in February, the CBI indicated that ABG Shipyard Ltd. has been doing business with the SBI since 2001. The shipbuilding company had a credit facility of Rs 22,842 crore, and most of it was paid out between 2005 and 2012 by a group of 28 banks led by ICICI Bank and SBI. 

However, a forensic examination conducted by Ernst & Young in 2018 led to multiple banks declaring the account fraudulent between April 2019 and March 2020. According to the CBI, the fraud was mainly caused by a massive transfer from the corporation to some of the accused.

It was also alleged that bank loans were redirected to its overseas subsidiary in order to finance the massive expansion. The investigative agency stated funds were diverted to purchase massive assets. 

The founding chairman, Santhanam Muthaswamy, as well as directors Sushil Kumar Agarwal, Ashwini Kumar, and Ravi Vimal Nevetia, have all been reserved by the central agency. Under the Indian Penal Code and the Prevention of Corruption Act, they have been charged with criminal conspiracy, cheating, and criminal breach of trust. 

A lookout notice was issued against Agarwal and eight others earlier this year. 

Fraud timeline for ABG Shipyard:

1985 – The ABG Group’s flagship corporation, ABG Shipyard Ltd, is founded. Founded by Rishi Agarwal, it operates shipyards in Dahesh and Surat, Gujarat, and engages in shipbuilding and repair. The consortium of 28 banks financed the company, with ICICI serving as the lead bank. 

2005-2010 – ABG Shipyards continues to receive large loans from banks despite 2008’s warning signs of a global economic crisis. 

2008 – ABG Shipyards is impacted by the global financial crisis, triggered by the US housing bubble and the bankruptcy of Lehman Brothers.  The lack of working capital has led to a “substantial rise in the operational cycle,” which has only made the company’s liquidity and financial problems worse. 

March 2014 – Loans to ABG Shipyard are being restructured by the SBI through corporate debt restructuring (CDR). The reorganization fell through because ABG Shipyards cannot pay the interest and installments when they are due. 

July 2016 – The ABG account is declared NPA immediately to November 30, 2013. 

August 2017- The company was placed on the RBI’s “dirty dozen” list of 12 massive nonperforming assets (NPAs), which also included Essar, Bhushan, Jaypee, and Amtek. 

The leading bank, ICICI Bank, has filed an IBC application with total claims of 27,400 crores payable to banks, the government, workers, and operational creditors. 

Jan 2019 – SBI discovers a scam. 

Jan 2019 – Ernst and Young LLP conducted a forensic audit of ABG Shipyard. Evidence of fraud between April 2012 and July 2017 is uncovered. The audit reveals that fraud was committed by “diversion of funds, misappropriation, and criminal breach of trust” with the intent to gain illegally at the bank’s expense. 

There was a total of 28 banks involved in the loan program that ABG Shipyard used to finance its operations. The money from these loans was redistributed to 98 sister concern companies, where it was primarily utilized to fund the purchasing of personal assets. 

November 2019 – SBI lodged the Complaint. 

August 2020 – SBI submits an updated official complaint. 

7 February 2022 – The CBI has opened an investigation into the activities of ABG Shipyard and ABG International Private Ltd. 

According to the CBI FIR, ABG SL has a debt of almost 22,842 crores. It has a total debt of 7,089 crore to ICICI, the consortium’s leader; 2,925 crores to SBI; 3,639 crores to IDBI Bank; 1,614 crores to Bank of Baroda; 1,244 crores to Punjab National Bank; 1,327 crores to Exim Bank; 1,244 crores to Exim Bank; 719 crores to Exim Bank; 1,244 crores to Exim Bank; 

15 February, 2022 – The CBI released lookout notices against Agarwal, and ABG executives Santhanam Muthuswamy and Ashwini Kumar. 

ABG Shipment India (Image Source – Splash 247)

The services of ABG Shipyard include the construction and maintenance of ships. Agarwal Shipyards is a key player in the industry that he helped launch, with facilities in Dahej and Surat, Gujarat. The Surat shipyard can construct vessels with a dead weight tonnage of up to 18,000 tonnes, and the Dahej facility can construct vessels with a dead weight tonnage of up to 1.20 million tonnes. 

Over the previous 16 years, the company has constructed over 165 vessels, 46 of which were destined for international markets. According to the FIR, the shipping industry was damaged by the global crisis because of a downturn in commodity demand and prices, which led to a decrease in cargo demand.

Cancellation of contracts for a small number of ships/vessels led to a buildup of surplus supplies. The company’s liquidity/financial difficulties have been made worse by the scenario as a whole. 

Even in 2015, the commercial shipping industry was in a crisis, therefore there was no need for new ships. In addition, no new defense orders were issued that year. 

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