Ruling out any effort to delay the process at any point of time, the State Bank of India (SBI) has said that the Rs 22,842-crore of loans to ABG Shipyard is undergoing liquidation under the National Company Law Tribunal (NCLT) after the lenders had discovered fraudulent fund diversion following a forensic audit by consultancy firm E&Y.

The SBI-led consortium of lenders had filed the first complaint against ABG Shipyard with the Central Bureau of Investigation (CBI) in November 2019.  “There was a continuous engagement between CBI and banks and further information was getting exchanged,” the SBI said.

The circumstances of the fraud, as well as CBI’s requirements, were deliberated in the various meetings of joint lenders and a “fresh and comprehensive” second complaint was filed in December 2020. The lenders accused ABG Shipyard of diversion of funds, misappropriation and criminal breach of trust.

A year after the second complaint, the CBI booked ABG Shipyard and its then chairman and managing director Rishi Kamlesh Agarwal along with others for allegedly cheating a consortium of banks of over Rs 22,842 crore.    

Bankers say there was no delay on their part and they gave both the company and the CBI ample time to take action. E&Y was appointed as forensic auditor by lenders during April 2018 and they submitted their report on January 19. The report was placed before the Fraud Identification Committee of 18 lenders and in November 2019, the lenders filed their first complaint with the CBI.

“At no point in time, there was any effort to delay the process.  The lender's forum diligently follows through with CBI in all such cases,” SBI said in a statement.

Elaborating on the chronology of the case, SBI said ABG Shipyard’s loan account was restructured under the CDR mechanism in March 2014 by all lenders. After the restructuring failed, the ABG Shipyard's account was classified as non-performing asset (NPA) in July 2016, with backdated effect from November 30, 2013.

Incorporated on 15 March 1985, ABG Shipyard came under banking arrangements since 2001.  Engaged in shipbuilding and ship repair, the company was financed under consortium arrangement over a two dozen lenders. The leader in consortium was ICICI Bank. Due to poor performance, the account became NPA on November 30, 2013. “Several efforts were made to revive the company operations but could not succeed," India’s largest bank said in a release sent on Sunday.

The shipping industry was going through a downturn, one of the worst ever seen, and the operations of the company could not revive, SBI added.

ABG Shipyard was a major player in the Indian ship building industry, operating from shipyards located at Dahej and Surat in Gujarat. It had capacity to build vessels up to 18,000 dead weight tonnage (DWT) at Surat Shipyard and 1,20,000 dead weight tonnage (DWT) at Dahej Shipyard.

 Although ICICI Bank was the lead lender in the consortium and IDBI was the second lead, it was preferred that SBI, being the largest public sector bank, lodges the complaint with CBI. 

Forensic audits are conducted on all large NPA accounts.  In the forensic audit, it was discovered that both the external environment and the internal mishandling and diversion of funds led to the mess incapacitating the company to repay its loans.

A fraud is declared basis the Forensic Audit report findings that are discussed thoroughly in joint lenders meetings, SBI explained in the release. Typically, when fraud is declared, an initial complaint is preferred with the 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, SBI said. 

Besides Agarwal, CBI has 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. 

"Searches were conducted on Saturday (February 12, 2022) 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," the investigating agency said in a statement.

Meanwhile, the Congress at a press conference on Sunday asked why it took five years for the CBI to take action against ABG Shipyard when the liquidation proceeds had begun in 2017.