Gujarat shipbuilding firm booked for Rs 22,000 crore loan fraud: CBI

The agency has booked ABG Shipyard Ltd (ABGSL) and its former chairman and managing director, Rishi Kamlesh Agarwal, along with then executive director Santhanam Muthaswamy, directors Ashwini Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia.

Another company, ABG International Pvt Ltd, has also been booked in the case for alleged offences of criminal conspiracy, cheating, criminal breach of trust and abuse of official position under IPC and Prevention of Corruption Act.

ABG Shipyard is alleged to have diverted loan funds through subsidiaries in Singapore and through other means between 2012 and 2017. The loan was declared NPA in July 2016, and the company is already facing proceedings in the National Company Law Tribunal (NCLT).

The FIR has been registered on the basis of a 2019 complaint from the State Bank of India, one of the lenders.

The CBI, which registered the case on February 7, carried out searches at 13 locations in premises of the accused on Saturday. These include premises linked with ABGSL and its directors in Surat, Bharuch, Mumbai and Pune, among other places.

“It was alleged that the accused had cheated the consortium of 28 banks, including branches of erstwhile State Bank of Patiala, Commercial Finance Branch, New Delhi; erstwhile State Bank of Travancore, Commercial Branch, New Delhi; State Bank of India, Overseas Branch, Mumbai etc. The consortium of 28 banks was led by ICICI Bank,” CBI said in a statement.

According to CBI, the Surat-based company was engaged in shipbuilding and ship repair.

“It was alleged that the accused had colluded and committed activities by way of diversion of funds for the purpose other than for which the funds were released by the bank,” the agency stated. “Huge amounts were allegedly transferred by the said company to its related parties and subsequently adjustment entries were made.”

“It was alleged that bank loans to the said private company was diverted and huge investment was found to be made in the overseas subsidiary. It was alleged that funds from banks were diverted to purchase assets in the name of related parties,” it stated.

According to CBI, the ABG Group, which owns ABGSL, is a major player in the Indian shipbuilding industry. ABGSL’s shipyards are located at Dahej and Surat in Gujarat, and the company has 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, it stated.

ABGSL has constructed over 165 vessels, including 46 for export market, in the last 16 years. These include specialised vessels such as newsprint carriers, self-discharging and loading bulk cement carriers, floating cranes, interceptor boats, dynamic positioning diving support vessels, pusher tugs and flotilla for leading companies in India and abroad.

According to the complaint, the company was impacted by a global crisis in the shipping industry due to fall in commodity demand and prices and subsequent fall in cargo demand. However, an audit of its financials revealed fraudulent practices, CBI has stated.

The FIR stated: “The Forensic Audit report dated 18.01.2019 submitted by M/s. Ernst & Young LLP for the period April 2012 to July 2017 revealed that the accused have colluded together and committed illegal activities including diversion of funds, misappropriation and criminal breach of trust and for purposes other than for the purpose for which the funds are released by the Bank.”

The audit has cited several instances of circular transactions involving various subsidiaries, including one in Singapore, it stated.

In one instance it has been noted that “based on the bank book and ledgers…funds amounting to INR 15 Crs and INR 16 Crs transferred to ABG Energy respectively by ABG SL. Further, on same days, funds amounting to INR 31 Crs (2 inflow transactions of INR 15 Crs and INR 16 Crs respectively) were received from ABG International in the form of refund of accommodation deposits. The above indicates that there may not be actual refund of accommodation deposits previously paid by ABG SL amounting to INR 31 crores and only potential circular transactions.”

“On review of bank book, it is noted that out of INR 300 crores, INR 95 crores might have been bought in via circular transaction in April 2014 as outflow to linked parties and inflow from ABG International on the same date,” the report has said.