The Central Bureau of Investigation (CBI) has issued look-out circulars against the accused ABG Shipyard in relation to a ₹22,842 crore bank fraud case so that they do not leave the country during the probe. The Surat-based shipping company is embroiled in the biggest bank fraud case of the country.

Earlier this month, the central probe agency had charged ABG Shipyard, its former chairman and managing director Rishi Agarwal, former executive director Santhanam Muthaswamy, directors Ashwini Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia, and ABG International Pvt Ltd with criminal conspiracy, cheating, criminal breach of trust and abuse of official position under the sections of IPC and the Prevention of Corruption Act.

“The accused have been located in India. Subsequently, look out circulars (LOCs) against the accused have already been opened by CBI. Earlier, State Bank of India had also opened LOCs against the main accused in 2019,” states CBI.

According to a CBI statement, ABG Shipyard had been in business with the State Bank of India (SBI) since 2001. However, the account turned NPA on November 30, 2013, as told by SBI, leading to bad loans worth ₹22,842 crore. The majority of disbursement happened between 2005 and 2012 by a consortium of 28 banks led by ICICI Bank, and which included SBI.

The account was restructured under the corporate debt restructuring (CDR) mechanism on March 27, 2014, but the operations of the company could not be revived.

On September 10, 2014, N V Dand & Associates was deputed to conduct a stock audit of ABG Shipyard. It submitted the audit report in the matter on April 20, 2016, which listed several discrepancies on part of the company. Subsequently, the account of ABG Shipyard was declared NPA on July 30, 2016, with effect from November 30, 2013.

In accordance with a policy implemented since 2014 of red-flagging suspect accounts, commissioning forensic audits by empanelled forensic auditors, and making CMDs liable, a forensic audit was initiated based on the lenders’ decision in the joint lenders meeting dated April 10, 2018.

Following this decision, Ernst & Young was roped in as forensic auditor to look into the case. The forensic audit of ABG Shipyard covered the period from 2012 to 2017, as these audits covered a period starting approximately three to four years prior to the date of declaration of NPA, which, in this case was 2016

Meanwhile, ICICI Bank, the lead bank of the lending consortium to ABG Shipping, took the company to Ahmedabad bench of National Company Law Tribunal on August 1, 2017, for Corporate Insolvency Resolution Process (CIRP).

Between April 2019 and March 2020, various banks of the consortium declared the account of ABG Shipyard as fraud. The fraud is primarily on account of huge transfers by the company to its related parties and subsequently making adjustment entries.

The lenders also alleged that ABG Shipyard diverted bank loans to make huge investments in its overseas subsidiary and diverted 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 from 2005 to 2012.

SBI filed a complaint with CBI on August 25, 2020, after the agency raised queries in the complaint made in 2019, to look into the matter of the alleged bank fraud by the company and its directors. In the instant case, there are 28 banks involved in consortium with huge amounts of disbursement. The credit facilities extended to ABG Shipyard included CC loan, term loan, letter of credit, bank guarantee, etc., given as advance by the banks.

The central probe agency mentioned that the withdrawal of general consent to CBI investigation by certain states made the registration of bank fraud cases more challenging. There are around 100 high value bank fraud cases that could not be registered due to non-accordance of specific consent under Section 6 of DSPE Act by state governments where the general consent has been withdrawn, CBI added.

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 registered on February 07, 2022. Searches were conducted at 13 locations on February 12, 2022 during the course of investigation.

Several incriminating documents, such as books of accounts of the accused borrower company, purchase and sales details, minutes of board meetings, share registers, various contract files, etc. were recovered which are being scrutinised. Also, bank account details of the accused as well as related parties have been obtained.

CBI says further correspondences are being made with the consortium banks to provide details including documents regarding sanction of loan to ABG Shipyard and its disbursal.

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