How the cookie collapsed for ABG Shipyard

While Chief Congress Spokesperson Randeep Surjewala hinted at the complicity of the Narendra Modi government in the “fraud”, a tweet from Finance Minister Nirmala Sitharaman’s office said the account became an NPA in November 2013. “Those who make noise about it have dug holes in which they themselves have fallen,” the tweet read.

By Rajesh Kurup

Rishi Kamlesh Agarwal, the former chairman and managing director of ABG Shipyard, must have been surprised by the developments of the past few days. After all, even he couldn’t expect investigative agencies to take almost three years to get close to him since 2019, when his company’s forensic auditor, EY, uncovered embezzlement, prompting the State Bank of India (SBI) to approach the Central Bureau of Investigation (CBI).

But investigative agencies seem to be making up for lost time with a vengeance. A day after the Enforcement Branch filed a money laundering complaint (media suggests that at least 100 front companies were used to embezzle public money), the CBI, after filing an initial report of information, Agarwal was questioned on Thursday for allegedly defrauding a consortium of 28 banks of Rs 22,842 crore – the country’s biggest bank fraud to date.

The agency added that the majority of disbursements took place between 2005 and 2012, when the Congress-led UPA government was in power, leading to a political war of words. While Chief Congress Spokesperson Randeep Surjewala hinted at the complicity of the Narendra Modi government in the “fraud”, a tweet from Finance Minister Nirmala Sitharaman’s office said the account became an NPA in November 2013. “Those who make noise about it have dug holes in which they themselves have fallen,” the tweet read.

That’s quite a fall for what used to be one of India’s biggest shipbuilding companies, with an order book of Rs 16,600 crore. Until the end of 2012-13, the company had a net profit of Rs 107 crore. But the cookie subsequently collapsed, with losses reaching Rs 3,704 crore in March 2016. At its peak, it had the capacity to build vessels of up to 18,000 deadweight tons (DWT) at the yard Surat Shipyard and 1.20 lakh DWT at Dahej Shipyard.

The Gujarat-based company, according to the FIR registered by the CBI, invested the money contracted in the form of loans from banks in subsidiaries abroad, acquired assets through affiliated companies and transferred a part to multiple related parties.

“The majority of this disbursement occurred between 2005 and 2012, while ABG Shipyard’s account with SBI became a non-performing asset from November 2013. According to the FIR, the primary period of investigation would be 2005, while it will also extend until 2017,” said a banker, aware of the information, on condition of anonymity.

Transaction Web

SBI alleged that part of the loans had been used to purchase properties by “related parties” linked to ABG Shipyard and its developers. These were made through complex transactions, with the money channeled through different accounts and entities, a source said. “Probe is on” is all the source was willing to reveal.

Private lender ICICI Bank has the maximum exposure of Rs 7,089 crore, followed by IDBI Bank at Rs 3,639 crore, State Bank of India at Rs 2,925 crore and Bank of Baroda at Rs 1,614 crore. Others on the list, according to the FIR, are Exim Bank of India (Rs 1,327 crore), Punjab National Bank (Rs 1,244 crore), Indian Overseas Bank (Rs 1,228 crore), Standard Chartered Bank (Rs 743 crore) and Bank of India (Rs 719 crore) among others.

An official said the banks’ exposure to the scam would be less because the total amount also includes items of interest. ABG Shipyard, which was declared a non-performing asset in 2013, is currently undergoing bankruptcy proceedings and therefore all these amounts are accounted for,” the official said.

Global crisis

In its complaint to the CBI, SBI said a global crisis led to a drop in freight demand, which subsequently impacted the shipping industry. Demand for commercial vessels plummeted as the industry went through a downturn even in 2015, which was exacerbated by a lack of orders from the defense sector. making it difficult for the company to maintain a repayment schedule, he said.

The shipping company was also referred to the National Company Law Tribunal on August 1, 2017 by ICICI Bank as part of the company insolvency resolution process.

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