ABG Shipyard The Central Bureau of Investigation (CBI) issued lookout notices against Rishi Agarwal and other directors of ABG Shipyard in connection with the Rs 23,000-crore bank fraud case so that they are not able to leave the country while the case is investigated, media reports said.
News agency ANI quoted a senior CBI official as saying: “The Lookout Circulars (LOCs) were issued against the directors of ABG Shipyard in the Rs 22,842 crore bank loan fraud case.”
The Central investigating agency had filed a case on February 7 against some of its top executives, unknown public servants and private persons of ABG Shipyard, the flagship firm of the ABG Group, on charges of abuse of official position, criminal conspiracy, cheating, and criminal breach of trust.
The CBI initiated the investigation following an FIR by the State Bank of India, which alleged that the accused people had committed illegal activities and diverted the money borrowed from banks for purposes other than what was stated.
An investigation is already underway and the company is currently facing insolvency resolution in the National Company Law Tribunal, Money Control reported.
The vessel maker was once a profit-making company and banks lined up to lend money for its business. The company’s yards were located at Dahej and Surat in Gujarat, which were the nerve centres of India’s shipping industry.
However, things changed during the global financial crisis of 2007-08.
The company's working capital depleted and its operating cycle lengthened, worsening its liquidity and financial problems. Its difficulties were further aggravated due to the absence of fresh defence orders in 2015, said the report.
When the company failed to pay the loan installments, the lenders restructured the loan to ease the situation. However, after the restructuring failed, the account was classified as a non-performing asset in July 2016, with retrospective effect from November 30, 2013.
Now, ABG Shipyard owes a total of Rs 22,842 crore to a group of 28 lenders including SBI, ICICI Bank, IDBI Bank, Bank of Baroda, Punjab National Bank, Bank of India, Life Insurance Corporation of India, IFCI and Yes Bank, according to the report.
A forensic report submitted by Ernst & Young to lenders on January 18, 2019, for the period April 2012 to July 2017 revealed evidence of fund diversion.
The audit report stated that the money was diverted to One Ocean Shipping and ABG Engineering and Construction in previous years.
The audit raised questions about investments through an overseas subsidiary and indicated that properties had been purchased by related parties with funds provided by ABG Shipyard. The assets purchased with these funds were not part of the fixed assets in the books of the company, the report said.
Banks have already put the account under the bad loan category and have made provisions for the ABG Shipyard account, which means any further impact on the balance sheet is unlikely.
A loan becomes an NPA if neither the principal nor interest is paid for a period of 90 days.
A fraud is declared on the basis of the forensic audit report findings that are discussed thoroughly in joint lender meetings.
Usually, when fraud is declared, an initial complaint is filed with the CBI and based on its investigation, further information is gathered.
In some cases, when enough additional information is collected, a second complaint covering full and complete details is filed and this forms the basis for the FIR, the bank said.
In ABG Shipyard's case, the first complaint was filed in November 2019, and the second complaint in December 2020.
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