ABG Shipyard case: Company directors under CBI's scanner, diverted funds through 38 overseas firms

Economic Times reported that the federal agencies looking into the role of independent directors on its board, including two who were nominated by one of the banks allegedly duped by the Surat-based shipbuilding company.

On Tuesday, CBI again questioned Rishi Kamlesh Agarwal, former chairman of ABG Shipyard, in connection with the case which is being considered as the biggest bank fraud in the country, media reports said, adding that he was quizzed for eight hours.

However, his lawyer Vijay Aggarwal had said Rishi Agarwal had left ABG Shipyard from all executive capacities in 2008 and the company's debt at that time was Rs 441 crore, "which was duly repaid", the ET report said.

He said since 2016, the banks held 51 percent shareholding in the company and were engaged in running the company, while the promoters had only 7 percent shareholding in the company.

The allegations now pressed were in the knowledge of the banks for years but they were never considered fraudulent.

"The said stand is nothing but an afterthought," he said, adding that his client has fully cooperated with the investigation.

ABG Shipyard allegedly used 38 related overseas firms and 60 Indian companies to divert funds borrowed from banks.

One such entity based in Singapore has been named in a forensic audit report prepared by Ernst & Young (EY) in January 2019.

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.

"Based on review of financial statements of ABG Shipyard Limited (SL) for the review period, (the audit) noted preference shares of ABG Singapore subscribed by ABG SL amounting to $43.5 million," the audit report said.

The EY report further said the "payment paid to ABG SL Singapore may be potentially diverted", the ET report said.

Also, EY is likely to be a key prosecution witness in the bank fraud.

The Central investigating agency had filed a case on February 7 against some of its top executives, then executive director Santhanam Muthaswamy, directors Ashwini Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia, and another company ABG International Pvt Ltd, 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.