Delhi’s Rouse Avenue Court on Friday sent the ABG Shipyard managing director RK Agarwal to four days’ CBI custody in connection with the Rs 22,842 crore bank fraud case.
Agarwal was arrested on Thursday by the probe agency. The CBI on Friday produced him before the Special CBI court and sought his custodial remand.
The court after hearing their arguments granted them four days custody of the accused.
The CBI has seized incriminating documents, ie, account books of ABG shipyards, its sale-purchase details, minutes of Board meetings, share registers, contract files. Also, bank account details of ABG Shipyards and related parties were obtained. Subsequently, Lookout Circulars (LOCs) against the accused were opened by the CBI. The State Bank of India had also opened LOCs against the main accused in 2019.
In the instant case, there are 28 banks involved in consortium with huge amounts of disbursement. There were different kinds of bank loans, including CC Loan, Term Loan, Letter of Credit, Bank Guarantee, etc. that were given as advance by the banks.
The fraud was primarily on account of a huge transfer by ABG Shipyard Ltd to its related parties and subsequently making adjustment entries. It is also alleged that huge investments were made in its overseas subsidiary by diverting the bank loans and funds were diverted to purchase huge assets in the name of its related parties.
“They took a loan of Rs 1,228 from Indian Overseas Bank, 1244 crore from Punjab National Bank, 1614 crore from Bank of Baroda, 7089 crore from ICICI Bank and 3,634 crore from IDBI Bank. Later they didn’t pay the bank their dues. Initially, the bank initiated an internal inquiry in which it was found that the company was cheating the consortium of Banks by diverting funds to different entities,” said the CBI.
The CBI official said that ABG Shipyard Ltd has been in business with SBI since 2001. The account of ABG Shipyard turned NPA on November 30, 2013. As per the Bank’s complaint, the NPA is to the tune of Rs 22,842 crore and the majority of the disbursement happened between 2005 and 2012 by a consortium of 28 banks led by ICICI Bank and including SBI.
The account was restructured under the CDR mechanism on March 27, 2014. However, the operations of the company could not be revived.
On September 10, 2014, NV Dand and Associates was deputed to conduct a stock audit of ABG Shipyard Ltd. The Audit Firm submitted its report on April 30, 2016 and observed various faults on the part of the accused company. Subsequently, the account of ABG Shipyard Ltd was declared NPA.
In keeping with a policy implemented since 2014 of red-flagging suspect accounts, commissioning forensic audits by empaneled forensic auditors, and making CMDs liable, a forensic audit was initiated based on the lenders’ decision in the Joint Lenders Meeting dated 10 April 2018.
Ernst & Young LLP was appointed Forensic Auditor. As per the usual practice, these forensic audits cover a period starting approximately three to four years prior to the date of declaration of NPA, which, in this case, was 2016.
The forensic audit of ABG Shipyard Ltd therefore covers the period from 2012 to 2017. Meanwhile, the company ABGSL was also referred to NCLT, Ahmedabad on August 1, 2017 by ICICI Bank, being lead bank, for Corporate Insolvency Resolution Process(CIRP).
In between April 2019 to March 2020, various Banks of the consortium declared the account of ABG Shipyard as fraud.
The CBI is investigating this biggest fraud committed by any company so far.
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