A timeline of ABG Shipyard loan fraud case

As the ABG Shipyard bank fraud (to the tune of Rs 22,000 crore) case came to light, the government came in for severe criticism. And the fact the company comes from Prime Minister Narendra Modi’s home state Gujarat, gave the opposition an opportunity to attack the government.

So, the government is on a damage control mode and is desperately trying to shift the blame on UPA as the fraud was related to loans taken before 2014.

In its latest attempt to deflect the charges, the government has through the Central Bureau of Investigation (CBI) come out with a timeline insinuating that the fraud was actually took place before 2014.

The timeline

ABG Shipyard Ltd has been in business with State Bank of India (SBI) since 2001. The account of the company turned NPA on 30 November 2013 (as per SBI).

As per bank 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 CDR mechanism on 27 March 2014. However, the operations of the company could not be revived.

On 10 September 2014, N V Dand & Associates was deputed to conduct stock audit of ABG Shipyard Ltd. The audit firm submitted its report on 30 April 2016 and observed various faults on the part the accused company. Subsequently, the account of ABG Shipyard was declared NPA on 30 July 2016 with effect from 30 November 2013.

In keeping 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 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, therefore, covers the period from 2012 to 2017.

Meanwhile, the company was also referred to NCLT, Ahmedabad on 1 August 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 fraud is primarily on account of huge transfer by ABG Shipyard to its related parties and subsequently making adjustment entries. It is also alleged that huge investment 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.

During the perusal of records and initial investigation, it is seen that the critical period was 2005-2012. SBI made a complaint to CBI on 25 August 2020 (after CBI had raised queries in the complaint made in 2019) to look into the matter of aforesaid bank fraud made by ABG Shipyard Ltd and its Directors.

In the instant case, there are 28 banks involved in consortium with huge amount of disbursement. There were different nature of bank loans including CC Loan, Term Loan, Letter of Credit, Bank Guarantee etc. that were given as advance by the banks.

It may also be mentioned that the withdrawal of General Consent to CBI Investigation by certain States has 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.

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 7 February 2022. In continuation of the investigation, searches at 13 locations were conducted on 12 February 2022.

Several incriminating documents, such as books of accounts of the accused borrower company, purchase/sales details, minutes of meetings of Board, 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. 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. Further correspondences are being made with the consortium banks to provide details including documents with regard to sanction of loan and its disbursal.

Also See: Amount involved in fresh bank frauds drops 56% in 2020-21