Author: Samrudhi Mohapatra
College: SOA National Institute of Law
Abstract
The ABG Shipyard case, which was filed with the CBI in February 2022, is still the biggest bank fraud case in India. It concerns the alleged misappropriation of ₹22,842 crore that was borrowed from 28 institutions, including the State Bank of India and ICICI Bank. The factual matrix of the fraud, the legal framework under which it is prosecuted (including the Indian Penal Code, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, and the RBI’s Master Directions on Frauds), and the judicial developments influencing the course of such cases are all examined in this article. The ABG Shipyard case, which was filed with the CBI in February 2022, is still the biggest bank fraud case in India. It involves the purported diversion of ₹22,842 crore that was borrowed from a group of 28 banks, including ICICI Bank and the State Bank of India. The factual matrix of the fraud, the legal framework under which it is prosecuted (including the Indian Penal Code, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, and the RBI’s Master Directions on Frauds), and the judicial developments influencing the course of such cases are all examined in this article.
To the Point
In order to finance its shipbuilding activities, ABG Shipyard Limited, a former significant shipbuilder based in Surat and Dahej, Gujarat, borrowed heavily from a group of twenty-eight banks between 2005 and 2012. The account was restructured in 2014, labeled a non-performing asset in November 2013, and then declared an NPA once more in July 2016 following the failure of revival attempts. In January 2019, Ernst & Young submitted a forensic audit that revealed financial statements had been manipulated and money had been transferred to a foreign company and linked parties. The CBI only filed its FIR on February 7, 2022, despite the State Bank of India’s complaints in 2019 and 2020. It accused the company, its former chairman Rishi Kamlesh Agarwal, four other directors, and ABG International Pvt Ltd of criminal conspiracy, cheating, and criminal breach of trust in addition to violations of the Prevention of Corruption Act.
Use of Legal Jargon
• The CBI only filed its FIR on February 7, 2022, despite the State Bank of India’s complaints in 2019 and 2020. It accused the company, its former chairman Rishi Kamlesh Agarwal, four other directors, and ABG International Pvt Ltd of criminal conspiracy, cheating, and criminal breach of trust in addition to offenses under the Prevention of Corruption Act.
• Fraud Classification: In accordance with the RBI’s Master Directions on Frauds, banks must attach a formal tag to an NPA account if they suspect willful misrepresentation, money diversion, or record falsification. This will result in required RBI reporting and referral to investigating agencies.
• Criminal Breach of Trust: This is an offense under Section 405 read with Section 409 IPC that involves dishonest misuse of entrusted property; it applies here to money taken out of the loans’ authorized use.
• Prosecution Sanction under Section 17A, PC Act: Before investigating a public worker for an alleged offense under the Prevention of Corruption Act, 1988, investigating agencies must get mandatory prior consent from the relevant government authority.
The Proof
The CBI’s own case files, which show a loss of ₹22,842 crore distributed over 28 lenders—ICICI Bank at ₹7,089 crore, IDBI Bank at ₹3,639 crore, and SBI at ₹2,925 crore—provide proof of the extent of the alleged fraud. Records that the agency claims demonstrate multilayer diversion through Singapore-based group businesses utilizing letters of credit purportedly given for importing ship designs were found during searches at thirteen locations on February 12, 2022.A pattern of behavior that goes beyond the ABG consortium loans alone is demonstrated by the Enforcement Directorate’s concurrent action, which included asset attachment of ₹2,747.69 crore in September 2022 and its independent prosecution of Rishi Agarwal for a comparable ₹2,000 crore fraud on IL&FS subsidiary IFIN. The chargesheet that the CBI submitted in November 2022 against the twenty-five defendants admits that the inquiry into the role of public personnel is still ongoing while it is awaiting approval under Section 17A of the PC Act.
Case Laws
1. State Bank of India & Ors. v. Rajesh Agarwal & Ors., (2023) 6 SCC 1 (Supreme Court of India, decided 27 March 2023)
In its decision on petitions contesting fraud classifications made without hearing the borrower, the Court held that natural justice, specifically audi alteram partem, must be read into the RBI’s Master Directions on Frauds because such classifications carry serious civil consequences, such as reputational harm and exclusion from future credit. This directly affects cases such as ABG Shipyard, where the account was marked as fraudulent prior to the criminal proceedings, by mandating that borrowers receive notice and an opportunity to address forensic audit findings prior to the fraud tag being applied.
2. Central Bureau of Investigation v. Surendra Patwa & Ors., 2025 SCC OnLine SC 934 (Supreme Court of India)
The Court clarified the Rajesh Agarwal ruling by holding that administrative classification and criminal investigation serve separate purposes, so even if a fraud classification is later found to violate natural justice, this does not automatically vitiate a FIR or the criminal prosecution resulting from a bank’s complaint. This demonstrates that a simultaneous criminal trial, like the one against the promoters of ABG Shipyard, cannot be derailed by procedural errors at the classification stage.
3. Central Bureau of Investigation v. Rishi Kamlesh Agarwal, Special CBI Court order dated 8 December 2022 (New Delhi)
Rishi Agarwal was granted statutory release by the trial court under Section 167(2) CrPC, and the CBI’s chargesheet was deemed incomplete according to Section 17’s authorization to investigate public workers.A of the PC Act had not yet been acquired, depending on the Delhi High Court’s ruling in the Chitra Ramakrishna NSE co-location case, which held that in order to halt the statutory bail clock, a chargesheet required to include every offense listed in the FIR. This ruling was later contested by the CBI before the Delhi High Court, highlighting the ongoing conflict between the freedom of the accused and the agency’s need for time to obtain sanctions in cases involving public officials.
4. Enforcement Directorate v. Rishi Agarwal & Anupama Agarwal, Special PMLA Court order dated 6 July 2023 (Mumbai)
The Special Court granted bail to Agarwal and his wife in a related but distinct money-laundering prosecution involving an alleged ₹2,000 crore fraud on IL&FS Financial Services on the grounds that they had cooperated with the investigation and a complaint equivalent to a chargesheet had already been filed. This demonstrates how bail under the strict twin conditions of Section 45, PMLA is nevertheless granted once the substantive investigation is largely finished.
Conclusion
A forensic audit discovered the diversion in January 2019, but the CBI FIR was not filed until February 2022. This gap has been cited by critics from all political persuasions as proof of a structural delay in India’s fraud-reporting framework. The ABG Shipyard case is as much about a delayed institutional response as it is about the fraud itself. Prosecuting a mega-fraud is now inextricably linked to a complex procedural contest fought on multiple fronts at once, as evidenced by the subsequent litigation, which includes the Supreme Court’s insistence on natural justice before fraud classification in Rajesh Agarwal, its clarification in Surendra Patwa that this does not derail parallel criminal trials, and the ongoing battles over default bail and PMLA bail conditions. The outcome of this case, whose scope is comparable to India’s more well-known financial scandals, will probably influence how banks, investigators, and courts respond to the next significant corporate loan fraud.
FAQs
Q1. What is the ABG Shipyard case about?
It relates to the purported misappropriation of ₹22,842 crore that ABG Shipyard Limited borrowed from a group of twenty-eight banks between 2005 and 2012. The money was purportedly transferred through affiliated companies and foreign subsidiaries before being hidden through false financial statements.
Q2. Why did it take so long for a criminal case to be registered?
The account became non-performing in 2013 and again in 2016, but it was not until January 2019 that a forensic audit verifying fraud was finished. Following SBI’s complaints in 2019 and 2020, the CBI filed its FIR in February 2022, a delay that has received condemnation from the public and politicians.
Q3. What offences have been alleged against the accused?
In addition to offenses under Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988 relating misuse of official position, the FIR mentions criminal conspiracy, cheating, and criminal breach of trust under the Indian Penal Code.
Q4. Does a bank have to hear a borrower before declaring the account a fraud?
Indeed. In accordance with State Bank of India v. Rajesh Agarwal (2023), banks are required by the RBI’s Master Directions to notify the borrower of the forensic audit results and give them a chance to reply before officially labeling an account as fraudulent.
Q5. Can such a classification challenge stop the criminal case from proceeding?
No. In Central Bureau of Investigation v. Surendra Patwa (2025), the Supreme Court made it clear that a FIR or the criminal prosecution based on a bank’s complaint are not automatically invalidated by a natural justice breach in the administrative fraud categorization.