ABG SHIPYARD FRAUD
Author: Sakshi Jha, a student of Symbiosis Law School, Hyderabad Semester IV
ABSTRACT:
One of the largest shipbuilding businesses in India, ABG Shipyard Ltd., was involved in the most significant financial scandal in the nation between 2012 and 2017, which led to criticism of the Centre from the Congress, which said it was providing “undue favour” to the company.
The Central Bureau of Investigation (CBI) had detained Rishi Agarwal, the erstwhile promoter of the defunct shipbuilder ABG Shipyard Ltd. It was discovered that ABG Shipyard had set up a network of transactions to defraud a group of 28 banks out of ₹22,842 crore between 2012 and 2017. ICICI, IDBI, and State Bank of India (SBI) are among the banks.
INTRODUCTION:
The most significant shipbuilding enterprise in the private sector in India is ABG Shipyard Limited. Originally named Magdalla Shipyard Pvt. Ltd., it was established in 1985 and is headquartered in Maharashtra. The firm’s parent company is the Aditya Birla Group, and its subsidiaries are Western India Shipyard and ABG Motors Limited.
Since 2003–2004, the Ministry of Commerce of the Government of India has awarded the company the All India Trophy for Highest Exporters annually. It was given a contract in 2004 to construct the Indian Coast Guard’s pollution-control vessels.
It was in the shipbuilding and repair sector, with shipyards located at Dahesh and Surat in Gujarat, and was promoted by Rishi Agarwal. It is financed by a group of 28 banks, with ICICI serving as the lead bank.
Even after taking a significant hit in 2008, the banks continued to lend heavily to ABG from 2005 until 2010. ABG Shipyards was impacted by the global financial crisis of 2008, which was sparked by the US housing bubble and Lehman Brothers’ demise. Due to a shortage of working capital, the business’s operational cycle “significantly increased, aggravating the liquidity and financial problem.”
2014 saw an attempt by the SBI to restructure loans to ABG Shipyard under the corporate debt restructuring, or CDR. Because ABG Shipyards was unable to pay the interest and installments by the required date, the restructuring failed.
The company was one of the “Dirty Dozen,” or twelve large non-performing assets (NPAs) that the RBI designated for bankruptcy proceedings in 2017. These included Essar, Bhushan, Jaypee, and Amtek, among others. With claims against banks, the government, workers, and operational creditors totaling ₹27,400 crore, the principal bank, ICICI Bank, filed an application under the IBC.
in 2019. ABG Shipyard was the subject of a forensic audit by Ernst and Young LLP. Evidence of fraud from April 2012 to July 2017 was discovered. According to the audit, “diversion of funds, misappropriation, and criminal breach of trust, intending to gain unlawfully at the cost of the bank’s funds” were the methods used to commit fraud. ABG Shipyard obtained loans from twenty-eight institutions, mostly in three forms. The money obtained from these loans was then transferred through 98 sister companies, primarily to establish personal assets. Later that same year, SBI filed a complaint.
In 2022, CBI booked ABG Shipyard and ABG International Private Ltd. ABG Shipyard Ltd. owed around ₹22,842 crore, according to the CBI FIR. In addition to SBI (₹2,925 crore), Bank of Baroda (₹1,614 crore), Punjab National Bank (₹1,244 crore), Exim Bank (₹1,327), Indian Overseas Bank (₹1,244 crore), and Bank of India (₹719 crore), it owed ICICI (₹7,089 crore), which was leading the consortium.
The CBI had issued a lookout notice for Agarwal and ABG executives Santhanam Muthuswamy and Ashwini Kumar.
