The Central Bureau of Investigation (CBI) has charged ABG Shipyard Limited, one of India’s major private sector shipyard businesses, with defrauding 28 banks to the tune of Rs 22,842 crore. Along with the firm, which specializes in shipbuilding and repair, the case names Rishi Agarwal, Santhanam Muthuswamy, and Ashwini Kumar as accused persons. It is one of the largest bank fraud cases the CBI will investigate (larger than the Punjab National Bank scam involving Nirav Modi and Mehul Choksi).
According to the FIR filed in response to the State Bank of India’s (SBI) complaint, the forensic audit report revealed that between April 2012 and July 2017, the accused conspired and committed illegal activities including fund diversion, misappropriation, and criminal breach of trust, all for purposes other than those for which the bank releases funds.
ABG Shipyard is one of Largest Private Shipbuilding Company
Rishi Agarwal, a prominent figure in India’s shipbuilding sector, is the group’s promoter. ABG Shipyard Limited (ABGSL) has two shipyards in Surat and Dahej. Surat Shipyard can build vessels up to 18,000 deadweight tonnes (DWT) and Dahej Shipyard can build vessels up to 1,20,000 deadweight tonnes (DWT).
In the last 16 years, ABGSL has built over 165 vessels (including 46 for export), including specialized vessels such as newsprint carriers, self-dispensing, and loading bulk cement carriers, floating cranes, interceptor boats, dynamic positioning diving support vessels, pusher tugs, and flotilla for leading companies in India and abroad.
ABGSL was also purportedly awarded contracts by the Indian Navy in 2011 to build ships, however, the contract was later discontinued due to the firm’s financial difficulties.
Additionally, the FIR states, “The global crisis has damaged the shipping industry due to a decline in commodity demand and pricing, which has resulted in a decline in cargo demand.” Contract cancellations for a few ships/vessels resulted in inventory accumulation. This has resulted in a shortage of working capital and a significant lengthening of the operational cycle, increasing liquidity and financial problems.
There was no market for commercial vessels in 2015, as the industry was through a slowdown. Additionally, there were no new defense orders issued in 2015. The corporation was having significant difficulty meeting the milestones outlined in the CDR. As a result, the corporation was unable to pay the interest and installments on time.”
The company has been referred to the Ahmedabad bench of the NCLT (National Business Law Tribunal), which previously authorized the official liquidator for ABG Shipyard to conduct a private sale of the company’s assets.
ABG shipyard owes SBI Rs 2,925 crore, ICICI Bank Rs 7,089 crore, IDBI Bank Rs 3,634 crore, Bank of Baroda Rs 1,614 crore, PNB Rs 1,244 crore, and Indian Overseas Bank Rs 1,228 crore.
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