ED files money laundering case in ABG Shipyard bank fraud

The Enforcement Directorate (ED) has registered a criminal case of money laundering against ABG Shipyard Ltd, its former promoters, and others for allegedly cheating a consortium of 28 banks of over ₹22,842 crore, official sources said on Wednesday.

The action comes days after the CBI registered an FIR in the country's biggest alleged bank loan fraud case to l date.

The ED case has been filed under sections of the Prevention of Money Laundering Act (PMLA) after the investigators studied the CBI complaint and the forensic audit report, the sources said.

They added that the Enforcement Directorate (ED) will specifically look into the charges of alleged “diversion” of bank loan funds, creation of shell firms to launder public money and the role of the company’s executives and others.

Instances of "huge investments" being made in the overseas subsidiary of the company by "diverting" the loans will also form an essential part of the ED probe.

The agency can also move to attach assets of the accused once money laundering and layering of funds is established, they said.

The loans given to the company include categories like CC (cash credit) loan, term loan, letter of credit, bank guarantee etc.

The CBI had booked ABG Shipyard Ltd and its then chairman and managing director Rishi Kamlesh Agarwal, along with others, for allegedly cheating the consortium of banks of over ₹22,842 crore.

It had also named the then executive director Santhanam Muthaswamy, directors Ashwini Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia and another company ABG International Pvt Ltd, for alleged offences of criminal conspiracy, cheating, criminal breach of trust and abuse of official position under the Indian Penal Code (IPC) and the Prevention of Corruption Act.

The accused in the ED case are the same, they said.

The CBI FIR came about after the State Bank of India (SBI) first filed a complaint on November 8, 2019, after which the agency sought some clarifications on March 12, 2020.

The bank filed a fresh complaint in August that year. After "scrutinising" the complaint for over one-and-a-half years, the CBI filed an FIR on February 7.

The company was sanctioned credit facilities from 28 banks and financial institutions led by ICICI Bank, with the SBI having exposure of ₹2,468.51 crore.

A forensic audit by Ernst and Young showed that between 2012-17, the accused colluded together and committed illegal activities, including diversion of funds, misappropriation and criminal breach of trust, the CBI had said.

The CBI had said in a statement that the funds (bank loans) were used by the company and its promoters for purposes other than for which they were released by banks.

The loan account was declared a non-performing asset (NPA) in July, 2016 and fraud in 2019.

In its complaint, the SBI said ABG Shipyard Ltd (ABGSL) is the flagship company of the ABG Group which engaged in the business of shipbuilding and ship-repair.

The ABGSL, being a major player in the Indian shipbuilding industry, operates from shipyards that are located at Dahej and Surat in Gujarat, with a capacity to build vessels up to 18,000 dead weight tonnage (DWT) at Surat Shipyard and 1,20,000 dead weight tonnage (DWT) at Dahej Shipyard.

The company has constructed over 165 vessels, including 46 for export market, in the last 16 years, including specialised vessels like the newsprint carriers, self-discharging and loading bulk cement carriers, floating cranes etc with class approval of all international classification societies like Lloyds, American Bureau of Shipping, Bureau Veritas, IRS, DNV, the complaint said.

"Global crisis has impacted the shipping industry due to fall in commodity demand and prices and subsequent fall in cargo demand. The cancellation of contracts for few ships and vessels resulted in piling up of inventory. This has resulted in paucity of working capital and caused significant increase in the operating cycle, thereby aggravating the liquidity problem and financial problem," the SBI complaint said.

It added there was no demand for commercial vessels as the industry was going through a downturn even in 2015 which was further aggravated due to lack of defence orders, making it difficult for the company to maintain re-payment schedule.

The company has already been referred to the NCLT, Ahmedabad, by the ICICI Bank for corporate insolvency resolution process, it said.