February 15, 2022
3 mins read

ABGSL SCAM: India staring at biggest bank fraud

In a backgrounder, the CBI said that after it was declared a NPA, the ABGSL account was restructured under the CDR mechanism on March 27, 2014, but the company could not be revived…reports Quaid Najmi

A day after Union Finance Minister Nirmala Sitharaman declared that ABG Shipyard Ltd’s Rs 22,842-crore scam was detected “faster than normal average”, the Central Bureau of Investigation on Tuesday pushed back the fraud date by 8 years.

Spelling embarrassment for the Centre, the CBI declared that a perusal of the records and the initial investigations show that the scam’s “critical period was 2005-2012” – making it nearly 18 years old now.

The CBI said the ABGSL was conducting business with the SBI since 2001 and the bank declared it as a Non Performing Asset on November 30, 2013.

Referring to the SBI complaint, the CBI said the fraud was to the tune of Rs 22,842-crore and “the majority of disbursements took place between 2005-2012” by the consortium of 28 banks, led by the ICICI Bank, including the SBI.

On accusations of delays in lodging the complaint only last week, the CBI tried to shift the blame by saying: “Withdrawal of general consent to the CBI investigation by certain states has made the registration of bank fraud cases more challenging.”

The agency said how it could not lodge around 100 high value bank fraud cases due to “non-accordance of specific consent u/s 6 of DSPE Act by state governments where the general consent has been withdrawn” – but did not name the states.

“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, a FIR was registered on February 7, 2022,” said the CBI.

However, in a relief of sorts, the CBI announced that the accused in the ABGSL scam have been “located in India” and it has issued Look Out Circular (LOCs) against them, and even the complainant SBI had opened LOCs in 2019.

In a backgrounder, the CBI said that after it was declared a NPA, the ABGSL account was restructured under the CDR mechanism on March 27, 2014, but the company could not be revived.

Six months later in September 2014, N.V. Dand & Associates were asked to conduct a stock audit of the defaulting company which submitted its report after 18 months, on April 30, 2016, pointing out various lapses.

Thereafter, the ABGSL account was declared a NPA on July 30, 2016, with retrospective effect from November 30, 2013 and in April 2018, a forensic audit was ordered through Ernst & Young LLP, and covered the period from 2012-2017 as per the normal practice.

Prior to the forensic audit, the ICICI Bank – the worst-hit in the scam – had dragged ABGSL to the NCLT, Ahmedabad for the Corporate Insolvency Resolution Process (CIRP).

Then, things started moving swiftly as between April 2019-March 2020, various banks in the consortium declared the ABGSL account “fraud”, on account of huge transfers by it to related parties, and then making “adjustment entries”.

The ABGSL also made huge investments in its overseas subsidiary by diverting the banks’ loans and funds to procure huge assets in the name of its related parties.

The loans were of different types and after analysing the primary facts of the case, scrutiny, discreet verification, the issues mentioned, verifying the addresses of the accused, the CBI finally lodged the FIR on February 7 this year.

Jumping into action five days later, the CBI raided 13 locations as part of the probe, seized incriminating documents, books of accounts of the ABGSL, purchase/sales details, board meetings minutes, share registers, various contract files, etc, which are now being scrutinised, and obtained the bank account details of the accused.

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