In the latest development in the Rs 22,842 crore fraud, allegedly committed by ABG Shipyard company, the CBI said that it has issued a Look Out Circular (LOC), against the accused in the case.
The CBI revealed that there are around 100 high value bank fraud cases that could not be registered due to non-accordance of specific consent u/s 6 of the DSPE Act by the state governments where the general consent has been withdrawn.
The CBI has recovered incriminating documents, i.e account books of ABG Shipyards, its sale-purchase details, minutes of board meetings, share registers, contract files.
Also, the bank account details of ABG Shipyards and related parties have been obtained. Subsequently, LOCs against the accused have already been opened by the CBI. Earlier, the State Bank of India had also opened LOCs against the main accused in 2019.
"The withdrawal of general consent to a CBI investigation by certain states has made the registration of bank fraud cases more challenging. There are around 100 high value bank fraud cases that could not be registered due to non-accordance of specific consent u/s 6 of the DSPE Act by state governments where the general consent has been withdrawn," said a CBI official.
In the present case, there are 28 banks involved in a consortium with a huge amount of disbursement.
There were different types of bank loans including CC Loan, Term Loan, Letter of Credit, Bank Guarantee etc. that were given as advance by the banks.
The fraud is primarily on account of huge transfers by ABG Shipyard Ltd to its related parties and subsequently making adjustment entries. It is also alleged that huge investments were made in its overseas subsidiary by diverting the bank loans. Funds were diverted to purchase huge assets in the name of its related parties.
"They took a loan of Rs 1228 cr from the Indian Overseas Bank, Rs 1244 crore from Punjab National Bank, Rs 1614 crore from Bank of Baroda, Rs 7089 crore from ICICI Bank and Rs 3634 crore from IDBI Bank. Later they didn't pay the banks their dues. Initially the bank initiated an internal inquiry in which it was found that the company was cheating the consortium of Banks by diverting funds to different entities," said the CBI.
The CBI official said that ABG Shipyard Ltd has been in business with the SBI since 2001. The account of ABG Shipyard turned NPA on 30 November 2013. As per the bank complaint, the NPA is to the tune of Rs 22,842 crore and the majority of the disbursement happened between 2005 and 2012 by a consortium of 28 banks led by ICICI Bank and including SBI.
The account was restructured under the CDR mechanism on 27 March 2014. However, the operations of the company could not be revived.
On 10 September 2014, N V Dand and Associates was deputed to conduct a stock audit of ABG Shipyard Ltd. The audit firm submitted its report on 30 April 2016 and observed various faults on the part the accused company. Subsequently, the account of ABG Shipyard Ltd was declared NPA.
In keeping with a policy implemented since 2014 of red-flagging suspect accounts, commissioning forensic audits by empanelled forensic auditors, and making CMDs liable, a forensic audit was initiated based on the lenders' decision in the Joint Lenders Meeting on 10 April 2018.
Ernst & Young LLP was appointed Forensic Auditor. As per the usual practice, these forensic audits cover a period starting approximately three to four years prior to the date of the declaration of the NPA, which, in this case was 2016.
The forensic audit of ABG Shipyard Ltd therefore covers the period from 2012 to 2017. Meanwhile, the company ABGSL was also referred to NCLT, Ahmedabad on 1 August 2017 by ICICI Bank, being the lead bank, for Corporate Insolvency Resolution Process(CIRP).
Between April 2019 to March 2020, various banks of the consortium declared the account of ABG Shipyard a fraud.
The CBI is investigating this biggest fraud committed by any company so far.