Enforcement Directorate Raids against ABG Shipyard over Largest Bank Fraud in India

On April 26, the Enforcement Directorate (ED) began conducting raids on over 30 premises belonging to ABG shipyards in connection with India’s biggest bank fraud case.

As per the ED, raids took place in Mumbai, Pune, Kolkata, Surat, and other cities. After the ED questioned ABG Shipyard’s former Chairperson, Rishi Agarwal, they decided that raids were necessary to uncover even more documents regarding the massive bank fraud. Any documents found will be used to cross-check statements made by both ABG shipyards and bankers whom the company allegedly defrauded some 22,000 crore.

Raids Related to Massive Bank Fraud Case

According to the ED, these raids are in conjunction with the criminal money laundering case registered against ABG shipyards in February. Prosecutors claim that ABG and its consorts cheated a group of banks out of over 22,000 crore. In its report, the ED claims that to defraud banks, ABG shipyards used a massive web of Indian and overseas companies. In total, there were over 98 related entities involved. Of these, ABG used nearly 40 overseas companies in conjunction with 60 Indian firms to divert the massive sums of money from loans illegally.

Allegedly, the ABG shipyard made a massive and fraudulent money transfer to disburse the loan money among its related parties. In addition, ABG made massive overseas investments using subsidiary companies to divert bank loans. The funds of these diverted loans were then used to purchase large-scale assets.

Since the inception of the case, government agencies have been quizzing both bank officials involved in the case and ABG’s senior employees. Banks included in this sandal are ICICI Bank and others including BOI, BOB, SBI, and PNB. In total, 28 banks provided loans to ABG shipyard, which were used criminally.

Complicated History of ABG’s Bank Fraud Case.

The current bank fraud case already has a long and complicated history. In sum, officials claim that ABG took out many loans from some of India’s largest banks with no intention of paying their dues. Instead, ABG diverted the loan money to various entities fraudulently.

Back in 2013, complaints from banks meant that ABG shipyard’s account with the consortium of banks was classified as an NPA (non-performing asset) in November of 2013. Using the CDR mechanism, ABG shipyard’s account was restructured in March of 2014. However, due to the gross amount of fraud committed and money borrowed by the company, ABG’s operations could not be revived.

As a result, a firm known as N V Dand and Associates was ordered to conduct a full stock audit of ABG in 2014. The firm and its constituents took nearly two full years to submit their report. In the report dated April 2016, N V Dand and Associates found that ABG had committed various infringements. Due to this report, ABG’s account was once again declared to be a non-performing asset. By 2018, a forensic audit was ordered after it was decided to be the best course of action by the consortium of banks at a Joint Lenders meeting. A firm known as Ernst & Young LLP was appointed to be the forensic auditor. Ernst & Young LLP conducted an audit that began with documents beginning upwards of three years before ABG was declared a non-performing asset. This year was decided to be 2016.

Since then, ABG was referred to NVLT for Corporate Insolvency Resolution Process, and various banks of the 28 bank consortium have begun calling ABG shipyard’s account fraud.