Enforcement Directorate (ED) raids were underway on Tuesday, 26 April, at 26 locations across the country in connection with the Rs 22,000 crore bank scam case of ABG Shipyard.
The ED's case is on the basis of a First Information Report (FIR) lodged by the Central Bureau of Investigation (CBI).
In the case, there are 28 banks involved in the consortium with a huge amount of disbursement.
There were different nature of bank loans, including cash credit loan, term loan, letter of credit, and bank guarantee, which were given as advance by the banks.
The fraud is primarily on account of a huge transfer 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, and the funds were diverted to purchase huge assets in the name of its related parties.
The Money Laundering Scam
"They took loan of Rs 1,228 from Indian Overseas Bank, Rs 1,244 crore from Punjab National Bank, Rs 1,614 crore from Bank of Baroda, Rs 7,089 crore from ICICI Bank and Rs 3,634 crore from IDBI Bank. Later they didn't pay the bank 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," the CBI had said.
ABG Shipyard Ltd had been in business with SBI since 2001.
The account of ABG Shipyard turned a non-performing asset (NPA) on 30 November 2013.
As per a 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 the 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 stock audit of ABG Shipyard Ltd.
The firm submitted its report on 30 April 2016 and observed various faults on the part of 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 dated 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 declaration of 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 for Corporate Insolvency Resolution Process (CIRP).
In between April 2019 to March 2020, various banks of the consortium declared the account of ABG Shipyard as fraud.
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