ABG Shipyard bank fraud: Several efforts made to revive company operations were not fruitful, says SBI

A fraud is declared basis the Forensic Audit report findings that is discussed thoroughly in joint lenders meetings. Typically when fraud is declared, an initial complaint is preferred with CBI and based on their inquiries further information is gathered

After the Central Bureau of Investigation (CBI) registered an FIR against ABG Shipyard and its directors for allegedly duping 28 banks of Rs 22,842 crore, the State Bank of India on Sunday said that the several efforts were made to revive the company operations could not succeed.

"ABG Shipyard was incorporated on 15 March 1985, has been banking arrangements since 2001. Financed under Consortium arrangement over a two dozen lenders. The leader in Consortium was ICICI Bank. Due to poor performance, the account became NPA on November 30, 2013. Several efforts were made to revive the company operations but could not succeed," said the statement issued by the SBI.

"Account was restructured under CDR mechanism in March 2014 by all lenders. However, as the shipping industry was going through a downturn, one of the worst ever seen, the operations of the company could not revive," added the statement.

The statement further said that as the restructuring failed, the account was classified as NPA in July 2016 with backdated effect from November 30, 2013. E and Y were appointed as Forensic Auditor by lenders during April 2018 and they submitted their report on January 19. E&Y report was placed before the Fraud Identification Committee of 18 Lenders in 2019. Fraud is mainly attributed to diversion of funds, misappropriation, and criminal breach of trust.

Although, ICICI Bank was the lead lender in the consortium and IDBI was the second lead, it was preferred that SBI being the largest PSB lender, lodges the complaint with CBI. The first complaint was filed with CBI in November 2019. There was a continuous engagement between CBI and Banks and further information was getting exchanged.

The circumstances of the fraud, as well as CBI requirements, were further deliberated in the various meetings of Joint Lenders and a fresh and comprehensive second complaint was filed in Dec. 2020. The account is presently undergoing liquidation under an NCLT driven process.

A fraud is declared basis the Forensic Audit report findings that is discussed thoroughly in joint lenders meetings. Typically when fraud is declared, an initial complaint is preferred with CBI and based on their inquiries further information is gathered.

In a few cases, when substantial additional information is gathered, a second complaint incorporating full and complete details is filed which forms the basis for the FIR. At no point in time, there was any effort to delay the process. The lenders forum diligently follows through with CBI in all such cases, said the statement.

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