ABG Shipyard Accused of Biggest Loan Fraud in India's History
Five years after Indian shipbuilder ABG Shipyard filed for bankruptcy, India's Central Bureau of Investigation (CBI) has initiated a fraud case against the company and five executives.
The CBI alleges that ABG Shipyard and top members of its management team - named as chairman and managing director Rishi Kamlesh Agarwal, executive director Santhanam Muthaswamy, and directors Ashwani Kumar, Sushil Kumar Agarwal and Ravi Vimal Nevetia - cheated a consortium of 28 banks out of an estimated $3 billion in loans. The lead banker on the loan package, India's ICICI Bank, has an exposure of about $925 million, with smaller amounts owed to the other lenders. It is the largest case of loan fraud ever opened in India's justice system.
According to the CBI, ABG's managers diverted funds from the loan package to overseas subsidiaries and improperly used the money to purchase assets. The loans became non-performing in 2013, and ABG Shipyard entered bankruptcy in 2017. An audit performed by Ernst & Young found signs of fraud two years later, and the State Bank of India - one of the creditors - filed a formal complaint in November 2019.
Given the long timeline between the State Bank of India's complaint and the formal announcement of a criminal investigation, India's opposition Congress Party has accused the government of Prime Minister Narendra Modi of failing to take timely action in the case.
"Despite the apparent fraud and swindling of public money, the CBI, SBI and the Modi government proceeded to complicate the entire matter in bureaucratic wrangling and file pushing," said Congress Party spokesperson Randeep Surjewala.
Modi's finance minister, Nirmala Sitharaman, pushed back against this criticism in a press conference Monday. She noted that the loan became non-performing while the Congress Party was in power, and said that the fraud was detected more quickly than average for a financial wrongdoing case.