An Indian court on Friday granted bail to Rishi Kamlesh Agarwal, former chairman and managing director of ABG Shipyard. He and the company are the main accused, alongside others, in a long running investigation into alleged fraud at the shipyard, but there are serious concerns about the veracity of charges filed by investigators.

The accused allegedly used fraudulent letters of credit (L/Cs) and bank guarantees amongst other methods to cheat a group of 28 banks led by State Bank of India out of 22,842 crore Indian rupees (Rs22,842 crore), the equivalent of around US$2.7 billion.

Charges incomplete

Bail has been granted to Agarwal on the grounds that the charge sheet submitted by India's central bureau of investigation was incomplete because it was filed only on charges of criminal conspiracy and not offences under the prevention of corruption act.

The court found therefore that the former shipyard chief was entitled to the "desired relief" of bail. Agarwal was arrested on 21 September and has since been held in judicial custody.

L/C doubts

Doubts over the evidence in this case are also emerging. In one instance, India's directorate of revenue intelligence (DRI) issued an order accusing ABG of engineering ghost import shipments to fraudulently obtain L/Cs worth Rs 582.18 crore that were then used to channel hard currency abroad.

The DRI maintained that the goods in those shipments had been overvalued in order to channel funds abroad and the transactions were therefore fraudulent. But a customs tribunal subsequently overturned that order, even though Argawal and ABG had not disputed it.

Background

What may turn out to be India's biggest known bank fraud was initiated in the wake of the 2008 global financial crisis when the hard-pressed shipyard reportedly struggled to survive and by 2012 had exhausted its funds.

The company then arranged large loans from several banks. These have reportedly been used for a variety of purposes, including to obtain L/Cs, repay other loans, purchase real estate, pay for company expenses and transferred to entities associated with ABG via fund transfers through a network of overseas and offshore entities.

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