A list of 69 witnesses that the Enforcement Directorate (ED) has filed to support evidence in India’s biggest bank fraud case includes 21 senior bank officials and a partner at professional services firm Ernst & Young, show court documents.
EY had carried out a forensic audit of ABG Shipyard on the instructions of a consortium of 28 banks, which had alleged diversion of funds that they had lent to the Gujarat-based shipbuilder.
The EY partner (Forensic & Integrity) would testify to his statements given to the agency in March 2022 and June 2023 under Section 50 of the Prevention of Money Laundering Act. Statements given under this section are admissible in court. He is also expected to testify to the forensic audit report, dated January 18, 2019.
ET Tuesday reported that in its charge sheet filed recently in a Gujarat court, the federal agency that probed the money-laundering aspect of the ₹22,842 crore alleged fraud, said part of the funds was transferred to Singapore and utilised for investments in mutual funds in tax havens. The chargesheet also claimed that several paper companies were floated to “facilitate circular transactions” of the misappropriated funds.
The witness list includes officials from banks such as ICICI Bank, HDFC Bank, State Bank of India, IDBI, Yes Bank, Bank of India, Indian Overseas Bank, Punjab National Bank, Central Bank of India, Exim Bank of India, Federal Bank, IndusInd Bank, DCB Bank and Kotak Mahindra Bank. A senior official of Religare Finvest Ltd and a consultant of IL&FS Financial Services Ltd also feature as ED’s witnesses.
The agency has also made a former chief financial officer of ABG Shipyard as a witness in the case to depose against founder-chairman Rishi Agarwal. It has recorded statements of former directors of ABG Shipyard to elaborate on the alleged modus operandi adopted to allegedly dupe the banks.
The E&Y partner, according to the court documents that ET has seen, told the agency that the forensic audit had found indications of payments to related, or linked, parties as advance towards material supplies which it never received.
There were also indications of investments through overseas subsidiaries which were converted into preference shares, purchase of properties by related/linked parties from funds provided by the company and potential violations of corporate debt recovery provisions, according to the EY partner’s statement filed by the ED.
The forensic audit looked into potential manipulations in equity contributions through circular payments and diversion of funds. The management of ABG Shipyard was unable to provide corroborative documents in support of claims regarding raising funds abroad, the chargesheet said, citing the EY partner.
As per the court document, he also told the ED that the audit observed that crores of rupees were made “as advances towards supplies (in March 2016), however no purchases were made and purchase orders or agreements for these payments were not provided”.
The EY forensic audit report had said the company’s payment to ABG Shipping Singapore might have been diverted.
