New Delhi
The Securities and Exchange Board of India (SEBI) has barred Seacoast Shipping Services Limited (SSSL) and its key officials from raising investor funds for five years after finding them guilty of fund diversion, falsifying accounts, and misleading shareholders. The regulator also imposed penalties and ordered disgorgement of unlawful gains.
SEBI’s investigation revealed that SSSL diverted crores from a rights issue and created fictitious accounts to conceal misuse. At one point, the promoters claimed the funds were used to pay ransom for the alleged kidnapping of promoter Manish Shah’s son—a claim SEBI dismissed, citing lack of police reports or evidence. Contradictory statements from company officials further weakened the claim. Shah admitted under oath in February 2024 that funds were diverted for fictitious purchases, not ransom.
The probe found SSSL had fraudulently allotted 1.50 crore shares worth ₹22.73 crore to Shah without valid consideration and diverted ₹43.42 crore from rights issue proceeds and ₹10.83 crore from bank credit. Financial statements from FY21 to FY24 were grossly misrepresented, with over 85 percent of reported sales and 98 percent of assets found fictitious. Despite negligible inventory and assets, inflated revenues lured retail investors and drove up share trading.
The case originated from a Bombay Stock Exchange report flagging suspicious related-party transactions between April 2020 and December 2023. SEBI described the misconduct as one of the most unusual cases of market fraud in recent years.
The regulator’s order by Whole-Time Member Kamlesh Chandra Varshney marks a strong step against corporate fraud, warning companies against misleading disclosures that harm retail investors.