New Delhi : Seacoast Shipping SEBI ban came after regulators discovered the company diverted investor funds and falsified accounts. Consequently, SEBI imposed a 5-year prohibition, sending a strong message on compliance and accountability.
Additionally, the order imposes penalties and directs disgorgement of unlawful gains, ending one of the most unusual market misconduct cases in recent years.
SEBI stated that SSSL diverted crores of rupees raised through a rights issue and created fictitious accounts to conceal the misuse.
Meanwhile, promoters claimed the funds paid ransom after the alleged kidnapping of promoter Manish Shah’s son. SEBI rejected this claim, noting no police complaint or supporting documents existed. Moreover, contradictory statements from company officials revealed further inconsistencies.
In February 2024, Shah admitted under oath that the rights issue money went to fictitious purchases, not ransom. Another director claimed funds were used after a kidnapping but confirmed the family never reported it. Similarly, independent directors claimed ignorance of the rights issue.
SEBI stated clearly: “The rights issue proceeds were not utilised by the company and were instead diverted,” rejecting the kidnapping narrative outright.
Furthermore, the probe revealed deeper fraud. SSSL allotted 1.50 crore shares worth Rs 22.73 crore to Manish Shah without valid consideration. It also diverted Rs 43.42 crore from rights issue proceeds and Rs 10.83 crore from bank credit.
Financial statements from FY21 to FY24 were grossly misrepresented. Over 85% of reported sales and 98% of assets were fictitious. Despite negligible inventory and fixed assets, the company reported inflated revenues, misleading retail investors and boosting trading volumes.
The case began with a Bombay Stock Exchange (BSE) report flagging suspicious related-party transactions between April 2020 and December 2023. Subsequently, routine scrutiny expanded into a full investigation. Investigators uncovered inflated numbers, fraudulent allotments, and even a sensational kidnapping story to cover fund diversion.
SEBI, led by Whole-Time Member Kamlesh Chandra Varshney, banned the company and its top executives from fundraising for five years and ordered disgorgement of gains. Overall, the ruling highlights SEBI’s vigilance against corporate misconduct, especially where retail investors face misleading disclosures.
–IANS
