SEBI bars Seacoast Shipping, promoters for 5 years over fund diversion, fake accounts

SEBI has barred Seacoast Shipping Services Ltd (SSSL) and its promoters from the securities markets for 5 years, besides ordering disgorgement of nearly ₹48 cr, after finding the company guilty of misrepresenting financial statements, diverting funds and misleading investors.

In a 187-page order, SEBI’s whole-time member Kamlesh C Varshney held that SSSL’s financial results for FY21, FY22, FY23 and part of FY24 “were misrepresented/misstated” and misled investors.

The company went through multiple

corporate actions including bonus, rights and stock split between March 2020 to September 2024 resulting a 240 times increase in company’s outstanding equity to 53.9 crore shares. Further, the company disclosed a revenue of ₹430 crore for FY23, against ₹52 lakh reported in FY20.

The net profit surged over 700 times to ₹14.3 crore during the same period. Investigations further revealed fraudulent sale of ₹149.24 crore and a purchase of ₹134.31 crore as Related Party Transaction (RPT) with Seacoast-HUF.

The regulator also found that promoters Manish and Sameer Shah fraudulently allotted 1.5 cr shares to themselves, and subsequently offloaded stakes during a period of “considerable spike in retail investor interest”.

Further, the company diverted an amount of ₹43.42 crore from the Rights Issue proceedings and an amount of ₹10.83 crore from the Cash Credit facility availed from IndusInd Bank.

The company’s shares, suspended from trading on the BSE, last closed at ₹1.48 on September 22 — down 94% from the record high of ₹22.31 in July 2021.

“Kidnap ransom” defence fails

In a sensational submission, the company claimed proceeds from a rights issue had been used to pay ransom for the kidnapping of promoter Manish Shah’s son. The SEBI order recorded: the funds “were regretfully not utilised for the business purpose intended … transferred to Mr Utsav Patel and Mr Akshay Patel.”

However, the regulator rejected the explanation, noting there was no police complaint or corroborating evidence. Instead, investigators found a trail of fictitious transactions and contradictory statements by the company’s leadership.

Market manipulation and unlawful gains

SEBI observed that SSSL’s share capital had jumped nearly 240× between 2020 and 2024 through preferential allotments, rights issues and stock splits, enabling promoters to offload holdings at inflated prices.

Promoter Manish Shah alone made unlawful gains of ₹47.89 cr, which he has been ordered to disgorge with 12% annual interest to the Investor Protection and Education Fund within 45 days.

Penalties and restrictions

The regulator also imposed monetary fines totalling ₹1.97 cr on the company, its promoters and directors. Seacoast and its top executives face ₹50 lakh each, while other directors including Cheryl Shah and Sushil Sanjot were penalised ₹3–8 lakh for governance lapses.

Manish and Sameer Shah are barred from securities markets and from associating with any listed company or intermediary for 5 years. Cheryl Shah and Sushil Sanjot face 1-year restrictions.

How the case began

The probe was triggered by a BSE examination of suspicious spikes in Seacoast’s sales and profits. Investigations uncovered inflated revenues via fictitious related-party transactions, fraudulent preferential allotments and diversion of rights issue proceeds.

SEBI noted governance failures including irregular board meetings, incomplete annual reports, and an improperly constituted audit committee.