SEBI orders Seacoast Shipping to return diverted funds, rejects 'kidnapping' excuse, slaps securities ban
Sep 25, 2025
SEBI highlighted that the preferential allotment of shares was used for unlawful gains by the promoters and certain entities. The promoters notably sold their stake, reducing their holdings from 74% to 0.04%.
In a claim that can rival cinematic scripts, Seacoast Shipping Services Limited (SSSL) has attributed its diversion of funds to an alleged kidnapping incident involving the son of its chairman, Manish Shah. According to the company, funds raised through a rights issue were not used for their intended business purposes due to the tragic kidnapping event.
However, the Securities and Exchange Board of India (SEBI) has expressed skepticism over this explanation, deeming it a diversionary tactic amid serious financial mismanagement and fraudulent market activities.
SEBI’s investigation, which spanned from April 2020 to December 2023, uncovered significant issues with SSSL’s financial statements, including the misrepresentation of assets, fraudulent preferential allotments, and the illegal diversion of company funds. The regulatory body found that more than 85% of the company's reported sales and 98% of its assets were fabricated, misleading investors, particularly the retail shareholders who were drawn to the stock due to artificially-inflated financials.
1. Misrepresentation of Financials: SEBI’s investigation revealed that a large portion of SSSL’s reported revenue was based on fictitious transactions, which cast a shadow on the legitimacy of the company’s financial statements.
2. Preferential Allotment and Stake Divestment: SEBI highlighted that the preferential allotment of shares was used for unlawful gains by the promoters and certain entities. The promoters notably sold their stake, reducing their holdings from 74% to a meager 0.04%, raising concerns about the transparency and fairness of the allotment process.
3. Diversion of Funds: The company claimed that funds from a rights issue were diverted following the kidnapping of Manish Shah’s son, an excuse that SEBI found to be lacking in credible evidence. The regulatory body questioned the timing and the true purpose behind this fund diversion, suggesting it could be an attempt to cover up the actual financial misconduct.
SEBI’s actions
In response to the investigation’s findings, SEBI has imposed several measures:
SSSL is now prohibited from raising further funds from the public until further orders.
A number of individuals, including key promoters and directors, are restricted from engaging in securities transactions, either directly or indirectly.
The unlawful gains made through fraudulent activities will be impounded and deposited into an escrow account.
Corporate governance failures
SEBI also pointed to failures in corporate governance, noting that the Board of Directors and the Audit Committee did not adequately oversee the company’s financial practices. Several independent directors were found to have failed in their duties by not raising concerns about the manipulated financial statements.
Several accused parties have filed appeals against SEBI’s interim order. The Securities Appellate Tribunal (SAT) has allowed some appeals to proceed while ensuring SEBI’s final order is issued within the prescribed timeline.
[Business Today]
