SEBI fines Seacoast Shipping Rs 1.97 cr for fund diversion, rejects ransom claim

The Securities and Exchange Board of India (SEBI) has uncovered a large-scale financial fraud at Seacoast Shipping Services Limited (SSSL), rejecting the company’s sensational claim that investor funds were diverted to pay a ransom in a film-style kidnapping of a promoter’s son.

In a detailed order dated 24 September, SEBI revealed how SSSL diverted crores of rupees raised through rights issues and public offerings, falsified accounts and misled investors over several years. The regulator barred the company and key officials, including chairman and managing director Manish Shah, from accessing the securities market for periods ranging from one to five years.

Monetary penalties of Rs 1.97 crore were imposed, alongside a direction to return unlawful gains of Rs 47.89 crore with 12 per cent annual interest to the Investor Protection and Education Fund within 45 days.

An earlier interim order in September 2024 had already impounded more than Rs 84 crore in illicit gains, frozen promoters’ demat accounts, and halted any further rights issues.

A SEBI investigation found that between 2020 and 2024, SSSL grossly inflated revenues and fabricated transactions, with nearly 85 per cent of reported sales and 98 per cent of declared assets found to be fictitious.

Funds raised from the public were siphoned to entities linked to the promoters through sham transactions, while the promoters’ shareholding collapsed from nearly 74 per cent to just 0.04 per cent, indicating repeated fund-raising attempts without genuine stake holding.

During the probe, the company attempted to explain the diversion of rights issue proceeds by claiming they were used to pay a ransom after the alleged kidnapping of Manish Shah’s son.

However, SEBI found no evidence to support the claim. No police complaint was filed; no corroborating documents were produced and testimony from company officials was riddled with contradictions.

Shah himself admitted under oath in February 2024 that the funds were used for fictitious purchases, while another director repeated the kidnapping story but conceded that the family never approached law enforcement.

Independent directors maintained they were unaware of the rights issue altogether. SEBI dismissed the explanation, concluding that the proceeds were misappropriated.

The regulator also uncovered fraudulent allotment of 1.50 crore shares worth Rs 22.73 crore to Shah without valid consideration, diversion of Rs 43.42 crore from rights issue proceeds and Rs 10.83 crore from bank credit, and manipulation of financial results across four consecutive years (FY21–24).

Governance failures, including incomplete annual reports, irregular board meetings and an improperly constituted audit committee have allowed the misrepresentation to continue unchecked. SEBI has now ordered the reconstitution of the audit committee to enforce stronger oversight of financial reporting.

Trading in SSSL shares was suspended in early 2025 for persistent non-compliance with disclosure norms. Multiple SEBI circulars and stock exchange notices detailed the suspensions and reinforced the freeze on promoter holdings while mandating strict compliance measures.

SEBI’s whole-time member Kamlesh Chandra Varshney said the falsified financial statements misled the public about the company’s financial health, artificially inflating the share price and drawing unsuspecting investors into the market.

The case began after the Bombay Stock Exchange flagged suspicious related-party transactions in 2023. What started as a routine scrutiny has ended in one of SEBI’s most forceful crackdowns on a mid-sized listed company, exposing a scheme built on fabricated sales, manipulated accounts and a far-fetched kidnapping story more suited to a film script than a financial disclosure.