New Delhi, Sep 25 (NationPress) The Securities and Exchange Board of India (SEBI) has imposed a five-year ban on Seacoast Shipping Services Limited (SSSL) and its leading officials from soliciting investments, following findings of funds being improperly diverted from a rights issue, creation of fake accounts, and misleading shareholders with inaccurate disclosures.

This ruling also includes penalties and mandates the return of illicit gains, effectively concluding one of the most peculiar instances of market fraud in recent memory.

SEBI’s comprehensive order stated that SSSL had misappropriated crores of rupees obtained through a rights issue and fabricated accounts to conceal these misdeeds.

At one point, the company’s promoters even tried to rationalize the diversion with an unusual claim — that the funds were used to pay a ransom for the alleged kidnapping of promoter Manish Shah’s son.

However, SEBI found this assertion lacking credibility, noting that no police report or corroborating documents were ever submitted.

Furthermore, contradictory statements from company representatives intensified the discrepancies.

In February 2024, Shah testified under oath that the funds from the rights issue had been utilized for fictitious purchases, not for ransom.

Another director noted that the money was indeed taken following a kidnapping but admitted the family never notified the authorities.

Independent directors further complicated matters by claiming they were unaware of the rights issue.

SEBI’s order emphatically stated, “The proceeds from the rights issue were not utilized by the company and were instead misappropriated,” outright dismissing the kidnapping narrative.

The regulator's investigation unveiled more profound fraud, with SSSL fraudulently allotting 1.50 crore shares valued at Rs 22.73 crore to promoter Manish Shah without legitimate consideration.

It also misappropriated Rs 43.42 crore from the rights issue proceeds and an additional Rs 10.83 crore from bank credit.

Financial records from FY21 to FY24 were severely distorted, revealing that over 85 percent of reported sales and 98 percent of assets were fictitious.

Despite having minimal inventory and fixed assets, the company reported inflated revenues, deceiving unsuspecting retail investors and boosting trading volumes in its shares.

SEBI highlighted that such misleading financial information significantly affected both shareholder engagement and the company's stock price.

This case originated from a Bombay Stock Exchange (BSE) report, which raised concerns over dubious related-party transactions between April 2020 and December 2023.

What started as a routine investigation evolved into a full-scale inquiry that exposed how the mid-sized shipping company concocted inflated figures, fraudulent allotments, and even a sensational kidnapping narrative to mask its diversion of investor funds.

SEBI’s ruling, issued by Whole-Time Member Kamlesh Chandra Varshney, not only enforces a five-year fundraising prohibition on the company and its senior executives but also orders the return of profits accrued from these unlawful practices.

This verdict underscores the regulator's heightened vigilance against corporate misconduct, particularly in cases where retail investors are misled by manipulated disclosures.