Seacoast Shipping hit with SEBI ban, Rs 1.97 cr penalty and Rs 47.9 cr disgorgement order

Sebi bans Seacoast Shipping, promoter and others from market, imposes Rs 1.97 crore penalty, orders Rs 47.9 crore disgorgement

Market regulator Securities and Exchange Board of India (Sebi) has barred Seacoast Shipping Services Ltd (SSSL) and its key officials, including promoter Manish Shah, from accessing the securities market for periods ranging from 1 to 5 years, alleging fund diversion, financial misrepresentation and fraudulent share allotments. Sebi’s Whole-Time Member, Kamlesh Chandra Varshney, passed the 187-page final order in the matter on Wednesday.

Sebi also imposed a total penalty of Rs 1.97 crore on the company, its promoters and others. Both the company and promoter Manish Shah were fined Rs 50 lakh each. Further, Sebi ordered disgorgement from Shah, directing him to return Rs 47.89 crore in unlawful gains, along with 12 percent annual interest, to Sebi’s Investor Protection and Education Fund within 45 days.

The order follows an investigation covering April 2020 to December 2023, triggered by a BSE report flagging suspicious related-party transactions. Sebi found that more than 85 percent of the company’s reported sales and over 98 percent of its assets during the period were fictitious. Despite negligible fixed assets and inventory, the company reported inflated revenues, misleading investors and fuelling a sharp rise in retail participation.

Key findings included the fraudulent allotment of 1.50 crore shares worth Rs 22.73 crore to Manish Shah without valid consideration, diversion of Rs 43.42 crore from rights issue proceeds, and Rs 10.83 crore from bank credit. Sebi also found that the company misrepresented financial statements for four consecutive years (FY21–FY24). Misleading disclosures regarding business operations, related-party dealings, and investments were also noted. In addition, Sebi highlighted serious lapses in corporate governance, including incomplete annual reports, improper constitution of the audit committee, failure to convene meetings, and negligence on the part of directors.

Meanwhile, the promoters steadily exited the company, with their shareholding falling from 73.97 percent to just 0.04 percent, leaving around 2.5 lakh retail investors exposed. Sebi said the actions were necessary to protect investors and ensure market integrity, warning that the company could continue misreporting financials if unchecked.

Sebi’s then whole-time member Ashwani Bhatia had passed an interim order in the matter on September 30, 2024, barring the company and promoters from accessing the market and also impounding of Rs 84 crore of illegal gains.