In a case that entwines boardroom action with a Bollywood-inspired drama, the promoters of logistics services company Seacoast Shipping Services (SSSL) have offered a bizarre explanation to charges of misuse of investor funds, claiming the money raised via a rights issue was allegedly diverted as 'ransom', after the kidnapping of promoter Manish Shah’s son.
The explanation, however, has failed to convince the Securities and Exchange Board of India (Sebi), which in a damning order dated September 24 detailed how SSSL diverted crores of rupees, fabricated accounts and misled investors for years. Sebi has now barred the company and its key officials from the securities market, imposed penalties, and ordered disgorgement of unlawful gains.
Weird Kidnapping Narrative
Sebi’s investigation revealed that SSSL failed to provide even the most basic documents, purchase invoices, agreements, or ledgers, to substantiate how the proceeds of the rights issue were used. Instead, in a written submission dated June 20, 2025, the company offered a sensational justification.
The funds, Sebi order said, “were regretfully not utilised for the business purpose intended as, unfortunately during that period, the son of the Noticee No. 2 (Mr Manish Shah) was kidnapped, and the proceeds from the Rights Issue were transferred to Mr Utsav Patel and Mr Akshay Patel.” The regulator found that such a claim, unsupported by any complaint to police or corroborating evidence seemed unusual.
Promoters' Flipflops
What followed was a string of contradictory statements from the company’s leadership. In February 2024, Shah himself admitted under oath that the rights issue funds were used for fictitious purchases, not ransom payments. Another director, however, insisted that the money was taken away after the kidnapping incident, though she conceded the family never approached law enforcement and instead left the city.
Independent directors took another position, claiming ignorance of the rights issue altogether. Faced with the muddle, Sebi dismissed the kidnapping narrative outright. “Rights issue proceeds were not utilised by the company and were instead diverted from the company,” Sebi’s order stated categorically.
The kidnapping narrative was only one part of a much larger pattern of deceit uncovered during Sebi’s probe. According to the order, SSSL had systematically inflated financial statements, engaged in fraudulent share allotments, and made baseless claims to stock exchanges. Key findings included fraudulent allotment of 1.50 crore shares worth Rs 22.73 crore to Manish Shah without valid consideration, and diversion of Rs 43.42 crore from rights issue proceeds and Rs 10.83 crore from bank credit. Misrepresentation of financial results for four consecutive years (FY21-24) also came to light.
Sebi also found reporting of over 85 percent fictitious sales and 98 percent fictitious assets, and despite having negligible inventory and fixed assets, the company had declared inflated revenue, luring unsuspecting retail investors and fuelling a sharp rise in market participation.
In its order, Sebi’s whole-time member Kamlesh Chandra Varshney said that publication of such untrue and misleading financial results misled the public about the financial soundness of the company. The manipulated financial figures declared by SSSL had a significant impact on the number of public shareholders and on the scrip price, Sebi said.
SSSL’s disclosures to exchanges were made without basis, added Sebi, misleading investors and highlighted a casual approach by the company and its key managerial personnel.
Sebi Found Governance Lapses
The order also highlighted governance lapses, as SSSL’s annual reports were incomplete, its audit committee improperly constituted, and board meetings irregular. The company’s Directors failed in their fiduciary duties, allowing financial misrepresentation and fund diversion to flourish unchecked.
After Kidnapping Story, Coercion Charge on Sebi
During his deposition before Sebi, Manish Shah had unexpectedly attempted to turn the tables on the regulator itself, and alleged that the officials had coerced him during the investigation. “Since I was unable to answer the questions sufficiently, firstly I was terrorized with the consequences of alleged non-cooperation during the course of the investigation,” Shah claimed. He further alleged that officials threatened him with investigations by other agencies such as the Enforcement Directorate, CBI, Income Tax Department, Customs, and GST authorities.
When asked whether he had filed any complaint about coercion, Shah admitted he had not. Sebi, while recording his claims, noted that no evidence supported allegation of “terrorising,” and the contradictory testimonies further eroded credibility of his statements.
On September 23, Sebi had issued sweeping penalties on SSSL and its officials, including Manish Shah, including barring them from accessing the securities market from 1 to 5 years. Monetary penalties totalling Rs 1.97 crore were imposed on the company, its promoters, and associated entities.
Disgorgement order was also issued against Manish Shah for unlawful gains worth Rs 47.89 crore, along with 12 percent annual interest, to Sebi’s Investor Protection and Education Fund within 45 days.
How the Case was Uncovered
The case began with a BSE report highlighting suspicious related-party transactions involving the company between April 2020 and December 2023. What started as a routine scrutiny snowballed into a scathing finding, revealing how a mid-sized shipping firm used fiction, inflated numbers, and a bizarre kidnap story to justify fund diversion.
In September 2024, Ashwani Bhatia, Sebi’s whole-time member at that time had passed an interim order in the matter.
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