Sebi bans Seascoast Shipping, promoters from markets for 5 years
New Delhi: Sebi has restrained Seacoast Shipping Services and its promoters from the securities market for five years, besides ordering them to disgorge unlawful gains of nearly Rs 48 crore, for misrepresenting financial statements, fund diversion, and governance lapses.
In a 187-page order passed on Wednesday, the regulator found that Seacoast Shipping Services Ltd (SSSL) misrepresented financial results during the FY21, FY22, FY23 and for the period April 1, 2023, to December 31, 2023, were not genuine and misled the investors about its true financial health.
"The financial statements of SSSL during the period were misrepresented/misstated, hence the allegation of publishing misrepresented financial statements is established against Noticee 1, 2 and 3 (SSSL, Manish Shah and Sameer Shah).
"The allegation of fraudulently allotting 1.50 crore equity shares of SSSL to Manish Shah, and thereby, defrauding SSSL also stands established against Noticee Nos 1, 2 and 3," Sebi's whole-time member Kamlesh C Varshney said in the final order.
"As a result of the misrepresented financials of the company, there has been a considerable spike in the retail investor interest in the shares of the company, and the promoters divested almost their entire stake in the company during the investigation period."
Accordingly, the regulator found that SSSL, Manish and Sameer Shah flouted various provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules and the LODR (Listing Obligations and Disclosure Requirements) regulations.
Sebi said the company's share capital had jumped almost 240 times between 2020 and 2024, through a series of corporate actions, including preferential allotments, rights issues and stock splits, during which promoters and related parties offloaded holdings to unsuspecting investors.
The unlawful gains made by promoter Manish Shah alone amounted to Rs 47.89 crore, which the regulator has directed him to disgorge with 12 per cent annual interest to the investor protection and education fund within 45 days.
Besides the disgorgement, Seacoast and its top executives face monetary penalties. The markets watchdog slapped Rs 50 lakh each on Seacoast and promoters -- Manish Shah and Sameer Shah.
The regulator also levied fines in the range of Rs 3-8 lakh each on several other directors, including Cheryl Shah and Sushil Sanjot, for lapses in governance.
Seacoast has been restrained from raising funds from the public for five years, from September 2024, while promoters Manish and Sameer Shah have been barred from securities markets and from associating with any listed company or intermediary for the same period, as per the order.
Cheryl Shah and Sushil Sanjot face one-year restrictions from associating with any listed company or intermediary.
The regulator also directed Seacoast to bring back the diverted rights issue proceeds and cash credit facility funds, and to constitute a new audit committee with enhanced oversight to ensure compliance with disclosure norms and credibility of its financial disclosures.
The probe was triggered by a BSE examination, which flagged suspicious spikes in Seacoast's sales and profits.
Subsequently, the investigation revealed that the company had inflated revenues through fictitious transactions with related entities, carried out fraudulent preferential allotments, and diverted proceeds of rights issues and credit facilities.
Thereafter, the Securities and Exchange Board of India (Sebi) had initiated an investigation for the period from April 1, 2020, to December 31, 2023.
In September last year, Sebi had issued an interim order and barred Seacoast, its chairperson and MD Manish Shah, and several others, from the securities market for the alleged manipulation of the books and several other violations.
The market regulator had directed Shah and others to impound the illegal gains amounting to over Rs 84 crore and barred Seacoast from raising any money from the public.
