'Son Was Kidnapped': Seacoast Promoters' Bizarre Excuse For Fund Diversion Gets Rejected By SEBI
The promoters of logistics services company Seacoast Shipping Services Ltd. offered an explanation to SEBI about the alleged misuse of rights issue proceeds, claiming the money was diverted as "ransom" due to the kidnapping of promoter Manish Shah's son. The market watchdog has rejected this justification.
The company stated that the rights issue was genuine and not bogus, and that SEBI had incorrectly connected independent transactions and alleged circular flow of funds, without any substantive evidence. The company added that the funds were regretfully not utilised for business purposes at that stage due to the kidnapping.
During subsequent questioning by SEBI, it was stated that the alleged kidnapping was not reported to law enforcement agencies. The company's reply to the show cause notice, dated April 22, 2025, contained no further submissions on this matter.
Independent directors of the company admitted in their respective depositions that they were not aware of any such rights issue brought by the company. In light of the absence of documentary evidence and the admissions made by the company's directors, SEBI determined that Seacoast Shipping had diverted the funds of the rights issue.
SEBI further stated that the rights-issue proceeds were not used for their intended business purpose, and that preferential share allotments were used by promoters and certain entities for unlawful gains.
The investigation was initiated after the BSE conducted an examination due to a considerable increase in Seacoast Shipping's net sales and net profit in fiscal year 2021.
The exchange examination raised doubts on the genuineness of transactions, noting that the company had booked revenue and purchases with sundry debtors and creditors during FY21 and FY22.
During his deposition before SEBI, Manish Shah alleged that SEBI officials had coerced him during the investigation, claiming he was terrorised with the consequences of alleged non-cooperation when he was unable to answer questions sufficiently. Shah further alleged that officials threatened him with investigations by other agencies, including the Enforcement Directorate, CBI, Income Tax Department, Customs, and GST authorities.
Penalties
In September 2024, Ashwani Bhatia, then SEBI's whole-time member, passed an interim order in the matter. SEBI issued sweeping penalties on Seacoast Shipping and its officials, including Shah, including barring them from accessing the securities market for a period of 1 to 5 years.
Monetary penalties totaling Rs 1.97 crore were imposed on the company, its promoters, and associated entities. Additionally, a disgorgement order was issued against Shah for unlawful gains worth Rs 47.89 crore, along with 12% annual interest. Shah was directed to deposit this amount with SEBI's Investor Protection and Education Fund within 45 days.
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