Uncovering a series of fraudulent practices that included fabricating over Rs900 crore worth of sales, misrepresenting financial statements, siphoning funds raised through rights issues and serious lapses in corporate governance, market regulator Securities and Exchange Board of India (SEBI) has imposed bans, financial penalties and compliance directives on Seacoast Shipping Services Ltd, its promoters, and several directors. It marks one of the toughest crackdowns on a small-cap listed company in recent years.
In a
scathing final order, Kamlesh C Varshney, whole-time member (WTM) of SEBI says, "I find that the act of misstatement and misrepresentation of financial statements and publishing of the same, portrayed an image of Seacoast Shipping Services which was not true and fair. This led to investors not having timely assessment of financial position of the company. Further, there are also violation of diversion of funds and corporate governance related violations. In my opinion, in the facts and circumstances of this case, remedial and penal directions are warranted in this case."
The saga began in FY20-21, when Seacoast Shipping Services, earlier known as Mahaan Impex Ltd, reported a meteoric jump in sales and profits. Its revenues jumped from just Rs0.52 crore in FY19-20 to Rs243.15 crore in FY20-21, raising eyebrows at the Bombay Stock Exchange (BSE). On closer examination, BSE found that more than 60% of Seacoast Shipping Services’ transactions were with a related party: Seacoast Shipping and Marine Services HUF (Seacoast-HUF), owned by promoter Manishkumar Raichand Shah.
This triggered an investigation by SEBI covering April 2020 to December 2023, which revealed systematic misrepresentation across financial years.
The probe revealed that Seacoast Shipping Services’ accounts had been systematically manipulated. Of the Rs1,049.67 crore in sales declared during the investigation period, SEBI found that Rs900.45 crore or about 86% was fictitious. For FY22–23 alone, the company claimed revenues of Rs429.58 crore, but SEBI determined that none of it was genuine. These transactions lacked invoices, e-way bills or shipping documents.
Similarly, the company’s assets were grossly inflated; between 98% and 99% of the declared assets across three financial years were found to be non-existent, largely in the form of fictitious trade receivables and advances.
The regulator also scrutinised corporate actions taken by Seacoast Shipping Services during this period. In August 2020, the company allotted 1.50 crore shares worth Rs22.73 crore to Mr Shah as part consideration for acquiring his Hindu undivided family (HUF) business. SEBI found that this arrangement allowed Mr Shah to enrich himself without the company receiving any real value, constituting a fraudulent preferential allotment.
Around the same time, shares were also allotted to other entities, including Parasmal Kundanmal Shah, CSB Projects Pvt Ltd, Credo Holdings Pvt Ltd, Shail T Shah and Deep T Shah. Though SEBI did not establish fraud in those cases, it noted irregular fund movements suggestive of circular transactions.
The rights issue conducted in December 2021, through which Seacoast Shipping Services issued more than 20 crore shares, was also marred by irregularities. Proceeds from the issue, which were meant for business expansion and working capital, were instead diverted into sham purchases and related-party dealings. A cash credit facility obtained from IndusInd Bank was allegedly used in a similar fashion. SEBI concluded that the promoters had no intention of utilising these funds for genuine business purposes and instead misled retail shareholders while extracting value for themselves.
During this period, Seacoast Shipping Services’ manipulated accounts helped to project it as a fast-growing logistics firm, which drew in thousands of small investors. As the share price rose, the promoters steadily reduced their stakes. SEBI’s order notes that Mr Shah alone sold more than 17 crore shares, generating illegal gains of nearly Rs48 crore. By the end of 2023, promoter shareholding had fallen to just 0.04%, while the number of public shareholders swelled to nearly 2.5 lakh. SEBI observed that the promoters had essentially abandoned the company while cashing out at inflated valuations built on fictitious numbers.
The order also highlights glaring failures in corporate governance. Seacoast Shipping Services' audit committee meetings were either not held or not properly documented. Annual reports were incomplete, omitting required disclosures on related-party transactions. The company claimed there were no audit qualifications when, in fact, statutory auditors had flagged issues.
Independent directors and compliance officers of Seacoast Shipping Services also failed to ensure adherence to SEBI’s listing obligations and disclosure requirements, effectively allowing promoters a free hand. SEBI also noted that certain directors, including Viren Makwana, Shivangi Gajjar and Ankita Soni, had accepted their roles without exercising due diligence or ensuring oversight of financial reporting.
Invoking its powers under the SEBI Act, the regulator has barred Seacoast Shipping Services from raising money from the public for five years and fined it Rs30 lakh. Promoters Mr Shah and Sameer Shah have been restrained from accessing capital markets or associating with listed companies or intermediaries for five years. They have also been ordered to disgorge their unlawful gains by transferring the amounts into an escrow account.
Other directors and officers, including independent directors and company secretaries, have been banned from board positions for one year and fined amounts ranging from Rs1 lakh to Rs5 lakh. The company must constitute a new audit committee with enhanced oversight and recover diverted funds from its rights issue and bank credit facility, SEBI says.
The order concludes that Seacoast Shipping Services deliberately misrepresented its financial position, fabricated sales and assets, diverted shareholder funds and allowed its promoters to unjustly enrich themselves. It states bluntly that more than 85% of sales and 98% of assets during the investigation period were fictitious. The preferential allotment of shares to Mr Shah was fraudulent; the rights issue proceeds were misused; and governance norms were violated with impunity. The findings underline the erosion of investor trust that occurs when companies manipulate accounts and misuse public funds.
For retail investors, the case is a sobering reminder of the risks of chasing small-cap stocks with sudden surges in revenues and profits. Seacoast Shipping Services’ market-capitalisation had touched over Rs270 crore by late-2024 and shares were trading at just under Rs5 each. Now, with SEBI’s order in place, the stock and its investors face deep uncertainty.
While the regulator has acted to claw back unlawful gains and impose accountability, the episode exposes how such large-scale misrepresentation can go undetected for years and how retail shareholders often bear the brunt of fraudulent practices.
