This case of the stock market may find you like the story of a film. Market Regulator SEBI has taken strict action against Logistics Company Cichost Shipping Services LTD and its promoters in a shocking one. The stock of this company has crashed more than 70% in the last 1 year.
The company was accused of misusing the money raised from the rights issue from investors. In response, the company gave a peculiar explanation. The company claimed that this amount was allegedly given as ‘ransom’ after the kidnapping of promoter Manish Shah’s son.
SEBI found the whole matter fake in investigation
When SEBI investigated it, he found the whole matter fake. SEBI issued an order on 24 September, rejecting the company’s cleanliness. In this order, SEBI explained in detail how Cicost Shipping Services rigged crores of rupees, made fake accounts and misled investors for years.
SEBI has now banned the company and its leading officers for 1 to 5 years in the stock market, ordered a fine of ₹ 1.97 crore and a recovery of illegal earnings of ₹ 47.89 crore.
Strange story of kidnapping
SEBI investigation revealed that SSSL failed to present any concrete document related to the use of rights issue. Such as purchase invoice, agreement or laser. Instead, the company made a sensational claim in a written application given on 20 June 2025.
According to the order of SEBI, the company said in its statement, “Unfortunately, this amount cannot be used for the business work already fixed, because unfortunately during that time the son of promoter Manish Shah was kidnapped. In such a situation, the amount received from the rights issue was transferred to Shri Utsav Patel and Shri Akshay Patel.”
SEBI said that neither a police complaint was lodged nor any evidence was given in support of this claim. This makes the company’s claim “unusual and trust worth it”.
Promoters tangled statements
Promoters and directors made different and contradictory statements during the SEBI investigation. In February 2024, Manish Shah himself admitted in the affidavit that the money collected from the rights issue was not used in ransom but in fake purchases. At the same time, the second director of the company claimed that the amount was taken after kidnapping. However, he also admitted that the family never lodged a police complaint and left the city.
In contrast, the independent directors said that they did not know about the rights issue. In view of such a complicated and contradictory statements, SEBI completely rejected the kidnapping story. The order of SEBI clearly stated, “The amount received from the rights issue was not used by the company, but was sent to another place from the company itself.”
The investigation also revealed that the company had been cheating on a large scale for a long time. According to SEBI, SSSL introduced its financial results artificially, allotted fake shares and sent information to mislead stock exchanges. This includes the release of 1.50 crore shares worth Rs 22.72 crore to Manish Shah without any real payment, diversion of Rs 43.42 crore from the rights issue and allegations of diversion of Rs 10.83 crore from bank loan. SEBI said that the company introduced wrong financial results for four consecutive years (FY21-24).
SEBI also came to know that more than 85% of the company’s sales and 98% of the assets were only on paper. Despite this, the company showed false revenue, causing retail investors misleading and witnessed heavy activities in its shares.
SEBI’s Fultime Member Kamlesh Chandra Varshney said in his order that such incorrect and misleading financial results forced investors to think that the company was financially strong, while the reality was completely opposite. These fake data not only affected the number of public shareholders but also on the share price. SEBI also added that the revelations made to the company’s exchange were without any concrete basis, causing investors to be misled and all shows the very irresponsible attitude of the company’s management.
How did the whole matter come up?
Initially, the Bombay Stock Exchange (BSE) reported a report on the company’s suspected related-party transaction between April 2020 and December 2023. This report started as a general investigation, but gradually it started to make major revelations. Investigation revealed that this smallcap shipping company decorated its financial records with false figures, fake stories and even introduced a strange story like kidnapping of its promoter’s son to justify fund diversion.
As evidence came to light, the matter became serious. Finally in September 2024, SEBI’s full time member Ashwini Bhatia passed the interim order in the matter and further action started.
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