What is the Civil liability for mis statement in the Prospectus Who is punishable What is the punishment Section 35 of Indian Companies Act 2013

 

Section 35 Issue of Civil Liability for mis statement in the Prospectus - Indian Companies Act 2013

 

As per Section 35 of Indian Companies Act 2013 every person who is director or authorises a prospectus containing misstatement shall be liable punish under section 36 of the Act and liable to pay compensation to the persons who has sustained loss or damage. Provision in the Companies Act 2013 related to Civil liability for Mis Statement in the Prospectus is as under.


 

(1) Where a person has subscribed for securities of a company acting on any statement included, or the inclusion or omission of any matter, in the prospectus which is
misleading and has sustained any loss or damage as a consequence thereof, the company and every person who


(a) is a director of the company at the time of the issue of the prospectus;


(b) has authorised himself to be named and is named in the prospectus as a director of the company, or has agreed to become such director, either immediately or after an interval of time;


(c) is a promoter of the company;


(d) has authorised the issue of the prospectus; and


(e) is an expert referred to in sub-section (5) of section 26, shall, without prejudice to any punishment to which any person may be liable under section 36, be liable to pay compensation to every person who has sustained such loss or damage.


(2) No person shall be liable under sub-section (1), if he proves

(a) that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; or


(b) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave a reasonable public notice that it was issued without his knowledge or consent.


(3) Notwithstanding anything contained in this section, where it is proved that a prospectus has been issued with intent to defraud the applicants for the securities of a
company or any other person or for any fraudulent purpose, every person referred to in subsection


(1) shall be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by any person who subscribed to the securities on the basis of such prospectus.

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