Companies Act, 2013 - Chapter III: Prospectus and Allotment of Securities

Section 34 of the Companies Act, 2013: Criminal Liability for Misstatements in a Prospectus

Updated: 16 September 2026

In brief: Section 34 imposes criminal liability on every person who authorises the issue of a prospectus containing an untrue or misleading statement, or a material inclusion or omission likely to mislead. The person is liable under Section 447, subject to the statutory defence contained in the proviso to Section 34.

What does Section 34 cover?

Section 34 applies where a prospectus issued, circulated or distributed under Chapter III of the Companies Act, 2013 contains a statement that is untrue or misleading in the form or context in which it appears. It also covers the inclusion or omission of a matter where that inclusion or omission is likely to mislead.

The provision attaches liability to every person who authorises the issue of such prospectus. The consequence specified by Section 34 is liability under Section 447 of the Companies Act, 2013, which is the Act's general punishment provision for fraud.

Essential elements of liability under Section 34

There must be a prospectus issued, circulated or distributed under the relevant Chapter of the Companies Act.
The prospectus must contain an untrue or misleading statement, or an inclusion or omission likely to mislead.
The person proceeded against must have authorised the issue of the prospectus.
Where Section 34 applies, the statutory consequence is liability under Section 447, subject to the defence in the proviso.

Meaning of a misleading prospectus for Section 34

A statement need not be examined only in isolation. Section 34 expressly refers to whether a statement is misleading in the form or context in which it is included. The section also recognises that misleading disclosure can arise from what is omitted as well as from what is affirmatively stated.

Statutory defence: when a person may not be liable

The proviso to Section 34 protects a person who proves either of the following:

the statement or omission was immaterial; or
the person had reasonable grounds to believe, and continued up to the time of issue of the prospectus to believe, that the statement was true or that the inclusion or omission was necessary.

Practical point: The wording places importance on materiality, reasonable grounds for belief, and the person's belief continuing up to the time the prospectus was issued.

What is the punishment under Section 447?

Section 34 does not prescribe a separate numerical punishment. Instead, it makes the responsible person liable under Section 447. Section 447 contains the punishment framework for fraud and distinguishes, among other matters, fraud meeting the statutory monetary threshold from lower-value fraud that does not involve public interest. The exact consequence should therefore be determined by reading the current text of Section 447 together with the facts of the case.

Provision	Subject	Relevance
Section 34	Criminal liability for misstatements in prospectus	Creates criminal exposure for persons authorising a misleading prospectus, subject to its proviso.
Section 35	Civil liability for misstatements	Deals separately with compensation and civil consequences arising from misleading prospectus disclosures.
Section 36	Fraudulently inducing persons to invest money	Addresses specified false, deceptive or misleading inducements and deliberate concealment of material facts.
Section 37	Action by affected persons	Allows affected persons, groups or associations to bring a suit or take other action under Sections 34, 35 or 36.
Section 447	Punishment for fraud	Provides the punishment framework invoked by Section 34.

Section 34 and civil liability under Section 35

Criminal liability under Section 34 should be distinguished from civil liability under Section 35. Section 35 addresses liability to compensate persons who subscribe for securities on the faith of a misleading prospectus and sustain loss or damage. Depending on the facts, the statutory scheme may therefore involve criminal consequences, civil compensation, or other action under the Companies Act.

Who can take action?

Section 37 provides that a suit may be filed or other action may be taken under Section 34, Section 35 or Section 36 by any person, group of persons or association of persons affected by a misleading statement or by the inclusion or omission of a matter in the prospectus.

Related prospectus provisions

Section 34 forms part of the wider statutory framework governing public offers and prospectuses. Readers may also refer to the provisions dealing with the contents of a prospectus, advertisement of a prospectus, shelf prospectus, red herring prospectus, application forms, civil liability and fraudulent inducement.

Official legal resources

The current statutory text and regulatory materials should be checked before relying on the provision in a transaction, proceeding or compliance decision.

Ministry of Corporate Affairs - Companies Act, 2013 India Code - Central legislation SEBI - Regulations SEBI - Public issue filings

Frequently asked questions

Does every inaccurate statement automatically result in liability under Section 34?

Section 34 must be applied according to its statutory language. It covers untrue or misleading statements and inclusions or omissions likely to mislead, but its proviso also provides a defence where the person proves immateriality or the specified reasonable-ground-and-belief requirements.

Is Section 34 limited to false statements?

No. Its language also extends to a misleading statement in its form or context and to an inclusion or omission of a matter that is likely to mislead.

Does Section 34 itself state the amount of fine or term of imprisonment?

No. It makes the person liable under Section 447, so the applicable punishment framework is found in Section 447.

Disclaimer: This article is a general explanation of the statutory provision and is not a substitute for professional advice on the facts of a particular issue, prospectus or proceeding.