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.
1[(c) that, as regards every misleading statement purported to be
made by an expert or contained in what purports to be a copy of or
an extract from a report or valuation of an expert, it was a correct
and fair representation of the statement, or a correct copy of, or a
correct and fair extract from, the report or valuation; and he had
reasonable ground to believe and did up to the time of the issue of
the prospectus believe, that the person making the statement was
competent to make it and that the said person had given the consent
required by sub-section (5) of section 26 to the issue of the
prospectus and had not withdrawn that consent before 2[filing of a
copy of the prospectus with the Registrar] or, to the defendant's
knowledge, before allotment thereunder.]
(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 sub-section
(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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1. Ins. by Act 1 of 2018, s. 9 (w.e.f. 9-2-2018).
2. Subs. by Act 22 of 2019, s. 8, for "delivery of a copy of the
prospectus for registration" (w.e.f. 15-8-2019).
How to execute bills of exchange etc Section 22 of Indian Companies Act 2013
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