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CIVIL LIABILITY FOR MIS-STATEMENTS IN PROSPECTUS [SECTION 35]
Where a person has subscribed for securities of a company acting upon any misleading statement, inclusion or omission and has sustained any loss or damage as its consequence, the company and every person who –
a) is a director at the time of the issue of prospectus;
b) has named as director or as proposed director with his consent;
c) is a promoter of the company;
d) has authorised the issue of the prospectus; and
e) is an expert;
shall be liable to pay compensation to effected person.
This civil liability shall be in addition to the criminal liability under section 36.
Extreme caution:
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 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.
Defences under this section are:
a) he has withdrawn his consent or never give his consent;
the prospectus was issued without his knowledge or consent and when he become aware, gave a reasonable public notice that prospectus was issued without his knowledge or consent.
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