valid as on 24/06/2024

Section 35.Civil liability for mis-statements in prospectus.
Effective from 12-09-2013, font in green from 01-04-2014 and font in blue from 09-02-2018

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

(a) is a  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  of the company;

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

(e) is an  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.(Effective from 01.04.2014)

(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.

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said person had given the consent required by sub-section (5) of section 26 to the issue of the prospectus and had not withdrawn that consent before  delivery of a copy of the prospectus for registration or, to the defendant’s knowledge, before allotment thereunder.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.

2(81) Securities means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)
2(20) Company means a company incorporated under this Act or under any previous company law
2(70) Prospectus means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate
2(34) Director means a director appointed to the Board of a company
2(69) “promoter” means a person—

(a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or

(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity

2(38) Expert includes an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force
Inserted vide Companies (Amendment) Act, 2017 dated 03.01.2018.  Effective from 09.02.2018. To view the notification,Click Here
Substituted vide the Companies (Amendment) Act, 2019 dated 31.07.2019 w.e.f., 15.08.2019. To view the Amendment Act, Click Here. To view the commencement Notification, Click Here.

Commencement Notification dated 09.02.2018

Enforcement Notification S.O. 902(E) dated 26/03/2014

Enforcement notification S.O.2754 (E) dated 12/09/2013

Notification regarding Commencement of certain sections of the companies (Amendment) Act, 2019 dated 14.08.2019 w.e.f., 15.08.2019

The Companies (Amendment) Act, 2017 (Effective from 03.01.2018)

The Companies (Amendment) Act, 2019 dated 31.07.2019

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