A company engaged in the real estate business planned to raise funds through an Initial Public Offer (IPO) and filed a prospectus with SEBI for approval. The prospectus claimed that the company had a land bank in Chandig

Since, Ashwin is the original allottee and he had applied on the information given in the prospectus and invested in the Initial Public Offer (IPO), he may initiate legal action against the company and its directors. Section 37 of the Companies Act, 2013 provides that a suit may be filed or any other action may be taken under: Section 34 of the said Act (Criminal Liability for Mis-statements in Prospectus) or Section 35 of the said Act (Civil Liability for Mis-statements in Prospectus) or Section 36 of the said Act (Punishment for Fraudulently Inducing Persons to Invest Money) by any person, group of persons or any association of persons affected by any misleading statement or the inclusion or omission of any matter in the prospectus. Section 34 of the Companies Act, 2013 provides for criminal liability for mis-statement in prospectus. According to this section, where a prospectus issued, circulated or distributed under chapter III of said Act, includes any statement which is untrue or misleading in from or context in which it is included or where any inclusion or omission or any matter is likely to mislead, every person who authorizes the issue of such prospectus shall be liable for punishment for fraud under section 447 of the said Act. Section 35 of Companies Act, 2013 provides civil liability for mis-statements in a prospectus. According to this section, where a person has subscribed for securities of a company action 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 authorized himself to be named and is named in the prospectus as a director of the company, or has agree to become such director, either immediately or after an interval of time; c. Is a promoter of the company; d. Has authorized 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 of the said Act, be liable to pay compensation to every person who has sustained such loss or damages. Section 36 of Companies Act, 2013 provides for the punishment for fraudulently inducing persons to invest money. According to said section, any person who either knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading or deliberately conceals any material facts to induce another person to enter into or to offer to enter into- a. Any agreement for or with a view to acquiring disposing of subscribing for or underwriting securities; or b. Any agreement, the purpose of the pretended purpose of which is to secure a profit to any of the parties from the yield or securities or by reference to fluctuation in the value of securities; or c. Any agreement for or with a view to obtain credit facilities from any or financial institutions Shall be liable for action under section 447 (Punishment for Fraud) of the said Act. In view of the above discussion, Ashwin may initiate legal action against the company and its directors.