Ekta Textiles Ltd. issued a prospectus for its initial public offer (IPO). The prospectus contained some misleading information which may mislead the investors in subscribing to the issue. Some of the investors came to k

According to Section 37 of the Companies Act, 2013 , a suit may be filed or any other action may be taken under Section 34 or Section 35 or Section 36 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. Criminal Liability for Mis-statements in Prospectus (Section 34) Where a prospectus, issued, circulated or distributed under Chapter III, includes any statement which is untrue or misleading in form or context in which it is included or where any inclusion or omission of any matter is likely to mislead, every person who authorizes the issue of such prospectus shall be liable under Section 447 (punishment for fraud). Civil Liability for Mis-statements in Prospectus (Section 35) 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: is a director of the company at the time of the issue of the prospectus; 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; is a promoter of the company; has authorised the issue of the prospectus; and 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. Punishment for Fraudulently Inducing Persons to Invest Money (Section 36) 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 or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; or (c) any agreement for, or with a view to, obtaining credit facilities from any bank or financial institution, shall be liable for action under Section 447 . The affected persons can take action according to the above-mentioned provisions, seeking compensation for losses incurred due to the misleading prospectus.