Lakshay bought the shares of Blue Ladder Ltd in the public offer relying on claims made in the prospectus which was explained in detail by the Merchant Bankers. The company was involved in a governance scam and posted lo

Section 35 of the Companies Act, 2013 clarifies that 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 was responsible as specified 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. Besides civil liability, the promoters, directors and others authorised the issue of prospectus are criminally liable under Section 34 for the issue of prospectus containing untrue or misleading statements in form or context in which it is included or where any inclusion or omission of any matter is likely to mislead. Section 34 provides that, where a prospectus, issued, circulated or distributed under Chapter III-Part I of the Companies Act, 2013, 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 of the Companies Act, 2013 (Fraud). However, nothing in this section shall apply to a person if he proves that such statement or omission was immaterial or that he had reasonable grounds to believe, and did up to the time of issue of the prospectus believe, that the statement was true or the inclusion or omission was necessary. As per Section 37, 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. Accordingly, in view of the fact that Ms. Runa, is not a shareholder of Blue Ladder Ltd and is only the sister of its shareholder Lakshya, a suit filed by Ms. Runa for untrue statement in the prospectus for Mr. Lakshya who bought the shares of Blue Ladder Ltd will not be admissible, unless she proves to the satisfaction of the Court that she is also affected by the misleading statements in the prospectus. The claim for rescission is the right of the shareholder who purchased the shares relying on the untrue statement.