The person responsible for the issue of prospectus containing untrue statement can be exonerated from such liability if he can prove that:
In a suit under Section 52 of the companies Act, 1956:-
(i) He withdrew his consent to act as director before the issue of the prospectus and it was issued without his authority or consent; or
(ii) He withdrew his consent after the issue of prospectus but before allotment and public notice was given; or
(iii) The issue was made without his authority or consent and on becoming aware of the issue he gave reasonable public notice of the fact; or
(iv) He had reasonable ground to believe that the statements were true and believed them to be true; or
(v) The statement was correct and fair summary or copy of an expert’s repot; or
(vi) The statement represented a fair copy or fair extract from an official document or from the statement made by an official person.
In a suit under section 56:-
A director or other person sued under section 56 may escape liability if he proves:-
(i) That he has no knowledge of the matter not disclosed; or
(ii) That the contravention arose out of an honest mistake of fact; or
(iii) In the opinion of court, non-compliance or contravention was not material or that the person sued ought reasonably to be excused having regard to all the circumstances of the case.
39 Comments