Expert’s liability:
An expert becomes liable for an untrue statement in the prospectus if it is based and related to his report. If the expert is not concerned nor connected, than his report in this capacity cannot be taken:
(i) Unless he has given a written consent to the issue of the prospectus and has not withdrawn the consent before the delivery of the copy of the prospectus to the Registrar of Companies.
(ii) Till a statement as to his consent and non-withdrawal of it appears in the prospectus. (section 58)
The rule designed is very effective to protect a prospective investor by making a party responsible to the issue of prospectus and making them liable for untrue statement.
Penalty: section 59(1) of the companies Act, 1956 provides a penalty or fine extending Rs. 50,000 for the company and for any other person who is knowingly a party to the issue of prospectus.
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