What is rescission of the contract?

Rescission of the contract: An application must be made to the court for the rescission of the contract, if statement discovers out to be fraudulent on the faith of which the shares were taken. The application should be made within a reasonable time and before the company goes into liquidation. The shares allotted to the person will have to be surrendered to the company. His name is then struck off from the register of members and he gets back the money paid by him to the company alongwith interest. If the following conditions are fulfilled then only the contract will be rescind:-

(i)       The statement must be untrue

(ii)     The statement must be material misrepresentation of facts

(iii)    The omission of material fact must be misleading before rescission is granted

(iv)   The statement must have forced  the shareholders to take up the shares

(v)     The deceived share holder is an allottee and he must have relied on the statement in the prospectus.

(vi)   The proceeding for rescission must be started immediately as soon as the allottee comes to know of a misleading statement in the prospectus.