When is a Director or other person not liable for Mis-statement in prospectus?

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.