Criminal Liability concerning misrepresentation in a prospectus
The concept of corporate criminal liability was developed much later in India compared to the advanced Jurisdiction of the USA and UK. The rationale for not allowing the same was that corporates cannot commit crimes as a corporation is an artificial person and does not have the adequate ‘Mens Rea’ to commit a crime. However, in the advanced jurisdiction, the interpretation was in line with the fact that there are only some crimes that cannot be committed by corporates. In India, though the question of vicarious liability was recognized concerning torts for principal-agent relation as well as for employer-employee relations. However, in torts the intention to commit the tort is irrelevant. Damages are to be paid for legal damage irrespective of the fact that the respondent had the necessary intention to cause the damage.
The liabilities on the occasion of misrepresentation on a prospectus is via section 34 of the companies act as well as section 447 of the companies act. Section 34 of the Companies act holds the company to be criminally liable whereas section 447 puts into effect vicarious liability and makes persons working for the company liable. The punishment under both sections is near identical. Section 37 of the Companies Act provides a civil remedy to get back damages which have been occasioned due to the misrepresentation and have to file a lawsuit of the same.
Along with the provisions abovementioned, the other relevant statutes and regulations are, section 12A of the SEBI act, 1992. The section deals with manipulative and deceptive devices, insider trading, and the acquisition of securities. The above statutory provision along with Prohibition of Fraudulent and Unfair Trade Practices Relating To Securities Market) Regulations, 2003 also provides legal backing for prosecution in cases of fraud. It must be noted that to date not a single case of prosecution has taken place based on the provisions of section 36 of the companies act which holds the company to be liable for misrepresentation in a prospectus. Concerning section 447 concerning which orders and judgments have been passed are limited to only 12 in number. Although multiple cases deal with the misrepresentation in an IPO, the prospectus or red herring prospectus were issued primarily before 2013. The company's act should have made provisions to deal with all pending and future matters to be applicable with these particular provisions.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.