The definition of “prospectus” mentioned under the Indian Companies Act 1956 has been borrowed and based on the definition mentioned in the English Companies Act under section 455(1). The definition was altered through an amendment in the year 1960 following the recommendations of the Companies Act Amendment committee of 1957 and also in the year 1974. The Companies Act 2013 mentions the definition of a prospectus under section 2 (70) which states that: 

Prospectus means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement, or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate. 

It can be concluded from the concept that the prospectus is a paper issued by the corporation in order to invite public offers to subscribe or buy certain shares of the corporate organization. The prospectus thus serves as an opportunity to sell to the general public from the company's hand, and for the intent of subscribing or buying some shares of the corporate organization. In addition, the definition further notes that this invitation to tender can be made in the form of a note, an advertising, a circular message, holding the definition very open with regard to the modes of communication to the general public of the invitation to tender.

The prospectus is a very important document that explicitly portrays the identity of the firm and so if there is some misstatement or misrepresentation in the prospectus and may not give the investors the true facts about the company, then the company will be held liable. Depending on the type of the case, the fault, in this case, maybe either civil or criminal. The responsibility exists if any person subscribes to any shares or debentures for any injury or harm he might have suffered due to the untrue assertion included therein on the confidence of the prospectus.

Any error of a prospectus is the responsibility of the one who gives permission and signs the prospectus. The owners, CS, and even the business directors are responsible for the same. However, if the person who signed the prospectus is not a manager nor draws salaries from the firm, mere signing would not result in liability for errors.

In the situation, on behalf of the director of the firm, Sahara India Commercial Corporation Ltd., SEBI 31 October 2018, the company secretary signed the prospectus using their power of attorney and SEBI concluded that the CS was not responsible as the director of the company for the error inside the prospectus.

Now, in the event of errors in the prospectus, this article would explicitly discuss civil and criminal obligation. Section 62 of the Companies Act deals with civil responsibility in the case of civil liability which requires the individual person responsible for paying any single person who has contributed for any share or debentures and may have caused any harm by assuming that the prospectus has been released with inaccurate and misleading facts. It is the responsibility of every person and organization who-

· Is a director when the prospectus was issued

· Named as the director or authorized himself or has agreed to become a director

· The promoter of the corporation

· Has authorized the issue of the prospectus

And in case of criminal liability, when any statement within the prospectus includes misleading or untrue information is distributed then everyone who authorized the issue of the prospectus is liable under section 447 of the Companies Act. Here, various remedies have been provided within the act in the form of recovering damages and compensation to the parties who have suffered. 

It must, though, be observed that there must be a misrepresentation of evidence and not of a statute in order to label a prospectus a 'misleading prospectus.' In comparison, the essence of this essay is that there are many places where a prospectus, such as asset deterioration, inventories, receivables, unpaid expenditures, etc., has been misunderstood. Solvency is impaired, liquidity is impacted, productivity in the use of funds is impacted, and performance is also impacted. This is why investors should now be a bit more mindful of this and then take some measure to shield themselves from any harm. A prospectus is also one of a business as a whole's key components so several elements have been connected to the same.

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.