Damages for Feud. Under the general law, an allotted of shares

hold persons responsible for the issue of Prospectus (Directors, Promoters, etc.) liable for damages for any fraudulent misrepresentation or mis-8tatement in the Prospectus, if he was deceived by reason of acting on the faith of such Prospectus. But the directors (or promoters, etc.) will not be liable for the tort or deceit if they honestly believed the statements to be true (Derry Vs. Peek).

2. Damages for Misrepresentation (Section 62). An allotted of shares or debentures is entitled to claim compensation from directors, promoters and any other persons who authorized the issue of a Prospectus, for damages sustained by reason of any untrue statement in it, whether made fraudulently or innocently.

In order to recover damages or compensation under this section thesubscriber (allotted) wiII have to prove:

(i) that the prospectus contained untrue statements of material is not required to prove fraud or intent to deceive); and (ii) that he has actually sustained loss or damage by reason of untrue statements.This action can also be taken after the company goes into liquidation. The true measure of damage is the difference. between amount paid, and the market value of shares on the date of allotment (Adams vs. Thrift)

Defenses available to Directors, etc The true measure of damage is the difference between the amount paid and the market value of shares on the date of allotment (Adams vs. Thrift).However, the person other than expert sought to be made liable mayescape his liability, if he proves [Section 62(2)] :

(0) Withdrawal of Consent. That he withdrew his consent to acting’s director before the issue of the prospectus, and that it was issued without his consent.

.(b) buyout Knowledge. That the prospectus was issued without his knowledge or consent and that on becoming aware of its issue, he forthwith gave

public notice that it was issued without his knowledge or consent.© Ignorance of Untrue Nature of the Statement. That he believedon reasonable groundthat the statement was true.

(d) Official Documents. That the statement was a correct and fairrepresentation of a public official document or was based on ,the authorityof an official person.

(e) Statement of EXIJert. That, the statement was in fact made onthe authority of a competent expert and the expert had given his consent as required by

Section 58 and had not withdrawn it.