law: Companies Act, 1956
  Sec 62     -    Civil
  
  liability for mis-statements in prospectus 
  (1) Subject to the provisions of this section,
  
  where a prospectus invites persons to subscribe for shares in or debentures of
  
  a company, the following persons shall be liable to pay compensation to every
  
  person who subscribes for any shares or debentures on the faith of the
  
  prospectus for any loss or damage he may have sustained by reason of any untrue
  
  statement included therein, that is to say,
  (a) every person who is a director of the
  
  company at the time of the issue of the prospectus;
  (b) every person who has authorized himself to
  
  be named and is named in the prospectus either as a director, or as having
  
  agreed to become a director, either immediately or after an interval of time ;
  (c) every person who is a promoter of the
  
  company ; and
  (d) every person who has authorized the issue
  
  of the prospectus :
  Provided  that where, under
  
  section 58, the consent of a person is required to the issue of a prospectus
  
  and he has given that consent, or where under sub-section (3) of section 60,
  
  the consent of a person named in a prospectus is required and he has given that
  
  consent, he shall not, by reason of having given such consent, be liable under
  
  this sub-section as a person who has authorized the issue of the prospectus
  
  except in respect of an untrue statement, if any, purporting to be made by him
  
  as an expert.
  (2) No person shall be liable under
  
  sub-section (1), if he proves:
  (a) that, having consented to become a
  
  director of the company, he withdrew his consent before the issue of the
  
  prospectus, and that it was issued without his authority or consent ;
  (b) that the prospectus was issued without his
  
  knowledge or consent, and that on becoming aware of its issue, he forthwith
  
  gave reasonable public notice that it was issued without his knowledge or
  
  consent ;
  (c) that, after the issue of the prospectus
  
  and before allotment thereunder, he, on becoming aware of any untrue statement
  
  therein, withdrew his consent to the prospectus and gave reasonable public
  
  notice of the withdrawal and of the reason therefore ; or
  (d) that - 
  (i) as regards every untrue statement not
  
  purporting to be made on the authority of an expert or of a public official
  
  document or statement, he had reasonable ground to believe, and did up to the
  
  time of the allotment of the shares or debentures, as the case may be, believe,
  
  that the statement was true ; and
  (ii) as regards every untrue statement
  
  purporting to be a statement by an expert or contained in what purports to be a
  
  copy of or an extract from a report or valuation of an expert, it was a correct
  
  and fair representation of the statement, or a correct copy of, or a correct
  
  and fair extract from, the report or valuation ; and he had reasonable ground
  
  to believe, and did up to the time of the issue of the prospectus believe, that
  
  the person making the statement was competent to make it and that that person
  
  had given the consent required by section 58 to the issue of the prospectus and
  
  had not withdrawn that consent before delivery of a copy of the prospectus for
  
  registration or, to the defendant's knowledge, before allotment thereunder ;
  
  and
  (iii) as regards every untrue statement
  
  purporting to be a statement made by an official person or contained in what
  
  purports to be a copy of or extract from a public official document, it was a
  
  correct and fair representation of the statement, or a correct copy of or a
  
  correct and fair extract from, the document :
  Provided  that this sub-section
  
  shall not apply in the case of a person liable, by reason of his having given a
  
  consent required of him by section 58, as a person who has authorized the issue
  
  of the prospectus in respect of an untrue statement, purporting to be made by
  
  him as an expert.
  (3) A person who, apart from this sub-section,
  
  would, under sub-section (1), be liable by reason of his having given a consent
  
  required of him by section 58 as a person who has authorized the issue of a
  
  prospectus in respect of an untrue statement purporting to be made by him as an
  
  expert, shall not be so liable, if he proves -
  (a) that, having given his consent under
  
  section 58 to the issue of the prospectus, he withdrew it in writing before
  
  delivery of a copy of the prospectus for registration ;
  (b) that, after delivery of a copy of the
  
  prospectus for registration and before allotment thereunder, he, on becoming
  
  aware of the untrue statement, withdrew his consent in writing and gave
  
  reasonable public notice of the withdrawal and of the reason therefor ; or
  (c) that he was competent to make the
  
  statement and that he had reasonable ground to believe, and did up to the time
  
  of the allotment of the shares or debentures, believe, that the statement was
  
  true.
  (4) Where , -
  (a) the prospectus specifies the name of a
  
  person as a director of the company, or as having agreed to become a director
  
  thereof, and he has not consented to become a director, or has withdrawn his
  
  consent before the issue of the prospectus, and has not authorized or consented
  
  to the issue thereof ; or
  (b) the consent of a person is required under
  
  section 58 to the issue of the prospectus and he either has not given that
  
  consent or has withdrawn it before the issue of the prospectus ;
  the directors of the company excluding those
  
  without whose knowledge or consent the prospectus was issued, and every other
  
  person who authorized the issue thereof, shall be liable to indemnify the
  
  person referred to in clause (a) or clause (b), as the case may be, against all
  
  damages, costs and expenses to which he may be made liable by reason of his
  
  name having been inserted in the prospectus or of the inclusion therein of a
  
  statement purporting to be made by him as an expert, as the case may be, or in
  
  defending himself against any suit or legal proceeding brought against him in
  
  respect thereof :
  Provided  that a person shall
  
  not be deemed for the purposes of this sub-section to have authorized the issue
  
  of a prospectus by reason only of his having given the consent required by
  
  section 58 to the inclusion therein of a statement purporting to be made by him
  
  as an expert.
  (5) Every person who, becomes liable to make
  
  any payment by virtue of this section, may recover contribution, as in cases of
  
  contract, from any other person who, if sued separately, would have been liable
  
  to make the same payment, unless the former person was, and the latter person
  
  was not, guilty of fraudulent misrepresentation.
  (6) For the purposes of this section
  (a) the expression " promoter "
  
  means a promoter who was a party to the preparation of the prospectus or of the
  
  portion thereof containing the untrue statement, but does not include any
  
  person by reason of his acting in a professional capacity for persons engaged
  
  in procuring the formation of the company ; and
  (b) the expression " expert " has
  
  the same meaning as in section 58.