Section 36.Punishment for fraudulently inducing persons to invest money.


03 December 2023 As per section 36 of Companies Act 2013,

Any person who, either knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into:

c) any agreement for, or with a view to, obtaining credit facilities from any bank or financial institution , shall be liable for action under section 447.

Further as per Section 37, a suit may be filed or any other action may be taken under section 34 or section 35 or section 36 by any person, group of persons or any association of persons affected by any misleading statement or the inclusion or omission of any matter in the prospectus .


My questions are the following:

1) Does "statement , promise or forecast" mentioned u/s 36 mean the prospectus or can it be any other statement not being a prospectus? As suit can be filed only if misstatement is related to prospectus as per section 37, so should we assume that this statement given to induce an agreement is prospectus only?

2) Further what does "inducing a person to enter into an agreement for or with a view to obtaining credit facility from a bank" mean? Are we making an agreement with another individual to improve our credit worthiness in order to obtain credit?

3) To make someone liable u/s 447 should the suit be filed only by persons mentioned under section 37 ( that is an investor who was affected by the misstatement in the prospectus) ?



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