1. The plaintiff is the appellant in the present appeal. Defendant 1 was the President of a Company called 'The Dhandayudhapani Go, Ltd.' and defendant 2 was its Managing Director. The plaintiff's case was that defendant 2 represented to him that the Company was working properly and that on the strength of this and of the prospectus Ex. A, he induced him to lake shares to the value of E Section 1,000. The share certificate, Ex. B has been Signed by the President. It was found afterwards that the Company was not working and that the representations with respect to it in Ex. A were false. The plaintiff sued for the return of his money.
2. Defendant 2 who is said to have become bankrupt, remained ex par to. ' The trial Court stated that the plaintiff was proceeding against defendant 1 on two grounds: (1) for his having along with defendant 2, received the money and for having made misrepresentations as to the affairs of the Company; find (2) for his liability on account of the misrepresentations contained in the prospectus issued by the Company. On the first point, the plaintiff examined himself and on other witness and defendant 1 examined himself on the other side. The trial Court remarked that the evidence of the plaintiff's witness was, not at all satisfactory and did not deal with the evidence of the plaintiff. It did not find it proved that defendant 1 was present when the amount was paid and that be along with defendant 2 made any representations to the plaintiff. On the second ground it was admitted that the representations in Ex. A that the Company had purchased the Star Mills for B Section 25 000 as also the wood saws in the Coimbatore Industrial School were false. The statement that the Company was now carrying on business was also false. As regards the issue of prospectus defendant 1 admitted that defendant 2 was appoint-ed the Managing Director, that he was to look after everything, that it was in his power, as Managing Agent, to issue the prospectus and that he himself took no steps to supervise him. On these admissions and findings the trial Court held that defendant 1 as a Director of the Company was liable under S, 100, Companies Act, 1913.
3. On appeal the learned 'Subordinate Judge dismissed the suit As regards the first ground, the learned Subordinate Judge set out the evidence of the plaintiff and his witness and of the defendant and without further comment said :
I therefore agree with the lower Court that there is no sufficient evidence of misrepresentation or fraud of defendant 1.
4. With regard to the second point he held that Ex. A did not purport to be the prospectus1 of the Company, that the requirements of the prospectus are mentioned in Section 93, Companies Act, that a copy of the prospectus is required to be filed for registration, that Ex. A did not comply with the requirements of Section 93, and it was not said that its copy had been filed for registration and therefore Section 100 was not applicable to the case. Against this decision the present second appeal has been filed.
5. I do not think I need deal with the minor objection that the trial Court, having failed to discuss the evidence of the plaintiff with regard to the oral representation of defendant 1, and the lower appellate Court while setting out the evidence on both sides -not having commented upon it, the latter cannot be said to have detail properly with theevidence in accepting the view of the lower Court, because I am clear that the plaintiff must succeed on the second point. Ex. A the prospectus is headed 'Dhandayudhapani Co. Ltd., Anamalai.' The Tamil words are 'Kampanyin Socrukkamana Veevaram.' The prospectus is in these terms:
Dhandayudhapani Co. Ltd., Anamalai, Prospectus of the Company : (1) Bach share at Rs. 10 for Rs. 30,000 shares capital 3 lakhs. (2) Object of the Company carrying on trade, agriculture, money-lending. (3) The Company carried on now at Pollachi in the name of Star Mills has been purchased for Rs. 25,000 In this machines for hulling grams, paddy have been fixed and were being worked and are in a condition to be worked. Further the (wood) saws which were being worked in the Coimbatore Industrial School have been purchased. With these, the work may be commenced in two weeks. (4) Those who wish to join the Company may sign in the application sent herewith (and) send to the address given in the application along with the share amount and receive the share certificate. (5) For full particulars of the Company apply to the Managing Agent.
6. The learned Subordinate Judge has failed to note the definition of 'prospectus' in Section 2(14), Companies Act, which runs as follows:
'Prospectus' means any prospectus, notice, circular, advertisement or other invitation, offering to the public for subscription or purchase any shares or debentures of a Company.
7. There can be no question that Ex. A falls under that definition. The evidence of defendant 1 shows that defendant 2 was authorized to issue this prospectus. It is therefore immaterial whether defendant 1 saw it or not because Section 100(1) says:
Where a prospectus invites persons to subscribe for shares in or debentures of a Company every person who is a Director of the Company at the time of the issue of the prospectus and every person who has authorized the naming of himself and is named in the prospectus as a Director or as having agreed to become a Director either immediately or after an interval of time, and every promoter of the Company, and every person who has authorized the issue of the prospectus, shall be liable to pay compensation to all persons who subscribe for any shares or debentures on the faith of the prospectus for all loss or damage that they may have sustained by reason of any misleading or untrue statement therein, or in any report or memorandum appearing on the face thereof, or by reference incorporated therein or issued therewith except under certain exceptions which do not arise in this case.
8. Turning to Section 92 we find Clause (1) says:
Every prospectus issued by or on behalf of a Company or in relation to any intended Company shall be dated, and that date shall, unless the contrary be proved, be taken as the date of publication of the prospectus.
9. Clause 2 says:
A copy of every such prospectus, signed by every person who is named therein as a Director or proposed Director of the Company, or by his agent authorized in writing, shall be filed foe registration with the Registrar on or before the date of its publication, and no such prospectus shall be issued until a copy thereof has been so filed for registration.
10. Clause (3) says:
The Registrar shall not register any prospectus unless it is dated, and the copy thereof signed in manner required by this section.
11. Clause (4) says:
Every prospectus shall state on the face of it that a copy has been filed for registration as required by this section.
12. Clause (5) says:
If a prospectus is issued without a copy thereof being so filed the Company and every person who is knowingly a party to the issue of the prospectus, shall be liable to a fine not exceeding fifty rupees for every day from the date of the issue of the prospectus until a copy thereof is so filed.
13. It is quite clear that for the definition of 'prospectus' in every part of; this section we must go back to Section 2(14). To hold as the lower appellate Court has done that a prospectus is a prospectus only if it conforms to the terms of Section 93 would mean that in regard to Section 92 the penalty for failure to file the prospectus could be avoided by allowing it to lack any of the requisites laid down in Section 93. Moreover Section 93 itself contains an express proviso (Clause 5) showing that the interpretation of the lower appellate Court is incorrect. It says:
Nothing in this section shall limit or diminish any liability which any person may incur under the general law or this Act apart from this section.
14. Therefore a person who has incurred a penalty under Section 100 is expressly debarred from saving himself from that penalty by anything occurring in Section 93; otherwise he could take advantage of his own wrong. Section 93, Indian Companies Act, corresponds to Section 81, English Companies Act, and Section 100 corresponds to Section 84 thereof. Halsbury's Laws of England, Vol. 5, p. 126 aays:
The provisions of the Act of 1908, as to any proceedings do not limit or diminish any liability that any person may incur under the general law or under the Act apart from such provisions.
15. Palmer on Company Law, 10th Edn., says:
Paragraph 9 (which corresponds to Clause (5). Section 93, Companies Act) preserves the liability of Directors and others to be sued for misrepresentation under Section 81 or in an action of deceit.
16. The case in Prumatha Nath Sanyal v. Kali Kumar Dutt 1925 Cal. 714, is an illustration of what is meant by 'prospectus' and of the penalty incurred for failure to file a copy of it with the Registrar. In that case part of the advertisement ran:
Some shares are still available for sale according to the terms of the prospectus of the Company, which may be obtained on application Rs. 10 per share payable.
17. It was urged in that case that as the prospectus of the Company had already been filed with the Registrar, and as the advertisement referred to the prospectus and stated it had been so filed, it was not necessary under the law to file a copy of the advertisement as there would be no object in doing so and that even if it had been filed the Registrar would not have accepted it. But this contention was not accepted by the Court which remarked:
It is clear that an advertisement in the shape in which it has been published would not have been accepted by the Registrar as satisfying the requirement of Section 93; but that only means that it should not have been issued.
18. This judgment shows that the liability under Section 92 cannot be avoided by issuing a prospectus to satisfy the requirements of Section 93 which would not have been accepted by the Registrar had it been sought to be filed before him. It is a very much stronger case than the present where, if the view of the lower appellate Court is correct, a person may take advantage of his own deliberate wrong. It was urged for the respondent that in the plaint the plaintiff did not mention the prospectus Ex. B nor did he do so even in the notice of suit. I do not think that this is material. It was not denied that it was the prospectus of the Company issued by the Managing Director who was authorized to issue it. Nor was it denied that it, was shown to the plaintiff who swore that he acted on the faith of it. In fact, it does not seem to have been taken as a point in either of the lower Courts that it was not on the strength of this prospectus that the plaintiff took shares in the Company. No doubt there was said to be also an oral inducement which was not found to be proved. That the prospectus was also one of the things which induced him to invest his Rs. 1,000 in the Company is clear beyond doubt. As I said the liability under Section 100 being to my mind quite clear, it is not necessary to discuss the question as to whether the lower appellate Court dealt in proper legal fashion with the evidence of the oral representation. The second appeal is allowed. The decree of the lower appellate Court is set aside and the decree of the District Munsif is restored with costs throughout.