1. The question in this appeal is whether Article 36, Limitation Act, applies in the case of an action against the directors of a company for compensation for loss suffered as the result of a misleading prospectus. On 13th September 1936 a prospectus was published in a local newspaper calling for subscriptions in respect of an issue of shares by a company called the Cochin Furniture Co., Ltd. Believing the statements in the prospectus the appellant applied for 250 shares, which were promptly alloted to him. The capital required was not obtained and the company was compelled to go into liquidation. On 8th September 1939 the appellant filed a suit in the City Civil Court, Madras, for rescission of the contract and for compensation for the loss which had resulted to him from the misrepresentations contained in the prospectus. The company and all the directors were made parties. The trial Court held that the prospectus did contain false statements and that the appellant was entitled to compensation in the sum of Rs. 450. The appellant did not proceed with his plea for rescission of the contract. He limited his case to the claim for compensation. One of the directors entered into a compromise with the appellant but the others contested the suit.
2. It was contended by the contesting defendants that the claim had been preferred out of time as the article which governed the claim against them was Article 36. The appellant persuaded the Principal Judge of the City Civil Court who tried the suit, that the appropriate article was Article 120. Accordingly, the suit was held to be in time. On appeal to this Court Kunhi. Raman J. agreed with the trial Court that the appellant had a cause of action against the directors and that the finding of the trial Court that the appellant had suffered loss to the extent of Rs. 450 was correct. He disagreed, however, on the question of limitation. In his opinion the case was governed by Article 36 which meant that the suit was out of time. Consequently he set aside the decree of the City Civil Court and directed that the appellant's suit be dismissed. This appeal is from, the judgment of Kunhi Raman J. Article 36 fixes the period of limitation at two years for suits 'for compensation for any malfeasance, misfeasance or nonfeasance independent of contract and not herein specially provided for.' There is no article in the Limitation Act which specially provides for actions against a promoter or director, of a company in respect of a false statement made in a prospectus. A person who is responsible for the issue of a false prospectus commits a tort and by reason of the provisions of Section 100, Companies Act, is under a statutory liability to provide compensation. Article 36 must apply to this case unless the tort complained of arises out of the contract for the issue of shares. In our opinion it does not, but is independent of the contract. The contract is between the subscriber for shares and the company. The liability of the directors is confined to something which preceded the contract, to which they are not parties. We agree with Kunhi Raman J. that Article 36 applies and consequently we dismiss the appeal with costs.