Question

Ques.1: An allotee of shares in a Company brought action against a
director in respect of false statements ind prospectus The
director contended that the statements were prepared by the
promoters and he had relied on them. Is the director liable
under the circumstances?​

Answer 1

Explanation:

According to the Indian Companies Act, 1956, the director of the company is responsible for any irregular allocations of shares.

The director will be help personally liable for the irregular allotment.

If he willfully does any of the irregular allotment, he shall compensate the company and the allottee

But if it is done unknowingly then the Act empowers the court to give a chance to the director of a company.

The court considers all the matters that if it is done by negligence, default, breach of duty or breach of trust if it appears to  the court that although he is liable but he has performed his duty with honestly then he might be given a chance.