False prospectus statements and discovery-based limitation kept the prosecution alive in alleged corporate misrepresentation.

A prospectus statement that a company will pursue specified business objects is false if made without any intention to carry out those objects, and allegations that public funds were diverted away from the stated business disclosed a prima facie case of deliberate misstatement. The complaint was also held not barred by limitation because, for offences concerning false statements in a prospectus, time runs from discovery of the falsity, not from the date of issue where the falsity came to light only on later examination of the company's accounts. The quashing petition was therefore rejected and prosecution allowed to proceed.

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Issues: (i) Whether the criminal proceedings alleging false statements in the company prospectus disclosed a prima facie case for trial. (ii) Whether the complaint was barred by limitation.

Issue (i): Whether the criminal proceedings alleging false statements in the company prospectus disclosed a prima facie case for trial.

Analysis: The prospectus stated that the company would carry on leasing and hire-purchase business, but the complaint showed that a substantial part of the funds was diverted to advances, investments, and activities unrelated to the stated objects. A statement of objects in a prospectus, when made without intention to carry it out, can amount to a false statement. On the facts pleaded, the allegation was that the directors had no intention from the inception to use the public funds for the projected business and had made misleading statements to induce subscription.

Conclusion: The allegation disclosed a prima facie case of deliberately making a false statement in the prospectus, and the plea that the matter fell only under the offence of criminal breach of trust was rejected.

Issue (ii): Whether the complaint was barred by limitation.

Analysis: For offences under Sections 63 and 628 of the Companies Act, 1956, limitation was treated as running from the date when the false statement came to knowledge. The Registrar of Companies learned of the falsity only upon examination of the later balance sheet, so limitation did not begin from the date of issue of the prospectus. The contention based on expiry of time was therefore untenable.

Conclusion: The complaint was not barred by limitation.

Final Conclusion: The petition for quashing was rejected, and the prosecution was permitted to proceed.

Ratio Decidendi: A prospectus statement of corporate objects is false when made without an intention to carry out those objects, and for offences concerning such false statements the limitation period runs from the date of discovery of the falsity.

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