Prospectus definition confirmed: subscription invitations are prospectuses and directors are liable for misleading statements.

Exhibit A qualifies as a prospectus under the statutory definition and therefore attracts the filing and related obligations applicable to prospectuses; documents headed as prospectuses or inviting subscriptions and containing statements about business and assets fall within Section 2(14) and must comply with filing requirements. Persons who were directors at the time of issue or who authorised the issue are liable to compensate subscribers for loss caused by misleading or untrue statements in such a prospectus under the statutory liability provisions, and lack of formal compliance with particulars does not negate that liability where the statutory definition and authorisation are established.

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Issues: (i) Whether Exhibit A constituted a "prospectus" within the meaning of Section 2(14) of the Indian Companies Act, 1913 and related filing requirements under Section 92; (ii) Whether the 1st defendant (a director) was liable under Section 100 of the Indian Companies Act, 1913 for misleading or untrue statements in the prospectus.

Issue (i): Whether Exhibit A is a prospectus and whether statutory filing requirements apply.

Analysis: Exhibit A invited persons to subscribe for shares, was headed as a prospectus of the company, and contained statements about the company's business and assets. Section 2(14) defines "prospectus" to include any prospectus, notice, circular, advertisement or other invitation offering shares to the public. Section 92 requires a dated copy signed by named directors or their agents to be filed with the registrar before issue and prescribes obligations and penalties for failure to file. The appellate court's approach limiting the meaning of prospectus to documents satisfying Section 93's particulars was inconsistent with the statutory definition and with Section 93(5) which preserves other liabilities.

Conclusion: Exhibit A is a prospectus within Section 2(14) of the Indian Companies Act, 1913 and the filing and related obligations in Section 92 apply.

Issue (ii): Whether the 1st defendant is liable under Section 100 for misleading statements in the prospectus.

Analysis: Section 100 makes every director at the time of issue, every person who has authorised the issue, and other named persons liable to compensate subscribers for loss caused by misleading or untrue statements in a prospectus, subject to specified exceptions not applicable here. Evidence showed the managing director was authorised to issue the prospectus and the 1st defendant admitted that the managing director had authority and that he did not supervise him; the plaintiff proved he acted on the faith of the prospectus. The lower appellate court's finding that Section 100 did not apply because Exhibit A did not comply with Section 93 was contrary to the definitional and liability provisions.

Conclusion: The 1st defendant is liable under Section 100 of the Indian Companies Act, 1913 to compensate the plaintiff for loss sustained by reason of the misleading statements in the prospectus; the plaintiff's claim on this ground succeeds.

Final Conclusion: The Second Appeal is allowed, the decree of the lower appellate Court is set aside and the decree of the trial Court (District Munsif) is restored, thereby enforcing director liability for misleading prospectus statements and affirming that documents inviting subscription fall within the statutory definition of "prospectus".

Ratio Decidendi: A document inviting subscriptions for shares that offers to the public falls within the statutory definition of "prospectus" (Section 2(14)), and persons who are directors at the time of issue or who authorise the issue are liable under Section 100 for loss caused by misleading or untrue statements therein irrespective of whether the document satisfies the formal particulars in Section 93.

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