Misleading prospectus liability treated as tort, with limitation running under the general compensation article

Article 36 of the Limitation Act governs a suit for compensation against directors based on a misleading prospectus, because the claim is for malfeasance or misfeasance independent of contract and is not otherwise specially provided for. The making and issue of a false prospectus gives rise to a tort, and the statutory liability under section 100 of the Indian Companies Act does not convert the cause of action into a contractual one. The directors' liability arises from conduct preceding the subscription contract and remains separate from the subscriber-company contract. The suit is therefore time-barred.

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Issues: Whether a suit against directors for compensation for loss caused by a misleading prospectus is governed by Article 36 of the Limitation Act.

Analysis: Article 36 applies to suits for compensation for malfeasance, misfeasance or non-feasance independent of contract and not otherwise specially provided for. A claim against directors for statements made in a prospectus is not covered by any special article. The making and issue of a false prospectus gives rise to a tort, and the statutory liability imposed by section 100 of the Indian Companies Act does not make the cause of action contractual. The liability of the directors arises from conduct preceding the subscription contract and is independent of the contract between the subscriber and the company.

Conclusion: Article 36 applies and the suit is barred by time, so the appeal fails.

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