Where a prospectus, issued, circulated or distributed under this Chapter, includes any statement which is untrue or misleading in form or context in which it is included or where any inclusion or omission of any matter is likely to mislead, every person who authorizes the issue of such prospectus shall be liable under section 447:
Provided that: nothing in this section shall apply to a person if he proves that such statement or omission was immaterial or that he had reasonable grounds to believe, and did up to the time of issue of the prospectus believe, that the statement was true or the inclusion or omission was necessary.
Legal Commentary & Landmark Judgments: Section 34
Section 34 imposes severe criminal liability under Section 447 on any person who authorizes the issue of a prospectus containing untrue, misleading, or deceptive statements or material omissions.
Section 34 eliminates the defense of negligent ignorance for corporate directors and promoters. In public offerings and debenture issues, any misleading assertion regarding corporate profitability or order books triggers non-compoundable criminal liability punishable with up to ten years imprisonment. Due diligence defense requires comprehensive verification documentation maintained contemporaneously by transaction advisors.