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TMI Blog1987 (1) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... that they have a sure cause of action. The plaintiffs say that theirs is a quia timet action. Their case is that the defendants have indulged in fraudulent misrepresentations mainly with a view to "hoodwink" the public investors and if the public is lured to accept the offer to subscribe, it would be too late for them to realise that they all have been plain victims of deceit. They also allege that there is a breach of statute in the issue of the prospectus and also in the offer to subscribe by virtue of the order given by defendant No. 2 and, therefore, the public would be misled. They say that our experience should tell us that in such cases, though individual action is possible, it is rarely resorted to, with the result that the defendants will be able to amass money from the public by these means. The plaintiffs state in the plaint that the first defendants have issued their prospectus and public statements whereby they have given a very rosy picture of their company. In effect, they have shown various items which are, in fact, liabilities, but in the prospectus and in the statement these have been described as profits. According to them, though the statements show that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first defendant-company to the proposed issue of equity shares and non-convertible debentures is illegal, bad in law and null and void and consequently they are seeking an order of injunction restraining the first defendant-company from taking any action with regard to the issue of those public shares. In the notice of motion, their prayer for injunction is to restrain the first defendant from taking any action of any description, directly or indirectly, in pursuance of or in connection with the said issue of equity shares and debentures and the allotment of shares and debentures. Significantly, there is no relief sought as against the second defendant. Mr. I. M. Chagla, appearing for the plaintiffs, submitted that if one analyses the prospectus, it becomes clear that the statements contained in the prospectus are per se misleading and they are false. He also submitted that the first defendant-company have deliberately not given a correct picture of the company with a view to mislead the public. He submitted that this suit is on behalf of the general public and having obtained leave under Order I, rule 8 of the Code of Civil Procedure, this suit is maintainable as against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntil a later date, but once the misrepresentation is acted upon by the representee, the tortious act is completed provided that the representation is false at that date. If false when made but true when acted upon this is no misrepresentation." Mr. Cooper also submitted that assuming that the action is on the basis that there is a violation of the statute, viz. , the Companies Act, then the plaintiffs can seek remedies, provided they fall within the scope of section 62 or section 63 of the Act. The relevant portion of section 62 of the Act, which provides for civil liability for mis-statement, is as follows: "(1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or debentures of a company, the following persons shall be liable to pay compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein,......" This, of course, is founded plainly on the principle involved in the "tort of deceit". Mr. Cooper for the defendants also submitted that in a given case where a liability is created by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : "If public duties are to be enforced and social, collective 'diffused' rights and interests are to be protected, we have to utilise the initiative and zeal of public-minded persons and organisations by allowing them to move the court and act for a general or group interest, even though, they may not be directly injured in their own rights. It is for this reason that in public interest litigation litigation undertaken for the purpose of redressing public injury, enforcing public duty, protecting social, collective ' diffused ' rights and interests or vindicating public interest, any citizen who is acting bona fide and who has sufficient interest has to be accorded standing. What is sufficient interest to give standing to a member of the public would have to be determined by the court in each individual case. It is not possible for the court to lay down any hard and fast rule or any strait-jacket formula for the purpose of defining or delimiting 'sufficient interest'. It has necessarily to be left to the discretion of the court." On the other hand, it is contended that under section 9 of the Code of Civil Procedure, all suits of civil nature can be entertained by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospectus are false and that they are void, and that a future investor might be duped and that he might suffer, and, therefore, the company should be restrained from acting in any particular manner. Of course, the notes referred to above and which are contained in the prospectus refer to what has been described as "the changed method of accounting." As for me, it may be a bit of jugglery in accounting. But, I am no investor. The plaintiffs themselves are not cheated. There is no compulsion that the public must necessarily accept the offer of the first defendant-company. If that is so, I am not prepared to accept that those voluntary public investors are so gullible enough as to fall a prey to such an invitation. It is well-known that fluctuations in the stock market do not necessarily depend upon the profit and loss of any company. Investments in shares depend upon a variety of factors. The investors have their own calculations and the court cannot circumscribe the same. What is required in all matters of this type, assuming that there is some truth in what the plaintiffs say, is public knowledge and not any judicial interdiction. In the result, I am of the view that the plain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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