Analysis of High Court of Bombay Judgement in Kisan Mehta vs. Universal Luggage Mfg. Co. Ltd.

An uninterested person who is neither a member nor an investor in a company, cannot maintain action for misstatement in Prospectus.

An uninterested person who is neither a member nor an investor in a company, cannot maintain action. If a subscriber wants to take an action in addition to what is contemplated under section 34 or 35 under Companies Act 2013, it is open to him to take such action; but that does not mean that any other person who is not interested in the company at all can ever come forward and say that the statements contained in the 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. – Kisan Mehta vs. Universal Luggage Mfg. Co. Ltd. (1988) 63 Comp. Cas. 398 (Bom.)

However, a person who purchases shares from market and not on allotment, cannot claim indemnity on ground that there was misrepresentation in prospectus.

Judgement link : https://indiankanoon.org/doc/1206701/