# Application of Sections 34 to 36 and Chapter XX [Section 391]

## Application of Criminal & Civil Liability Provisions

Sections 34 to 36 (Criminal liability, Civil liability and Punishment for fraudulently inducing investment) shall apply to:

Issue of a prospectus by a company incorporated outside India, and
Issue of IDRs by a foreign company.

## Application of Winding Up Provisions

If money raised through issue of securities is not repaid, then:

Chapter XX (Winding Up) shall apply mutatis mutandis for closure of place of business in India (as if it were an Indian company).

## Purpose

This section extends investor protection mechanisms — including criminal/civil consequences for misstatements and the winding-up framework — to foreign companies and IDR issuers, ensuring that foreign issuers cannot escape liability by virtue of being incorporated outside India.

Worked example

### Example 1

Example: A foreign company issued IDRs in India. The prospectus contained false statements that fraudulently induced investors. Under Section 391, Sections 34-36 apply — directors can face criminal prosecution, and civil liability for misstatements is enforceable in Indian courts. Additionally, if the company fails to repay, Chapter XX winding-up provisions apply to close its Indian place of business.

⚠️ Common exam mistakes

Assuming winding-up under Chapter XX of the Companies Act applies to the entire foreign company — it applies only for closure of the Indian place of business.
Believing that issuing IDRs (rather than equity shares) exempts foreign companies from Sections 34-36 liabilities.

Reference: Section 391 — Companies Act, 2013

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Application of Sections 34-36 and Chapter XX (Section 391)

Worked example

⚠️ Common exam mistakes