# Actions by Affected Persons under Sections 34, 35 and 36

## 1. Who Can Sue?

A suit or other action under Sections 34, 35, or 36 can be brought by:

Any person, group, or association affected by a misleading statement, inclusion, or omission in the prospectus.

## 2. Important Limitation — Only Primary Market

These remedies are available only if shares were allotted in the primary market (directly from the company via the prospectus).

Secondary market purchasers (those who bought from the stock exchange) cannot sue under these sections. They did not rely directly on the prospectus when the company issued it.

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## 3. Class Action Suits — A Key Companies Act 2013 Feature

### Meaning

A class action is a suit filed by a group of similarly-affected persons against a defendant who has caused common harm to the entire group.

### Advantages over Individual Suits

Individual Suit	Class Action
Each victim files separately	One petitioner represents the whole group
Group must be physically present	No need to be present — one represents all
Costly and duplicative	Cost-effective, single proceeding

### Why It Matters

Where many small investors are individually harmed (and individually have small claims), class actions make legal recourse practical.
Companies Act, 2013 treats class actions as a major investor protection mechanism.

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## Visual Summary

```

Misleading Prospectus → Primary Market Allotment

↓

Affected Persons (any) can sue under Sec 34/35/36

↓

Option A: Individual suits | Option B: Class action (one for all)

```

Worked example

### Example 1

Example 1: 5,000 small investors subscribed to XYZ Ltd's IPO based on a fraudulent prospectus, each losing ₹50,000. Suing individually is impractical given lawyer fees.

Answer: They can file a class action — one petitioner represents the entire group of 5,000 investors. This is a key advantage introduced by the Companies Act, 2013.

### Example 2

Example 2: Mr A bought XYZ Ltd shares one month after IPO from the stock exchange and lost money when the misstatement was discovered.

Answer: Mr A cannot sue under Sections 34/35/36 — these apply only to primary market allotments. He bought in the secondary market and may have other remedies under SEBI regulations, but not under these sections.

⚠️ Common exam mistakes

Assuming all shareholders can sue under Sections 34/35/36 — only primary market allottees can.
Confusing class action with derivative action — class action is for COMMON harm to a group; derivative is on behalf of the company.
Forgetting that a single petitioner represents the entire class — the whole group need not be present in court.
Thinking secondary market purchasers have remedies under these specific sections — they don't; their remedies lie under SEBI laws and contract law.

Reference: Sections 34, 35, 36 (read with Section 245) — Companies Act, 2013

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Actions by Affected Persons and Class Action Suits

Worked example

⚠️ Common exam mistakes