Section 36 - Punishment for Fraudulently Inducing Persons to Invest Money
## Section 36 — Punishment for Fraudulently Inducing Persons to Invest Money
### Conduct punished
Any person who, knowingly or recklessly, makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals material facts, to induce another person to:
Enter into an agreement to acquire/dispose/subscribe for securities, OR
Obtain credit facilities from a bank/financial institution.
### Punishment
Liable under Section 447 (fraud):
Imprisonment: 6 months to 10 years (in case of public interest fraud, not less than 3 years).
Fine: Not less than the amount involved, extendable up to 3 times the amount of fraud.
### Key Notes
This is a criminal liability provision (punishment).
Applies even if no actual loss results — the act of fraudulent inducement is itself punishable.
Applies to any person, not limited to directors/promoters.
Worked example
### Example 1
Example: A broker makes a false forecast that XYZ Ltd. shares will double in 3 months to induce investors to subscribe to a fresh issue. Even if no loss results immediately, the broker is liable under Section 36 read with Section 447 — imprisonment 6 months to 10 years and fine 1x to 3x the amount.
⚠️ Common exam mistakes
Confusing Section 36 with Section 34 — Section 34 is about misstatement in prospectus, Section 36 is about any fraudulent inducement (broader).
Forgetting that Section 36 also covers inducement to obtain credit facilities, not just securities.
Thinking actual loss is needed — the offence is completed on the fraudulent inducement itself.
Bare-Act text Section 36 · Companies Act, 2013 · click to expand
Any person who, either knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into, any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting securities; or any agreement to obtain credit facilities from any bank or financial institution, shall be liable for action under section 447.