Section 498

Liability of directors for allotment of shares for inadequate consideration.—(1) Any director, creditor or member of a company may apply to the Court for a declaration that any shares of the company specified in the application have been allotted for inadequate consideration.

(2) Every director of the company who is a party to making the allotment of such shares shall be liable, jointly and severally with his codirectors, to make good to the company the amount by which the consideration actually received by the company for the shares is found by the Court, after full inquiry into the circumstances of the transaction, to be less than the consideration that the company ought to have received for such shares, if it is proved, as to any such first mentioned director, that such director-

(a) had knowledge that the consideration so received by the company was inadequate; or

(b) failed to take reasonable steps to ascertain whether such consideration so received by the company was in fact adequate.