The Supreme Court observed there is no distinction between suing a proprietorship in its trade name or in the proprietor’s name, since the firm has no independent legal status and is inseparable from its owner. “Whether proprietorship concern is sued in its name or through its proprietor representing the concerned is one of the same thing.”, the court said. Holding thus, the bench comprising Justices Vikram Nath and Sandeep Mehta set aside the Andhra Pradesh High Court’s decision which held that the suit against the proprietorship firm would be maintained against its trade name, and not in the name of the proprietor concern.
The dispute arose from an eviction suit filed by landlords against “Aditya Motors” a sole proprietorship run by the respondent. After the lease expired and the tenant refused to vacate, the landlords instituted eviction proceedings, initially naming “Aditya Motors” as the defendant. Later, they amended the plaint to substitute the proprietor, Prasad, as the defendant. This prompted him to seek rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure (CPC), arguing that deleting “Aditya Motors” extinguished the cause of action.
While the trial court dismissed his plea, the High Court allowed it, holding that the suit ought to have been maintained against the trade name under Order XXX Rule 10 CPC. Setting aside the High Court’s decision, the judgment authored by Justice Vikram Nath held that a suit originally filed against a proprietorship firm, and later amended to substitute the proprietor’s name in place of the firm, cannot be dismissed, since a proprietorship has no independent legal existence apart from its owner and both are legally one and the same.
“The use of the word can in Order XXX Rule 10 CPC only indicates that proprietorship concern may be made a party. However, it does not necessarily mean that the proprietor itself if made a party would not be enough, inasmuch as, the proprietorship is to be defended by the proprietor only and not by anybody else. Once the proprietor has been impleaded as a party representing the proprietorship, no prejudice is caused to rather its interest is well protected and taken care of by the only and only person, who owns the proprietorship. Order XXX Rule 10 CPC does not in any manner debar a suit being filed against the proprietor.”, the court said.
“The High Court seems to have taken completely hyper technical view not realising that there was no prejudice caused and the cause of action very much accrued against the proprietor as he alone had signed the lease deed on behalf of the proprietorship concern and there was no involvement of any second or third party, whose interest could be said to have been prejudicially affected. Once the interest of the proprietorship concern was taken care of by the proprietor having been impleaded nothing further remained.”, the court added.
Accordingly, the appeal was allowed.