Factual Background and Procedural History
The present appeal arose from a dispute concerning a lease arrangement involving a proprietorship concern, Aditya Motors, and the appellants, Dogiparthi Venkata Satish and another, the owners of the suit property. The controversy stemmed from the question of whether a proprietorship firm could independently be sued or whether proceedings must directly name the proprietor as the real party in interest.
Under a registered lease deed dated 13 April 2005, the appellants leased their premises to Aditya Motors, a sole proprietorship owned by Pilla Durga Prasad. Subsequently, without the consent of the lessors, Aditya Motors sublet the premises to M/s Associated Auto Services Pvt. Ltd. Upon expiry of the lease term, the lessee failed to vacate, prompting the appellants to issue a notice under Section 106 of the Transfer of Property Act, 1882, followed by filing a suit for eviction against Aditya Motors, the sub-lessee company, and its directors.
During trial, the appellants sought amendment of the plaint under Order VI Rule 17 CPC to substitute Pilla Durga Prasad in place of Aditya Motors, reflecting his status as sole proprietor. The Trial Court allowed the amendment by order dated 28 March 2018, which attained finality.
Subsequently, Pilla Durga Prasad moved an application under Order VII Rule 11 CPC for rejection of the plaint, arguing that once Aditya Motors was deleted, the plaint disclosed no cause of action against him individually, as the lease was executed in the name of Aditya Motors. The Trial Court dismissed the application by order dated 2 July 2018, holding that the proprietor and the proprietorship were one and the same entity.
However, the High Court of Andhra Pradesh, in Civil Revision Petition No. 1679 of 2019, reversed the Trial Court’s decision by order dated 19 October 2023, holding that under Order XXX Rule 10 CPC, a proprietorship concern could be sued only in its business name. Aggrieved, the appellants approached the Supreme Court of India.
Identification of Legal Issues
The Supreme Court was called upon to determine the following key issue:
- Whether a proprietorship concern is a juristic person capable of being sued independently of its proprietor, or whether the proprietor is the real party to such litigation.
A subsidiary issue concerned the interpretation of Order XXX Rule 10 of the Code of Civil Procedure, 1908, and whether the failure to implead the proprietorship concern in its trade name rendered the suit defective.
Arguments of the Parties
Appellants (Plaintiffs/Lessors)
- Contended that Aditya Motors was merely a trade name, and its proprietor, Pilla Durga Prasad, was the real person behind the lease transaction.
- Asserted that since the proprietor signed the lease deed, the cause of action was directly against him.
- Argued that the substitution of Pilla Durga Prasad in place of Aditya Motors was proper and did not alter the cause of action.
- Maintained that Order XXX Rule 10 CPC is an enabling provision and does not preclude suits directly against the proprietor.
Respondents (Defendants/Lessee)
- Argued that the lease was executed in the name of Aditya Motors, and once the entity was deleted from the plaint, no cause of action survived against Pilla Durga Prasad individually.
- Contended that under Order XXX Rule 10 CPC, only the business name could be sued and that the amendment substituting the proprietor was procedurally defective.
- Relied on the High Court’s view that the proprietorship concern, being a business entity, must be separately impleaded.
Court’s Analysis and Reasoning
Delivering the judgment, Vikram Nath, J., with Sandeep Mehta, J. concurring, the Supreme Court comprehensively analysed Order XXX Rule 10 CPC, clarifying the legal identity of proprietorship concerns in Indian civil jurisprudence.
1. Proprietorship Not a Juristic Person
The Court held unequivocally that a proprietorship concern is not a juristic person; it is merely a trade name adopted by an individual for carrying on business. Therefore, the proprietor is the real party in any legal proceeding, whether as plaintiff or defendant.
Quoting Order XXX Rule 10 CPC:
“Any person carrying on business in a name or style other than his own name… may be sued in such name or style as if it were a firm name…”
The Court noted that the use of the word “may” is permissive, not mandatory. Hence, a suit may be filed against the business name or directly against the proprietor, both being legally valid forms.
2. Misapplication by the High Court
The Supreme Court held that the High Court adopted a hyper-technical approach, misconstruing Order XXX Rule 10 as mandating that a proprietorship must be sued in its trade name. Since no prejudice was caused to the respondent—who was the sole proprietor and had executed the lease—the suit could validly continue against him directly.
3. Reliance on Precedents
The judgment reaffirmed the principles established in:
- Ashok Transport Agency v. Awadhesh Kumar (1998) 5 SCC 567 — holding that a proprietary concern is only a business name, not a juristic entity, and that Order XXX Rule 10 CPC merely enables proceedings in the trade name.
- Shankar Finance and Investments v. State of Andhra Pradesh (2008) 8 SCC 536 — clarifying that in proceedings involving proprietary concerns, representation may be in the trade name, but the proprietor remains the real party in interest.
The Court reiterated that unlike partnerships governed by the Indian Partnership Act, 1932, a proprietorship has no separate legal existence. Hence, suing or being sued through the proprietor satisfies all procedural requirements.
4. Purpose and Policy Objective
Emphasising substance over form, the Supreme Court underscored that procedural rules are intended to facilitate justice, not obstruct it. The object of Order XXX Rule 10 CPC is to simplify litigation involving sole proprietors, not to create artificial distinctions or technical barriers.
Final Conclusion and Holding
The Supreme Court allowed the appeal, set aside the Andhra Pradesh High Court’s order dated 19 October 2023, and restored the Trial Court’s order dated 2 July 2018 rejecting the application under Order VII Rule 11 CPC.
The Court concluded that:
- A proprietorship firm is not a separate legal person; it is merely a trade name.
- A suit against the proprietor directly is valid, even if the business name is not mentioned.
- Order XXX Rule 10 CPC is an enabling provision, not a restrictive one.
The Trial Court was directed to proceed with the suit on its merits.
FAQs:
1. Can a proprietorship firm file or defend a lawsuit in India?
A proprietorship firm cannot sue independently since it is not a separate legal entity. However, the proprietor can file or defend a case either in their own name or using the firm’s trade name under Order XXX Rule 10 CPC.
2. What does Order XXX Rule 10 of the CPC mean?
Order XXX Rule 10 is an enabling provision that allows a person conducting business under a trade name to be sued in that business name. It does not mandate that suits must be filed in the trade name; the proprietor remains the real party.
3. Is there any legal difference between a proprietorship and a partnership firm?
Yes. A partnership is governed by the Indian Partnership Act, 1932, and may sue or be sued in the firm name. A proprietorship, however, is owned entirely by one person and has no legal existence separate from its proprietor.
4. What happens if a proprietor is not named in a suit against the firm?
If the proprietor’s identity is clear and the cause of action relates to the proprietorship business, the court may treat the proceedings as valid. Technical errors in naming can be corrected without defeating the suit.
5. Why did the Supreme Court intervene in the Dogiparthi Venkata Satish case?
The Supreme Court found that the High Court had misapplied Order XXX Rule 10 CPC. It reaffirmed that suing a proprietor directly, instead of the firm’s trade name, is legally sufficient and causes no procedural defect.
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