The Supreme Court of India has set aside a judgment of the Andhra Pradesh High Court in a long-running property dispute, ruling that a proprietorship is not a separate legal entity and that the proprietor alone is the real party in interest.
Background of the Case
The case arose from a lease agreement signed in April 2005, under which the appellants had leased their property to a business operating under the name Aditya Motors, a sole proprietorship owned by Pilla Durga Prasad. After the lease expired, the premises were not vacated, prompting the owners to initiate eviction proceedings against the lessee and others in occupation.
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During the litigation, the appellants amended the plaint, substituting the name of the sole proprietor in place of the trade name Aditya Motors. This change later became the centre of contention when the respondent argued that the plaint disclosed no cause of action against him personally.
High Court and Supreme Court Views
In 2018, the trial court rejected an application filed under Order VII Rule 11 of the Civil Procedure Code (CPC), which had sought dismissal of the plaint. However, the Andhra Pradesh High Court overturned that decision in 2023, holding that the proprietorship concern should have been made a party.
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The Supreme Court, led by Justice Vikram Nath, disagreed with the High Court's reasoning. The bench clarified that a proprietorship is merely a trade name and not a juristic person like a company or partnership firm.
"Once the proprietor has been impleaded as a party representing the proprietorship, no prejudice is caused," the Court observed.
It further noted that the High Court had taken a "hyper-technical view" without recognising that the cause of action was always against the proprietor, who had signed the lease deed.
Legal Principles Explained
The Judgment emphasised that while Order XXX Rule 10 CPC allows a proprietorship to be sued in its trade name, the real party remains the proprietor. Citing earlier precedents, the Court reiterated that a suit by or against a proprietorship is effectively by or against the individual owner.
In support, the Court referred to Ashok Transport Agency v. Awadhesh Kumar (1998) and Shankar Finance and Investments v. State of Andhra Pradesh (2008), which had held that a sole proprietor remains the true party in all legal dealings, even if the business is run in another name.
With this decision, the Supreme Court restored the trial court's order and directed that the eviction suit should proceed on its merits. The ruling provides clarity on how sole proprietorships are to be treated in legal disputes, underlining that the individual owner cannot escape liability by relying on the trade name of the business.
The Court concluded firmly:
"The proprietorship concern cannot be equated with a company or partnership firm. The cause of action very much accrued against the proprietor as he alone had signed the lease deed."
Case Title: Dogiparthi Venkata Satish and Another vs. Pilla Durga Prasad and Others
Case No.: Civil Appeal No…… of 2025 (arising out of SLP (C) No. 25938 of 2023)
