CPC | Proprietary Concerns Can File Suits Provided Complete Details Of Owner Are Disclosed In Plaint: J&K High Court

Clarifying the law on the subject of suits filed by proprietary concerns, Justice Javed Iqbal Wani observed,

“..A suit by a proprietary concern of a sole proprietor or by the assumed business name or style of a person seems to be maintainable; only legal requirement being that when such a suit is filed, complete details of the owner of the proprietary concern or assumed business name should be disclosed in the plaint as required under Order 7 Rule 1 of the Code to establish the identity of the owner of the proprietary concern or the assumed business name".

The issues had arisen when respondent No.1/Plaintiff, a steel manufacturer, sued the appellant/defendant No. 5 for non-payment of bills related to steel items supplied in 1993. The defendants/appellant had challenged the suit's validity, arguing that respondent No.1 was neither a registered firm nor had competence under law to file the suit.

Dismissing the objections, the Trial Court ruled in favor of respondent No.1. Accordingly, the matter came before the High Court, as an appeal against the decree passed in favor of respondent No. 1.

The appellant's challenge was inter-alia on the ground that since respondent No. 1 was not a firm, i.e., a legal entity, the suit itself before the Trial Court was not maintainable.

Upon examination, Justice Wani held in favor of respondent No.1, observing,

“..the Trial Court had framed an issue as to whether the Plaintiff firm is not a registered Unit under a self-employment Unit. The onus of proof was on the Defendants-Appellant herein, however, they failed to discharge the same. On the other hand, the Plaintiff-respondent 1 herein deposed that same used to be on the record of the DIC, as such the issue was decided in favour of the Plaintiff-Respondent 1 herein".

It was added that as the appellant did not cross-examine respondent No.1 on the issue, acceptance of latter's evidence, which remained un-rebutted and unchallenged, could not be said to be an illegality committed by the Trial Court.

The court further emphasized that Order 30 Rule 1 CPC is an enabling provision, granting statutory backing for a suit to be brought by or against a firm and its partners. Importantly, it clarified that there was no bar on filing of a suit by a proprietorship concern or a person under an assumed business name.

“Otherwise also, there is no express or implied bar imposed by any provision of the Code to filing of a suit by a proprietorship concern or by a person under assumed name of business”.

The court also referenced Order 30 Rule 10 CPC, which allows any person carrying on business under an assumed name to be sued in that name, and said that the rule empowers such a person to file a counterclaim, treated as a cross suit, with the same effect as any other suit under the Code.

“That being the position would be not be illogical to say that a proprietary concern cannot file a suit as plaintiff. If an entity is treated as a legal person and a plaintiff for the purpose of cross suit then there is nothing to prevent such an entity to come as plaintiff in the first instance”, the court reasoned.

Reference was also made to Section 3(30) of the J&K General Clauses Act, which defines "person" as including any company, association, or body of individuals, whether incorporated or not, to reinforce the idea that any person is entitled to file a suit for enforcement or adjudication of his right against a defendant unless expressly prohibited by law.

"Incorporation is not necessary for an entity to claim the status of a person."

Acknowledging a discrepancy in the title of the plaint, where respondent No.1-Mousvy Industries was described as "Mousvy Industries Budgam through its Proprietor Abdul Majid", the court said that the identity of the proprietor-Abdul Majid was sufficiently clear for the defendants/appellant to recognize the suing entity. Hence, the mis-description did not strike at the root of the case's merits.

Based on these observations, the court dismissed the appeal.

Mr. Syed Musaib, Dy. AG appeared for appellant

Mr. S.M. Yousuf, Advocate appeared for respondents

Case Title: Executive Engineer, Dal Lake Division-I Vs Mousvy Industries Budgam

Citation: 2023 LiveLaw (JKL) 297

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