Sole Proprietor or Partnership

Negotiable Instruments Act, 1881 (26 of 1881) - Section 138,  Section 141 Explanation (b)  - Cheque was issued by the Sole Proprietorship firm that was not impleaded as an accused person in the complaint – There was no requirement to implead his sole proprietary concern as an accused person nor there was any need to additionally implead the applicant by his trade name – Complaint maintainable. #2020 SCeJ 986 (All.) 

Partnership - Sole proprietary concern - Association of individuals - Negotiable Instruments Act, 1881, S. 142. 

Held, Sole proprietary concern, does not falls within the meaning of the term 'company' or a 'firm' used in Section 142 Negotiable Instruments Act, 1881 (26 of 1881) as a proprietorship firm is neither incorporated nor constituted by or under any statute. Held further, As to the meaning to be attributed to the words "association of individuals", the same has to be understood as an entity created by the free will of more than one individual, for furtherance of a common object or purpose. The use of the plural form of the word 'individual' itself leaves no room for any doubt in that regard. Then, for any 'association' of individuals to arise, there have to exist at least two individuals to form it. A single individual may never form an association with himself. Thus, the phrase "association of individuals" necessarily requires such entity to be constituted by two or more individuals i.e. natural persons. On the contrary a sole-proprietorship concern, by very description does not allow for ownership to be shared or be joint and it defines, restricts and dictates the ownership to remain with one person only. Thus, "associations of individuals" are absolutely opposed to sole-proprietorship concerns, in that sense and aspect. Held further, A 'partnership' on the other hand is a relationship formed between persons who will fully form such relationship with each other. Individually, in the context of that relationship, they are called 'partners' and collectively, they are called the 'firm', while the name in which they set up and conduct their business/activity (under such relationship), is called their 'firm name'. While a partnership results in the collective identity of a firm coming into existence, a proprietorship is nothing more than a cloak or a trade name acquired by an individual or a person for the purpose of conducting a particular activity. With or without such trade name, it (sole proprietary concern) remains identified to the individual who owns it. It does not bring to life any new or other legal identity or entity. No rights or liabilities arise or are incurred, by any person (whether natural or artificial), except that otherwise attach to the natural person who owns it. Thus it is only a 'concern' of the individual who owns it. The trade name remains the shadow of the natural person or a mere projection or an identity that springs from and vanishes with the individual. It has no independent existence or continuity. Held further, In the case of a sole proprietary concern, there are no two persons in existence. Therefore, no vicarious liability may ever arise on any other person. The identity of the sole proprietor and that of his 'concern' remain one, even though the sole proprietor may adopt a trade name different from his own, for such 'concern'. Thus, even otherwise, conceptually, the principle contained in section 141 of the Act is not applicable to a sole-proprietary concern. #2020 SCeJ 986 (All.)



Your feedback is looked forward to:

Note: Please fill out the fields marked with an asterisk.