Why a Sole Proprietorship Firm Cannot Hold Property or Execute Sale Deeds in the Firm's Own Name

A recurring question in Indian property and commercial transactions is whether a proprietorship firm can purchase property in its own name through an authorisation letter, or execute a sale deed as a transacting party. Practitioners and registries frequently encounter documents executed in the name of M/s XYZ & Co. without naming the individual proprietor, and the enforceability of such instruments is often challenged. The settled judicial position is that a proprietary concern is not a legal person, and this has direct consequences for property dealings, authorisations, and litigation involving such firms.

The Core Answer: A Proprietorship Is Only a Business Name

A proprietorship concern is not a company, a partnership, or an association of persons. It is merely a business name under which an individual carries on trade or business. All rights, obligations, and liabilities arising from that business attach personally to the proprietor. This means:

• A proprietorship firm generally cannot hold immovable property in the firm's name; property acquired for the business is held by the proprietor personally.
• Instruments such as sale deeds, agreements to sell, or authorisation letters must be executed by, or in favour of, the individual proprietor, even where the business name is used as a trade label.
• A proprietorship firm has no independent right to sue or be sued; it is the proprietor who is vested with both the rights and liabilities on behalf of the firm 2022 0 Supreme(Cal) 666.
• On the death of the proprietor, the firm ceases to have legal existence, and only the legal representatives of the deceased proprietor can sue or be sued in respect of the business dealings 2017 0 Supreme(Gau) 691 and 2024 2 Supreme 751.

The Key Judgment: Raghu Lakshminarayanan vs. Fine Tubes

The authoritative statement comes from the Supreme Court in Raghu Lakshminarayanan vs. M/s Fine Tubes, (2007) 5 SCC 1032024 2 Supreme 751. Distinguishing a juristic person — such as a company, partnership, or association of persons — from a proprietary concern, the Court observed that a person who carries on business in the name of a business concern, being the proprietor thereof, would be solely responsible for the conduct of its affairs. A proprietary concern is not a company; it is only the business name in which the proprietor of the business carries on the business 2024 2 Supreme 751.

The Court further held that where a decree or order is not against the estate of a deceased sole proprietor but is based on the skills and expertise of the sole proprietor, the obligations which had to be performed by the sole proprietor come to an end on his demise and cannot be imposed on his legal heirs or representatives 2024 2 Supreme 751. However, monetary liabilities remain enforceable against the estate inherited by the legal representatives.

Practical Implications for Property Transactions

Registration of sale deeds in a firm name

Sub-registrars and courts typically insist that sale deeds be executed by the individual proprietor, not the firm name. Where an auction purchaser participates through a proprietorship or on behalf of nominees, courts have clarified the mechanics: since the petitioner was the entity that took part in the auction, the respondent bank argued the sale deed could be registered only in the name of the petitioner and not any other person; the court nonetheless held there is no legal prohibition against registering property in the names of nominees, provided necessary authorisations and indemnities are executed 2024 Supreme(Online)(KER) 37160. The lesson is that the registered instrument must identify real, competent parties — the proprietor or duly authorised nominees — rather than the non-existent firm as a juristic entity.

Authorisation and power of attorney limits

Authorisation letters must be read strictly. Courts have quashed transactions where a power of attorney did not expressly include power to sell, purchase, or execute a sale deed or encumber the property — an agent holding only lease, mortgage, or release powers cannot convey title

Harish Ambalal Choksi VS Narendra Ambalal Choksi

Funding from a proprietorship firm and benami concerns

Where property stands in the name of an individual but funds are paid from a proprietorship firm, the Benami Transaction (Prohibition) Act analysis becomes relevant. Courts have held that funds paid from joint accounts of an individual and spouse, or from a proprietorship firm in the spouse's name, do not constitute the exclusive known sources of income of that individual for attracting the exception under Section 2(9)(A)(iii) of the Benami Transaction (Prohibition) Act 2026 Supreme(Online)(Del) 18580. Once a sale deed in favour of named individuals stands, the registered owners have an absolute right to deal with the property 2026 Supreme(Online)(Del) 18580.

Litigation Consequences of the Firm's Non-Existence

The lack of juristic personality creates recurring procedural pitfalls:

• Complaints or suits filed in the firm's name after the proprietor's death face the objection that the proprietorship firm has no legal existence upon the proprietor's death 2017 0 Supreme(Gau) 691.
• In cheque dishonour prosecutions, courts distinguish between the liability of a proprietorship firm and that of its proprietor, holding that it is the proprietor who is vested with both rights and liabilities on behalf of the proprietorship firm 2022 0 Supreme(Cal) 666.
• Property dealings by co-proprietors or partners are governed by their personal and partnership arrangements rather than the firm's independent will

  CHU CHAI YIN & ANOR vs LIM WEE WAN

  2026 Supreme(Online)(Kar) 17801.

Key Takeaways

1. A proprietorship firm is not a separate legal or juristic person; it is only a trade name of its proprietor 2024 2 Supreme 751.
2. Property purchases and sale deeds should be executed in the name of the individual proprietor; an authorisation or letter in the firm's name generally cannot substitute for the proprietor's personal execution.
3. Powers of attorney and authorisation letters must expressly confer power to sell, purchase, or execute sale deeds; silence on these powers is fatal

   Harish Ambalal Choksi VS Narendra Ambalal Choksi

   .
4. On the proprietor's death, the firm loses existence; legal representatives alone can pursue or defend claims, though personal-skill obligations do not bind them 2024 2 Supreme 751 and 2017 0 Supreme(Gau) 691.
5. Registration of property in nominees' names may be permitted with proper authorisation and indemnity, but the competent executing parties must always be identified 2024 Supreme(Online)(KER) 37160.

The governing judgment to cite for this proposition is Raghu Lakshminarayanan vs. M/s Fine Tubes, (2007) 5 SCC 103. Because property titles are highly fact-sensitive, parties should generally verify the correct executing party before registration, and this article is general information rather than specific legal advice.