The statement “a proprietorship firm cannot place any application under Section 9 of IBC 2016” is not entirely correct — but it needs clarification.
✅ Legal Position:
A proprietorship firm is not a separate legal entity under Indian law. It is not distinct from its proprietor. Hence, the proprietor himself/herself must initiate proceedings in their own name, representing the proprietorship firm.
๐ Case Law Support:
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M/s. Shailesh Sangani v. Joel Cardoso (NCLAT, 2019):
A sole proprietorship firm can file an application under Section 9, provided the application is filed by the proprietor in his own name, showing proof of the existence of the firm and that the debt arose in the course of the firm's business.
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Uttam Galva Steels Ltd. v. DF Deutsche Forfait AG & Anr.:
NCLAT held that an operational creditor can be any person, including an individual carrying on business as a proprietorship.
๐งพ Requirements for a Proprietorship Firm to File Under Section 9:
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The application should be filed in the name of the sole proprietor.
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It must clearly state that the claim arises from the business carried on under the proprietorship.
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Attach supporting documents to prove:
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Existence of the firm (GST registration, trade license, etc.)
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That the debt relates to the proprietorship’s business.
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⚠️ What Is Not Allowed:
A proprietorship cannot file in the name of the firm as if it were a company or LLP. That would be legally defective.
✅ Correct Way:
If “XYZ Traders” is a proprietorship of Mr. A, the petition under Section 9 must be filed as:
"Mr. A, sole proprietor of M/s XYZ Traders"
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