Court rules that minor cannot be held liable for firm's debts, directs correction of credit score
In a significant judgment, the Kerala High Court has ruled in favor of Dhruv Hitesh Dattani, a petitioner who was classified as a defaulter by the Reserve Bank of India and other financial entities due to the liabilities of a firm he was associated with as a minor. The court's ruling, delivered by Justice M.A. Abdul Hakhim, underscores the legal protection afforded to minors under the Indian Partnership Act, 1932.
The petitioner, Dhruv Hitesh Dattani, was admitted to the benefits of the firm M/s. Nanji Topanbai & Company as a minor. The firm's financial obligations resulted in adverse remarks on Dattani's credit report, despite his non-involvement in the firm's management or its liabilities during his minority. The petitioner challenged this in WP(C) No. 35894 of 2025, seeking rectification of his credit score and removal of the defaulter remark from his CIBIL report.
The Reserve Bank of India and the concerned bank had labeled Dattani as a defaulter, arguing that he continued as a partner after attaining majority due to his failure to make a declaration under Section 30(5) of the Indian Partnership Act, 1932. However, the court found that the firm was dissolved before Dattani reached adulthood, thereby negating any requirement for such a declaration.
Justice Abdul Hakhim stated that the dissolution of the firm occurred upon the death of its partners, in line with Section 42 of the Indian Partnership Act, 1932. Consequently, the petitioner could not be held liable for the firm's debts incurred during his minority. The judge emphasized that a minor admitted to a firm's benefits is not liable for the firm's obligations during that period.
The court's decision mandates that the bank issue a corrective communication to the Credit Information Company (respondent no. 2) to amend the petitioner's credit score and report. The ruling is expected to have broader implications for similar cases involving minors associated with firms.
The judgment reaffirms the legal principle that minors cannot be held accountable for business liabilities incurred during their minority, providing a crucial precedent for future disputes involving minors' rights in financial matters.
Bottom line:-
A minor admitted to the benefits of a firm cannot be termed as a defaulter for the firm's liabilities during his minority. Communication adversely affecting credit score based on such classification is unjustified.
Statutory provision(s): Indian Partnership Act, 1932 Sections 30(5), 42
Dhruv Hitesh Dattani v. Reserve Bank of India, (Kerala) : Law Finder Doc id # 2941925
