Bombay HC shields personal assets of One-Person Company owners in ₹10 Cr debt dispute

In a landmark ruling, the Bombay High Court has clarified that entrepreneurs running One Person Companies (OPCs) cannot be personally held liable for company debts unless specific legal conditions are met. The decision came in the wake of a financial dispute between Endemol India and Bengaluru-based Innovative Film Academy Pvt. Ltd., solely owned by Saravana Prasad.

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Endemol had sought to recover over ₹10 crore from the company and attempted to target Prasad’s personal assets, alleging liability beyond the corporate structure. The claim stemmed from unpaid dues related to a production agreement.

The case had first reached an arbitral tribunal, which directed both the OPC and its owner to deposit the disputed sum in a fixed deposit and disclose financial details. Challenging the order, Prasad approached the Bombay High Court.

The court ruled on July 3 that an OPC retains a separate legal identity from its owner, despite having only one shareholder-director. It found no contractual agreement or personal guarantee that would justify holding Prasad personally responsible for the firm's liabilities. The judgment strengthens the principle of limited liability, which is central to the OPC framework in India.

However, the court upheld the tribunal’s instruction for the company to secure the disputed amount, ensuring availability of funds pending resolution. The ruling is expected to reinforce confidence among small entrepreneurs relying on OPCs for business ventures.