The Position of ‘Joint Ventures’ in a Developing Economy

According to Black's Law Dictionary `Joint Venture' means:

“A business undertaking by two or more persons engaged in a single defined project. The necessary elements are an express or implied agreement; a common purpose that the group intends to carry out; shared profits and losses; and each member's equal voice in controlling the project.”

Indian Law does not define Joint Venture (JV) under the Competition Act of 2002 nor the Companies Act of 1956. However, for the restricted purposes of foreign direct investment, JV implies an Indian entity incorporated in accordance with the laws and regulations of India in whose assets a non-resident entity makes an investment.

The foremost objective of this paper is to deliberate the position of ‘Joint Ventures’ in a developing economy such as India, and side-by-side discuss the lessons that India can learn from the European Union’s dealing with JV’s. For this purpose, the paper shall be sub-divided into 4 parts. Part 1 shall briefly introduce us to the concept of Joint Venture and its understanding under Indian Law. Part 2 shall delve into a discussion of the need for JV’s and also highlight the complexities of this form of collaboration. In part 3, we shall discuss the position of JV under Indian Law and the European Union. Finally in part 4, we shall present our conclusion where we shall try to determine if JV is going to be a part of the Indian future investment policy.

The Supreme Court of India in the case of New Horizons Ltd v. Union of India, has held:

The expression ‘joint venture connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly unde...

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...lready be in existence. In distinction, a contractual joint venture does not directly centre on a corporate vehicle, but takes the form of a co-operation agreement or agreements that together define the activity of cooperation. These definitional elements are important because a JV is not defined in the Competion Act, 2002. The Act under §.3(3) provides for applicability of per se rule whereby certain activities such as price maintenance, division of market shares, bid rigging, collusive bidding and other like activities are presumed to be illegal and anti-competitive in nature. However, here the Act mentions about JV’s and provides that any agreement entered into by the way of a joint venture shall not be presumed to be anti-competitive if it increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.