ITD Cementation India Ltd. v. SSJV-ZVS Joint Venture

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INTRODUCTION

The case of ITD Cementation India Ltd. v. SSJV-ZVS Joint Venture, removes the corporate veil in the context of joint ventures, the ruling offers an interesting perspective. The judgment was pronounced on March 7th, 2023.  The major issue in this case is to determine whether the Arbitral award must be held liable on Respondent number 2 as no notice was specifically sent to the respondent? The Hon’ble High court of Delhi provides insights on how joint ventures already include the partnership laws. Thus, all the partners must abide by the rules of partnership. The decision was given where the joint venture was held liable jointly and all the partners of the joint venture are the parties of the case.

FACTS OF THE CASE

1. A joint venture between M/s SSJV Projects Private Limited and M/s Zarubezhvodstroy is the first respondent. 
2. According to the applicant’s own admissions, the aforementioned joint venture was established in order to carry out the contract for building a barrage and a de-silting chamber for the Tapovan-Vishnugad Hydroelectric Power Project.
3.  The records presented in these proceedings make it clear that on February 6, 2009, the Respondent signed a contract for the building of an upstream cut-off wall. Following disagreements, arbitration was called upon to settle the issue. 
4. The award that was made at the end of those proceedings is what is being sought to be executed in this petition. 
5. The second Respondent, SSJV Projects, was unquestionably a part of the joint venture. In front of the Arbitral Tribunal, the joint venture was named as a Respondent.
6. However, Respondent No. 2 argues that the execution actions against it are unmaintainable since it was not individually placed on notice by the Arbitral Tribunal. Legal counsel will argue that no execution procedures may be brought against the second respondent since it is a properly constituted corporation with a separate and distinct legal personality.

ISSUES RAISED

1. Whether the arbitration award is enforceable against the members of the Joint Venture who were not, in their individual capacity, parties to arbitration?
2. Is it legal for the Petitioner to pursue legal action against the Respondents on a joint and several bases? 
3. Is it necessary for each joint venture participant to be included as a party respondent?

CONTENTIONS OF APPELANT

1. Dr. George, on behalf of counsel of appellant began his explanation of the idea of a joint venture by citing a ruling made by the Gujarat High Court’s Division Bench in Asia Foundations & Constructions Ltd., Bombay v. State of Gujarat. It was mentioned in para 47 of this judgement, “joint venture consists of (1) name and address of joint venture; (2) name and address of all the partners of joint, venture; (3) the responsibility of the firm leading the joint venture and the responsibility of the other joint venture partners; (4) the name of bankers and (5) the financial participation of each firm in the joint venture. Thus, it is clear that in case of a group of firms, the applicant-has to give, more particulars which have been set out above, namely, which firm will be responsible for applying for and submission of tender and for completion of the contract document, and also the responsibility of the lead firm as well as other member-firms is to be clearly stated. The effect of the conjoint reading of the Memorandum of instructions and information as well as the forms in which the particulars were to be furnished clearly indicates that the authorities had visualized and envisaged the group of firms as well as the joint venture consortia as different entities which could seek pre-qualification.” In this judgement, the Hon’ble court distinguishes between joint venture and partnership.
2. The views as expressed in Asia Foundations were reiterated again by the Gujarat High Court in Continental Construction Ltd. and Ors. v. State of Gujarat & Anr. “When a contract is concluded with a joint venture group, all members are made jointly and severally liable, even if only one is capable of rendering the services in question.”
3. The decision of the Supreme Court in New Horizons Ltd. v. Union of India was also mentioned.

CONTENTIONS OF REPONDENT

1. Respondent No. 2 contends that the execution actions against it are unmaintainable since it was not individually placed on notice by the Arbitral Tribunal. Legal counsel will argue that no execution procedures may be brought against the second respondent since it is a properly constituted corporation with a separate and distinct legal personality.

JUDGEMENT

The Petitioner has the legal right to pursue a joint and several action against the Respondents, the Court said. The Court additionally decided that the Petitioner was not required to list each member of the joint venture as a party respondent and was not under any obligation to do so. As a result, the request to remove Respondent No. 2 from the list of parties in the current case was denied.

ANALYSIS

A legal relationship established by American courts, a joint venture is typically defined as an arrangement between two or more individuals to conduct a single commercial operation for profit. Generally, a community of interest in the endeavour or in achieving its goal must exist for it to qualify as a joint venture. Although the criteria of equality of right to control need a factual assessment, the joint venture problem may become a legal dispute due to the current status of the facts. The Petitioner has the legal right to pursue a joint and several action against the Respondents, the Court determined. The Court additionally declared that the Petitioner was not required to present the person or under any obligation to do so.

CONCLUSION

This case involved the matter whether all the parties in a relation of partnership in a joint venture must be mentioned separately to be held liable or not. It raises the question as law was silent on it. The above contentions made by the counsel of applicant states through precedents. Regarding removing the corporate veil in the context of joint ventures, the ruling offers an interesting perspective. Through this ruling, the Delhi High Court has established two important principles: first, that even though the joint venture is a separate legal entity, the partners can still be held vicariously liable for its actions; and second, that because the joint venture is similar to a partnership, it must abide by partnership laws. It states the specific features of the joint venture. It states that once a joint venture is formed all the partners and companies are liable irrespective of one of their partners sent legal notice as the notice is for the joint venture. 

REFERENCES

1. SCC Online
2. https://indiankanoon.org/doc/111538592/ 

This Article is written by Ozal Budhia student of Des Shri Navalmal Firodia law college; Intern at Legal Vidhiya.

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