Choice of law and resolution methods

In your jurisdiction, are there constraints on the choice of law or the method of dispute resolution provided for in joint venture agreements?

Choice of governing law in an agreement between parties is recognised and accepted by Indian courts. It is common for international commercial contracts, such as joint venture agreements, made between foreign parties and Indian entities to be governed by a foreign law. Generally, the law of the foreign party’s jurisdiction or of a neutral jurisdiction is chosen. However, agreements between two Indian parties are necessarily governed by Indian laws.

While the principle of choice of governing law is recognised, such governing law may not have judicial notice by the courts and will, therefore, need to be proved as a fact if the dispute is to be adjudicated by Indian courts. Indian evidence law requires that if a dispute is adjudicated before an Indian court and the subject matter of such a dispute is governed by a foreign law, the party relying on the foreign law will be required to plead and prove such foreign law as if it were a fact to the proceedings. The choice of law must also be bona fide and should not be opposed to public policy.

With regard to dispute resolution mechanisms, arbitration is the most common mechanism for dispute resolution in joint venture agreements. Such arbitration may be seated in a foreign jurisdiction. Courts in India also recognise the right of parties to assign their dispute resolution mechanisms to courts in foreign jurisdictions if such courts ordinarily have jurisdiction over the subject matter of the dispute. However, generally, if arbitration is an agreed dispute resolution mechanism in the agreement, the parties cannot approach a court for resolution of their disputes.

Mandatorily applicable local law

What mandatory provisions of local law will apply irrespective of the choice of governing law?

There are certain mandatory provisions of local Indian laws that apply to joint ventures, regardless of the parties’ choice of governing law. Such mandatory provisions are of the laws applicable to the management and governance of the joint venture entity, such as company law, taxation law, foreign exchange law, competition law, criminal law and employment laws. Matters that are purely contractual in nature can be chosen to be governed by the law agreed upon by the parties.

Remedy restrictions

Are there any restrictions on the remedies a tribunal can grant that would have a bearing on the arbitration of joint venture disputes? Are there any restrictions on the arbitration of shareholder claims?

While most commercial disputes and breaches of contract in the context of a joint venture can be referred to and settled by arbitration, there are various disputes in the context of a joint venture that cannot be referred to arbitration. Such disputes include those between the joint venture parties with regard to management and administration of the joint venture entity, particularly relating to the subject matter of company law or disputes arising from a violation of certain statutory provisions, where statutory remedies are sought (such as winding up, insolvency or remedies for oppression and mismanagement of the joint venture entity). Such matters are subject to the exclusive jurisdiction of the National Company Law Tribunal (NCLT) or courts.

Minority investor protection

Are there any statutory protections for minority investors that would apply to joint ventures?

The Companies Act, 2013 (the Companies Act) provides various legal protections and rights to minority shareholders of a joint venture company. In the event of oppression and mismanagement of the joint venture company, the Companies Act gives the right to shareholders to approach the NCLT if such shareholders represent no fewer than 100 members of the company or not less than one-tenth of the total number of its shareholders, whichever is less, or hold not less than one-tenth of the issued share capital of the company. Class action suits can also be initiated by a prescribed number of shareholders on behalf of the other shareholders. The Companies Act also provides for various mechanisms for minority shareholders if they wish to exit the company on the triggering of certain events.

From a management perspective, the Companies Act requires various items to be passed by a special resolution (ie, by a three-quarters majority of the shareholders present and voting). Thus, a minority shareholder that has more than a quarter of the shareholding of the company also has the power to control the passing of such special resolutions. At the board level, certain matters can be decided only with the unanimous approval of all the directors present and voting in the board meeting. Such matters primarily include decisions on investments, or giving loans, guarantees or securities by the joint venture company.

Regardless of the choice of governing law of the parties to their joint venture agreement, the aforementioned rights are always available to the minority shareholders of the joint venture company.


How can joint venture parties have liabilities to each other beyond what is expressly agreed in the joint venture agreement?

The liabilities of joint venture parties towards each other are typically governed by the joint venture agreement between them. However, in some instances, courts have recognised the fiduciary duties of one joint venture party to the other party, similar to a partnership, depending upon the terms of the joint venture agreement.

In relation to the liabilities of joint venture parties towards third-party claims, the nature and extent of liabilities depend upon the structure of the joint venture. In the case of incorporated joint ventures, generally, joint venture parties are not liable towards third parties for the acts of the joint venture entity, except in certain instances where the separate legal identity of the joint venture was compromised by the joint venture parties for their own gain and the corporate veil is lifted because it is determined that fraudulent and dishonest use was made of the joint venture entity by the persons who are in control of the joint venture entity.

Disclosure of evidence

Are there any particular issues that can arise in joint venture disputes in your jurisdiction concerning disclosure of evidence?

In the context of disclosure of evidence, the general rule is that a party intending to rely upon a document is bound to produce the same document before the arbitrator or court, share a copy of the same with the opposite party and make the original document available for inspection.

Further, a party to the dispute is permitted to obtain materials and documents from the other party by way of discovery. Any party may approach the court or the arbitration tribunal for an order directing the other party to make discovery of documents relating to the subject matter of the dispute.

However, there are instances where a party can claim privilege. In such instances, the documents can be treated as protected from production. Such privilege is available for attorney–client communication, where the production of documents is contrary to the public policy of India or where the production of documents may incriminate the party.