How to draft a Joint Venture Agreement


By A.N.Sabri




Joint Venture is business entity formed by two or more parties to achieve specified objectives without losing their independent identity. Joint Venture is a temporary arrangement which ends upon completion of the specified project/activity.  It is a special vehicle for doing the business activities. In a Joint Venture two or more business entities agreed to participate in a  specified project/ activity on profit and Loss sharing basis in accordance to their share of participation.
           
Joint Ventures are of two types, one is incorporated Joint Venture other is unincorporated Joint Venture. Incorporated joint venture is formed in accordance to the provisions of the companies Act and unincorporated Joint Venture is formed by legally binding agreements between the parties.      
           
In construction Industry Joint Venture a common form of business. Whenever two companies wish to bid for a big constriction project but none of them is eligible /capable to qualify and execute the project on its own, although they have expertise in their respective area, they form a joint Venture so that they can execute the project jointly.
           
Incorporate Joint Venture is a lengthy process so most of the companies opt for the unincorporated joint venture, which is created just by a simple Joint Venture Agreement.

While drafting a joint venture agreement following points should be taken into consideration.

Recitals :

Recitals of an agreement contain the brief introduction of the parties, project and the objective of the Joint Venture. The first Para of joint Venture agreement should mention the date of agreement ( place of execution may be mentioned ) followed by the name of the parties and their authorised signatory and addresses of the parties.

After the name and addresses of the companies a brief description of the companies and their business activities can be mentioned. The name of project/ activities for which parties are forming the joint venture should be specified.





Agreed Terms and Conditions

After the recitals the terms and conditions agreed between the parties should be recorded. It can be started with the following words:

“NOW, THEREFORE, and in consideration of the foregoing premises and other considerations and covenants hereinafter set forth, the Parties hereby agree as follows:”

Following clauses can be incorporated in the joint Venture agreement
           
           
1. Purpose and object of agreement          

The purpose of the agreement should be mentioned clearly to avoid any confusion or ambiguity at later stage. If the parties are forming a Joint Venture for obtaining a construction project the following conditions may be incorporated.

“The Parties shall jointly prepare and submit the tender documents for the Project and if the tender shall be accepted by the client, the Joint Venture shall perform the Project in accordance with the terms and conditions of the Contract. The Joint Venture shall be jointly and severally bound to the client by such acceptance in accordance with the terms of this agreement”.

Similarly the relationship of the parties can be defined in the following words:

“The relationship between the Parties shall be limited to performance of the Contract(s) in accordance with the terms of the Agreement, and nothing in the Agreement shall limit either of the Parties from other activities. Further nothing in this agreement shall be considered/construed as creating any permanent Joint Venture between the parties or establishing an agency, incorporated or unincorporated company or partnership between the parties or limiting the powers or rights of the respective Party to carry on its separate business for its sole benefit and further their common interest in relation to the Project under the terms of this Agreement”.
           
2. Joint Venture Name, office and participating interest

Joint Venture Name and address, name of the lead member and the participating interest of the parties should be specified unambiguously.
           
3. Obligations of the Parties

The obligations of the respective parties should be clearly spelt out. It should be clarified who will bear the cost and other expense of Joint Venture, how the tender will be prepared and submitted, who will lead the negotiations with the client, who will submit the bond and insurances required by the client etc. The responsibility matrix would help to clarify the works to be executed by the respective parties and it would avoid confusion and conflict during the execution of the works.

4.  Organization and management             

How the Joint Venture will be administered should be clearly mentioned. Normally a management board is constituted for administration purpose. This Board consist members from the Joint Venture Partners. It should be specified that how members of board and its chairman will be appointed and how they will take decision.
Similarly the provision for opening of Bank Account and its operation should be made clearly.

5. Liabilities               

Normally the Parties are jointly and severally liable to the Client for all the obligations arising from and in connection with the performance of the Project.

However, the parties can make their inter- se arrangement in case of default of the other party. The defaulting party should indemnify the non-deflating party.  

6. Exclusivity and Confidentiality                                                          

Exclusivity and confidentiality clause can be incorporated to protect the data and information.

7. Governing Law

Governing Law of the Joint Venture Agreement should be specified to avoid any complication in case of disputes.

Similarly the provision for dispute settlement mechanism should also be incorporated. Parties can opt for Arbitration under ICC Rules or any domestic Arbitration rules.

8. Miscellaneous       

Some more Legal clauses regarding Assignment, Publicity, Notices and Validity can also be incorporated.

At last do not forget to write witness clause which can be written as under:   

IN WITNESS WHEREOF, the authorized representatives of the Parties hereto have executed this Agreement on the day, month and year first above written”.

At the end mention name of parties and their authorised signatories and witnesses.

( Contact author at azeez_nazar@rediffmail.com ) 


When a person will be ineligible to act as an Arbitrator

By Azeez Nazar Sabri

The main objective of the Arbitration law is to provide speedy, inexpensive and fair trial by an Impartial Tribunal. Arbitration law gives autonomy to the parties and limits the intervention of the court.

Since the Arbitration Act give autonomy to the parties to appoint the Arbitrator(s), the independence and Impartiality of an Arbitrator is indispensable as an independent and impartial mind is essential in the exercise of the judicial power.    

Section 12 of the Arbitration and Conciliation Act, 1996 has been amended in 2015 Amendment. This amendment has been made with a view to ensure the independence and impartially of the Arbitrators. The amendment provision identifies the “Circumstances” which give rise to “Justifiable doubts” about the independence and impartially of the Arbitrator. The fifth Schedule to the Act enumerates the grounds which may give rise to justifiable doubts of this nature. Similarly, Seventh Schedule stipulates those circumstances which would attract the provisions of Sub-section (5) of Section 12, which makes person ineligible to be appointed as an arbitrator.

Following amendments have been made in sub-section (1) & (5) of Section 12.

Subsection (1)

When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,-
a) Such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject- matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or Impartiality: and

b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within period of twelve months.
Explanation 1: The ground stated in the fifth Schedule shall guide in determining to the justifiable doubts as to the independence or impartially of an arbitrator.

Subsection (5)

Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator.
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this Sub-section by an express agreement in writing.

The Seventh Schedule

The Seventh Schedule specified the following categories of the Arbitrator relationship with the parties or counsel, which disqualifies a person for the position of arbitrator.
1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with the party.
2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is representing one of the parties.
5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.
7. The arbitrator’s law firm currently has assigned commercial relationship with one of the parties or an affiliate of one the parties.
8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.
10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of the one of the parties.
11. The arbitrator is a legal representative of an entity that is a party in the arbitration.
12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.
13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case.
14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.
15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
16. The arbitrator has previously involvement in the case.
17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.    
18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.
19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.

The close family member mentioned in the seventh schedule refers to a spouse, sibling, child, parent or life partner. “Affiliate” encompasses all companies in one group of companies including the parent company.
If the above circumstances/ grounds exist then a person shall not be illegible to be appointed as an arbitrator. If he does not disclose the above circumstance at the time of his appointment, his appointment can be challenged by the aggrieved party.

                                                            

Termination of Contract under UAE Law


Termination of the contract is governed by Section 5 of the UAE Civil Code from Article 267 to 275.

A valid contract can’t be terminated under UAE laws except by the following three modes:

1. With the mutual consent of the Party.
2. With an order of the Court.
3. Under the provision of the law.

First mode of termination of contract is by way of mutual consent of the parties. Under Article 268 of UAE Civil Code the contracting parties with the mutual consent can terminate the contract. As per Article 270 of the UAE Civil Code the revocation/ termination of contract should be by offer and acceptance in the session ( Majlis). The precondition for such termination is that the subject matter of the contract must be in existence. If part of the subject matter of the contract is not in existence then the termination shall be valid to the extent of the existing subject matter.   

The second mode of termination is by way of the order of the Court. However, Article 271 of UAE Civil Code gives freedom to the parties to dispense with the requirement of the court order for termination of the contract, if they mutual agree for that. If the parties mutual agree in a written contract that in case of non- performance of contractual obligation by one party, the other party has right to cancelled/ terminated by a party without need for a judicial order then there is no need to obtain a court order for termination of the contract.   

Article 272 stipulates the procedure to terminate the contract by a court order. If a party to contract fails to perform his contractual obligation, the other party may give notice to the defaulting party with an instruction to perform his contractual obligations or face termination. If the defaulting party failed to act upon the notice given by the other party, that party can move to the court for termination of the contract. Court may order the defaulting party to perform his obligation forthwith or may defer such performance for a specified period. Court may also pass an order for termination of the contract and can award compensation to the non- defaulting party.    

The third mode of termination of contract is by way of operation of law. Article 273 of UAE Civil Code governs the termination of the contract by operation of law. If performance of the contract becomes impossible due to force majeure conditions then the reciprocal contractual obligations of the parties shall cease and the contract shall stand automatically cancelled.

In case of partial impossibility, only that part of the contract which is impossible shall be extinguished and the same shall apply to temporary impossibility in continuing contracts.

Article 274 and 275 of the UAE Civil code deal the effects of dissolution/ termination of the contract.
Under clause 274, if the contract is cancelled/ terminated automatically or by the act of the parties, then the two contracting parties shall be restored to the position they were in before the contract was made, and if not possible, compensation may be ordered by the court.

As per Article 275 of the UAE Civil Code, if the contract is dissolved by the reason of voidness or cancellation or through any other cause and each of the parties is obliged to return that which he has obtained, it shall be permissible for each of them to retain what he has received so long as the other party has not returned what he has received from the former, or provided security for such return.

( You can mail to writer at azeez_nazar@rediffmail.com) 






Changes in Indian Arbitration Law



The Arbitration and Conciliation Act, 1996 failed to achieve its object to provide cost effective and speedy dispute resolution unlike the litigation. Therefore, Arbitration Act 1996 was amended in 2015 for ushering the reforms mooted for many years. Amended Act  broadly make following changes to address the lacunae of the 1996 Act;

Interim relief in foreign arbitrations- S.2- A new  proviso has been added in Section 2 which stipulates that Subject to an agreement to the contrary, the provisions of section, 9, 27 and clause (a) of sub-section (1) and Subsection (3) of section 37 shall also apply to International Commercial Arbitration even if the place of Arbitration is outside India, and an arbitral award made to or to be made in such places is enforceable and recognized under the provisions of Part –II of the Act. This address that lacuna by reverting, in part, to the Bhatia principle; that is, only two provisions in Part-I of the Act - pertaining to court’s power to grant interim relief (Section 9) and render assistance in taking evidence (Section 27), along with their respective appeal provision - would apply to international arbitrations held outside India, unless where parties, by agreement, have excluded the applicability of such provisions. With this new provision Indian courts will continue to have jurisdiction to pass interim relief or assist in taking evidence, even in international arbitrations outside India.
Mode of Communication - email recognized as an authentic communication for forming Arbitration Agreement ( S.7) .



Time limit for initiating Arbitration after Interim order (S.9)- If any Interim Order is passed by the Court under S.9, the Arbitration proceedings shall be started within 90 days from date of Interim Order.

Limited role of the Court in granting Interim Relief - Sec.9 – Once the arbitral Tribunal has been constituted, the Court shall not entertain application for Interim measure unless the circumstances exist which may not render the remedy provided under section 17 efficacious.  

Appointment of Arbitrators ( S.11)

a) Power to appoint arbitrators in domestic arbitrators shall rest with the High Court (or institution designated by it). In case of international arbitrations, the power to appoint shall vest with the Supreme Court (or institution designated by it);

b)  An application for appointment of arbitrator shall be disposed of as expeditiously as possible and endeavor shall be made to dispose of the application with 60 days from date of service of notice to other party.

c) A decision appointing an arbitrator is final and no appeal including Letters Patent Appeal shall lie against it;

d) High Court may frame rule for the purpose of determination of the fee of the Arbitral Tribunal in domestic Arbitration.

Fee of arbitrators- Fourth Schedule S.11

a) While appointing arbitrator(s), Court may fix fee after taking into consideration the fee set out in Schedule IV – The fee structure has been given Schedule IV. Minimum fee is Rs. 45,000/- with an increase of 0.5% to 3.5% of the claim amount with a ceiling of Rs. 30 lacs where claims are for or over Rs. 30 crores;

b) In cases where a sole arbitrator is appointed, 25% extra fee over and above the fee prescribed in the schedule shall be paid;

c) The aforesaid schedule of fee shall not be applicable to international Commercial Arbitration and in arbitration (other than International Arbitration) where the parties have agreed for determination of fee as per the rules of Arbitral Institution;

d) Separate fee is payable if counter claims are filed.

Declaration by the Arbitrator (S.12) - Before appointment, an arbitrator has to declare that he is independent and that he has enough time to conclude the arbitration in 12 months

Schedule VII provides instances where a person is not eligible for appointment as arbitrator – such as where he is an employee or consultant of or has a controlling interest in or personal relations with any party or its affiliate or advocate. However, the parties may waive the applicability of this provision. Further this provision shall not be applicable to those case where the Arbitrator has been appointed prior to 23rd October, 2015.  

Power of Arbitral Tribunal to grant Interim Relief – S.17 –During the Arbitral proceedings or at any time after making of the Arbitral Award but before it is enforced, the Arbitral Tribunal shall have the same power for making interim orders as the Court has and subject to any order passed in appeal under section 37, any order issued by the Arbitral Tribunal under the CPC,1908, in the same manner as if it were an order of the Court. Thus the order under Section 17 shall be as good as order passed under section 9.

Time Limit for making Arbitral Award- S.29 A- Arbitral Tribunal has to make the award within 12 months from the date the Arbitral Tribunal enters upon the reference. This period can be further extended for a further period of 6 months with the consent of parties. If the award is made within 6 months, the Arbitral Tribunal shall be entitled for incentive. If the award is not made within stipulated time the mandate of the Arbitrator ( s) shall be terminated unless the Court has extended the period. Application seeking extension of time has to be disposed of by the Court within 60 days;.

Penalty on Arbitral Tribunal- (S.29 A) If the court finds that proceedings have been delayed for the reasons attributable to the Arbitral Tribunal, it may reduce the fee of Arbitrator(s) by not exceeding 5% of each month of such delay.  

Fast Track Arbitration – S.29B – The parties may agree to the fast track procedure, in that case the Arbitral Tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without oral hearings. The oral hearing shall be held only on request of the parties for clarification of certain issues only. The Award shall be made within 6 months from the date the Arbitral Tribunal enters upon the reference. 

Increased rate of future interest & cost- S. 31 - Future interest shall be paid @ 2% over the current rate of interest unless otherwise stated so in the award;
Actual costs shall be awarded – general rule being that the unsuccessful party is to be saddled with all costs incurred by the successful party.

Limited Grounds of Public Policy –S.34

a) Section 34(2)(b) has been made more specific in consonance with the Associate Builders judgment, public policy is defined as under;
Award shall be treated in conflict of public policy of India on if;
i) The making of the Award was induced or affected by fraud or corruption or was in violation of Section 75 or S. 81 or
ii) It is in contravention with the fundamental policy of Indian law; or
iii) It is in conflict with the most basis notions of morality or justice.
 An award can be set aside by the Court, if the Court finds that the award is vitiated by the patent illegality appearing on the face of award but shall not be set aside merely on the ground of an erroneous application of the law or by appreciation of evidence.
b) Before filing application under Section 34 opposite party has to be given prior notice.
c) Application under section 34 has to be disposed of within 12 months from the date of service of notice on other party.

No automatic stay of Award (S.36)- The award shall not be automatically unenforceable merely on filing of the application under Section 34. The court may grant stay of the operation of Award provided the party seeking award deposit money as directed by court.   

( Writer can be contacted at azeez_nazar@rediffmail.com) 

Delhi LG has no independent decision making power, says Supreme Court

In a landmark judgment Supreme Court of India in the matter of GOVERNMENT OF NCT OF DELHI VS UNION OF INDIA & ANOTHER ( Civil appeal no. 2357 of 2017) settled the law regarding powers of the LG of Delhi.

The principal question before the Supreme Court was whether the inhabitants or voters of NCT of Delhi remain where they were prior to the special status conferred on the Union Territory or the amended constitutional provision that has transformed Delhi instills “ Prana” to the cells. 

Supreme Court held as under:

1. In the light of the ruling of the nine judges bench in New Delhi municipal corporation, it is clear NCT of Delhi can be accorded the status of a “State” under our present constitutional scheme. The status of NCT of Delhi is sui generis, as class apart, and the status of the Lieutenant Governor ( LG) of Delhi is not that of a Governor of a State, rather he remains an administrator, in a limited sense, working with the designation of Lieutenant Governor.

2.  With the insertion of Article 239 AA by virtue of the Sixty-ninth Amendment, the Parliament envisaged a representative form of Government for the NCT of Delhi. The said provision intends to provide for the Capital a directly elected Legislative Assembly which shall have legislative power over matters falling within the State List and the Concurrent list, barring those excepted, and a mandate upon the Lieutenant Governor to act on the aid and advise of the Council of Ministers except when he decides to refer the matter to the President for final decision.   

3. The interpretive dissection of Article 239 AA(3) (a) reveals that Parliament has power to make laws for the National Capital of Delhi with respect to any matters enumerated in the State List and the Concurrent List. At the same time, the Legislative Assembly of Delhi also has power to make laws over all those subjects which figure in the Concurrent List and all, but three excluded subjects in the State List.  

4. Under Article 239AA the executive power of the Government of NCTD is co-extensive with the legislative power of the Delhi Legislative Assembly and , accordingly, the executive power of the council of ministers of Delhi spans over all subjects in the concurrent List and all, but three excluded subjects, in the State list. However, if the Parliament makes law in respect of certain subjects falling in the State List or concurrent List, the executive action of the State must conform to the law made by the Parliament.

5. The Union of India has executive power with respect to the NCT of Delhi relating to the three matters in the State List in respect of which the power of the Delhi Legislative Assembly has been excluded. In respect of other matters, the executive power is to be exercised by the Government of NCT of Delhi. This  however, is subject to the proviso to Article 239AA(4) of the Constitution.

6. The meaning of  “aid and advice” employed in Article 239 AA has to be construed to mean that the Lieutenant Governor of NCT of Delhi is bound by the aid and advice of the council of Ministers and this position holds true so long as the Lieutenant Governor does not exercise his power under the proviso to clause (4) of Article 239AA .The Lieutenant Governor has not been entrusted with any independent decision- making power. He has to either act on the “aid and advise” of Council of Ministers or he is bound to implement the decision taken by the President on a reference being made by him.

7. The power of the Lieutenant Governor under clause (4) of Article 239 AA is exceptional and not the general rule. The Lieutenant Governor should not act in a mechanical manner without due application of mind so as to refer every decision of the council of Ministers to the President.

8. The difference of opinion between the Lieutenant Governor and the Council of Ministers should have a sound rationale.

9. The Lieutenant Governor and the Council of ministers must attempt to settle any point of difference by way of discussion and dialogue.     

10. The Transaction of Business Rules, 1993 suggest that the Lieutenant Governor must work harmoniously with his Ministers and must not seek to resist them every step of the way.

11. The Scheme under Article 239 AA and 239 AB read with the provisions of the GNCTD Act, 1991 and the corresponding Transaction of Business Rules, 1993 , indicates that the Lieutenant Governor, being the Administrative head, shall be kept informed with respect to all the decisions taken by the Council of Ministers. The decision of council of Ministers must be communicated to the Lieutenant Governor but this does not mean that the concurrence of the Lieutenant Governor is required. The said communication is imperative so as to keep him apprised in order to enable him to exercise the power conferred upon him under Article 239AA(4) and the proviso thereof.

Apex Court also observed that there is no room for absolutism under the constitutional scheme and there is no space for anarchy. The constitutional functionaries are expected to cultivate the understanding of constitutional renaissance by realization of their constitutional responsibility and sincere acceptance of the summon to be obeisant to the constitutional conscience with a sense of reawakening to the vision of the great living document so as to enable true blossoming of the constitutional ideals.   The lieutenant Governor and the Council of ministers headed by the Chief Minister are to constantly remain alive to this idealism.

(For full judgment feel free to write to azeez_nazar@redffmail.com)


                                                     

Who can file a consumer Complaint



Under the consumer Protection Act 1986, a consumer can file a complaint for defective goods or deficient services. A consumer is a person who purchases a product (item or goods) or hired a service for consideration for his personal use and not for commercial use or running a business.


Section 2(d) of the Consumer Protection Act, 1986 defines the consumer as under:

person who- 

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person;



Any person who obtains the goods for ‘resale’ or  commercial purposes’ is also not a consumer

Who can file a complaint?

Under the consumer Protection Act, following  can file a consumer complaint:

(a) a consumer; or
(b) any voluntary consumer association registered under the Companies Act,1956 or under any other law for the time being in force, or
(c) the Central Government or any State Government,
(d) one or more consumers, where there are numerous consumers having the same interest.


In addition to the above following persons can also file a complaint:

 Beneficiary of the goods/services : The definition of consumer itself includes beneficiary of goods and services. Hence a beneficiary of goods/ services can file a complaint under Consumer Protection Act.  

Parents of the child-  The parents of a minor child can file a complaint under the Consumer Protection Act.

Legal representative of the deceased consumer : The Consumer Protection Act does not expressly  indicate that the legal representative of a consumer are also included in its scope. But by operation of law, the legal representatives can file a complaint.

Legal heirs of the deceased consumer : A legal heir of the deceased consumer can also file complaint under the Consumer Protection Act.

Husband of the consumer : A husband  of a woman can also file complaint under the Consumer Protection Act on behalf of his spouse.

A relative of consumer : A relative of the Consumer can also initiate and prosecute  a consumer complaint when he/she is authorised by the Consumer and complaint is originally signed by the consumer.


( For further assistance fee free to write azeez_nazar@rediffmail.com) 

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