Published on: 01 September 2023 at 16:10 IST
Court: High Court of Gujarat
Citation: Continental Construction Ltd. V. State of Gujarat (1986)
Honourable High Court of Gujarat has held that Joint Venture including all its members / partners / shareholders are equally responsible and under obligation towards its commitment to the contract. It is held that the Joint Venture Group members jointly share the economic liability for its performance of the contract.
14. It should not be lost sight of that internal agreements between the members of a joint venture group are not generally effective vis-a-vis the third parties, and they merely constitute the basis for mutual services and entitlements within the joint venture group.
The members of joint venture are jointly and severally liable for performance of the construction work jointly undertaken irrespective of the internal division of work. If a member of a joint venture group does not fulfil his commitments, the other members thereof are under obligation to provide the missing services to the customer. If the customer enters into a contract with a joint venture group, it increases the liability of the members of the joint venture for due performance of the construction work. As noted above, 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.
The justification for such liability is the possibility of bringing pressure to bear on a member of the group in order to induce him to render his share of the services or, if necessary, to arrange for a substitute. Of course, members of a joint venture group who do not fulfil their commitments remain liable to co-share to indemnify their co-venturers (see : Articles on Join Venture Groups (supra)).
The joint and several liability of co-venturers is not only for the execution of the works but also in respect of any claims for damages by the customer and in respect of all joint financial commitments to suppliers, planners and architects and also in respect of fees, dues, penalties or other payments to public authorities. In any case the internal agreements regarding liability have no force vis-a-vis third parties.
Drafted By Abhijit Mishra
