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The Position Of ‘Joint Ventures’ In A Developing Economy

1186 words - 5 pages

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 undertaking some commercial enterprise wherein all contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses.

WHY IS THERE A NECESSITY FOR JOINT VENTURES?
A joint venture will be established between companies or individuals who each lack one or more of the resources necessary to establish and carry on a new business, or develop an existing business, but by amalgamating their resources are able to do such business. The main stumbling blocks for Indian companies in achieving expected levels of global existence could be scarcities in terms of product quality, technology, infrastructure and even management processes. These insufficiencies can be contradicted by way of a coalition with a foreign counterpart. Alliances between those possessing variable expertise and skills in technology, marketing and distribution, etc. are necessary to meet the growing needs of modern business. Today, business obligations are far too large to be accomplished by a single company because the conduct of many businesses dictates a huge pool of resources...

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