Unregistered Project-Specific Joint Venture Cannot Sue For Contractual Dues: Calcutta High Court

The Calcutta High Court has held that a joint venture can constitute a partnership firm under the Indian Partnership Act, 1932, even when it is formed specifically to execute a particular project or undertaking.

The court said that the substance of the arrangement, rather than the nomenclature adopted by the parties, determines whether their relationship amounts to a partnership.

A Division Bench of Justices Debangsu Basak and Aryak Dutt held that Rahee-GPT (JV) was a partnership firm formed by two parties for executing a railway project. Since the joint venture was not registered under the Partnership Act, the Bench held that its suit seeking contractual payments and refunds from South East Central Railway was barred under Section 69(2).

It consequently set aside the Single Judge's March 10, 2026 decree directing the Railway to refund the security and earnest money deposits, bank guarantee amount and bill amount, along with interest. The Single Judge had also awarded ₹1 lakh in costs.

“A Joint Venture entity may be a partnership firm. All partnerships may not be a Joint Venture. A partnership firm can be created for the purpose of executing an object or a project. Section 8 of the Act of 1932 permits a partnership for a particular adventure or undertaking,” the bench observed.

The dispute arose from a railway tender dated February 23, 2010, for designing and constructing the foundation, substructure, approaches, and allied and miscellaneous works of Bridge No. 182 between IB and Brajraj Nagar Railway Station in the Champa-Jharsuguda section.

The joint venture was formed through a Memorandum of Understanding dated February 20, 2010. The two parties subsequently executed a Joint Venture Agreement on November 29, 2010.

The Railway issued a letter of acceptance in favour of the joint venture on July 28, 2010. The respondents alleged that the Railway had prevented them from executing the contract and discharging their obligations. They challenged several notices issued by the Railway, including a termination notice dated March 5, 2014, the invocation of the bank guarantee, and the forfeiture of the security deposit.

The court explained that an association would qualify as a partnership if there was an agreement between the parties to conduct business and share its profits. The agreement must also create an agency relationship between them, under which each party is bound by the acts of the other. The Bench said all three ingredients must exist simultaneously. The nomenclature adopted by the parties is of no consequence.

Applying this test, the Bench found that the agreements showed that the two parties intended to execute the project jointly, share its profits and create agencies between themselves. The agreements also provided for their joint and several liability in executing the project. The court therefore concluded that the essential ingredients of a partnership were satisfied.

“In the facts and circumstances of the present case, therefore, there is a Memorandum of Understanding dated February 20, 2010 and a Joint Venture agreement dated November 29, 2010 expressing the intention of the respondent nos. 2 and 3 to enter into an agreement to execute a project, share the profits of such project and to create agencies between the respondent nos. 2 and 3. In our view, therefore all ingredients required for formation of partnership have been satisfied,” the Bench observed.

The court also examined the tender conditions governing the joint venture. It observed that the entity contemplated under the tender had to be legally capable of entering into contracts, suing and being sued. This was necessary because either contracting party had to be able to approach a court or adjudicatory forum to resolve disputes arising from the contract.

The Bench noted that the conduct of the parties, the Railway and their bankers showed that they had treated the joint venture as an entity distinct from its constituent members. However, no material established that the joint venture was a company incorporated under the Companies Act, 2013, or an existing company. The court therefore concluded that it was a partnership firm formed by the two parties.

Having classified the joint venture as a partnership, the court examined whether it was registered under the Partnership Act. It noted that the respondents had admitted that the firm was not registered. The Bench held that Section 69(2) barred the suit because the plaintiffs were seeking to enforce rights and claim reliefs arising from a contract with the Railway.

The court clarified that the plaintiffs had not sought to enforce statutory or common-law rights. It further held that impleading all the partners of an unregistered partnership firm would not overcome the statutory bar when the firm sought remedies relating to a contract.

The Bench also held that the objection under Section 69(2) could be considered at the appellate stage, even though the Railway had not raised it in its written statement or memorandum of appeal. It observed that the burden was on the plaintiff to establish that the statutory bar did not apply. The bar, the court added, could not be waived even with the consent of the parties.

Accordingly, the Calcutta High Court allowed the Railway's appeal, set aside the Single Judge's judgment and decree dated March 10, 2026, and dismissed the suit filed by Rahee-GPT (JV) and its partners as barred under Section 69(2) of the Indian Partnership Act, 1932.

For the Appellants: Advocates Pramod Kumar Drolia and Santosh Kumar Pandey.

For Respondents Nos. 1, 2 and 3: Senior Advocate Samrat Sen, Advocates Nirmalya Dasgupta, R. L. Mitra and Priyanka Dhar