Revenue Sharing Type Unincorporated Joint Venture when would be AOP :
As per Black’s Law Dictionary (7th edition page 843), Joint Venture is a business undertaking by two or more persons engaged in a single defined project. The necessary elements are – (1) an express or implied agreement (2) a common purpose that the group intends to carry out (3) shared profits and losses and (4) each member’s equal voice in controlling the project – quoted with approval in Faqir Chand Gulati v. Uppal Agencies (2008) 15 STT 296 (SC).
The expression ‘joint venture’ is more frequently used in United States. It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual benefit 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 performance of the subject matter, which may be altered by
agreement, to share both in profits and losses. [Black’s Law Dictionary, 6th Edn, p 839]. According to Words and Phrases, permanent edn, a joint venture is an association of two or more persons to carry out a single enterprise for profit. (p 117 Vol. 23). A joint venture can take the form of a corporation where two or more persons may join together. A joint venture corporation has been defined as a corporation which has joined with other individuals or corporations within the corporate framework in some specific undertaking. – New Horizons Ltd. v. UOI 89 Comp Cas 849 = (1995) 1 SCC 478 = 1995 AIR SCW 275 – quoted with approval in Gammon India v. CC (2011) 269 ELT 289 (SC).
If there is no sharing of risk/profits/losses and entire expenditure/risk/benefits are borne/enjoyed by only one party, it is not a joint venture. Sharing of profit and losses and a community of interest among parties are integral ingredients of joint venture. Each joint venture stands in relation of principal as well as agent to each other co-venturer, within the general scope of enterprise. – Delhi Public School Society v. CST (2014) 43 GST 421 = 41 t 377 (CESTAT).
Unincorporated joint venture is a new entity and it cannot be said that it cannot provide service to the JV partner – Mediaone Global Entertainment Ltd. v. CCE (2013) 40 STT 475 = 36 57 (Mad HC).
Joint control is essential – If there is no joint control and no share in profit/loss of venture, it is not a joint venture – Faqir Chand Gulati v. Uppal Agencies (2008) 15 STT 296 (SC). In this case, the land owner had agreement with builder termed as ‘collaboration agreement’ or ‘joint venture agreement’. However, land owner had absolutely no say in matter of development, construction or sale of flats. It was held that this is not ‘joint
venture’. If there is no joint control, it is not a joint venture. [Hence, land owner is ‘consumer’ within the meaning of ‘Consumer Protection Act’].