‘No Mutual Control, No Profit Sharing, No Joint Venture’ – Calcutta High Court Dismisses Developer’s Commercial Dispute Claim
Kiran Raj
The Calcutta High Court, Commercial Division, Single Bench of Justice Krishna Rao has dismissed a real estate development dispute, stating that the agreement between the parties did not constitute a joint venture and therefore did not fall under the definition of a commercial dispute under the Commercial Courts Act, 2015.
The dispute arose from two development agreements executed on October 25, 2017, between a real estate developer, the plaintiff, and the owners of two contiguous premises located at 42C and 42D, Serpentine Lane, Kolkata. These agreements granted the developer the right to demolish the existing structures and construct a new building. According to the agreements, the owners were entitled to 50% of the constructed area, including any tenanted portions, while the remaining 50% was allocated to the developer, who had the right to sell their portion.
The plaintiff alleged that the defendants, the owners of the property, breached their contractual obligations by failing to pay municipal taxes and by not cooperating in securing an amalgamation of the premises, which was essential for the development project. The plaintiff stated that, despite making various payments, including a security deposit of Rs. 40,000 and Rs. 3,00,000 for tenant negotiations, the defendants failed to clear outstanding dues and did not produce necessary legal documents, such as the partition deed and boundary declaration, which were required by the Kolkata Municipal Corporation.
On December 13, 2019, the Kolkata Municipal Corporation rejected the plaintiff's request for amalgamation due to the non-submission of the partition deed and boundary declaration by the defendants. The plaintiff claimed that the defendants did not take the necessary steps to resolve this issue despite receiving payments intended for the same.
On September 1, 2020, the defendants terminated the development agreements, alleging that the plaintiff delayed the construction process. The plaintiff refuted these allegations, arguing that the delays were caused by the defendants' failure to comply with municipal requirements. The plaintiff also noted that, despite the termination, further payments were made, including Rs. 2,50,000 on September 22, 2021, for tenant negotiations.
The defendants countered that the agreement did not meet the criteria for a joint venture under Section 2(1)(c) of the Commercial Courts Act, 2015. They argued that a valid joint venture requires elements such as shared profits and losses, mutual control over the project, and joint decision-making authority, none of which were present in the agreement.
The court examined whether the development agreement could be classified as a joint venture under Section 2(1)(c) of the Commercial Courts Act, 2015. The judge observed that while the agreement granted the developer the right to construct and sell designated portions of the building, it did not create a joint venture as there was no provision for profit-sharing or joint management.
The court referred to the Supreme Court judgment in Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. (2008) 10 SCC 345, stating:
“For an agreement to be a joint venture, it must involve shared profits and losses, mutual decision-making, and equal control over the project. The present development agreement does not satisfy these conditions.”
The court also cited Sushil Kumar Agarwal v. Meenakshi Sadhu & Ors. (2019) 2 SCC 241, which provided a classification for various types of development agreements. The judgement stated that a contract that merely allocates built-up areas without mutual control over the project does not constitute a joint venture.
The court further observed:
“The development agreement merely granted the developer the right to construct and sell portions of the property. The owners retained their share without assuming financial risks in the development process. Hence, the agreement lacks the essential characteristics of a joint venture.”
The court also scrutinized the terms of the agreement, noting that it explicitly stated that the developer alone was responsible for managing the construction, acquiring necessary approvals, and handling financial aspects of the project. The agreement did not provide for shared decision-making or risk-sharing between the parties, which are fundamental components of a joint venture.
The court stated that the plaintiff continued making payments to the defendants even after the alleged termination of the agreement, which contradicted the claim that the development agreement was still enforceable. Furthermore, the defendants denied receiving certain payments, alleging that some receipts were forged or manufactured.
On the issue of jurisdiction, the court stated that since the agreement was not a joint venture, the dispute did not qualify as a ‘commercial dispute’ under the Commercial Courts Act, 2015. Consequently, the Commercial Division of the Calcutta High Court lacked jurisdiction over the matter.
Concluding the matter, the court directed:
“The department is directed to return the plaint along with all documents to the plaintiff by keeping copies for the record. The plaintiff is at liberty to file a fresh suit before the appropriate court.”
The plaintiff’s application for an interim order (G.A. No. 1 of 2023) was dismissed, while the defendants’ application for dismissal of the suit (G.A. (COM) No. 2 of 2024) was allowed. Consequently, the suit C.S. (COM) No. 553 of 2024 (Old C.S. No. 213 of 2023) stood dismissed.
Advocates Representing the Parties
The plaintiff, Abdul Rashid, was represented by Advocates Aritra Basu, Souradeep Banerjee, Sanjana Sinha, and Abhisek Ghosh.
The defendants were represented by Advocates Ratul Das, Sarbajit Mukherjee, and Md. Sayeed Khan.
The State was represented by Advocate Srijani Mukherjee.
Case Title: Abdul Rashid v. Bidhan De Sarkar & Anr.
Case Number: G.A. No. 1 of 2023 with G.A. (COM) No. 2 of 2024 in C.S. (COM) No. 553 of 2024 (Old No. CS 213 of 2023)
Bench: Justice Krishna Rao
[Read/Download order]
