Joint and several liability in concession contracts

Public-private partnership (PPP) projects in India typically allow two or more parties to come together as a consortium to bid for projects. The consortium, if selected, either incorporates a special purpose vehicle (SPV) or continues as an unincorporated joint venture to implement the project.

In cases where the consortium continues as an unincorporated joint venture, concessioning authorities have insisted on joint and several liability from all consortium members to ensure full and proper performance of contracts. However, in light of recent rulings of the Authority for Advance Rulings (AAR), concessioning authorities need to reconsider their approach.

Recent cases

In Alstom Transport SA v DIT, a tender was floated by the Bangalore Metro Rail Corporation (BMRC). Four companies entered into a consortium agreement to bid for the tender and, if successful, perform the obligations under the concession agreement. The companies were jointly and severally bound by the terms of the tender and were to be jointly and severally liable to the BMRC for the performance of all obligations under the concession agreement.

Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad. Saurabh Bhasin is a partner and Chandni Lochan is an associate. Samsuddha Majumder, a counsel at Trilegal, assisted with this article.