What dispute resolution mechanisms apply in the case of performance issues?

In an industrial land development partnership or Joint Venture (JV), dispute resolution mechanisms are essential for addressing performance issues such as delays, quality lapses, funding shortfalls, or breach of agreement. These mechanisms are typically codified in the JV agreement or shareholders’ agreement and aim to resolve conflicts without derailing the project or harming stakeholder relationships. Below are five standard mechanisms used to manage disputes related to performance:

1. Internal Escalation and Joint Review

• The first tier of resolution involves structured escalation within the governance framework:
  
  • Project-level issues are escalated to the Steering Committee or JV Board.
    
  • Scheduled meetings allow both parties to present facts, propose remedies, and renegotiate timelines or deliverables.
    
• Aimed at resolving disputes amicably and quickly without involving external entities.
  
• Often governed by a cure period clause (e.g., 30–60 days) for the defaulting party to rectify the issue.

2. Mediation by a Neutral Third Party

• If internal resolution fails, the parties may engage a mutually agreed-upon independent mediator.
  
• Mediation is non-binding but helps facilitate a settlement through negotiation.
  
• The mediator may be:
  
  • A retired judge, industry expert, or legal consultant
    
  • Appointed through institutions like the FICCI Arbitration Centre or the ICADR
    
• This method is cost-effective and preserves the working relationship between parties.

3. Binding Arbitration

• Most JV agreements include a clause for arbitration under the Indian Arbitration and Conciliation Act, 1996.
  
• Arbitration becomes binding if mediation fails or if a dispute is deemed substantial (e.g., breach of profit sharing, non-performance, capital default).
  
• Common features:
  
  • Single or three-member tribunal
    
  • Seat of arbitration (e.g., New Delhi, Mumbai)
    
  • Language and procedural rules (e.g., SIAC, LCIA, or ad hoc)
    
• The final award is enforceable in court and recognized under law.

4. Specific Performance and Legal Recourse

• In extreme cases of breach (e.g., willful delay, misappropriation, refusal to share revenue), the non-defaulting party may:
  
  • File for specific performance to enforce the terms of the JV.
    
  • Seek injunctive relief or damages under civil law.
    
• Subject to the Indian Contract Act and jurisdiction clauses defined in the agreement.
  
• Courts may grant remedies such as financial restitution or direct performance orders.

5. Exit and Buyout Clauses

• Some disputes are resolved by activating exit provisions instead of prolonging the conflict.
  
• Includes:
  
  • Put/call options
    
  • Buyout mechanisms based on fair market value
    
  • Drag-along/tag-along rights to trigger asset sale or share transfer
    
• These clauses provide a clean commercial resolution if ongoing collaboration is no longer viable.