Why conflicts recur in India JVs

• In India, legal rights typically co-exist with informal understandings, relationship dynamics, and practical and cultural considerations. For global investors, this creates uncertainty around enforceability, increases transaction risk and complicates capital recovery, despite robust contractual protections.
• Global investors typically approach Indian JVs with extensive reserved matters, expecting these rights will translate into effective veto powers and considerable influence over crucial decisions. In practice, governance in many promoter-driven Indian enterprises works through a mix of formal authority and informal decision-making systems.
• Where deadlock provisions lack clear timelines, interim operating arrangements or structured escalation to neutral third parties, the deadlock process can stall, reduce company value, and lead to litigation rather than resolution.
• Exit mechanisms are not carefully aligned with regulatory constraints, and can become unenforceable. Sectoral caps and “control tests” may also be triggered by step-up acquisitions, while pricing restrictions limit foreign investors’ ability to secure assured returns. As a result, exit provisions that appear commercially certain at the time of contracting may later prove difficult to enforce.
• Transactions with promoter affiliates are common, especially in promoter-led groups where procurement, distribution, management or IP reside within the broader promoter ecosystem, which also become pathways for value leakage where transactions are not at arm’s length. To mitigate this risk, JV agreements should establish robust governance around related party transactions.
• Dispute resolution provisions that look strong on paper may fail if they do not address interim relief, business continuity and co-ordination with Indian courts.
  Investors often focus heavily on financial, legal and regulatory diligence while underweighting operational and cultural dynamics. Investors must also understand how decisions are made, information flows within the organisation and disagreements are managed.

Bridging JV expectations and reality

The underperformance of cross-border JVs in India often reflects a gap between investor assumptions and the practical realities of promoter-led businesses. While robust documentation remains essential, JVs should recognise these dynamics early and align legal protections with operational and cultural realities, rather than replicate governance frameworks from other jurisdictions.

This article was originally published in Indian Business Law Journal on 27 August 2026 Co-written by: Sakshi Mehra, Partner; Deepa Rekha, Partner; Manisha Nayak, Senior Associate. Click here for original article

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