Joint Venture vs Consortium in Construction Projects – Differences, Risks and Joint Liabilities

Theme: Business Framework; Module: JV & Third Parties

Author: Dr. Pradeep Reddy Sarvareddy

Published Date: 11 Jan 2026

Joint Ventures and Consortiums are commonly used by contractors to qualify for large government and infrastructure projects, and includes several last-minute decisions on this “partnership”.  At the tender stage, the arrangement appears exciting and great for business growth.  Several aspects are taken care of initially itself like scope of work of each Partner, lead partner & Role, payment terms and escrow accounts, and then the bid is submitted.  The real issues surface later which could include tax notices, disputes, liquidated damages or even blacklisting, which affect each of the Contractors even if they had performed their scope of work perfectly.  This is when many Contractors discover that the legal structure and the risks that such structuring carried.  This article examines Joint Ventures, Consortiums, SPVs, AOP and incorporated vs unincorporated entities, the risks and benefits based on the structuring, and practical situations, risks & liabilities that arise for a partner’s actions.

Difference between JV and Consortium

There is no universal definition adopted by the Government Tenders.  The practice varies depending on the tender conditions.  The difference arises only when the entity is required to be incorporated. 

Category 1: Unincorporated Entity (Joint Venture or Consortium)

Most tenders follow this approach.  They allow bidders to come together without forming a new company.  This unincorporated group may be called a Joint Venture or a Consortium.  The naming does not always reflect different legal consequences.  In many tenders, both behave the same way.

  • Members sign a Joint Venture agreement or consortium agreement, and share it with the Department Officially.
  • A lead member is appointed.
  • Members cannot change after bid submission unless allowed.
  • Liability is often joint and several.
  • Experience and financial criteria are shared or split as per tender rules.
  • Usually, all the payment is received by the Lead Member and then shared with the Other members of the Entity. 
  • New PAN or GST or separate Bank Account are not required.

Caution:  Nowadays, some tenders are asking for a new PAN, GST and Bank Accounts even for Unincorporated Entities by treating them as an “Association of Persons”.  Look out.

Category 2:  Incorporated Entity (Joint Venture or Consortium)

This is where the true difference appears.  Some tenders require that: You may bid as an unincorporated Joint Venture or Consortium initially, BUT if you win, you must create a new incorporated entity (company).  This new entity becomes the contracting party.

  • A Special Purpose Vehicle (SPV) company must be formed after selection.
  • All bidding members become shareholders in this new entity.
  • The contract is signed by the new company, not the original group.
  • Parent company guarantees or undertakings keep the original members liable.
  • The shareholding pattern may be locked for a specified period.
  • New PAN, GST and Bank Account should be on the name of the SPV.

The tender conditions decide everything.

Liability of all Partners of JV or Consortium

Consider this situation.  Two Contractors entered into a Joint Venture Agreement with specific scope bifurcated between the two Contractors and officially shared the Joint Venture Agreement with the Government Department.  One Partner’s scope was for Civil Work and the Other Partner’s scope was MEP Work. 

Now note the general legal position.  Even in the case above, all the Joint Venture Partners are typically jointly and severally liable.  The Department can recover 100% of Liquidated Damages, Claims or losses from any of the JV Partner, regardless of the internal split.

Practical consequences

  • A mistake in one Partner’s scope can lead to claims against another Partner.
  • Bank Guarantees may be invoked against one partner even if the issue arose in the other’s package.
  • Termination or Liquidated Damages can be levied against both the Partners.
  • Blacklisting of both the Partners may arise even if one Partner defaulted.
  • If one Partner becomes insolvent, the Department may treat the Joint Venture as non‑performing and terminate the Project, even if the other Partner is performing well.

Recommendations

  • Choose Partners with good reputation.
  • If things go wrong, retain sufficient evidence to protect yourself. Maybe you could save yourself, in some extreme cases.
  • Be prepared to file case against your Partner in the end.

This is a tough one.  You should trust your Partner, yet prepare to legally fight with your Partner.