Supreme Court Upholds Validity of Exclusive Jurisdiction Clauses in Employment Contracts

Summary:

[1]This Judgement consisting of 2 Civil Appeal addresses the question that whether civil suits challenging termination from employment could be instituted in Patna and Delhi courts, despite having an exclusive jurisdiction clause in the employment contracts specifying Mumbai courts. The Apex Court analysed the validity and effect of such exclusive jurisdiction clauses in employment contracts, referencing established precedents.

Facts:

1. Rakesh Kumar Verma v. HDFC Bank Ltd. (Civil Appeal 1)

• Rakesh Kumar Verma (hereinafter the ‘Appellant’) was appointed by HDFC Bank (hereinafter ‘The Bank’) in Patna, with an appointment letter specifying that disputes would be subject to the exclusive jurisdiction of Bombay (Mumbai) courts.
• His service was terminated in 2016 on allegations of fraud and misconduct.
• The Appellant filed a Civil Suit in Patna, seeking a declaration that his termination was illegal and for reinstatement with back wages.
• The Bank sought rejection of the Appellant under Order VII, Rule 11 of the Code of Civil Procedure, 1908 (hereinafter ‘The Code’), arguing that only Mumbai courts had jurisdiction per the contract.
• The Trial Court dismissed The Bank’s petition; however, the Patna High Court allowed its revision, holding Patna courts lacked jurisdiction due to the exclusive jurisdiction clause.

2. HDFC Bank v. Deepti Bhatia (Civil Appeal 2)

• Deepti (hereinafter ‘Complainant’) initially employed by Lord Krishna Bank (later merged with HDFC Bank and hereinafter ‘The Bank’) , worked in Delhi with a similar exclusive jurisdiction clause favoring Mumbai courts.
• Her service was terminated in 2017 on similar grounds.
• The Complainant filed a Civil Suit in Delhi courts seeking similar relief.
• The Trial Court held that the exclusive jurisdiction clause did not oust Delhi courts’ jurisdiction.
• The Bank’s revision was dismissed by the Delhi High Court, which relied on Deepti’s residence and place of work

Issues:

• Whether, in light of exclusive jurisdiction clauses in the employment contracts, the civil suits could be instituted in Patna and Delhi courts by Rakesh and Deepti, or whether only Mumbai courts had jurisdiction to decide such disputes?

Held:

• The Supreme Court reaffirmed that where two or more courts have jurisdiction under The Code, parties may by agreement choose one such court to the exclusion of others, provided the chosen court otherwise has jurisdiction.
• The exclusive jurisdiction clause in the employment contracts was valid and enforceable, as it did not oust the jurisdiction of all courts but only confined it to one competent court (Mumbai).
• Therefore, the Civil Suits by Rakesh and Deepti could not be entertained in Patna and Delhi, respectively, and only Mumbai courts had jurisdiction as per the contractual agreement.

Analysis:

The Court reviewed Section 28 of the Indian Contract Act, 1872 (agreements in restraint of legal proceedings) and Section 20 of The Code (jurisdiction of courts). It cited precedents including Hakam Singh v. Gammon (India) Ltd., Globe Transport Corpn. v. Triveni Engg. Works (1995) 4 SCC 153. A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, and Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. 2013 (9) SCC 32 which consistently uphold the validity of exclusive jurisdiction clauses when multiple courts have jurisdiction. The Court further clarified that such clauses do not offend Section 28 of the Contract Act, as they do not absolutely bar legal proceedings but select among competent forums. The principle of expressio unius est exclusio alterius (expression of one is the exclusion of another) was applied, meaning that specifying one jurisdiction implied the exclusion of others, provided the chosen court had jurisdiction under law. The impugned orders of the Patna High Court (allowing HDFC’s revision) and Delhi High Court (dismissing HDFC’s revision) were thus harmonized under this settled legal position.

[1] BEFORE THE HON’BLE SUPREME COURT OF INDIA

RAKESH KUMAR VERMA & ANR. vs. HDFC BANK & ANR.

CIVIL APPELLATE JURISDICTION

C.A. NO. 2282 OF 2025, (2025 INSC 473)

 Judgment dated: April 8, 2025

https://api.sci.gov.in/supremecourt/2022/14199/14199_2022_12_1501_60615_Judgement_08-Apr-2025.pdf