The Supreme Court, in the case of Rakesh Kumar Verma v. HDFC Bank Ltd., Civil Appeal No. 2282 of 2025, decided on 08.04.2025, upheld the validity of exclusive jurisdiction clauses in private employment contracts, making it mandatory for disputes to be filed only in the courts specifically agreed upon by the parties.
FACTS
HDFC Bank Ltd. (hereinafter referred to as “the Defendant”) appointed Rakesh Kumar Verma, (hereinafter referred to as “the Appellant”) in July 2002 as an Executive in its Wholesale Banking Operations at Patna. The Appellant’s appointment letter contained a clause conferring exclusive jurisdiction on Mumbai courts for disputes arising from employment. On 28 August 2016, the Appellant’s services were terminated on allegations of fraud and misconduct. Aggrieved, the Appellant filed a civil suit before the Sub-Judge at Patna, seeking a declaration that the termination was illegal, reinstatement with continuity of service, arrears of salary, and other benefits. The Defendant challenged the maintainability of the suit under Order VII Rule 11 CPC, citing the exclusive jurisdiction clause. The trial court rejected this plea in December 2018, but on revision, the Patna High Court upheld the Defendant’s objection, holding the jurisdiction clause binding even in service termination disputes.
A similar case arose in Delhi where the plaintiff, whose 2009 agreement with the defendant bank also vested jurisdiction in Mumbai. After the plaintiff’s termination on 31 May 2017 on allegations of misconduct, the plaintiff sued before the Rohini courts. Both the trial court and the Delhi High Court held that Delhi courts had jurisdiction despite the clause.
Faced with conflicting rulings from two High Courts on the same point of law, both parties carried their grievances to the Supreme Court. The Appellant, feeling aggrieved, has therefore filed an appeal before the Supreme Court.
ISSUES
Whether the suits filed in Patna and Delhi were maintainable despite the employment contracts conferring exclusive jurisdiction on Mumbai courts?
CONTENTIONS OF THE PARTIES
It was contended on behalf of the Plaintiff that his dismissal was illegal, arbitrary and a breach of the rules of natural justice. The Plaintiff applied for his reinstatement with all consequential benefits before the Sub-Judge, Patna. When the Defendant exercised the jurisdiction clause on the appointment letter, the Plaintiff countered that since he worked in Patna and the termination order was operational there, the Patna courts had jurisdiction under Section 20 of the CPC. The trial court seems to have accepted that logic, and the Defendant’s application under Order VII Rule 11 CPC was dismissed.
On the contrary, the Defendant emphasised that the appointment letter expressly provided that only Bombay courts would have jurisdiction. Relying on Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (2013) 9 SCC 32, it held that once the parties had agreed to an exclusive jurisdiction clause, the employee could not sidestep it. Accordingly, the Patna court was found to lack jurisdiction.
In the parallel dispute, the plaintiff, argued that her cause of action substantially arose in Delhi since she lived, worked, and received the termination order there. The trial court observed that despite the clause, Delhi courts retained jurisdiction. On revision, the Delhi High Court affirmed this view, relying on its earlier decision in Vishal Gupta v. L&T Finance 2009 SCC OnLine Del 2806, to emphasise that an exclusive jurisdiction clause in an employment agreement could not deprive an employee of the right to seek redress in the court of her local forum.
The central issue boiled down to whether the employees were bound by the forum mentioned in their contracts, or whether they could still rely on the ordinary jurisdiction of local courts.
DECISION AND FINDINGS
The Supreme Court observed that the key issue was whether the forum-selection clauses in the appointment letters of the Plaintiffs could restrict them from filing suits in Patna and Delhi and limit the proceedings solely to Mumbai.
In answering this, the Court first turned to Section 28 of the Indian Contract Act, 1872. This provision invalidates agreements that impose an absolute bar on approaching courts. However, a clause that merely channels disputes to one of several courts which already possess jurisdiction does not remove the remedy; it only determines where it can be pursued. In the present case, the employment contracts did not abolish the right to sue; they only required that disputes be filed in Mumbai. Hence, Section 28 was not violated.
The Court then examined Section 20 of the Code of Civil Procedure, which deals with the place of suing. The reasoning is that a corporation is considered to carry on business not only at its principal office but also at any location where a cause of action arises. On the facts, appointment and subsequent termination decisions of the Plaintiffs were taken in Mumbai, and the relevant letters were issued from there by the Defendant. This is sufficient for the courts in Mumbai to assume jurisdiction. While parts of the cause of action may have also arisen in Patna or Delhi, the parties’ contractual choice of Mumbai was valid, since Mumbai already had jurisdiction. The clause was not an attempt to confer power on a court that inherently lacked it.
The Supreme Court then reviewed prior precedents that have uniformly supported the validity of such exclusive jurisdiction clauses. In Hakam Singh v. Gammon (India) Ltd., (1971) 1 SCC 286, it was held that where several courts have jurisdiction, parties may restrict themselves to one. Globe Transport Corporation v. Triveni Engineering Works, (1983) 4 SCC 707, clarified that jurisdiction cannot be given to a court lacking it, but may be confined to one among competent courts. A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem, (1989) 2 SCC 163, explained that terms like “alone” or “exclusive” exclude other forums, and such intent can also be inferred from context. Lastly, Swastik Gases Pvt. Ltd. v. Indian Oil Corporation Ltd., (2013) 9 SCC 32, the Court held that naming a specific forum by itself rules out others. Based on these rulings, the Supreme Court concluded that the key requirements were met: the clauses complied with Section 28 of the Indian Contract Act, 1872; the selected court possessed jurisdiction as per Section 20 of the Code of Civil Procedure, 1908; and the wording explicitly barred other courts.
The employees had argued that such clauses should not bind them, given the inherent inequality in bargaining power in employment contracts. The Court rejected this plea. It distinguished private employment from government service, which is governed by constitutional and statutory safeguards. In private contracts, unless illegality or statutory prohibition is shown, parties remain bound by their agreements. The Delhi High Court’s reliance on Vishal Gupta v. L&T Finance 2009 SCC OnLine Del 2806, to carve out such an exception was expressly disapproved.
While affirming the Patna High Court’s conclusion, the Supreme Court corrected its procedure. The High Court had ordered rejection of the plaint under Order VII Rule 11, but the proper course was return of the plaint under Order VII Rule 10 for presentation in the competent court. Accordingly, both the plaintiffs were directed to pursue their claims in Mumbai, with liberty to amend pleadings and seek condonation of limitation where necessary. The merits of their termination disputes were left untouched, and no order as to costs was passed.
AMLEGALS REMARKS
The ruling in this case firmly establishes the significant authority of exclusive jurisdiction clauses within private employment contracts. The Supreme Court’s decision to uphold Mumbai as the designated court, grounded in the terms of the contract and supported by provisions such as Section 28 of the Indian Contract Act, reflects a strong judicial preference for honouring the agreed terms between parties provided they do not entirely obstruct access to justice. This outcome favours employers seeking to consolidate disputes in a single forum, offering them greater control and predictability in legal proceedings by ensuring that all related cases are adjudicated in a centralised location of their choosing, such as Mumbai in this instance. This centralised approach allows for streamlined management of litigation, reduces the complexity of handling cases across multiple jurisdictions, and provides a consistent legal framework, which can be particularly advantageous for large organisations like HDFC Bank when addressing similar employee disputes.