Introduction

In the recent case of Rakesh Kumar Verma v. HDFC Bank Ltd.[1], the Hon’ble Supreme Court (“SC”) addressed the enforceability of exclusive jurisdiction clauses in employment contracts. The SC upheld the validity of exclusive jurisdiction clauses in employment contracts, provided they meet specified legal conditions. This judgment is significant as it reinforces the enforceability of such clauses within employment arrangements and underscores the principle of contractual freedom.

Brief Facts

In this case, civil suits were filed by the former employees of HDFC Bank Ltd. (“HDFC Bank”), Rakesh Kumar Verma and Deepti Bhatia (“Former Employees”), challenging their respective terminations on the grounds of alleged fraud and misconduct. Rakesh Kumar Verma initiated proceedings before the Patna High Court, while Deepti Bhatia approached the Delhi High Court. In both cases, HDFC Bank contended that the respective courts lacked jurisdiction, citing the exclusive jurisdiction clause in the employment contracts designating Mumbai as the sole forum for resolving disputes.

In Rakesh Kumar Verma’s case, the Patna High Court accepted the HDFC Bank’s argument and ordered the matter to be transferred to Mumbai, in accordance with the jurisdiction clause. Aggrieved by this decision, he filed the petition. In contrast, Deepti Bhatia’s suit in the Delhi High Court resulted in a different outcome. The court rejected HDFC Bank’s plea to shift the case to Mumbai, affirming Bhatia’s right to pursue her claim in Delhi. HDFC Bank has since appealed this decision in a connected proceeding.

Issue Raised

Whether the exclusive jurisdiction clauses in the employment contracts of the Former Employees, which specified Mumbai courts, were valid and enforceable, thereby preventing them from filing suits in Patna and Delhi, respectively?

Legal Analysis by the Hon’ble SC

In addressing the enforceability of exclusive jurisdiction clauses in employment contracts, the SC began by interpreting the statutory framework under Section 28 of the Indian Contract Act, 1872 (“ICA”). This provision renders void any agreement that absolutely restricts a party from enforcing their legal rights through ordinary legal proceedings. However, the Court clarified that exclusive jurisdiction clauses do not fall within this prohibition, as they do not extinguish the right to legal recourse but merely designate a specific forum for adjudication. The SC emphasized that such clauses are valid as long as they do not bar access to justice altogether and the designated court has jurisdiction under the law.

The Court examined Section 20 of the Code of Civil Procedure, 1908, (“CPC”) which determines the territorial jurisdiction of civil courts based on where the defendant resides, conducts business, or where the cause of action arises. It observed that both the Mumbai courts and the courts at the respective places of employment i.e. Patna and Delhi, had jurisdiction in the this case. Mumbai courts were competent due to the location of key employment actions, such as appointment, contract issuance, and termination, while the local courts had jurisdiction as the services were rendered there. Relying on established precedents, the SC reiterated that when multiple courts have jurisdiction, parties may lawfully agree to limit proceedings to one of them. This principle became central to the case, as the Former Employees, had accepted employment agreements that explicitly designated Mumbai as the exclusive forum for legal disputes, despite their services being performed in Patna and Delhi, respectively.

To reinforce its reasoning, the SC relied on a series of authoritative precedents. In Hakam Singh v. Gammon (India) Ltd.[2], the SC held that where two or more courts have jurisdiction, parties can validly agree to restrict jurisdiction to one of them. Such an agreement does not contravene Section 28 of the Contract Act and is not against public policy. This foundational principle was reaffirmed in Globe Transport Corporation v. Triveni Engineering Works[3], where the Court reiterated that while jurisdiction cannot be conferred on a court that lacks it, parties can choose among competent courts and exclude others.

A more nuanced interpretation was provided in ABC Laminart Pvt. Ltd. v. A.P. Agencies[4], where the Court held that even in the absence of explicit words like “only” or “exclusive,” the intention to confer exclusive jurisdiction can be inferred from the contract. The Court invoked the maxim expressio unius est exclusio alterius, which means that the expression of one is the exclusion of another, to support the view that specifying one court implies the exclusion of others, provided the clause is clear and unambiguous.

The most significant precedent cited was Swastik Gases (P) Ltd. v. Indian Oil Corporation Ltd.[5], a three-judge bench decision. In that case, the Court held that even without the use of the word “exclusive,” a clause stating that the agreement is subject to the jurisdiction of a particular court implies that only that court has jurisdiction. The Court emphasized that such clauses are not hit by Section 23 or Section 28 of the Contract Act and are not against public policy. This decision was particularly influential in the present case, as the employment contracts of both THE Former Employees contained clear and express language conferring exclusive jurisdiction on Mumbai courts.

The Supreme Court also addressed and rejected the reasoning adopted by the Hon’ble Delhi High Court (“Delhi HC”) in Vishal Gupta v. L&T Finance[6], which had taken a more employee-centric view. In that decision, the Delhi HC held that exclusive jurisdiction clauses in employment contracts may be unfair due to the unequal bargaining power between employers and employees. However, the SC firmly rejected this approach, stating that all contracts, whether commercial or employment, must be treated equally under the law. The Court dismissed the metaphor of the “mighty lion” (employer) and the “timid rabbit” (employee), asserting that legal enforceability should not depend on the relative strength of the parties but on the validity of the contract itself.

Applying these principles, the SC concluded that the exclusive jurisdiction clauses in the employment contracts of the Former Employees were legally enforceable. The SC laid down the following three criteria that must be mandatorily fulfilled for an exclusive jurisdiction clause to be valid:

  1. It should be in consonance with Section 28 of the Contract Act, i.e., it should not absolutely restrict any party from initiating legal proceedings pertaining to the contract,
  2. The court that has been given exclusive jurisdiction must be competent to have such jurisdiction in the first place, i.e., a court not having jurisdiction as per the statutory regime cannot be bestowed jurisdiction by means of a contract; and;
  3. The parties must either implicitly or explicitly confer jurisdiction on a specific set of courts.

The SC held that all three mandatory conditions for upholding the validity of the exclusive jurisdiction clause are satisfied in these appeals.

First, Section 28 of the Indian Contract Act does not prohibit exclusive jurisdiction clauses. It only bars agreements that entirely prevent access to legal remedies. In this case, the clause does not extinguish the employee’s right to legal recourse but limits the forum for such recourse to Mumbai courts.

Second, jurisdiction cannot be conferred by contract on a court that otherwise lacks it. However, in this instance, since key employment decisions, such as appointment, issuance of contracts, and termination, took place in Mumbai, those courts inherently have jurisdiction under Section 20 of the CPC.

Finally, the wording of the clause is unambiguous. By expressly using the term “exclusive,” the contract clearly excludes the jurisdiction of all other courts except those in Mumbai.

Ruling of the Hon’ble SC

The SC ruled in favour of the HDFC Bank, affirming the validity of the exclusive jurisdiction clauses in both employment contracts. It held that the exclusive jurisdiction clauses in this case did not violate Section 28 of the Contract Act, the Mumbai courts had jurisdiction under Section 20 CPC, these clauses were agreed between the parties and the language of the clauses was clear and exclusive. Therefore, the suits filed in Patna and Delhi were not maintainable, and the proper forum for adjudication was the courts in Mumbai, as agreed upon by the parties.

 The Court held that the Patna High Court correctly applied the law but erred in rejecting Rakesh Kumar Verma's plaint. Instead, the Supreme Court directed the Patna High Court to return the plaint to Verma for presentation in the appropriate court in Mumbai. Similarly, the Delhi High Court's decision was overturned, and Deepti Bhatia was directed to present her case in a Mumbai court.

Critical Analysis

While the decision favours the employer, it raises significant concerns for employees within the broader framework of the employer-employee relationship. These have been given as follows:

  1. Commercial and Employment Contract Treated Equally: The SC, in upholding the exclusive jurisdiction clause, failed to meaningfully distinguish between commercial contracts, where parties typically negotiate from positions of equal bargaining power, and employment contracts, which are inherently imbalanced and often formed under the influence of economic necessity and subordination. By treating both categories of contracts identically, the judgment overlooks the unique vulnerabilities of employees and dilutes the protective purpose of employment law.
  2. Departure From Master-Servant Doctrine: The judgment also marks a significant departure from the well-established master-servant doctrine, which historically recognised the employer’s position of authority and the employee’s relative dependence. By enforcing an exclusive jurisdiction clause that restricts legal redress to a distant court, the SC has subordinated the need for accessible justice to the formal terms of a contract terms which, in employment relationships, are seldom truly negotiated.
  3. No Distinction Between Categories of Employees: Moreover, the Court did not consider distinctions between different categories of employees. It applied a uniform standard to all employees regardless of their roles, positions, or bargaining power within the organisation. This undifferentiated approach effectively imposes a rigid, one-size-fits-all rule that ignores the diverse realities of modern employment relationships. Junior employees with limited legal knowledge or financial means to litigate in distant jurisdictions are placed at a significant disadvantage, undermining their access to justice.
  4. Imposes Financial and Logistical Burden on the Employee: By enforcing a rigid exclusive jurisdiction clause in favour of the employer, the SC has, in effect, endorsed a contractual term that can disproportionately burden employees. Consider, for example, an employee working in Gurugram for a company headquartered in Chennai. If the employment contract mandates exclusive jurisdiction in Chennai, the employee, who was appointed, performed services, and was terminated in Gurugram, must now file a legal challenge in a distant city. This imposes a significant financial and logistical burden on the employee, who must travel, arrange accommodation, and appear for hearings in Chennai, while the employer, with far greater resources, faces no such hardship. These practical considerations like access to justice, economic disparity, and procedural fairness, have not been addressed by the SC.

Key Insights for Employers

    1. Employers can use exclusive jurisdiction clauses in employment contracts to specify a particular court for dispute resolution, provided that such clauses are clear, unambiguous, and do not completely bar employees from seeking legal recourse.
    2. The chosen court must have the inherent jurisdiction to address the employment disputes.
    3. Such clauses help in streamlining legal proceedings and ensure that disputes are resolved in a predictable and convenient forum for the employer, especially in cases where the company has a pan-India presence.

[1] 2025 SCC OnLine SC 752

[2] (1971) 1 SCC 286

[3] (1983) 4 SCC 707

[4] (1989) 2 SCC 163

[5] (2013) 9 SCC 32

[6] 2009 SCC OnLine Delhi 2806

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Authors:

Gyanendra Mishra, Partner

Mudrika Purohit, Associate