EXCLUSIVE JURISDICTION IN EMPLOYMENT CONTRACTS
In a recent judgement, the Supreme Court of India[1] has affirmed the validity of exclusive jurisdiction clauses in employment contracts, provided they comply with certain conditions. This judgment is significant as it clarifies the enforceability of such clauses under employment contracts and emphasizes on the principle of contractual freedom.
Facts
The present case refers to two civil appeals involving two employees of HDFC Bank Ltd. (Bank), Rakesh Kumar Verma and Deepti Bhatia, who were terminated from their employment on the grounds of fraud and misconduct. Being aggrieved by such termination, both of them filed civil suits challenging their termination in courts located in Patna and Delhi, respectively. The Bank appealed the jurisdiction of these courts, stating that the courts of Mumbai have exclusive jurisdiction in case of any dispute between the parties and the court of Mumbai is the sole forum for dispute resolution.
Specific criteria for exclusive jurisdiction clause
The judgment relies on the interpretation of Section 28 of the Indian Contract Act, 1872, which states that any agreement that restricts a party from enforcing their rights through legal proceedings shall be declared void. The Court reiterated that the exclusive jurisdiction clauses in any contract, are permissible if they meet specific criteria:
- Compliance with Section 28: The exclusive jurisdiction clause should not restrict any party from initiating legal proceedings;
- Competent Jurisdiction: The designated court must have jurisdiction under the Code of Civil Procedure (CPC); and
- Express or Implied Agreement: The parties must have either expressly or implicitly agreed to confer jurisdiction on certain courts.
Supreme Court’s Decision
The Supreme Court upheld the exclusive jurisdiction clause in Rakesh's employment contract, stating that any legal disputes should be resolved in Mumbai courts. Similarly, the Supreme Court upheld the exclusive jurisdiction clause in Deepti's employment contract, which required disputes to be resolved in Mumbai courts. In both the cases, the Court emphasized that such clauses are enforceable as long as they do not prevent access to legal recourse.
This ruling set a precedent for employment contracts which clarifies that employers can specify a particular court for resolving disputes, provided the chosen court has jurisdiction. It further clarifies that the private employment contracts can include exclusive jurisdiction clauses, which will be upheld by the courts if they are reasonable and do not entirely restrict access to justice.
Take away
The employers can be relieved as the court has upheld the practice of having a one-sided exclusive jurisdiction clause in their employment contracts, knowing that such clause would continue to be upheld by the courts.
Authors:
Smrithi Nair
Partner,
Juris Corp
Email: [email protected]
Viidhi Chopra
Senior Associate,
Juris Corp
Disclaimer:
This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein.
[1] Rakesh Kumar Verma v. HDFC Bank Ltd., 2025 SCC OnLine SC 752.