Introduction

Companies’ operating footprints have changed as a result of the widespread adoption of remote work, especially permanent work-from-home (“WFH”) agreements. The Supreme Court’s recent ruling in Rakesh Kumar Verma v. HDFC Bank Ltd. (2025 INSC 473) (“Rakesh Kumar”) offers critical guidance on the enforceability of exclusive jurisdiction clauses in private employment contracts. The Supreme Court affirmed the legality of such provisions, making it clear that parties will be held to their contractual choice of forum where the terms of engagement are explicit and mutually agreed upon.

This decision carries significant implications for employers with distributed workforces and permanent WFH policies, seeking to insulate themselves from litigative uncertainty and forum shopping by employees.

Background

The Supreme Court’s judgment arises from suits filed in Delhi and Patna by former employees of HDFC Bank Limited (“Bank”), challenging the termination of their employment by the Bank. Each employee’s erstwhile employment agreement stipulated that any dispute arising from such employment agreement would be adjudicated exclusively by courts at Mumbai, where the Bank has its corporate headquarters. The terminated employees worked at the Bank’s branches / offices in Patna and Delhi and were residents of those cities.

In each case, the Bank sought that the former employee’s suit be rejected or be transferred to an appropriate court at Mumbai in line with the exclusive jurisdiction clause in the employment agreements. The Patna and Delhi High Courts took differing views in the matter, with the Patna High Court holding that courts at Mumbai had exclusive jurisdiction, while the Delhi High Court holding that the employee’s residence and workplace justified local jurisdiction, and the ouster of local courts was not justified in law. The findings of the Patna and Delhi High Courts were subsequently challenged before the Supreme Court, which agreed with the Patna High Court’s view and disagreed with the Delhi High Court’s view.

Section 20 of the Code of Civil Procedure, 1908

Before discussing the Supreme Court’s ruling, it would be helpful to review Section 20 of the Code of Civil Procedure, 1908 (“CPC”), as amended, which stipulates the rules for determining territorial jurisdiction for civil suits, which are not otherwise specifically provided for in the CPC or in other statutes (for e.g., suits relating to immovable property, matrimonial disputes, insolvency, infringement of intellectual property etc.).

Section 20 of the CPC stipulates that a suit can be instituted in a court within the local limits of whose jurisdiction:

1. The defendant actually and voluntarily resides, carries on business, or personally works for gain; or
2. One of multiple defendants resides or works for gain, albeit with the court’s permission; or
3. All or part of the cause of action arises.

Where the defendant is a corporate entity, Section 20 stipulates that such an entity is deemed to carry on business at its sole or principal office or a subordinate or branch office, if the cause of action has arisen at such branch or subordinate office.

Section 20, therefore, gives plaintiffs a choice of forums based on either (i) the residence or principal business location of the defendant, or (ii) the place where the cause of action arose and provides defendants some protection from being forced to litigate in courts which have no real nexus to the dispute.

The Supreme Court's Ruling

In Rakesh Kumar, the Supreme Court reviewed the effect of Section 20 of the CPC and its interplay with contractual jurisdiction clauses, and reiterated the validity of exclusive jurisdiction provisions. According to the Supreme Court, if in the absence of an exclusive jurisdiction clause, more than one court could potentially exercise jurisdiction under Section 20, the parties are at liberty to agree to grant one of these courts exclusive jurisdiction, so long as that court is not otherwise prohibited from doing so. The Supreme Court clarified that there was no basis to treat exclusive jurisdiction clauses in private employment contracts any differently.

The Supreme Court relied on established jurisprudence, including Hakam Singh (1971 SCR (3) 314) and Swastik Gases (2013 (9) SCC 32) to affirm that:

1. Exclusive jurisdiction clauses are enforceable unless they oust jurisdiction entirely, violating Section 28 of the Indian Contract Act, 1872 (i.e., clauses which absolutely restrict a party’s ability to enforce its rights through legal proceedings, or limit the time within which a party can enforce its rights);
2. The court chosen must already have jurisdiction under law;
3. Such clauses must clearly or impliedly express the parties’ intent to exclude other courts.

Applying these principles, the Supreme Court found that Mumbai had a sufficient nexus to the relationship between the Bank and the employees in question, i.e., in both instances the decisions to hire and terminate these employees were taken at Mumbai, and communications to the employees and the employment agreement were issued from Mumbai. Accordingly, the Supreme Court held that courts at Patna and Delhi lacked jurisdiction in light of the contractual exclusion.

The Supreme Court also clarified that in such situations, suits should not be rejected under Order VII Rule 11 of the CPC but should be returned to the plaintiff under Order VII Rule 10 for refiling in the jurisdictional court.

Analysis

The judgment in Rakesh Kumar is a timely reaffirmation of party autonomy in contractual arrangements, with specific relevance to the evolving realities of remote employment. Several key takeaways emerge for organizations operating in decentralized or fully remote environments:

Clarity in forum selection

With employees spread across jurisdictions, frequently working remotely on a full-time basis from their homes, litigation risks multiply for companies, especially when employees initiate proceedings at their home locations. The Court’s validation of exclusive jurisdiction clauses confirms that employers can centralize litigation, reducing complexity and unpredictability.

Defensive strategy against forum shopping

The judgment will dissuade employees from exploiting geographic dispersion as a form of forum shopping. This reduces the administrative burden and legal exposure for large employers, especially in sectors like banking, IT, and services where remote work is now commonplace. This is equally important for small organizations like start-ups which often rely on a remote working model to save expenditure on real estate and office infrastructure and in response to the demand from employees for a more flexible work environment. Indian subsidiaries of overseas corporations who may not have sufficient local personnel or resources to conduct litigation across different states will also find this helpful.

Alignment with contractual fairness

The Supreme Court rejected arguments based on alleged disparities in bargaining power, such as the idea that the employer was a “mighty lion” and the employee was a “timid rabbit.” It underlined that legally binding agreements must be upheld unless they are tainted by elements like deception or coercion.

Practical Considerations for Employers

In light of this judgment, organizations, especially those with permanent WFH or hybrid models, could consider proactively revisiting their employment contracts. Key safeguards include:

1. Drafting Clear Jurisdiction Clauses: The clause must explicitly state that only the specified courts shall have exclusive jurisdiction.
2. Ensuring Jurisdictional Nexus: The chosen forum must have a legitimate connection to the employment transaction, such as the location of the registered office or decision-making authority. The place where the employment contract is executed, whether physically or digitally can also establish jurisdiction under Section 20 of the CPC. Employers should clearly record the place of execution in the contract.
3. Contractual Consistency: Employment agreements, offer letters, and HR policies should uniformly reflect the agreed forum to avoid ambiguity.

Conclusion

The Supreme Court’s judgment delivers an authoritative precedent for employers navigating the jurisdictional maze created by a geographically diverse and remote-working employee base. In an era where physical office locations are getting increasingly irrelevant, and employees operate across state lines from their homes, the Supreme Court’s endorsement of exclusive jurisdiction clauses empowers employers to anchor legal accountability to a single, predictable forum. This consolidation mitigates litigation risk, curbs forum shopping, and significantly reduces the cost and complexity of dispute resolution.

For companies with permanent WFH or hybrid workforces, jurisdiction is no longer an administrative afterthought but a strategic imperative. Employers must proactively reassess their employment contracts, audit for jurisdictional coherence, and ensure that legal enforceability is built into the foundation of their human resource frameworks. Doing so will not only fortify employers against procedural vulnerabilities but also foster clarity and fairness in employment relationships, an essential hallmark of the modern, distributed workplace.

This insight has been authored by Abhishek Tewari and Utkarsh Trivedi from S&R Associates. They can be reached at [email protected] and [email protected], respectively, for any questions. This insight is intended only as a general discussion of issues and is not intended for any solicitation of work. It should not be regarded as legal advice and no legal or business decision should be based on its content.