Read Judgment: https://lawyerslibrary.in/books/xqel/

Citation: 2025 (4) KLR (SC) 50 : 2025 INSC 473
Case Number: Civil Appeal No. 2282/2025 and Civil Appeal No. 2286/2025
Date of Judgment: April 08, 2025
Court: Supreme Court of India, Civil Appellate Jurisdiction
Bench: Dipankar Datta; J., Manmohan; J.
Parties: Rakesh Kumar Verma v. HDFC Bank Ltd; HDFC Bank v. Deepti Bhatia

Employment Contracts – Exclusive Jurisdiction Clause – Validity and Enforcement – Jurisdiction of Courts – Section 28, Indian Contract Act, 1872 – Section 20, Code of Civil Procedure, 1908 – Order VII, Rules 10 & 11, CPC

Held

Exclusive jurisdiction clauses in employment contracts designating Mumbai courts as the sole forum for disputes are valid and enforceable. Such clauses comply with Section 28 of the Contract Act as they do not absolutely bar legal recourse, provided the chosen court has inherent jurisdiction and the clause explicitly excludes other forums. No distinction exists between employment and other contracts based on unequal bargaining power; all contracts are equally binding unless vitiated by law. In the lead appeal, the Patna High Court correctly upheld the clause but erred in rejecting the plaint instead of returning it for filing in Mumbai. In the connected appeal, the Delhi High Court wrongly prioritized the employee’s residence over the agreed clause. Plaints in both cases to be returned for presentation in Mumbai courts, with liberty to amend or file afresh. Merits of termination disputes left open. 

Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., (2013) 9 SCC 32 followed; 

Vishal Gupta v. L & T Finance, 2009 SCC OnLine Del 2806 disapproved. 

Lead appeal dismissed with modification; connected appeal allowed. No costs.

For Appellant(s): Mr. Sonal Jain, AOR Mr. Narender Hooda, Sr. Adv. Mr. Rishab Raj Jain, Adv. Ms. Kajal Sharma, Adv. Mr. Grijesh Kumar, Adv. Mr. Sandeep S Deshmukh, Adv. Mr. Vatsalya Vigya, AOR

For Respondent(s): Mr. G. S. Chaturvedi, Adv. Mr. Shantanu Chatuervedi, Adv. Ms. Priyanka Tyagi, Adv. Mr. Surya Kant, AOR Mr. Sonal Jain, AOR Mr. Narender Hooda, Sr. Adv. Mr. Rishab Raj Jain, Adv. Ms. Kajal Sharma, Adv. Mr. Grijesh Kumar, Adv.

Facts:

• Lead Appeal (Rakesh Kumar Verma v. HDFC Bank):

• Rakesh was appointed by HDFC Bank as an Executive in its Transaction Banking Group (Operations) via a letter dated July 24, 2002, with an exclusive jurisdiction clause stating that Bombay courts would have sole jurisdiction over disputes.
• His service was terminated on August 28, 2016, for alleged fraud and misconduct.
• Rakesh filed a civil suit in Patna seeking a declaration that his termination was illegal and reinstatement with benefits.
• HDFC Bank moved to reject the plaint under Order VII, Rule 11 of the CPC, citing the exclusive jurisdiction clause. The trial court dismissed this, but the Patna High Court reversed the decision on January 25, 2022, upholding the clause.

• Connected Appeal (HDFC Bank v. Deepti Bhatia):

• Deepti was appointed as a Clerk by Lord Krishna Bank (later merged with HDFC Bank) and, via an employment agreement dated March 23, 2009, worked in Delhi with a similar exclusive jurisdiction clause favoring Mumbai courts.
• Her service was terminated on May 31, 2017, for alleged fraud and misconduct.
• Deepti filed a suit in Delhi seeking to quash the termination and reinstatement.
• HDFC Bank contested jurisdiction, but the trial court ruled in Deepti’s favor on April 17, 2021. The Delhi High Court upheld this on November 12, 2011, rejecting the exclusive jurisdiction clause’s applicability.

Issues:

• Whether the civil suits filed by Rakesh (Patna) and Deepti (Delhi) were maintainable given the exclusive jurisdiction clauses designating Mumbai courts as the sole forum for disputes.

Legal Provisions:

• Section 28, Indian Contract Act, 1872: Prohibits agreements that absolutely restrict legal proceedings but allows jurisdictional choices if not in violation.
• Section 20, Code of Civil Procedure, 1908 (CPC): Governs jurisdiction based on defendant’s residence, business, or where the cause of action arises.
• Order VII, Rules 10 & 11, CPC: Provides for return or rejection of plaints based on jurisdiction or other grounds.

Precedents Cited:

• Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (2013) 9 SCC 32: Upheld exclusive jurisdiction clauses when clear and agreed upon.
• Hakam Singh v. Gammon (India) Ltd. (1971) 1 SCC 286: Parties can choose a forum if multiple courts have jurisdiction.
• A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies (1989) 2 SCC 163: Clear ouster clauses exclude other courts’ jurisdiction.
• Vishal Gupta v. L & T Finance (2009 SCC OnLine Del 2806): Delhi High Court ruling favoring employee convenience in service contracts (disapproved by this judgment).

Holding & Reasoning:

• Validity of Exclusive Jurisdiction Clauses:

• The Court reaffirmed that exclusive jurisdiction clauses are valid if: (a) they comply with Section 28 of the Contract Act (not an absolute bar to legal recourse), (b) the chosen court already has jurisdiction under law, and (c) the clause explicitly or impliedly excludes other courts.
• The clauses in both cases met these criteria: Mumbai courts had jurisdiction (decisions to hire/terminate originated there), and the term “exclusive” clearly ousted other forums.

• Application to Employment Contracts:

• The Court rejected arguments distinguishing employment contracts due to unequal bargaining power (employer vs. employee). It held that all contracts—commercial, service, or otherwise—are equally enforceable unless vitiated by law.
• Disapproved Vishal Gupta, finding no basis to exempt employees from agreed terms based on perceived power imbalance.

• Jurisdiction Analysis:

• In Rakesh’s case, the Patna High Court correctly upheld the clause, but erred in rejecting the plaint under Order VII, Rule 11 instead of returning it under Rule 10 for filing in Mumbai.
• In Deepti’s case, the Delhi High Court erred by prioritizing her residence and workplace over the agreed clause, ignoring binding precedents like Swastik Gases.

Decision:

• Lead Appeal (Rakesh v. HDFC Bank):

• Dismissed. Patna High Court’s ruling affirmed on jurisdiction, but modified to return the plaint to Rakesh for presentation in Mumbai (not rejection).
• Rakesh granted liberty to amend the plaint or file afresh, with limitation issues to be pleaded if applicable.

• Connected Appeal (HDFC Bank v. Deepti):

• Allowed. Delhi High Court’s ruling set aside. Deepti’s plaint to be returned for filing in Mumbai, with similar liberties for amendment or fresh filing.

• Merits:

• The Court refrained from examining the merits of the termination disputes, leaving all substantive issues open.

Conclusion:

• Exclusive jurisdiction clauses in employment contracts are enforceable, and suits must be filed in the agreed forum (Mumbai). The Patna High Court’s legal stance was upheld with procedural correction, while the Delhi High Court’s ruling was overturned. No costs awarded.