Source: Supreme Court 

Why in News? 

A bench of Justice Dipankar Datta and Justice Manmohan upheld the exclusive jurisdiction clause in employment contracts.  

• The Supreme Court held this in the case of Rakesh Kumar Verma v. HDFC Bank Ltd. (2025). 

What was the Background of Rakesh Kumar Verma v. HDFC Bank Ltd. (2025) Case?   

• The case pertains to the appointment and termination of two persons. 
• Rakesh's Case: 
  • Appointed as Executive at HDFC Bank's Patna branch in July 2002. 
  • Employment contract contained an exclusive jurisdiction clause stating Bombay Courts have jurisdiction for disputes, 
  • Terminated on 28th August, 2016 for alleged fraud and misconduct. 
  • Filed a civil suit in Patna court seeking declaration of termination as illegal and reinstatement. 
  • HDFC Bank filed petition to reject the suit claiming courts in Mumbai had jurisdiction. 
  • Trial court dismissed HDFC's petition. 
  • HDFC Bank filed revision application in Patna High Court, which was successful. 
• Deepti's Case: 
  • Initially worked at Lord Krishna Bank, which merged with HDFC Bank in 2009. 
  • Appointed as officer in Delhi branch with employment agreement containing similar exclusive jurisdiction clause for Mumbai courts. 
  • Terminated on 31st May, 2017 for alleged fraud and misconduct. 
  • Filed civil suit in Delhi court seeking declaration of termination as null and void and reinstatement. 
  • HDFC Bank contested jurisdiction in written statement. 
  • Trial court held jurisdiction clause did not fully oust Delhi courts' jurisdiction. 
  • HDFC Bank's revision application to Delhi High Court was dismissed. 
• Key Judgments: 
  • Patna High Court ruled in favor of HDFC Bank, stating exclusive jurisdiction clause applied to service termination disputes. 
  • Delhi High Court ruled against HDFC Bank, holding that the exclusive jurisdiction clause did not oust Delhi courts' jurisdiction. 
• The central legal issue in both cases concerns whether the exclusive jurisdiction clauses in employment contracts override the employees' right to file suits in courts where they worked and were terminated. 

What were the Court’s Observations? 

• The Court laid down that for an exclusive jurisdiction clause to be valid it should satisfy the following conditions: 
  • It should be in consonance with Section 28 of Indian Contract Act, 1872 (ICA) i.e., it should not absolutely restrict any party from initiating legal proceedings pertaining to the contract, 
  • 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, finally. 
  • The parties must either impliedly or explicitly confer jurisdiction on a specific set of courts. 
• The Court held that in the private sector the parties are governed by the terms of the employment contract entered into between the parties. 
• It was further observed that as long as the employment contract does not offend the  applicable legislation like the Civil Procedure Code, 1908 (CPC) or ICA, there is no scope for interference. 
• Further, a contention was made by the parties that since the present case pertains to service contract the above laid down law would not be applicable is not accepted by the Court. 
• The Court held that a contract be it commercial, insurance, sales, service etc is after all a contract. There can be no distinction on the basis of the status, power or influence of the parties. 
• The Court thus moved to apply the test laid down above in the present facts: 
  • It was observed that Mumbai will have jurisdiction because decision to employ Rakesh and Deepti were taken in Mumbai, the appointment letter in favour of Rakesh was issued from Mumbai, the employment agreement was dispatched from Mumbai, the decision to terminate the services of Rakesh and Deepti were taken in Mumbai and the letters of termination were dispatched from Mumbai 
• Thus, the Court held that HDFC Bank was justified in it’s claim that the suit should be instituted in an appropriate Court in Mumbai. 

What are the Landmark Case Laws on Exclusive Jurisdiction Clause? 

• Hakam Singh v. Gammon (India) Ltd. (1971): 
  • It is not open to the parties by agreement to confer by their agreement jurisdiction on a Court which it does not possess under the Code. 
  • But where two courts or more have under the CPC jurisdiction to try a suit or proceeding an agreement between the parties that the dispute between them shall be tried in one of such Courts is not contrary to public policy. 
  • Such an agreement does not contravene Section 28 of the Contract Act.
• Swastik Gases (P) Ltd v. Indian Oil Corp Ltd (2013): 
  • The intention of the parties—by having Clause 18 in the agreement—is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. 
  • It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary