Rakesh Kumar Verma vs HDFC Bank Ltd. 2025 INSC 473 - Contract - Exclusive Jurisdiction Clauses
Indian Contract Act, 1872 - Section 28 - Section 28 of the Contract Act does not bar exclusive jurisdiction clauses. What has been barred is the absolute restriction of any party from approaching a legal forum. The right to legal adjudication cannot be taken away from any party through contract but can be relegated to a set of Courts for the ease of the parties. (Para 29) For an exclusive jurisdiction clause to be valid, it should be (a) 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, (b) 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, (c) the parties must either impliedly or explicitly confer jurisdiction on a specific set of courts. These three limbs/criteria have to be mandatorily fulfilled. (Para 18) Private Sector Employment - It may not be possible for all employers in the private sector to contest suits at far-off places from the registered office. This seems to be the overwhelming reason why exclusion clauses are inserted. (Para 22)
Government Service and Private Sector - The origin of government service is contractual. There is an offer and acceptance in every case. But once appointed to his post or office, the government servant acquires a status and his rights and obligations are no longer determined by the consent of both the parties, but by the statute or statutory rules as framed. In other words, the legal position of a government servant is more one of status than that of contract. A government servant may not be tied down by his employer to a court at a particular place, should a dispute arise for adjudication by a law court. Articles 14, 16 and 21 could stand in the way- On the other hand, service in the private sector is governed by the terms of the employment contract entered into by and between the parties inter-se. Like any other contract, even in an employment contract, a concluded contract pre- supposes the existence of at least two parties with mutual rights and obligations. Once a concluded contract comes into existence, it is axiomatic that such rights and obligations of the parties are governed by the terms and conditions thereof. (Para 21)
Contracts - A contract – be it commercial, insurance, sales, service, etc. – is after all a contract. It is a legally binding agreement, regardless of the parties involved or their inter se strengths- Law treats all contracts with equal respect and unless a contract is proved to suffer from any of the vitiating factors, the terms and conditions have to be enforced regardless of the relative strengths and weakness of the parties- Contracts should be treated equally, without bias or distinction. The fact that one party is more powerful or influential (the mighty lion) and the other more vulnerable (the timid rabbit) does not justify making exceptions or distinctions in the application of contractual principles. (Para 24-26)
