A) ABSTRACT / HEADNOTE

The Supreme Court considered whether contractual exclusive jurisdiction clauses in appointment letters/employment agreements specifying the Bombay/Mumbai courts prevent employees from instituting civil suits in fora where they work or reside (Patna, Delhi). Two parallel suits, arising from terminations for alleged fraud/misconduct, were before different High Courts. The Patna High Court upheld the clause; the Delhi High Court rejected the bank’s revisional challenge.

The Supreme Court affirmed that exclusive jurisdiction clauses are valid provided three mandatory criteria are satisfied:

(i) the clause does not absolutely restrain access to courts in violation of Section 28 of the Indian Contract Act, 1872;

(ii) the court designated must be competent under statutory rules (e.g., Section 20 CPC); 

(iii) the parties must have manifested ad idem in conferring jurisdiction on that forum. Applying binding precedents including Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. and earlier rulings on forum-selection clauses the Court held the Mumbai courts were competent and the parties had agreed to Mumbai as exclusive forum; thus suits in Patna and Delhi were instituted in an incompetent forum.

The Court set aside the Delhi High Court order, affirmed Patna HC on law but remediated procedure (directing return of plaint under Order VII, Rule 10 CPC rather than rejection under Order VII, Rule 11), and permitted plaintiffs to present fresh suits or withdraw/amend as necessary. The decision reiterates that employment contracts are ordinary contracts for this purpose and unequal bargaining power alone does not render forum-selection clauses invalid.

Keywords: exclusive jurisdiction clause; Section 28, Indian Contract Act; Section 20, CPC; return of plaint; employment contract; forum-selection; Order VII Rule 10 & 11 CPC; Swastik Gases; ad idem.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appeals arise from two employment-termination suits filed by erstwhile private-sector employees in fora local to their workplace/residence despite exclusive jurisdiction clauses in their appointment letters designating Bombay/Mumbai courts. The Bank relied upon the clause and sought rejection/return of the plaints; courts below took divergent views. The Patna High Court allowed the bank’s revisional application, concluding jurisdiction lay in Mumbai.

The Delhi High Court dismissed the Bank’s revisional petition and followed a coordinate bench decision (Vishal Gupta) to hold that an employee’s local residence/work and service of termination in that place preserves the local court’s jurisdiction notwithstanding the clause. The Supreme Court was asked to decide the narrow legal question whether such contractual forum-selection clauses are enforceable in private employment contracts and if so, what procedural remedy is appropriate when a plaint is filed in a forum other than the agreed forum.

The matter required reconciliation of precedents dealing with ouster/selection clauses, balancing Section 28 (prohibiting absolute restraint on legal proceedings) with contractual freedom to select competent courts where more than one forum exists under Section 20 CPC. The Court also had to consider policy arguments about unequal bargaining power in employment contracts and judge whether private employment relationships occupy a special category to render exclusive jurisdiction clauses unenforceable.

The Court framed three criteria for validity of such clauses and applied them to the facts focusing on competence of the chosen courts, absence of absolute restraint, and mutual intention (ad idem). Procedural correctness under CPC (return v. rejection of plaint) was also considered.

D) FACTS OF THE CASE

The Bank appointed Rakesh (Executive, Transaction Banking Group) by letter dated 24 July 2002 and Deepti (Clerk/officer) under an employment agreement dated 23 March 2009 (merged employer). Both appointment documents contained the clause: “the Bombay Courts will have exclusive jurisdiction” in respect of disputes. Rakesh worked at Wholesale Banking, Exhibition Road, Patna; Deepti worked at Janak Puri, Delhi.

Both were terminated for alleged fraud and misconduct Rakesh on 28 August 2016 (termination letter dated 28.06.2016 in plaint) and Deepti on 31 May 2017. Aggrieved, Rakesh instituted Title Suit No. 212 of 2017 in Sub-Judge-1, Patna seeking declaration, injunction and reinstatement with arrears; Deepti instituted Civil Suit No. 1164 of 2017 in Rohini Courts seeking quash of termination and reinstatement.

HDFC Bank filed a petition under Order VII, Rule 11 CPC in Patna for rejection of the plaint on grounds of lack of jurisdiction (Mumbai exclusive). The trial court dismissed the petition; Patna High Court allowed the Bank’s revisional application and held jurisdiction lay in Mumbai. In Delhi, the trial court held it had jurisdiction despite the clause; the Delhi High Court dismissed the Bank’s revisional challenge, relying on Vishal Gupta. The Supreme Court consolidated appeals to determine the lawfulness and effect of the exclusive jurisdiction clause in private employment contracts and the proper procedural remedy when jurisdiction is wrongly invoked.

E) LEGAL ISSUES RAISED

i. Whether a contractual exclusive jurisdiction clause designating the courts of Mumbai precludes institution of civil suits in other courts (Patna, Delhi) by employees?
ii. Whether exclusive jurisdiction clauses in employment contracts are barred by Section 28 of the Indian Contract Act, 1872?
iii. Whether a contract can confer jurisdiction on a court which does not possess jurisdiction under Section 20 CPC?
iv. What is the correct procedural remedy — rejection under Order VII, Rule 11 or return under Order VII, Rule 10 — when a plaint is presented in an improper forum due to an exclusive forum clause?
v. Whether unequal bargaining power in employment contracts invalidates forum-selection clauses as a matter of public policy?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The Bank argued that the appointment letters expressly conferred exclusive jurisdiction on Bombay courts; parties were bound by the contractual choice of forum.
ii. The Bank maintained the Mumbai courts were competent under Section 20 CPC because the letters were issued and decisions to terminate were taken/dispatched from Mumbai.
iii. The Bank contended that permitting suits in local fora would defeat commercial convenience and the parties’ expectation of dispute resolution at Mumbai.

G) RESPONDENT’S ARGUMENTS

i. The employees contended that their residence/place of work and service of termination in Patna/Delhi preserved local jurisdiction under Section 20 CPC and that employment contracts reflect unequal bargaining power, making exclusive clauses unconscionable in practice.
ii. Reliance was placed on the Delhi coordinate bench decision Vishal Gupta v. L & T Finance (2009) to argue the clause should not oust local jurisdiction in employment disputes.

H) RELATED LEGAL PROVISIONS 

i. Section 28, Indian Contract Act, 1872 — agreements in restraint of legal proceedings void to the extent they absolutely restrict enforcing rights by usual legal proceedings.
ii. Section 20, Code of Civil Procedure, 1908 — forum where defendant resides/works or where cause of action arises; explanation re: corporation.
iii. Order VII, Rule 10 & 11, CPC — return of plaint for presentation before competent court; rejection of plaint for non-joinder/misjoinder etc.

I) JUDGEMENT

The Court reaffirmed settled principles: parties may not confer jurisdiction on a court that lacks competence under statutory provisions, but where multiple forums are competent under Section 20 CPC, parties may agree to a particular forum and exclude others. Citing Hakam Singh v. Gammon, Globe Transport, A.B.C. Laminart, and the three-judge Bench decision in Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., the Court articulated three mandatory limbs for validity of exclusive jurisdiction clauses:

(a) the clause must not amount to an absolute bar on access to courts and thus offend Section 28;

(b) the designated court must be competent to hear the dispute under the statutory regime;

(c) parties must have manifested intention (express or implied) to confer jurisdiction on the chosen forum (ad idem).

Applying these limbs, the Court held the appointment letters did not absolutely bar access they merely limited forum to Mumbai — so Section 28 was not infringed. The factual matrix showed critical acts (offer/appointment/dispatch of letters and decision to terminate) emanated from Mumbai, satisfying competence of Mumbai courts under Section 20 explanation (corporate principal office and subordinate offices).

The presence of the word “exclusive” and clear contractual language showed the parties had agreed on Mumbai as the situs; hence the clause excluded other courts. The Supreme Court therefore concluded suits instituted in Patna and Delhi were filed in a forum lacking competency under the contractually agreed choice of forum.

However, while affirming the Patna High Court’s legal conclusion, the Supreme Court corrected its procedural approach: instead of allowing rejection under Order VII, Rule 11 (which would dismiss the plaint on merits grounds), the correct course is to direct return of the plaint under Order VII, Rule 10 to enable presentation before the competent Mumbai court, or allow withdrawal and fresh presentation.

Consequently, the Patna HC order was affirmed on law but modified in relief; the Delhi HC order was set aside. The Court expressly disapproved Vishal Gupta to the extent it took the contrary view. The merits of termination were left open for trial in the competent forum; liberty granted to amend plaints and plead limitation grounds where necessary.

a. RATIO DECIDENDI

The operative ratio is threefold:

(1) exclusive jurisdiction clauses are enforceable provided they do not absolutely bar access to judicial remedies in contravention of Section 28;

(2) a contractual conferment of forum cannot create jurisdiction in a court that is statutorily incompetent under Section 20 CPC;

(3) where more than one forum is competent, parties may validly select and exclude other competent fora by an unambiguous clause express words such as “exclusive”, “only”, or equivalent imply exclusion of others.

Applying these principles, the Court held that private employment contracts are ordinary contracts for forum-selection purposes and unequal bargaining power alone does not invalidate the clause absent vitiating factors. Procedurally, where plaint is filed in a wrong forum due to such clause, the appropriate remedy is return under Order VII, Rule 10 (with endorsement) rather than rejection under Order VII, Rule 11, unless other grounds for rejection exist.

b. OBITER DICTA

The Court observed obiter that governmental/public service positions differ from private employment: statutory frameworks and constitutional guarantees may render forum-selection inapplicable to public servants. The bench also commented on policy concerns that unequal bargaining power is common across many commercial relationships and therefore, equality of contractual treatment is desirable unless vitiating factors exist. The Court hinted that forum-selection clauses should not be lightly upset on welfare grounds absent clear statutory or constitutional resonance. Finally, the bench noted practicalities: private employers operating pan-India may validly choose forum for predictability and convenience.

c. GUIDELINES

i. Three-limb test for validity — clause must not

(a) absolutely restrain access to courts (Section 28),

(b) confer jurisdiction on an otherwise incompetent court,

(c) reflect parties’ clear intention to confer jurisdiction on the chosen forum.
ii. Employment contracts treated as ordinary contracts — doctrine of equality applies; no special exemption unless statutory rules/constitutional rights apply.
iii. Procedure when plaint filed in wrong forum — direct return under Order VII, Rule 10 with endorsement to enable presentation before competent court; avoid mechanical rejection under Order VII, Rule 11 unless other grounds exist.
iv. Competence analysis — enquire factually whether the chosen court is competent under Section 20 (e.g., decisions dispatched/issued from principal office).
v. Limitation & amendment — plaintiffs granted liberty to amend plaints and to plead limitation exemptions (Order VII, Rule 6) when re-presenting suits.

J) CONCLUSION & COMMENTS

This judgment consolidates and reiterates long-standing principles favoring enforcement of clear forum-selection clauses where statutory competence exists. It closes the door on treating private employment agreements as an exceptional category automatically immune from contractual forum selection simply because of perceived unequal bargaining power. The Court’s emphasis on Section 28’s limited reach, coupled with a fact-driven competence inquiry under Section 20, provides a predictable framework for employers and employees. The corrective on procedural remedy is practically important — it protects plaintiffs by preserving their cause of action (returning plaint) while respecting contractual choice. Litigants and courts must therefore undertake a careful triage: ascertain competence of the designated forum factually, interpret the clause for clarity of exclusion, and then adopt the remedy that preserves rights without permitting forum-shopping. The judgment balances contractual autonomy and access to justice and will likely guide employment-contract drafting (clear forum clauses) and strategic litigation choices going forward.

K) REFERENCES

a. Important Cases Referred

1. Rakesh Kumar Verma v. HDFC Bank Ltd., [2025] 5 S.C.R. 78 : 2025 INSC 473.

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

3. Hakam Singh v. Gammon (India) Ltd., (1971) 1 SCC 286.

4. Globe Transport Corpn. v. Triveni Engg. Works, (1983) 4 SCC 707.

5. A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem, (1989) 2 SCC 163.

6. Patel Roadways Ltd. v. Prasad Trading Co., (1991) 4 SCC 270.

7. Angile Insulations v. Davy Ashmore India Ltd., (1995) 4 SCC 153.

8. New Moga Transport Co. v. United India Insurance Co. Ltd., (2004) 4 SCC 677.

9. Shree Subhlaxmi Fabrics (P) Ltd. v. Chand Mal Baradia, (2005) 10 SCC 704.

10. Rajasthan SEB v. Universal Petrol Chemicals Ltd., (2009) 3 SCC 107.

11. A.V.M. Sales Corpn. v. Anuradha Chemicals (P) Ltd., (2012) 2 SCC 315.

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

b. Important Statutes Referred

1. Indian Contract Act, 1872, Section 28.
2. Code of Civil Procedure, 1908, Section 20; Order VII, Rule 6, 10 & 11.