Paragraph numbers below are the court’s original numbering, recovered from the source text.
16. There are multiple other decisions of this Court upholding similar exclusive jurisdiction clauses. The decisions in Patel Roadways Ltd. v. Prasad Trading Co.,17 Angile Insulations v. Davy Ashmore India Ltd.,18 New Moga Transport Co. v. United India Insurance Co. Ltd.,19 Shree Subhlaxmi Fabrics (P) Ltd. v. Chand Mal Baradia,20 Rajasthan SEB v. Universal Petrol Chemicals Ltd.21 and A.V.M. Sales Corpn. v. Anuradha Chemicals (P) Ltd.22 are some of them providing ample guidance in this behalf. (1991) 4 SCC 270 (1995) 4 SCC 153 (2004) 4 SCC 677 (2005) 10 SCC 704 (2009) 3 SCC 107 (2012) 2 SCC 315 [2025] 5 S.C.R. Rakesh Kumar Verma v. HDFC Bank Ltd.
17. The issue as to how an exclusive jurisdiction clause has to be read and understood is, thus, no longer res-integra.
18. A bare perusal of the above decisions leads to the conclusion that 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.
19. Swastik Gases (P) Ltd. (supra) is wholly applicable to the facts at hand, and being a larger Bench decision, binds us.
20. However, in none of the precedents of this Court, noticed above, did an service/employment contract fell for consideration. According to Mr. Deshmukh and Mr. Chaturvedi, learned counsel for Rakesh and Deepti, respectively, the decision in Vishal Gupta (supra) correctly explains the legal position vis-à-vis service/employment contracts and, therefore, this Court may consider accepting the forward-looking posture and practical view expressed by the learned Judge. It has been contended that in an unequal battle between the mighty lion (employer) and the timid rabbit (employee), where the dice is heavily loaded from the inception against the employee, no further embargo ought to be placed in his/her pursuit for justice by pinning him/her down to the courts in the city (Mumbai) mentioned in the appointment letter/employment agreement.
21. At this stage, it would be appropriate to glance through a legal position having a bearing on these appeals. There is a gulf of difference between a public service and a service contract with a private employer. 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 90 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. Since there is a prior meeting of minds of the contracting parties, their intentions have to be gathered from the contract (appointment letter/employment agreement, here) and looking at the same, it can safely be inferred that the contracting parties were ad idem on the terms of the appointment letter/ employment agreement which specified courts in Mumbai exclusively as the situs of dispute resolution.
22. Nowadays, the private sector employs individuals pan-India for providing services to reach people in the last mile. Therefore, 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. Rakesh and Deepti having accepted the terms and conditions of the appointment letter/employment agreement and acted upon its terms by joining their respective posts, they could not have possibly avoided the contract on a second thought that a term contained therein may not be beneficial for them at a subsequent stage.
23. As long as an employment contract does not offend the provisions of any applicable legislation, such as the Contract Act or the CPC, ordinarily, there should be no reason to interfere. It cannot but be gainsaid that the scope of interference, in such matters, is quite narrow.
24. The contention on behalf of Rakesh and Deepti that the decisions referred to above would not be applicable in the case of a service contract has not really impressed us. 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. To make a distinction for employment contracts on the specious ground that a mighty lion and a timid rabbit are the contracting parties would violate the principle of equality, in the sense [2025] 5 S.C.R. Rakesh Kumar Verma v. HDFC Bank Ltd. that rights and liabilities would not be dependent on the parties’ status, power or influence. 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.
25. We may also emphasize that unequal bargaining power is not unique to contracts of personal service. In many areas, such as business, commerce, or real estate, contracts may involve parties with dissimilar levels of strength, resources or negotiating power. As and by way of illustration, we can cite instances where big builders sub-contract a part of the development work entrusted to them to sub-contractors. Such contracts too involve the mighty lion and, though not a timid rabbit, but a weak lamb. Based on the status of the parties, the latter cannot escape from the consequences if the former seeks to enforce a condition in the contract which the latter perceives is oppressive or the latter, refusing to perform any of its obligations considering it as onerous faces a law suit for breach of contract.
26. 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.
27. Thus, we are unable to approve the law laid down in Vishal Gupta (supra).
28. Upon a perusal of the service contract and the exclusive jurisdiction clause under consideration in the instant appeals, we are convinced that the Patna High Court has offered a sound legal opinion with reference to the facts at hand while the Delhi High Court has erred in dismissing the civil revisional application placing entire reliance on the decision in Vishal Gupta (supra). All the three applicable mandatory criteria to hold that the clause is valid have been fulfilled in the instant appeals. We propose to assign brief reasons for each of the applicable limbs.
29. First, 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 92 to a set of Courts for the ease of the parties. In the present dispute, the clause does not take away the right of the employee to pursue a legal claim but only restricts the employee to pursue those claims before the courts in Mumbai alone.
30. Secondly, the Court must already have jurisdiction to entertain such a legal claim. This limb pertains to the fact that a contract cannot confer jurisdiction on a court that did not have such a jurisdiction in the first place. The explanation to Section 20 of the CPC is essential to decide this issue. In the instant case, considering that the 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, we are convinced that the courts in Mumbai do have jurisdiction.
31. Lastly, the clause in the contract has clearly and explicitly barred the jurisdiction of all other courts by using the word “exclusive”. A profitable reference may be made to the extract of ABC Laminart (supra) reproduced above. Relief
32. HDFC Bank is, thus, justified in its claim that the suits ought to have been instituted in an appropriate court in Mumbai.
33. We hasten to observe that the Patna High Court, while correctly holding in favour of HDFC Bank on the point of law, has committed a fundamental error. It has allowed the application of HDFC Bank under Order VII, Rule 11 of the CPC meaning thereby the plaint stands rejected. Since the courts in Mumbai have the jurisdiction to decide the dispute raised by Rakesh and his plaint is not otherwise liable to rejection on attraction of any of the clauses of Rule 11, the proper course for the Patna High Court would have been to direct return of the plaint by the trial court under Order VII, Rule 10 of the CPC to Rakesh for its presentation before the competent court in Mumbai. While directing the trial court to return the plaint to Rakesh and to make the necessary endorsement in terms of sub-rule (2) of Rule 10, we grant him the liberty to present such plaint in the competent court in Mumbai. [2025] 5 S.C.R. Rakesh Kumar Verma v. HDFC Bank Ltd.
34. If Rakesh wishes to institute a fresh suit in a competent court in Mumbai, in such a case he need not take back the plaint but may have the suit instituted by him withdrawn.
35. Insofar as the suit instituted by Deepti too is concerned, the plaint has to be returned to her for presentation in a court in Mumbai. In the alternative, she may have her pending suit withdrawn and file a fresh suit in a competent court in Mumbai.
36. We have also noticed from the pleadings and prayers made in the respective plaints by Rakesh and Deepti that the same are defective. We grant them liberty to seek amendment of their respective plaints. If applications in this behalf are made, the trial courts may, in their discretion, allow the prayers therein. If fresh suits are instituted, this liberty would cease to operate.
37. If fresh suits are instituted, Rakesh and Deepti may plead in their plaints the grounds on which exemption from the law of limitation is claimed in terms of Order VII, Rule 6 of the CPC. Conclusion
38. The impugned judgment and order of the Patna High Court is affirmed to the extent mentioned above and the lead appeal is dismissed. The connected appeal, however, stands allowed and the impugned judgment and order of the Delhi High Court is set aside.
39. We clarify that the merits of the disputes have not been examined and all points are left open.
40. No order as to costs. Result of the Case: Matters disposed of. †Headnotes prepared by: Nidhi Jain