Supreme Court Bench of Justices Dipankar Datta and Manmohan Upholds Exclusive Jurisdiction Clauses in Private Employment Contracts

Introduction

Along with a connected appeal made by HDFC Bank, the Supreme Court of India rendered a significant ruling in the case of *Rakesh Kumar Verma vs. HDFC Bank Lt.* on April 8, 2025. The ruling resolved a major legal question on the validity of exclusive jurisdiction clauses in private employment contracts. The two appeals concerned disagreements between HDFC Bank employees and each other about termination from employment and the suitable courts to launch such lawsuits. The decision of the Supreme Court specifies how private employment contracts are to be understood under the law and supports the legality of such clauses where they satisfy legal prerequisites.

Short Background Information on the Case

Rakesh Kumar Verma, who had been employed by HDFC Bank as an Executive in its Patna branch in 2002, filed the main appeal. His employment letter contained a stipulation stating that courts in Mumbai would have sole jurisdiction over all contract-generated conflicts. Rakesh’s services were ended in 2016 on claims of misbehavior and fraud. Seeking reinstatement and other remedies, he sued civally before a Patna court. Responding by applying for rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC), HDFC Bank argued lack of jurisdiction based on the exclusive jurisdiction clause. The Bank moved the Patna High Court in revision after the trial court turned down this application, and it decided in its advantage. Then Rakesh turned to the Supreme Court.

HDFC Bank filed a linked appeal against a Delhi High Court ruling. In that instance, a worker whose services were similarly cut off, Depti Bhatia, had sued in a Delhi court. Her employment contract also included an exclusive jurisdiction clause pointing to Mumbai. The Bank’s protest was dismissed by the Delhi High Court, which decided the Delhi courts had jurisdiction. The Bank questioned this conclusion before the Supreme Court.

The Basic Legal Concern

The main legal question was whether civil lawsuits over termination of employment might be filed in courts outside of those designated in an exclusive jurisdiction clause included in a private employment contract. When such restrictions restrict the employee’s access to seek a local court for relief, the Court had to determine whether they are legally legitimate and enforceable.

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Applicable Legal Provisions

Particularly Section 20 of the Code of Civil Procedure and Section 28 of the Indian Contract Act, 1872, the Supreme Court scrutinized various legal clauses thoroughly. Section 20 CPC states that a lawsuit can be brought where the cause of action develops or where the defendant lives. Section 28 of the Contract Act permits reasonable limitations on where such remedies might be sought while invalidating agreements that totally ban legal remedies.

Examining various historic rulings addressing exclusive jurisdiction clauses in contracts, the Court also looked at *Hakam Singh vs. Gammon (India) Ltd.*, *ABC Laminart Pvt. LTD. vs. A.P. Agencies*, and *Swastik Gases vs. Indian Oil Corporation Ltd.* These cases established that, given one of the relevant courts has first geographical jurisdiction, parties to a contract can, by mutual agreement, select one of them to have exclusive jurisdiction.

Court’s Argument

The Supreme Court confirmed the well-established rule that contract participants can consent to give one of multiple competent courts sole jurisdiction. It underlined that such clauses are valid as long as the agreed court has jurisdiction under the law and the clause does not completely forbid legal remedies.

The employees’ contention that employment contracts should be handled differently due to the unequal negotiating force between employer and employee was turned down by the Court. The ruling underlined that all contracts—including employment contracts—are legally binding and should be read according to their provisions rather than in line with the assumed power disparity between the parties. The Court clarified that allowing particular treatment for work contracts would go against contract law’s equality principle.

The Court looked at the factual foundation for jurisdiction as well. It said that Mumbai made the choice to name and dismiss both staff members. Mumbai generated the termination letters and appointment letters. The Mumbai courts thus possessed legitimate territorial authority. This led the exclusive jurisdiction clauses pointing to Mumbai to be both valid and binding to be held as such.

The Court also criticised the Delhi High Court’s rationale, which drew on a past ruling in *Vishal Gupta vs. L\&T Finance* allowing the employee to bring lawsuit in a local court notwithstanding an exclusive jurisdiction clause. Declaring that it ran counter to accepted legal standards, the Supreme Court specifically overturned that ruling.

Corrective Guideline for Method

The Supreme Court observed that the Patna High Court had improperly interpreted Order VII Rule 11 of the CPC to reject the plaint even when it maintained the finding of the High Court on the jurisdictional argument. It clarified that the right course of action was to return the plaint under Order VII Rule 10 so that the plaintiff can show it at the relevant court. A rejection of the plaint suggests—which was not the case here—that the claim itself is not legally viable. The Court thus gave the Patna trial court instructions to send the plaint back to Rakesh for Mumbai filing. It also instructed Deepti’s suit to be refiled in Mumbai and removed from Delhi.

Explaination of Limitations and Amendments

The Court let both plaintiffs seek revision of their plaints and granted their liberty to bring fresh lawsuits in Mumbai should they so want. It also made clear that, when relevant, they could contain claims for exemption from the law of limitation under CPC Order VII Rule 6.