Latest JudgementIndian Contract Act, 1872Code of Civil Procedure, 1908

Rakesh Kumar Verma v. HDFC Bank Ltd., 2025

The Apex Court encapsulates the principle of Exclusive Jurisdiction Clauses in Employment Contracts.

Supreme Court of India·7 April 2025

Court

Supreme Court of India

Date of Decision

7 April 2025

Judges

Justice Dipankar Datta ⦁ Justice Manmohan

Citation

Acts / Provisions

Section 28 of the Indian Contract Act, 1872 Section 20 of the Civil Procedure Code

Facts of the Case

Two employees of HDFC Bank Ltd., Rakesh Kumar Verma and Deepti Bhatia, filed suits against the bank after their termination.
The employment contracts of both employees conferred exclusive jurisdiction on the courts in Mumbai to resolve disputes.
However, Rakesh filed a suit in Delhi and Deepti in Patna.
The Patna High Court held that the suit filed in Patna was barred by the exclusive jurisdiction clause, while the Delhi High Court ruled that the suit in Delhi was maintainable.
The Supreme Court was called upon to decide whether the exclusive jurisdiction clauses were enforceable and whether the suits could be filed outside Mumbai.

Whether exclusive jurisdiction clauses in employment contracts are valid under Section 28 of the Indian Contract Act, 1872?
Whether such clauses violate the employee’s right to access a legal forum in other jurisdictions?
Whether the Delhi High Court's ruling (allowing the suit in Delhi) should be upheld?

The Supreme Court upheld the exclusive jurisdiction clause in the employment contract, affirming that such clauses are not barred by Section 28 of the Indian Contract Act, 1872.
The Court explained that Section 28 of the Contract Act only prohibits agreements that restrict or limit a party’s ability to seek legal redress completely. Exclusive jurisdiction clauses, however, do not take away the right to approach a legal forum but limit the forum to a specific location.
The Court clarified that for an exclusive jurisdiction clause to be valid:
- It must not absolutely restrict any party’s right to approach the courts.
- The courts that are given exclusive jurisdiction must already have competence over the subject matter (i.e., jurisdiction as per the statutory framework).
- The parties must explicitly or implicitly confer jurisdiction to a specific set of courts.
The Court noted that, in this case, the employees’ appointments were made in Mumbai, the contracts were executed in Mumbai, and the decisions related to their termination were also taken in Mumbai. Therefore, the courts in Mumbai were deemed to have jurisdiction.
The Delhi High Court's ruling was overruled, and the judgment of the Patna High Court was affirmed, confirming that the suits should be filed in Mumbai.

The Supreme Court upheld the validity of the exclusive jurisdiction clause in the employment contracts.
It affirmed the decision of the Patna High Court.
The Delhi High Court's judgment was set aside.
The employees were directed to file fresh suits in Mumbai, in accordance with the exclusive jurisdiction clause of their employment contracts.

Legal Interpretation of Section 28 of the Contract Act: The Court emphasized that Section 28 only invalidates clauses that completely prevent a party from seeking legal recourse. The exclusive jurisdiction clause does not remove the right to legal action but simply limits it to a specific court.
Justification for Exclusive Jurisdiction Clauses in Employment Contracts: The Court acknowledged that, in large organizations like HDFC Bank, having employees spread across various locations, it may be impractical for the employer to contest legal suits in distant or different jurisdictions. Such clauses serve to ensure efficiency and convenience.
Equality of Contracts: The Court rejected the argument that exclusive jurisdiction clauses should not be enforced in employment contracts due to the unequal bargaining power between the employer (a large organization) and the employee (an individual). The Court held that contracts must be enforced according to their terms, and inequality of bargaining power does not justify treating employment contracts differently from other types of contracts.
Competence of Courts: The judgment also highlighted the importance of the competence of the courts that are given exclusive jurisdiction. The courts in Mumbai were found to be competent due to the facts that the decisions regarding employment were made there, and the contractual relationship was established there.