Supreme Court validates exclusive jurisdiction clauses under Section 28, stating contracts must be treated equally regardless of party strength.
SECTION 28 CONTRACT ACT ALLOWS JURISDICTION CLAUSES
Case in News
Section 28 Contract Act permits Jurisdiction Clauses, holds the Supreme Court in the case of Rakesh Kumar Verma vs HDFC Bank Ltd validating contractually chosen courts.
Case Overview
Case Name: Rakesh Kumar Verma vs HDFC Bank Ltd,
A ruling of the Supreme Court held that exclusive jurisdiction clauses in employment contracts do not violate Section 28 of Indian Contract Act 1872. The bench of Justice Dipankar Datta and Justice Manmohan overruled the view of Delhi High Court in the case of Vishal Gupta v. L&T Finance and validated the jurisdiction clause in HDFC Bank’s employment agreements which restricted disputes to Mumbai courts. The case arose when employees Rakesh and Deepti filed suits in Delhi and Patna despite such clauses .
Key Aspects
- Employment contracts with jurisdiction clauses were challenged by employees post termination.
- Contracts restricted legal proceedings to courts in Mumbai.
- Patna High Court upheld the clause; Delhi High Court disagreed.
- Dispute centered on whether such clauses violate Section 28 of ICA.
Legal Insights
- Section 28 of Indian Contract Act 1872 bars absolute legal restriction and not specific court preference.
- Clause must name a competent court with existing jurisdiction.
- Section 20 of CPC explanation was applied—Mumbai was the place of appointment and termination.
- Overruled the case of Vishal Gupta vs. L&T Finance for favoring weaker parties in contracts.
- Focused that contracts are to be respected equally regardless of party strength.
Court’s Verdict
The Supreme Court of India upheld exclusive jurisdiction clauses under Section 28 of Indian Contract Act 1872. It affirmed the ruling of the Patna HC and set aside judgment of Delhi HC and ordered parties to file fresh suits in Mumbai, confirming that Justice Dipankar Datta and Justice Manmohan found no illegality in choosing competent courts through employment contracts .
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