Introduction
In a landmark judgment that could significantly influence employer employee litigation in India, the Supreme Court in Rakesh Kumar Verma v. HDFC Bank Ltd. (2025 INSC 473) has upheld the enforce ability of exclusive jurisdiction clauses in private employment contracts. Delivered on April 8, 2025, by Justice Dipankar Datta, the decision marks a definitive shift toward upholding contractual autonomy in private employment relationships.
Background
The lead case involved R, whose employment with HDFC Bank was terminated in 2016. He filed a civil suit in Patna, challenging the termination. D, a co-appellant, filed a similar suit in Delhi. Their employment contracts contained an exclusive jurisdiction clause conferring jurisdiction on Mumbai courts alone:
“The terms and conditions set out in this letter of appointment constitute service conditions applicable to your employment in the Bank and with regard to any dispute thereof, the Bombay Courts will have exclusive jurisdiction.”
HDFC Bank sought rejection of both suits based on these clauses. While lower courts rendered differing judgments, the matter ultimately reached the Supreme Court, which resolved the legal controversy with far-reaching implications.
The Legal Issue
Could civil suits be instituted in courts outside Mumbai, despite express clauses conferring exclusive jurisdiction on Mumbai courts?
The Supreme Court’s Ruling
The Supreme Court answered in the negative, laying down a three-pronged test for assessing the validity of exclusive jurisdiction clauses:
1. Compliance with Section 28 of the Indian Contract Act: The clause must not completely bar legal remedies but may restrict them to specific forums.
2. Inherent Jurisdiction: The chosen court must already have jurisdiction under applicable law.
3. Express and Exclusive Language: The clause must clearly indicate the exclusion of other jurisdictions.
Applying this test, the Supreme Court upheld HDFC Bank’s jurisdiction clause and held that the suits were improperly filed in Patna and Delhi.
Public vs. Private Employment
The Supreme Court drew a clear distinction between public and private employment. While public employment invokes statutory protections and constitutional guarantees, private employment remains purely contractual. Thus, private employers and employees are bound by the terms they have freely agreed upon—including jurisdictional clauses.
Rejecting the Unequal Bargaining Power Argument
A noteworthy part of the judgment is the Supreme Court’s refusal to accept that employment contracts deserve special treatment due to power imbalances. It famously dismissed the “mighty lion vs. timid rabbit” analogy, stating:
“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.”
This marks a significant and categorical departure from the Supreme Court’s earlier position, where it was not uncommon to recognize the disparity in bargaining power between employers and employees in contractual disputes.
Procedural Clarity: Return, Not Rejection of Plaint
The Supreme Court corrected the Patna High Court’s approach in rejecting the plaint under Order VII, Rule 11 CPC. It held that the appropriate course, where a court lacks territorial jurisdiction, is to return the plaint under Order VII, Rule 10 CPC, allowing it to be presented before the proper forum.
Practical and Legal Implications
For Employers:
– Certainty and Predictability: The judgment affirms that exclusive jurisdiction clauses in employment contracts are legally enforceable, providing employers with clarity on where disputes will be adjudicated and allowing for consistent application of legal strategy across employment matters.
– Cost Management: Centralized litigation at the principal place of business becomes feasible.
For Employees:
– Access to Justice Concerns: Litigating in distant cities may deter employees from pursuing valid claims.
– Financial Hurdles: Travel, legal representation, and other costs may pose significant barriers.
For Legal Drafting:
– Contracts must use clear, unambiguous language when assigning exclusive jurisdiction.
– The designated court must inherently possess jurisdiction based on statutory law.
A Step Toward Contractual Formalism
While the ruling provides much-needed clarity, it reflects a shift toward formal equality—treating all contracts the same—over substantive equality, which accounts for bargaining disparities. The Supreme Court’s prioritization of freedom of contract over protective considerations may warrant future reflection, especially in contexts involving socio-economic vulnerability.
Conclusion
The Supreme Court’s judgment in Rakesh Kumar Verma v. HDFC Bank Ltd. is a defining moment in Indian employment law. It reinforces the principle that private employment is fundamentally contractual and that exclusive
jurisdiction clauses—if properly framed—are binding. Employers should revisit their contract templates to ensure clarity and legal compliance, while employees must exercise diligence before accepting employment terms.
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