I. Introduction
When drafting dispute resolution provisions in commercial agreements, contracting parties must evaluate the most effective and economical forums for adjudicating potential disputes. A key consideration is the extent of autonomy parties may exercise in designating an appropriate judicial forum. To mitigate procedural inefficiencies of litigation in suboptimal jurisdictions, parties often stipulate mutual consent to submit disputes to a specific court, drafting such forum selection clauses with regard to the parties’ economic and geographic conveniences.
Commercial contracts enable parties to secure legally enforceable rights and responsibilities through various terms and conditions. A well-drafted contract provides clarity and freedom for parties to mutually define their relationship. Among the myriad clauses that govern contractual relationships, provisions regarding dispute resolution and jurisdictional competence are of particular import for effective enforcement.
This article examines the critical legal considerations pertaining to exclusive jurisdiction clauses under Indian law, focusing on their validity, enforcement, and judicial interpretation.
II. Statutory Framework Governing Jurisdictional Competence
Section 9 of the Code of Civil Procedure, 1908 (“CPC”) provides that all courts shall have jurisdiction to try all suits of civil nature unless jurisdiction is expressly or impliedly barred. Section 20 of the CPC further stipulates that a suit may be instituted where the defendant resides, conducts business, or where any part of the cause of action arises. Thus, Section 20 of the CPC clarifies that multiple Courts may have jurisdiction over a suit, and causes of action may arise in several places subject to different courts’ jurisdiction.
III. Legal Validity of Exclusive Jurisdiction Clauses
Exclusive jurisdiction clauses express the parties’ intent to restrict legal proceedings to a designated court. A typical clause might state: “The Agreement shall be subject to jurisdiction of the courts at [specific location].” While often misinterpreted to encompass all courts, this conflicts with established legal principles.
Section 23 of the Indian Contract Act, 1872 (“Contract Act”) invalidates contractual provisions contravening statutes or defeating the operation of law. Moreover, Section 28 of the Contract Act voids absolute restraints on legal remedies or the enforcement of contractual rights, specifically rendering void agreements that:
- absolutely restrict a party from enforcing contractual rights through usual legal proceedings in ordinary tribunals or limit the time for such enforcement; or
- (ii) extinguish rights or discharge liabilities under a contract upon expiry of a specified period, thereby restricting enforcement.
Nevertheless, holistically interpreting Section 20 of the CPC with Sections 23 and 28 of the Contract Act permits partial restriction of forums by limiting recourse to a designated jurisdiction. Exclusive jurisdiction clauses thus occupy the juridical space between absolute restraints and opportunistic forum selection. The Indian Contract Act and judicial precedent establish that parties cannot confer jurisdiction on a court lacking it, but may limit proceedings to one among several forums having valid jurisdiction.
Such clauses serve to reduce inconvenience and minimize legal costs by precluding proceedings in multiple jurisdictions. An exclusive jurisdiction clause manifests the clear, unambiguous intention that only the specified court shall have adjudicatory competence over contractual disputes, to the exclusion of other courts
IV. Judicial Interpretation of Exclusive Jurisdiction Clauses
In Hakam Singh v. Gammon (India) Ltd. [1971 SCR (3) 314], the Supreme Court examined the contractual validity of forum selection provisions. The petitioner approached the Varanasi Court seeking an order directing arbitration. The contract stipulated exclusive jurisdiction to Mumbai courts. The trial court held the cause of action accrued entirely in Varanasi and the parties could not confer jurisdiction on Mumbai courts lacking it.
The Hon’ble Supreme Court articulated that when two courts have concurrent jurisdiction, the parties’ consensual selection of one forum is not an impermissible restraint under Section 28 of the Contract Act, nor contravenes public policy under Section 23 of the Contract Act. However, the Court emphasized parties cannot contractually confer jurisdiction upon a court statutorily lacking it. This position has been consistently affirmed by the Hon’ble Supreme Court.
In A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem [1989 SCR (2) 1], the contract stipulated Kaira courts’ jurisdiction. The plaintiff instituted proceedings for recovery in Salem. The Madras High Court upheld Salem’s concurrent jurisdiction as the contract was partially performed there. On appeal, the Supreme Court observed that interpreting exclusive clauses presents little difficulty when terms like “alone,” “only,” “exclusive,” etc. are used absent lack of consensus. However, implied exclusion absent such terminology must be inferred from the totality of facts rather than presumed.
The Court found other jurisdictions connected to the contract were not explicitly excluded, and the provisions did not intend to exclude alternative forums. While acknowledging the clause’s validity, the Court ultimately recognized Salem’s jurisdiction. Post A.B.C. Laminart, courts had to inquire into implied exclusion of forums, giving latitude to parties deviating from exclusive jurisdiction provisions.
Further in M/S Swastik Gases Pvt. Ltd. v. Indian Oil Corp. Ltd. [(2013) 9 SCC 32], the Supreme Court clarified that absence of “alone,” “only,” “exclusive,” etc. is neither determinative nor materially significant. The three-judge bench articulated a jurisdictional clause clearly manifests the parties’ intentions and should not be interpreted with statutory rigidity. It noted the interpretive principle “expressio unius est exclusio alterius” applies to such provisions which means that “the express mention of one thing excludes all others”.
The Court observed: “where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts.” This significantly strengthened the presumptive enforceability of forum selection clauses, even absent explicit exclusionary language.
In Shridhar Vyapar v. Gammon India [AIR 2019 CAL 178], the Calcutta High Court adjudicated a recovery suit under invoices stipulating Raipur and Nagpur courts’ jurisdiction. The Court held parties can be bound to an exclusive jurisdiction clause if their subsequent conduct shows intent to effectuate the contract, unless the cause of action arose wholly in another jurisdiction and it would be oppressive to compel litigation in the chosen forum.
The Court emphasized mutual agreement in forum selection. It concluded the party contesting the clause failed to demonstrate undue inconvenience or oppression, enforcing the provision as stipulated.
In EXL Careers & Ors v. Frankfinn Aviation Services Pvt. Ltd. [AIR 2020 SC 3670], the Hon’ble Supreme Court reaffirmed it is settled law that in disputes where multiple courts have jurisdiction, parties may by agreement confer exclusive jurisdiction on one court. When a clause clearly indicates only a particular court shall have exclusive jurisdiction, no other court shall have jurisdiction.
V. Conclusion: A Balanced Approach to Enforcement
Courts in India have unequivocally established contracting parties may validly include exclusive jurisdiction clauses to limit disputes to one court, excluding others that might otherwise have jurisdiction. Such clauses do not contravene the law but allow parties to mutually select a convenient, cost-effective forum for potential litigation.
While exclusive jurisdiction clauses may generally be enforced per Swastik Gas across most cases, exceptions to this principle must be acknowledged. Such provisions are often in contracts of adhesion lacking meaningful negotiation and having bargaining asymmetries. Circumstances may arise where parties could not anticipate the designated court would impose extraordinary hardship or inconvenience. Forum selection clauses are generally respected, but courts retain discretion to disregard them in exceptional circumstances where enforcement would yield manifestly unjust outcomes or undue procedural burdens.
This balanced approach upholds the principle of contractual freedom while preserving judicial oversight to prevent abuse of bargaining power or circumstances that would effectively deny parties meaningful access to legal remedies.