The Supreme Court recently dealt with two cases where former employees of HDFC Bank challenged their terminations in courts located in places where they were working – Patna and Delhi. Both had been terminated for alleged misconduct. They filed suits to get their termination declared illegal and to be reinstated with full benefits. HDFC Bank objected, saying the appointment letters had a clause that any legal dispute would only be handled by courts in Mumbai. This clause was clearly mentioned and accepted by the employees when they joined the Bank.

In both cases, the lower courts had taken different views. In Rakesh’s case, the Patna court accepted jurisdiction, but the Patna High Court later ruled in favour of HDFC Bank. In Deepti’s case, the Delhi High Court ruled that the Delhi court could still hear the matter. HDFC Bank challenged this.

The key question before the Supreme Court was whether employees can file cases outside Mumbai when the employment contract says only Mumbai courts can hear such cases.

The Supreme Court held that when a contract clearly states which court will handle disputes and both parties have agreed to it, that clause must be followed. Such clauses are valid as long as the chosen court has the legal authority to hear the case. Since the decisions to appoint and terminate both employees were made in Mumbai, and the employment documents came from there, the Mumbai courts had proper jurisdiction. The Court clarified that this applies equally to private job contracts and business agreements. It also rejected the view that employees can avoid such clauses by claiming weaker bargaining power. Unless the contract is unfair or illegal, its terms must be respected.

While the Patna High Court got the legal point right, it made a mistake in rejecting Rakesh’s case entirely. Instead, the Court should have ordered the case to be sent to the correct court in Mumbai. So, the Supreme Court allowed Rakesh to transfer his case to Mumbai or to file a new one there. The same direction was given in Deepti’s case.

Both employees were also allowed to correct mistakes in their original court documents, if needed. If they file new suits, they can also explain any delays to avoid limitation issues.

In summary, the Supreme Court confirmed that when a contract clearly mentions that only a specific court can decide disputes, that clause will be upheld. This applies even in employment matters with private companies. Employees cannot later ignore such clauses after accepting the job.

This judgment is important for all private employers and employees. It confirms that jurisdiction clauses in contracts are binding if they are clear and the court mentioned has legal authority. Companies should ensure their contracts have such clauses when needed, and employees should be aware that these will be enforced.

, Advocate | Abhay Nevagi & Associates