Court named in contract can only handle case: HC

In a significant judgment on the effect of jurisdiction clauses in contracts, the Punjab and Haryana High Court has made it clear that parties agreeing to submit to the jurisdiction of a specific court in a contract automatically excludes the jurisdiction of all other courts.

The ruling by the Division Bench of Justices Sureshwar Thakur and Sudeepti Sharma came in response to a reference by a single Bench on “whether the agreement to submit to the jurisdiction of one court impliedly ousts the jurisdiction of all other courts?”

Answering the question in affirmative, the Bench held that the parties inherently exclude the jurisdiction of all other courts after they contractually agree to submit to the jurisdiction of a specific court. The court added that jurisdiction clauses were required to be interpreted in a manner that the exclusive mention of one court implied the exclusion of all others, unless explicitly stated otherwise.

The Bench based its ruling on Supreme Court verdicts, which upheld the enforceability of such clauses when they clearly designated a competent court for dispute resolution. The court asserted that the agreed-upon jurisdiction would remain exclusive under such clauses even if part of the cause of action arose elsewhere.

The matter placed before the Bench involved an agreement between a bank and a clothing company. Among other things, it included a jurisdiction clause designating the high court in Mumbai for dispute resolution. The clause explicitly waived objections to the venue and jurisdiction, leaving no room for alternative forums. The Bench asserted that the parties by signing the agreement had irrevocably submitted to the jurisdiction of Mumbai court, making any litigation in other courts untenable.

The court further reiterated that such jurisdiction clauses did not violate the contract Act, provided it was clear and unambiguous. In fact, the clauses were considered valid and enforceable as long as they did not contravene public policy or statutory restrictions.

This ruling is significant as it reinforces the enforceability of jurisdiction clauses in commercial contracts, making it clear that parties agreeing to the jurisdiction of a particular court were required to honour such clause.

The case also touches on the broader issue of jurisdictional competence and the application of Section 20 of the CPC governing the venue of civil suits, based on where the defendant resides or where the cause of action arises. The court clarified that the contractual agreement to a specific court’s jurisdiction was binding even if part of the cause of action arose outside the agreed jurisdiction, as long as the cause was sufficiently connected to the venue.