Analysing Rakesh Kumar Verma v. HDFC Bank Ltd and HDFC Bank Ltd. v. Deepti Bhatia (2025 SCC OnLine SC 752.)
The companies with a widespread presence across India, such as banks, IT firms, and retail chains, often include a clause in their employment contracts specifying that any legal disputes will be subject to the exclusive jurisdiction of the courts located at their headquarters or where their registered offices are situated. Despite this, employers frequently face legal action initiated by existing or former employees in courts situated at the employees’ place of residence or work, in complete disregard of the contractual jurisdiction clause.
Historically, Indian courts have generally ruled in favour of employees while deciding jurisdiction-related matters in employer-employee disputes, despite the employment contract specifying a particular jurisdiction. Courts distinguish between commercial contracts and employment contracts, noting employment-based contracts are not on an equal footing and must be interpreted differently. In cases where employees initiate litigation in courts convenient to them, potentially leading to a multi-jurisdictional litigation for the employer, courts have often sided with employees. This is primarily because employment contracts are typically seen as one
sided, with employers holding significantly greater bargaining power, making many of these terms potentially unconscionable.
This legal position has been overturned by the Supreme Court of India in its recent decision in the Rakesh Kumar Verma matter. In this decision, the Court held that all contracts, whether commercial, insurance, or employment, must be treated equally, without any special bias or distinction. As a result, employees can no longer file lawsuits solely in courts of their convenience, thereby relieving employers from the undue burden of facing litigation across multiple jurisdictions. The case involved two appeals concerning former employees of HDFC Bank: Rakesh Kumar Verma and Deepti Bhatia, who challenged the terms of their termination. Rakesh joined HDFC Bank in 2002 as an Executive in Patna, Bihar, while Deepti became an Officer in 2009 in Delhi, following the merger of her previous employer with HDFC Bank. Both had signed employment agreements containing a jurisdiction clause stipulating that any legal disputes would be subject exclusively to the courts in Mumbai. Years later, both were terminated on allegations of fraud and misconduct. Disputing their dismissals, Rakesh filed a lawsuit in Patna and Deepti in Delhi, seeking declarations that their terminations were unlawful and requesting reinstatement along with back pay. HDFC Bank contested the territorial jurisdiction in both cases, arguing that the appropriate forum was Mumbai, as agreed in their contracts.
The two High Courts arrived at conflicting decisions: the first being the Patna High Court which ruled in favour of HDFC Bank, holding that the matter should be adjudicated in Mumbai, while the Delhi High Court allowed Deepti’s case to proceed in Delhi. These contradictory rulings prompted both matters to be appealed before the Supreme Court of India by HDFC Bank, which was tasked with resolving the jurisdictional conflict definitively.
The Supreme Court had to answer an important question: Can employees ignore an exclusive jurisdiction clause in their employment contracts and file cases wherever they want?
The Supreme Court, while answering the query in the negative, observed that nowadays, the private sector employs individuals’ pan-India for providing services to reach people in the last mile. Therefore, it may not be possible for all employers in the private sector to contest suits in places far from their registered office. This seems to be the overwhelming reason why exclusion clauses are inserted.
The Court held that for an exclusive jurisdiction clause to be valid, three limbs/criteria must be mandatorily fulfilled:
(a) in consonance with Section 28 of the Contract Act, i.e., it should not restrict any party from initiating legal proceedings pertaining to the contract;
(b) the Court that has been given exclusive jurisdiction must be competent to have such jurisdiction in the first place; and, finally,
(c) the parties must either, implicitly or explicitly confer jurisdiction on a specific set of courts.
The Court held that, unlike public sector contracts with the government, service in the private sector is governed by the terms of the employment contract entered into between the parties inter se. Like any other contract, even in an employment contract, a concluded contract presupposes the existence of at least two parties with mutual rights and obligations. Once a concluded contract comes into existence, it is obvious that such rights and obligations of the parties are governed by the terms and conditions thereof. If an employment contract does not offend the provisions of any applicable legislation, such as the Contract Act or the Code of Civil Procedure (“CPC”), ordinarily, there should be no reason to interfere.
The Court observed that the fact that one party is more powerful or influential and the other more vulnerable does not justify making exceptions or distinctions in the application of contractual principles. The Court held that unequal bargaining power exists in many contracts, not just employment. The court “illustrated this with big builders versus small subcontractors, who have dissimilar levels of strength, resources, or negotiating power, but that does not mean the rules should bend. If the terms are clear and legal, they stand, no matter who is stronger.
The Court clarified that parties cannot confer jurisdiction on a court that does not have any under the CPC. However, if multiple courts have jurisdiction (e.g., where the cause of action arises or where the defendant resides), parties can agree to restrict disputes to one specific court, among those that have natural jurisdiction as per law. Under Section 20 of the CPC, courts can hear cases where the defendant (in this case HDFC Bank) had its main office or where the dispute arose.
Since HDFC Bank’s headquarters are in Mumbai, and decisions about hiring and firing were made there, the courts in Mumbai were held to be a valid choice for dispute resolution. In the end, the Supreme Court upheld the Patna High Court’s decision (with variations) and overturned the Delhi High Court’s decision on jurisdiction, while leaving the merits of the terminations in
status quo.
This judgment is of significance to employers in India, especially those with offices or branches spread across India, as it clarifies how these corporations can manage legal claims from employees in different locations and avoid being dragged into courts far from their headquarters. For employer companies, this judgment offers clarity and relief, reducing the risk of scattered litigation and reinforcing the enforceability of agreed-upon dispute resolution terms. Employers can now avoid defending lawsuits in multiple jurisdictions simply by specifying a single forum (e.g., courts where the corporate office is located).
To conclude, by carefully drafting and implementing exclusive jurisdiction clauses, employers can streamline legal proceedings, reduce costs, and maintain consistency in managing employment disputes across their operations.
Please note: The information in this article is provided for general understanding and does not constitute legal advice. If you need specific advice or further details, please reach out to us directly at:
Mr. Sheahan Verghese
Founder & Practice Head, Labour and Employment
Email: sheahan@tlaindia.com
Ms. Aditi Kulshreshtha
Associate, Labour and Employment
Email: aditi@tlaindia.com
