This article is written by Debottam Chattopadhyay and Aratrika Deb of School of Law, KIIT University, Bhubaneswar

Introduction

Exclusive Jurisdiction clauses are terms in a contract that provide for wavering the right of the parties to go to any of the civil courts having jurisdiction to resolve a dispute arising out of that contract by giving exclusive jurisdiction to one or more of the competent courts. Several issues arise while drafting such contracts including but not limited to issues such as:

• Validity under Indian Contract Act, 1872 (Contract Act) with specific reference to Section 28.
• The maxim “expressio unius est exclusio alterius”.
• The law with regards to foreign courts.

This article aims to analyse the statutory provisions various judgements to decipher the law related to exclusive jurisdiction clauses in India.

Statutory Provisions

Section 9 of Civil Procedure Code, 1908 (CPC) states that the Courts shall (subject to the provisions of CPC) have jurisdiction to try all suits of a civil nature except suits which are either expressly or impliedly barred.

Section 16 of CPC states that suits are to be instituted where subject-matter situate.-Subject to the pecuniary or other limitations prescribed by any law, suits-(a) for the recovery of immovable property with or without rent or profits,(b) for the partition of immovable property,(c) for foreclosure, sale or redemption in the case of a mortgage of or charge upon immovable property,(d) for the determination of any other right to or interest in immovable property,(e) for compensation for wrong to immovable property,(f) for the recovery of movable property actually under distraint or attachment, shall be instituted in the Court within the local limits of whose jurisdiction the property is situate :Provided that a suit to obtain relief respecting, or compensation for wrong to, immovable property held by or on behalf of the defendant, may where the relief sought can be entirely obtained through his personal obedience be instituted either in the Court within the local limits of whose jurisdiction the property is situated, or in the Court within the local limits of whose jurisdiction the defendant actually and voluntarily resides, or carries on business, or personally works for gain. Explanation.– In this section “property” means property situate in [India].

Section 17 of CPC explains the procedure for suits for immovable property situate within jurisdiction of different Courts- Where a suit is to obtain relief respecting, or compensation for wrong to, immovable property situate within the jurisdiction of different Court, the suit may be instituted in any Court within the local limits of whose jurisdiction any portion of the property is situated :Provided that, in respect of the value of the subject matter of the suit, the entire claim is cognizable by such Court.

Section 18 of CPC explains the procedure when the local limits of jurisdiction of Courts are uncertain-(1) Where it is alleged to be uncertain within the local limits of the jurisdiction of which of two or more Courts any immovable property is situate, any one of those Courts may, if satisfied that there is ground for the alleged uncertainty, record a statement to that effect and thereupon proceed to entertain and dispose of any suit relating to that property, and its decree in the suit shall have the same effect as if the property were situate within the local limits of its jurisdiction :Provided that the suit is one with respect to which the Court is competent as regards the nature and value of the suit to exercise jurisdiction.(2) Where a statement has not been recorded under sub-section (1), and objection is taken before an Appellate or Revisional Court that a decree or order in a suit relating to such property was made by a Court not having jurisdiction where the property is situate, the Appellate or Revisional Court shall not allow the objection unless in its opinion there was, at the time of the institution of the suit, no reasonable ground for uncertainty as to the Court having jurisdiction with respect thereto and there has been a consequent failure of justice.

Section 19 of CPC states that: Where a suit is for compensation for wrong done to the person or to movable property, if the wrong was done within the local limits of the jurisdiction of one Court and the defendant resides, or carries on business, or personally works for gain, within the local limits of the jurisdiction of another Court, the suit may be instituted at the option of the plaintiff in either of the said Courts.

Further section 20 of CPC states that: Subject to the limitations aforesaid, every suit shall be instituted in Court within the local limits of whose jurisdiction-(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or(b) any of the defendants, where there are more than one, at the time of the commencement of the suit actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or(c) the cause of action, wholly or in part, arises.

Section 28 of Indian Contract Act, 1872 states agreements which are in restraint of legal proceedings are  void.

Swastik Case: A Brief Analysis

The maxim “expressio unius est exclusio alterius” means expression of one is the exclusion of another. This particular maxim has made strong ramifications when it comes to drafting of “exclusive jurisdiction clauses” especially after the landmark judgement in Swastik Gases Pvt. Ltd v Indian Oil Corporation Limited (Swastik case)[1]. To understand the current state of law to draft such clauses better it is imperative to analyse the Swastik case and the law that prevailed before it.

The facts of the Swastik Case are simple:

The Respondent was engaged in the business of storage, distribution of petroleum products, manufacturing and marketing of various types of lubricating oils, grease, fluid and coolants. The Appellant was duly appointed as their consignment agent for marketing lubricants at Jaipur.

Unfortunately, certain disputes arose between the parties due to failure to sell stock of lubricants by the Appellant. Despite several attempts at reconciliation, the parties failed to resolve the disputes amicably. Thereafter the Appellant invoking the arbitration clause, nominated their Arbitrator to resolve the disputes. The Respondent failed to nominate its arbitrator within thirty days of receipt of the notice. The Appellant filed an application under Section 11 of the Act in the Rajasthan High Court for appointment of arbitrator in respect of the disputes arising out of the above agreement.

In Swastik Gases, the major issue that arose was whether a jurisdiction clause, without the use of expressions such as “only”, “alone”, “exclusive”, “exclusive jurisdiction”, could still be construed to oust the jurisdiction of all courts except the one mentioned, in case of an application made under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”).

In the said case the agreement mentioned the phrase- “subject to jurisdiction of courts at Kolkata”. Indian Oil contended that the agreement had been signed at Kolkata; while it was the contention of Swastik that it was signed at Jaipur and except execution of the agreement at Kolkata, all necessary facts forming part of the cause of action arose at Jaipur.

The Hon’ble Supreme Court held that:

“…It is a fact that whilst providing for jurisdiction clause in the agreement the words like ‘alone’, ‘only’, ‘exclusive’ or ‘exclusive jurisdiction’ have not been used but this, in our view, is not decisive and does not make any material difference. 

The intention of the parties – by having clause 1 in the agreement – is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary.”

Therefore, the law becomes very clear that there is no requirement for using terms such as “only”, alone” or any such term to give exclusive jurisdiction to a Court, the same can be done by the mere expression of one by excluding another. Though the Court does not give strict guidelines, it has now established a clear principle of Contract interpretation.

Earlier Case Laws

The Courts (both Supreme Court and High Courts) have dealt with these matters in a plethora of previous judgements such as:

Hakam Singh v. M/s. Gammon (India) Ltd.[2] held that where two courts would have jurisdiction and the agreement is that the dispute should be tried only by one of them, the court mentioned in the agreement would have jurisdiction. Agreements such as this are not in contravention of Section 28 of Indian Contract Act, 1872.  It also mentions it is not open for parties to confer jurisdiction on a Court which does not have it under Civil Procedure Code.

A.B.C. Laminart Pvt.[3] Ltd it was held that “an agreement which purports to oust the jurisdiction of the Court absolutely is contrary to public policy and hence void. But where two Courts or more have under the Code of Civil Procedure jurisdiction to try the suit or proceeding, an agreement between the parties that the dispute between them shall be tried in one of such Courts was not contrary to public policy and such an agreement did not contravene Section 28 of the Contract Act.”

In the case of Angile Insulations v Davy Ashmore India Ltd[4]., it was held that normally a Court would have jurisdiction where the cause of action arises, except when the terms of the contract specify otherwise.

Further, in Emmsons International Ltd v Metal Distributors(UK)[5] it was held that an Indian party is deprived of his rights to proceed before Indian Courts if Foreign Court has been given exclusive jurisdiction.

But a caveat is put in the case of Maharashtra State Road Transport Corporation v Larsen& Toubro Ltd.[6] that jurisdiction available under the Civil Procedure Code was allowed where the jurisdiction clause in the contract is ambiguous.

Conclusion

The aforementioned case laws make it very clear that one has to be careful while drawing up an exclusive jurisdiction clause. It has to be unambiguous and even if terms such as “only” are not present but a particular Court is mentioned the clause will be held to be an exclusive jurisdiction clause. Therefore, if a party wants an exclusive jurisdiction clause he has to draft it without any ambiguity. On the other hand, if a person does not want the exclusive jurisdiction clause he has to ensure that both the Courts that have jurisdiction is mentioned or no Court at all is mentioned. Sometimes the exclusive jurisdiction clause may be taken casually by parties as there may be an Arbitral clause, but even then in various stages such as appointment, enforcement and setting aside the Court maybe required.

The Courts have further laid down the provision by which exclusive jurisdiction clause shall be legally valid under Contract Act as well as the various issues related to the Latin maxim and Foreign Courts have been authoritatively answered.

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[1] (2013) 9 SCC 32

[2] 1971 (1) SCC 286

[3] 1989) 2 SCC 163

[4] (1995) 4 SCC 153

[5] (2005) 116 DLT 559

[6] (2004) Bom CR 186