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A Question Of Exclusive Jurisdiction Clause In Invoices

Shivam Kumar
1 Dec 2021 1:30 PM GMT
A Question Of Exclusive Jurisdiction Clause In Invoices
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Have you ever wondered what is written on the bottom or behind every cash memo, bill, invoice or any, service contract? If you read these lines mindfully, the majority of which are illegible, in between the lines, you will find an exclusive jurisdiction clause providing that only Courts at a particular place will have the jurisdiction to adjudicate a dispute emanating from the...

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Have you ever wondered what is written on the bottom or behind every cash memo, bill, invoice or any, service contract? If you read these lines mindfully, the majority of which are illegible, in between the lines, you will find an exclusive jurisdiction clause providing that only Courts at a particular place will have the jurisdiction to adjudicate a dispute emanating from the said transaction and restricting any other courts from hearing the same.

There may be many instances where A is a company situated in Delhi whereas B is a consumer of A's goods and the invoice generated by A's company specifically stipulates that only court in Haryana would have jurisdiction. In another case where A is a company situated in Delhi whereas B resides in Haryana, however, the invoice stipulates that Courts of Delhi only will be having the jurisdiction. There may be another situation where a company may be registered in Delhi but operating its business in another state through its authorized subordinate branch office, for e.g in Tamil Nadu, whereby B availed the service of the said company through its authorized branch office of Tamil Nadu, however, the invoice priorly stipulates that the courts situated in Delhi only would be having the territorial jurisdiction to adjudicate the dispute, if any.

Considering all that has been said, it would be not wrong to say that these clauses are couched with much arbitrariness and can be termed as draconian clauses whereby leaving the contract to be an adhesion contract. Would it be rational to restrict a person from raising his grievance/claim before a court situated within his territorial jurisdiction merely because some lines, which are not even legible, provide so? Is such a provision of which the person has no knowledge or even no power to bargain is considered valid? Can a clause providing that only courts at a particular place will have jurisdiction to entertain the dispute emanating out of the transaction be legally valid? Are such contracts even valid in the eyes of law?

Seen against this background, let us delve into the issue of whether the 'exclusionary jurisdiction clause' provided in contracts has any legal effect on it or can be enforced as it stands, irrespective of any circumstance that may arise.

Factors For Determining Territorial Jurisdiction For Place Of Filing Suit

Where there is a breach of contract, Section 20 of the Civil Procedure Code, 1908, provides for determining the jurisdiction for instituting the suit on two scores, and same are provided as hereunder: -

  • where the defendant voluntarily resides, carries on business, or works for personal gains and;
  • where the breach of contract took place or cause of action arises within the local limits of the jurisdiction of one court.

This elucidates that where the breach of contract was done or cause of action arises within the local limits of the jurisdiction of one court that court would be having the jurisdiction to entertain any claim/suit by the aggrieved party.

However, in the present scenario the parties have a prior agreement to confer the jurisdiction to one particular court, in case of any dispute arises, and since the parties have already agreed to that effect, can one take a roundabout and deny to adhere to it on premise that he is not bound by it?

Valid Or Not

In case if the contention is raised by one of the parties, probably the consumer, that they were not aware or had not been fully informed about the contents of the cash memo, bill, invoice or any, service contract, or whether it had carried any exclusive jurisdiction clause conferring jurisdiction to any particular court does not hold water, as law on the present subject of conferring jurisdiction to the particular court by inserting exclusive jurisdiction clause is valid and as such was very much covered in the case of M/s InterglobeAviation Ltd. Vs. N. Satchidanand in Civil Appeal No. 4925 of 2011; where the Hon'ble Supreme Court of India categorically observed that " Mere fact that a passenger may not read or may not demand a copy does not mean that he will not be bound by the terms of contract of carriage". Having said that, it is now well settled that exclusive jurisdiction clause conferring jurisdiction to any court is valid and has legal backing, but can a party who has more bargaining power, which is general in the relationship of service provider and consumer where a consumer is unilaterally saddled with the terms and conditions imposed by the service provider, be justified? In the present scenario, there is yet another judgment of the Hon'ble Supreme Court of India reported as Central Isnald Water Transport Corporation Vs. Brojo Nath Gangoli, cited as (1986) 3 SCC 156; where Hon'ble Apex Court was of the view that courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between the parties, who are not equal in bargaining power. More so, the same view was also reiterated by the Hon'ble Delhi High Court in the case of North Delhi Municipal Corporation V/s Gautam Anand in RFA 425/2017. As it can be perused, diverging views have been expressed by the Hon'ble Supreme Court of India in the above said two cases which have made the present issue grimmer and dicier, and same warrants immediate attention of the competent courts so that the present lacunae can be filled.

However, it would be wise to view the present dispute from a different compass as well. Henceforth, the same merits discussion, so let us dig further to know the validity of these exclusive jurisdiction clauses and in what circumstances can it be held to be legally valid for determining place having the jurisdiction to file the suit, in case of the above-mentioned contracts.

What Law Says

The law on the present subject is very clear that in a contractual matter, the jurisdiction of a court arises from four aspects, and same are as follows: -

  • Where parties have entered into the contract
  • Where the contract is designed to be performed
  • Where a contract is to be executed in terms of payment to be made and
  • Where the defendants in the suit are residing or voluntarily working for gain

Considering the above mentioned four aspects it can be deduced that there may be a probability that cause of action arising at more than one place resulting in courts of more than one place having the jurisdiction to try the suit arising from a single transaction. Going further, Hon'ble Supreme Court in the case of ABC Laminart Pvt. Ltd. & Anr. Vs. A.P. Agencies Salem, cited as AIR 1989 SC 1239; laid down the law that, in case there is more than one court that has territorial jurisdiction, then parties by contract can restrict the jurisdiction to one or more of the courts which have the jurisdiction, however, parties by consent cannot confer jurisdiction on a court which otherwise does not have any.

The ratio laid down in the above-said judgment cleared the air and settled the present issue that parties even by consent cannot confer jurisdiction on a court which otherwise does not have any, even if they have a prior agreement to that effect. Therefore, the exclusive jurisdiction clause providing jurisdiction on a court which does not have any is unsustainable as being against the provisions of the settled law established through various decisions, and even otherwise also the court being alien to the contract would be unable to adjudicate the dispute effectively.

In another case of United India Insurance Co. Ltd. Vs. Associated Transport Corporation, cited as AIR 1988 Ker 36; Hon'ble Kerela High Court has held that unilateral exclusive clause regarding jurisdiction is not binding on the parties. Henceforth, suffice to say that every cash memo, bill, invoice or any, service contract; containing the exclusionary clause conferring jurisdiction to any particular court, would not be detrimental, and in alternate what determines is, if some part of the cause of action has arisen in the jurisdiction of the court or not. That being so, the place where no part of the cause of action has occurred cannot be held to be a place having the jurisdiction to file the suit. Moreover, in a case where there may be more than one competent court that can entertain a suit consequent upon a part of the cause of action that has occurred within the jurisdiction of that court, the parties to the contract can agree to jest jurisdiction in one of such competent courts to try the dispute which might arise between the parties and such an agreement would be valid and binding upon the parties but the same cannot be conferred to a court which does not have any.

That since now the law on exclusive jurisdiction clause present in contracts viz. cash memo, bill, invoice or any, service contract; whereby conferring the jurisdiction to a particular court and thus have mutually limited the jurisdiction to one court, has been held to be valid therefore the consumers who seldom read the terms and conditions regarding jurisdiction of the court in case of dispute, need to be circumspect of the conditions rather than raising the plea afterward. However, the exclusive jurisdiction clause comes with a rider that parties can only confer the jurisdiction to court where some part of the cause of action has arisen and parties even by consent cannot confer jurisdiction on a court which otherwise does not have any. The above law established by the courts through various decisions is a reasonable one as the inclusion of such clause can impede upon the rights of the consumer / agreeing party who have no bargaining power to get them altered and are not even on an equal pedestal and same should not become an instrument to harass one party, that also at the whims of the other party. Even the courts also need to be cautious of the fact that merely because the contract carries the exclusive jurisdiction clause conferring the jurisdiction to that court, in absence of any evidence showing the cause of action to have occurred within the jurisdiction of that court, should discourage the practice of issuing notice without applying its judicial mind and if it is transpired that there does not arise any cause of action from the breach of contract within the jurisdiction of that court, the suit should be nipped in the bud at that instance only. It is further pertinent to mention herein that the plea that the court lacks territorial jurisdiction needs to be raised at the earliest and the same cannot be raised before the court exercising appellate and revision jurisdiction if a party failed to raise it before the court having the original jurisdiction.

The author is an Advocate and views are personal.

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