Conferment of Jurisdiction by Agreement in Indian Law

The Conferment of Jurisdiction by Agreement in Indian Law: Principles and Limitations

Introduction

The concept of jurisdiction is fundamental to the administration of justice, denoting the authority of a court to adjudicate upon a matter. A pivotal question in civil and commercial litigation is whether parties, through mutual agreement, can confer jurisdiction upon a court which it otherwise lacks, or oust the jurisdiction of a competent court. This article examines the legal position in India regarding the conferment of jurisdiction by party agreement, drawing upon statutory provisions and judicial pronouncements. It will delineate the established principle that while parties cannot vest a court with jurisdiction it does not inherently possess, they may, within certain limits, choose a specific forum from amongst multiple competent courts.

Understanding Jurisdiction in Indian Law

Jurisdiction of civil courts in India is primarily governed by the Code of Civil Procedure, 1908 (CPC). Section 9 of the CPC grants courts the jurisdiction to try all suits of a civil nature, excepting suits of which their cognizance is either expressly or impliedly barred. Jurisdiction can be broadly categorized as follows:

  • Territorial or Local Jurisdiction: This refers to the geographical limits within which a court can exercise its authority. Sections 16 to 20 of the CPC lay down the rules for determining the place of suing.
  • Pecuniary Jurisdiction: This relates to the monetary value of the suit that a court is competent to hear. Section 15 of the CPC mandates that every suit shall be instituted in the Court of the lowest grade competent to try it.
  • Subject-Matter Jurisdiction: This pertains to the authority of a court to try a particular type or class of cases. Certain courts are constituted to deal with specific subject matters (e.g., family courts, debt recovery tribunals).
  • Inherent Jurisdiction: This is the power vested in a court to deal with a matter by virtue of its constitution as a court of law. A lack of inherent jurisdiction renders the court's decree a nullity.

It is a foundational principle that jurisdiction is conferred upon courts by the Constitution or by statutes enacted by the legislature. As observed by the Supreme Court in The State Of Jharkhand & Ors. v. M/S. Hindustan Construction Co. Ltd., jurisdiction can be exercised only when provided for either in the Constitution or in laws made by the legislature.[12] Similarly, in Zuari Cement Limited v. Regional Director, Employees' State Insurance Corporation, it was held that jurisdiction can be conferred only in accordance with the statute.[23]

The Rule Against Conferring Jurisdiction by Consent

Inherent Lack of Jurisdiction

The most unequivocal principle in this domain is that parties cannot, by agreement or consent, confer jurisdiction upon a court that inherently lacks it. If a court has no jurisdiction over the subject matter of the dispute, or if its jurisdiction is statutorily barred, any agreement between the parties to submit to such a court's jurisdiction is void and of no effect. A decree passed by a court without inherent jurisdiction is a nullity and can be challenged at any stage, including in execution proceedings or collateral proceedings.[2]

The Supreme Court in Harshad Chiman Lal Modi v. DLF Universal Ltd. And Another (Modi I)[8] and subsequently in Harshad Chimanlal Modi (II) v. DLF Universal Ltd. (Modi II)[3] firmly established that where a court lacks jurisdiction over immovable property situated outside its territorial limits (as per Section 16 CPC), parties cannot confer jurisdiction on it by agreement. The Court in Modi I stated, "It is well settled that by agreement the parties cannot confer jurisdiction, where none exists, on a Court to which the Code of Civil Procedure applies."[8] This principle was reiterated in numerous cases, including Kiran Singh And Otheres v. Chaman Paswan And Others,[2] Khairullah v. Badri,[20] Ramesh Chandra Sankla And Others v. Vikram Cement And Others,[25] State Of Madhya Pradesh & Ors. v. M/S. Lion Engineering Consultants,[24] Kailash Kumar v. State Of Haryana And Others,[26] and Shanmugam v. District Collector, Collectorate Coimbatore.[27] The court in Official Trustee, West Bengal And Others v. Sachindra Nath Chatterjee And Another also highlighted that a court cannot exceed its statutory authority, even upon the parties' petition, in the context of modifying trust terms.[1]

Statutory Tribunals and Special Forums

The rule against conferment of jurisdiction by consent is particularly stringent in the case of statutory tribunals and special forums. These bodies derive their jurisdiction solely from the statutes that create them. Parties cannot, by agreement, vest jurisdiction in a special tribunal (e.g., a Rent Controller or a Consumer Court) if the dispute does not fall within the statutory purview of that tribunal. The Punjab & Haryana High Court in Shiv Charan Singh Petitioner v. Haryana State Industrial & Infrastructure Development Corporation Limited And Another S observed that parties cannot agree to confer jurisdiction on a Rent Controller by a lease deed in a notified urban area or upon a Consumer Court by an agreement when it does not involve a consumer dispute, as the jurisdiction of special tribunals is determined by the applicable statute alone.[11] This aligns with the Supreme Court's view in Zuari Cement, where it was held that consent of parties cannot confer jurisdiction on an ESI Court if the statute does not provide for it.[23]

Permissible Agreements: Choosing Among Competent Courts

Ouster Clauses and Exclusive Jurisdiction

While parties cannot confer jurisdiction where none exists, they are permitted to choose one among multiple courts that possess concurrent jurisdiction over the subject matter. This is often achieved through "ouster clauses" or "exclusive jurisdiction clauses" in an agreement. Section 20 of the CPC provides that a suit can be instituted where the cause of action, wholly or in part, arises, or where the defendant resides or carries on business. If these conditions give rise to jurisdiction in more than one court, parties may agree to confine their litigation to one of those competent courts.

The Supreme Court in Hakam Singh v. Gammon (India) Ltd. clarified that it is not open to parties by agreement to confer jurisdiction on a court which it does not possess under the Code, but where two or more courts have jurisdiction under the CPC to try a suit, an agreement between the parties that the dispute between them shall be tried in one of such courts is not contrary to public policy and such an agreement does not contravene Section 28 of the Indian Contract Act, 1872.[6] This principle was affirmed in A.B.C Laminart (P) Ltd. And Another v. A.P Agencies, Salem[7] and Swastik Gases Private Limited v. Indian Oil Corporation Limited.[4] The court in NRP Projects v. Bharat Petroleum Corporation reiterated that parties can by consent confer jurisdiction to the exclusion of others *only* to a Court which otherwise has jurisdiction.[19] The Delhi High Court in U. Can Migrate Consultants Pvt. Ltd. v. Canadian Connections Groups Ltd. noted that while parties cannot confer jurisdiction where none exists on a court to which CPC applies, this principle does not apply when parties agree to submit to the exclusive or non-exclusive jurisdiction of a foreign court.[15]

Interpretation of Ouster Clauses

For an ouster clause to be effective, it must be clear and unambiguous. The intention to exclude the jurisdiction of other competent courts must be manifest. In A.B.C Laminart, the Supreme Court held that in the absence of explicit exclusionary words like "only," "alone," or "exclusive," the clause might not oust the jurisdiction of other competent courts.[7] However, in Swastik Gases, the Court, while acknowledging this, applied the maxim expressio unius est exclusio alterius (the expression of one thing is the exclusion of another) to hold that a clause stating "The agreement shall be subject to jurisdiction of the courts at Kolkata" implied an intention to exclude other jurisdictions, even without words like "only" or "exclusive," especially when the chosen court (Kolkata) had jurisdiction as part of the cause of action arose there.[4] The Bombay High Court in Aniket Sa Investments Llc v. Janapriya Engineers Syndicate Pvt. Ltd. And Others, citing Swastik Gases, emphasized giving a proper commercial meaning to such clauses as intended by the parties.[14] The Delhi High Court in Nariman Films v. Dilip R. Mehta also confirmed that parties can confer exclusive jurisdiction on one competent court, and the clause itself must be seen.[21]

Arbitration Agreements: Seat v. Venue

In the context of arbitration, the designation of a "seat" of arbitration carries significant jurisdictional implications. The Supreme Court in Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. held that an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause.[16] Once the seat is designated, it confers exclusive jurisdiction on the courts of that seat to supervise the arbitration and entertain applications arising out of the arbitration agreement and proceedings. This was followed by the Orissa High Court in Ridhi Sidhi v. Levis Strauss (India) Pvt. Ltd. And Another Opp. Parties.[17]

Waiver of Jurisdictional Objections

Territorial and Pecuniary Jurisdiction

While inherent lack of jurisdiction cannot be cured by consent or waiver, objections relating to territorial and pecuniary jurisdiction stand on a different footing. Section 21 of the CPC provides that no objection as to the place of suing shall be allowed by any Appellate or Revisional Court unless such objection was taken in the Court of first instance at the earliest possible opportunity and in all cases where issues are settled, at or before such settlement, and unless there has been a consequent failure of justice. Similarly, Section 11 of the Suits Valuation Act, 1887, deals with objections regarding over-valuation or under-valuation of suits, stipulating that such objections will not be entertained by an appellate court unless taken in the court of first instance and unless the over-valuation or under-valuation has prejudicially affected the disposal of the suit on its merits.

The Supreme Court in Kiran Singh explained that while a decree passed by a court without jurisdiction is a nullity, Section 11 of the Suits Valuation Act (and by analogy, Section 21 CPC) enacts an exception, providing that defects of jurisdiction arising from improper valuation or territorial limits are waivable and do not render the decree a nullity unless prejudice on merits is shown.[2] The Kerala High Court in Kanakku Karthiayani Pillai Narayani Pillai And Others, v. Neelacanta Pillai Raman Pillai And Another, distinguished inherent jurisdiction (non-waivable) from pecuniary or territorial jurisdiction (waivable).[13] In Bahrein Petroleum Co. Ltd. v. P.J Pappu And Another, it was clarified that merely protesting jurisdiction while applying for a stay does not amount to waiver if the objection is pressed before the trial court gives a verdict on merits.[5]

No Waiver for Inherent Lack of Jurisdiction

It is crucial to reiterate that the principle of waiver embodied in Section 21 CPC and Section 11 of the Suits Valuation Act does not apply to cases of inherent lack of jurisdiction, particularly concerning subject matter. If a court lacks jurisdiction over the subject matter, its decree is void, and this defect cannot be cured by consent, acquiescence, or waiver.[2] As affirmed in Harshad Chiman Lal Modi (I), an objection to subject-matter jurisdiction can be raised at any stage of the proceedings, even in appeal or execution.[8] The Allahabad High Court in Khairullah v. Badri also stated that neither acquiescence nor consent of parties can confer jurisdiction on a Court which lacks inherent jurisdiction.[20] This was also noted in Sukhdeo Ganeshram Tardeja v. Rajesh Dayaram Sadhwani And Another.[22]

Nuances and Related Doctrines

Cause of Action: Substantial v. Trivial

For a court to exercise jurisdiction based on part of the cause of action arising within its limits (under Section 20(c) CPC), that part must not be trivial or insignificant. The Delhi High Court in Rattan Singh Associates (P) Ltd v. Gill Power Generation Company Pvt. Limited[9] and Rashtriya Manila Kosh v. Dale View[10] observed that a trivial or insignificant part of the cause of action arising at a particular place would not be sufficient to confer territorial jurisdiction; it is the court within whose jurisdiction the cause of action has substantially or predominantly arisen which would have territorial jurisdiction.

Forum Non Conveniens

Even if a court possesses jurisdiction under the CPC, it may, in exceptional circumstances, decline to exercise it under the doctrine of forum non conveniens if it is satisfied that another competent court provides a more appropriate forum for the trial of the action, considering factors like residence of parties, location of evidence, and situs of the dispute. This principle was also alluded to in Rattan Singh Associates[9] and Rashtriya Manila Kosh.[10]

Conclusion

The law in India on the conferment of jurisdiction by party agreement is well-settled. The cardinal rule is that parties cannot by consent endow a court with jurisdiction it inherently lacks. Such lack of jurisdiction, particularly over the subject matter, renders any decree passed a nullity and is an unwaivable defect. However, where multiple courts have concurrent jurisdiction under the law (typically territorial or based on cause of action), parties are at liberty to agree to submit their disputes exclusively to one of such competent courts. Such ouster clauses, if clear and unambiguous, are generally upheld by Indian courts. Furthermore, objections to territorial and pecuniary jurisdiction are considered waivable if not raised at the earliest opportunity and if no prejudice is caused. The legal framework thus strikes a balance between respecting party autonomy in choosing a forum and upholding the statutory conferment of jurisdiction, ensuring that courts operate within their legislatively defined boundaries.

References

  1. Official Trustee, West Bengal And Others v. Sachindra Nath Chatterjee And Another (1969 AIR SC 823, Supreme Court Of India, 1968)
  2. Kiran Singh And Otheres v. Chaman Paswan And Others (1955 SCC 1 107, Supreme Court Of India, 1954)
  3. Harshad Chimanlal Modi (Ii) v. Dlf Universal Ltd. (2006 SCC 1 364, Supreme Court Of India, 2005)
  4. Swastik Gases Private Limited v. Indian Oil Corporation Limited . (2013 SCC 9 32, Supreme Court Of India, 2013)
  5. Bahrein Petroleum Co. Ltd. v. P.J Pappu And Another (1966 AIR SC 634, Supreme Court Of India, 1965)
  6. Hakam Singh v. Gammon (India) Ltd. . (1971 SCC 1 286, Supreme Court Of India, 1971)
  7. A.B.C Laminart (P) Ltd. And Another v. A.P Agencies, Salem . (1989 SCC 2 163, Supreme Court Of India, 1989)
  8. Harshad Chiman Lal Modi v. Dlf Universal Ltd. And Another (2005 SCC 7 791, Supreme Court Of India, 2005)
  9. Rattan Singh Associates (P) Ltd v. Gill Power Generation Company Pvt. Limited (Delhi High Court, 2007)
  10. Rashtriya Manila Kosh v. Dale View (Delhi High Court, 2007)
  11. Shiv Charan Singh Petitioner v. Haryana State Industrial & Infrastructure Development Corporation Limited And Another S (Punjab & Haryana High Court, 2012)
  12. The State Of Jharkhand & Ors. (S) v. M/S. Hindustan Construction Co. Ltd. (S) (Supreme Court Of India, 2017)
  13. Kanakku Karthiayani Pillai Narayani Pillai And Others, v. Neelacanta Pillai Raman Pillai And Another, (Kerala High Court, 1968)
  14. Aniket Sa Investments Llc v. Janapriya Engineers Syndicate Pvt. Ltd. And Others (Bombay High Court, 2019)
  15. U. Can Migrate Consultants Pvt. Ltd. v. Canadian Connections Groups Ltd. . (Delhi High Court, 2007)
  16. Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. (Supreme Court Of India, 2017)
  17. Ridhi Sidhi v. Levis Strauss (India) Pvt. Ltd. And Another Opp. Parties. (Orissa High Court, 2019)
  18. NRP Projects v. Bharat Petroleum Corporation (Madras High Court, 2018)
  19. Khairullah v. Badri . (1972 SCC ONLINE ALL 361, Allahabad High Court, 1972)
  20. Nariman Films v. Dilip R. Mehta (2005 SCC ONLINE DEL 1109, Delhi High Court, 2005)
  21. Sukhdeo Ganeshram Tardeja v. Rajesh Dayaram Sadhwani And Another (2015 SCC ONLINE BOM 6169, Bombay High Court, 2015)
  22. Zuari Cement Limited v. Regional Director, Employees' State Insurance Corporation, Hyderabad And Others (2015 SCC 7 690, Supreme Court Of India, 2015)
  23. State Of Madhya Pradesh & Ors. v. M/S. Lion Engineering Consultants (Madhya Pradesh High Court, 2014)
  24. Ramesh Chandra Sankla And Others v. Vikram Cement And Others (Supreme Court Of India, 2008)
  25. Kailash Kumar (S) v. State Of Haryana And Others (S) (Punjab & Haryana High Court, 2015)
  26. Shanmugam v. District Collector, Collectorate Coimbatore (Madras High Court, 2010)