"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Monday, July 8, 2013

Exclusive Jurisdiction Clause: Sense Prevails Finally!

There was always a risk of exclusive jurisdiction clauses being held by the courts as non-exclsuive in the absence of specific words like "only", "alone" etc. For instance, in ABC Laminart v AP Agencies (1989) 2 SCC 163, the clause in issue provided that any dispute arising out of the sale "shall be subject to Kaira jurisdiction". Despite a clear choice of court, the Madras High Court and the Supreme Court (on appeal) held that the Salem court had jurisdiction to entertain a suit pertaining to the said sale.
 
In view of the ambivalent approach of the courts towards jurisdiction clauses, parties which could afford the cost of legal advice often used the terms "only", "alone", etc in the jurisdiction clauses to signify grant of exclusive jurisdiction to a particular court having jurisdiction. 
 
It may be noted that parties incur additional transaction costs for negotiating an additional contractual term. If so, the court should prudently give force to such clauses. Instead, requiring that jurisdiction clauses must be unequivocal and must employ terms such as  "only", "alone", etc. does fall flat of reason. Why should parties by agreement designate a particular court in their agreement if their intent is not to refer all disputes to that particular court?
 
In a recent judgement (03.07.2013) in M/s Swastik Gases P. Ltd. v. Indian Oil Corp., the Supreme Court has held the following clause to be an exclusive jurisdiction clause: "The Agreement shall be subject to jurisdiction of the courts at Kolkata." Of the three judges, Madan B. Lokur, J. in his concurring judgement has rightly stated  that "parties would not have included the ouster clause in their agreement were it not to carry any meaning at all... [I]f the parties had intended that all Courts where the cause of action or a part thereof had arisen would continue to have jurisdiction over the dispute, the exclusion clause would not have found a place in the agreement between the parties." (para 27, concurring judgement). Justice RM lodha (with whom Justice Kurian Joseph agreed) applied the maxim expressio unius est exclusio alterius (meaning the expression of one thing is the exclusion of another) and held that parties had intended that all disputes should be referred to the courts at Kolkata in the absence of any intent to the contrary. The court held: "Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think an inference may be drawn that parties intended to exclude all other courts."
 
The judgement can be accessed from here (pdf).

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