Agreements in restraint of legal proceedings and exclusive jurisdiction clauses in international contracts.

Published December 22, 2009 Jurisdiction Leave a Comment Tags: exclusive Jurisdiction clauses, Foreign Court Jurisdiction, Indian Contract Act 1882,Indian Contracts, Indian Courts, jurisdiction, Section 28

Sec 28 of the Indian Contract Act : Every agreement,(a) by which any party there to is restricted absolutely from enforcing his rights underor in respect of any contract, by the usual legal proceedings in the ordinary tribunals,or which limits the time with in which he may thus enforce his rights;. is void to that extent. The issues surrounding exclusive jurisdiction clauses in India are to two folded. One is the affect of Sec 28 on exclusive jurisdiction clauses in India and another is the affect on cross border contracts. Are the clauses which restrict the right of parties to approach any court in India which has competent jurisdiction to grant the relief void? Domestic Jurisdiction of Civil courts in India All civil courts in India below High court derive their authority to try all kinds of civil suits from Section 9 of the Code of Civil Procedure. The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.

So Courts in India unlike some American Courts derive jurisdiction solely from the Code. This jurisdiction is normally subject to territorial and pecuniary limitations further set out in the code and the concerned State law creating the civil court. In Hakam Singh Vs Gammon (India) Ltd AIR1971SC740, (1971)1SCC286, [1971]3SCR314, Supreme court of India discussed the issue of jurisdiction of Courts in India as follows: By Clause 13 of the agreement it was expressly stipulated between the parties that the contract shall be deemed to have been entered into by the parties concerned in the City of Bombay. In any event the respondant have their principal office in Bombay and they were liable in respect of a cause of action arising under the terms of the tender to be sued in the Courts at Bombay. It is not open to the parties by agreement to confer by their agreement jurisdiction on a Court which it does not possess under the Code. But where two courts or more have under the CPC jurisdiction to try a suit or proceeding an agreement between the parties that the dispute between them shall be tried in one of such Courts is not contrary to public policy. Such an agreement does not contravene Section 28 of the Contract Act.< The Supreme Court in British Steam Navigation case [19902CompLJ1(SC), 1990(48)ELT481(SC), JT1990(1)SC528case] had further interpreted S28 of the Contract Act as applied to cross border transactions. The key to this interpretation are the words absolutely in Section 28. Court considered that Sec 28 while declaring clauses which are

in restraint of judicial/legal proceedings are void is applicable only if the restraint is absolute. So If the contract is domestic one and the parties are both Indian nationals any clause in contract which confers jurisdiction on some specific court to the exclusion of others is not hit by S28 . However, in such a case the specific court referred to in the contract should have jurisdiction (under the code) i.e competent to try the suit. Since partial restraint of the party to limit his legal relief to one court is not against public policy (waiver of private rights under a contract is lawful as long as such waiver is not against public policy) and only partial restraint the clause is enforceable. Foreign Jurisdiction Where the other party has an option to get a remedy in another jurisdiction and not necessarily in India the clause holds good as the condition is not absolute restraint. Court had essentially considered whether one party to the contract would be left absolutely remedy less of the exclusive jurisdiction clause is enforced. In a proceeding before the Indian Court if it is proved as a matter of fact by evidence that the other party to the contract has legal remedy in foreign jurisdiction then the Indian court would not further interfere in the matter since the plaintiff still has some legal remedy albeit in foreign jurisdiction. However, in case of cross border transactions the issue is little more complicated. Every Indian Court as per Indian Evidence Act takes judicial notice of all laws of Republic of India. Laws of foreign countries need to be proved in a court of law by production of relevant evidence. So in case of foreign

jurisdiction clauses excluding jurisdiction Indian Courts, the defendant has to prove by production of documentary and other evidence that the foreign country referred to in the contract in fact has laws which provide adequate legal remedy to him. In case of domestic contracts since the court already takes judicial notice of the laws, it will only check if the other court in India is competent to try to the suit or not. If the other court is competent to try the suit it will not further entertain the suit arising from the contract.