Legal questions surrounding the exclusive jurisdiction clause in the Invoice
Updated: Sep 2
Whenever a dispute arises owing to a breach of contract, the question of jurisdiction of the court is involved and is decided primarily on 4 grounds, which are, a) the place where the parties entered the contract, b) the place where the contract is to be performed, c) where the contract is supposed to be executed or d) where the defendant to the suit resides. However, if one would notice the bottom of any invoice, he/she would find an “exclusive jurisdiction clause” stating that in case of any dispute, a particular court which is mentioned in the contract shall exercise the jurisdiction over the matter and other courts shall not have the jurisdiction over the same.
Let us understand it in layman terms; for instance, X, a consumer, avails the services of firm Z’s branch which is situated in Mumbai. The invoice clause by company Z clearly stipulates that in case of any dispute between them, the Gujarat High Court shall exercise jurisdiction over the matter. This is an invoice clause that primarily restricts the right of X, a consumer, to approach any other court.
This is a highly draconian clause that is framed in an arbitrary manner that leaves the question of jurisdiction to the adhesion of the contract. It severely hampers the right of the consumer, who is here a disabled entity in comparison to the companies, to approach the court of his jurisdiction. Over the years, many questions have been raised surrounding this invoice clause granting or preventing jurisdiction to certain courts. Is the clause rational and justified in restricting the individual to approach the court where the jurisdiction should ideally lie? In many instances, the consumers do not read such clauses or have knowledge of it, so is a clause valid? Can a mere invoice clause do away with the actual jurisdictions of the courts of law?
Exclusive jurisdiction in the invoice:
The Indian Contract Act, a colonial act which was enacted in 1872, is a substantive law that only determines the circumstances in which one party is legally bounded by the promise of another, it determines the basic and very essential ingredients that are supposed to be there while framing a contract and rest things are left upon the parties to the contract to determine. For example- unlike CrPC, ICA, 1872 does not mention what all things should not be there; like in CrPC, it is mentioned that arrest after 7 pm cannot be done without the magistrate's permission.
The parties are supposed to approach the court in case of any civil dispute arising out of the invoice. However, for the convenience of the parties to the contract, the India Contract Act leaves space for conferment of jurisdiction upon courts under the specific territory which is called “the exclusive jurisdiction”.
An example of exclusive jurisdiction may include- “The contract shall be deemed under the jurisdiction of Chhattisgarh’s courts.” Here, the parties, by their mutual agreement, are specifically conferring the jurisdiction upon the courts within the state of Chhattisgarh. But, it is a misconception that the invoice clause can confer jurisdiction upon any court within the designated territory. Section 9 of the Code of Civil Procedure specifically establishes that “all courts shall have jurisdiction to try all suits of civil nature unless the jurisdiction is either expressly or impliedly barred.” Additionally, Section 20 lays down different jurisdictions for the courts within India. Moreover, Section 28 of the Indian Contract Act, 1872 clearly mandates that “the agreements in restraint of legal proceedings are void.”
An express reading of these sections will indicate that the exclusive jurisdiction through the invoice clause cannot be conferred upon a court that itself does not have the actual jurisdiction to litigate such cases i.e. the court is either expressly or impliedly barred from adjudicating such lawsuits.
The validity of invoice clause:
There may be instances wherein an argument could be raised by one of the parties, especially the consumer, that he/she had not been aware of such an invoice clause granting exclusive jurisdiction to a particular court in case of a dispute and therefore, hampers his/her ability to avail justice. The said question of validity was discussed by the Supreme Court in the case of M/s InterglobeAviation Ltd. v. N. Satchidanand wherein the court clearly held that “the 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 the contract of carriage.” The court here clearly established the validity of such an invoice clause granting exclusive jurisdiction to a particular court. However, it is pertinent to note that it is highly unjustified that a party that has more bargaining power can arbitrarily impose such “terms and conditions” on the other party which is usually the innocent consumer.
But there is one more judgment of the Supreme Court on the said aspect of law. In Central Isnald Water Transport Corporation v. Brojo Nath Gangoli, the court held 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 is entered into between the parties, who are not equal in bargaining power.” This very judgment of the Apex Court was reaffirmed by the Delhi High Court in the case of North Delhi Municipal Corporation v. Gautam Anand. The question of the validity of invoice clause is an unsettled position of law in India which has been differently interpreted by the judiciary. But since there is no clear repealing of invoice clauses, they continue to hold the ground of validity.
The enforcement of invoice clause:
In A.B.C. Laminart Pvt. Ltd. & Anr vs A.P. Agencies, Salem the contract clause clearly stated that if any dispute arises out of the contract then courts of Kaira shall have the jurisdiction to deliberate upon the matter. However, the plaintiff filed the suit in the Court of Salem and the Madras High Court upheld the suit stating that it was valid since the contract was partly performed in Salem. The question of Kiara’s jurisdiction was again challenged before the Apex Court wherein the court upheld the validity of the Madras HC judgement. The court ruled that “ the division bench of the Supreme Court in Special Leave to Appeal, stated that as regards the construction of the ouster clause when words like ‘alone’, ‘only ‘, ‘exclusive’ and the like have been used there may be no difficulty in construing the ouster, unless it is found that there is no consensus ad idem. ” But in the current case, there was no implied exclusion of other jurisdictions as inferred from the facts and circumstances. But the overall validity of invoice clauses was held to be valid.
The position of the above judgment was again reiterated by the Supreme Court in Swastik Gas (M/S Swastik Gases Pvt. Ltd v. Indian Oil Corp.Ltd wherein the court clearly stated that “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 that an inference may be drawn that parties intended to exclude all other courts.”
Drawing from the various judicial precedents of the Supreme Court of India, it can be concluded that parties are free to enter into agreements conferring “exclusive invoice jurisdictions” upon their free will. But the jurisdiction cannot be conferred to such courts that do not possess the jurisdiction of legislation to adjudicate on such matters i.e. they are either expressly or impliedly barred. However, a deep understanding of the exclusive invoice jurisdiction would clearly show that it has the capacity to disable the rights of an innocent party, which is usually the consumer and gives arbitrary powers to the companies to impose their unjustified “terms and conditions” upon the customers who, in most of the cases, does not even have the knowledge of such an exclusive invoice jurisdiction clause. Hence, it’s time that the “exclusive invoice jurisdiction clause” undergoes a revision and required changes are made to it so that innocent consumers are not disabled.
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