25 Jan 2010

Ouster clause and jurisdiction of Court: Principles explained

In a recently reported decision the Delhi High Court has explained the meaning and implications of the various 'ouster clauses' in the agreements wherein the parties agree to submit their disputes before a particular forum only. In this case, the High Court was dealing with the validty of the case filed by a party to an agreement before the Delhi High Court whereas in the agreement it had been agreed "That both the parties irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts in Chandigarh".

Explaining the legal position, the High Court directed the parties to appear before the courts in Chandigarh, observing inter alia as under;
17. Having considered the submissions of the counsel for the parties, it appears to this Court that the defendant will succeed in these applications. The question of jurisdiction has to be decided on the facts and circumstances of every case. In A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem, the Supreme Court in para 21 explained the position concerning the ouster clause as under (SCC @ p.175-76):
“From the foregoing decisions it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other Courts. When the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other courts should avoid exercising jurisdiction. As regards construction of the ouster clause when words like 'alone', 'only, 'exclusive' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim 'expressio unius est exclusio alterius' - expression of one is the exclusion of another - may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed.”
In light of the law explained by the Supreme Court in A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem, the wording of the ouster clause is unambiguous particularly when it uses words like “exclusive”. In those circumstances, no option is left to the court to still assert its jurisdiction. Once an ouster clause is clear that it is only the court in Chandigarh that will have the jurisdiction, it is not possible to ignore such a clause and still say that since a part of the cause of action has arisen within the territorial jurisdiction of this court, this suit should be entertained.

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