Exclusive Jurisdiction Clause Operative Only If Chosen Court Had Competence Under Section 20 CPC; J&K&L High Court Sets Aside Order Returning Dealer’s Suit
Safiya Malik
The High Court of Jammu & Kashmir and Ladakh, Division Bench of Justice Rajnesh Oswal and Justice Rahul Bharti set aside the trial court’s order that had returned a plaint for want of territorial jurisdiction in a commercial dispute between a dealer company and a vehicle manufacturer concerning a dealership agreement. The Court held that parties cannot, by design or default, confer jurisdiction on a court that inherently lacks it, and clarified that an exclusive jurisdiction clause is effective only if the chosen court was competent under Section 20 of the Code of Civil Procedure at the time of the contract. The matter was remanded to the Jammu Commercial Court for consideration on merits.
The appellant, PAL Sales and Service Pvt. Ltd., filed a civil suit on February 27, 2025, seeking damages of Rs 35.65 crore for alleged loss of business opportunities and profits due to Daimler India Commercial Vehicles Pvt. Ltd.’s alleged failure to act according to a dealership agreement executed on August 30, 2021. The plaintiff also sought a declaration that a show cause notice dated January 27, 2025, was null and void, along with injunctions restraining Daimler from terminating the dealership or appointing another dealer for Jammu and Ladakh.
The dealership agreement, executed at Delhi, appointed PAL Sales as a non-exclusive dealer for Daimler’s commercial vehicles and services within the Union Territories of Jammu & Kashmir and Ladakh. The agreement included Article 17, which stipulated that disputes arising from it would fall under the exclusive jurisdiction of Chennai courts.
Daimler moved an application under Order VII Rule 11 and Rule 10 of the Civil Procedure Code, contending that in view of Article 17, only Chennai courts had jurisdiction. The company requested that the plaint be returned to be presented before the proper court in Chennai. PAL Sales opposed, arguing that no part of the cause of action had arisen in Chennai and that the defendant’s offices were outside the Chennai district’s territorial jurisdiction. The plaintiff contended that the dealership’s operations and all related transactions were confined to Jammu and Ladakh, making the Jammu court the competent forum under Section 20 of the CPC.
The trial court, however, accepted Daimler’s contention and on July 24, 2025, returned the plaint under Order VII Rule 10 CPC. Aggrieved, PAL Sales filed an appeal before the High Court.
The Bench examined Article 17 of the Dealer Agreement, which provided that “All disputes, controversies or claims arising from the interpretation, performance or non-performance of this Agreement or any and all transactions related to this Agreement shall be submitted to the exclusive Courts at Chennai, which will have exclusive jurisdiction over disputes between the Parties arising under, or relating to this Agreement.”
The Court recorded that, “Parties cannot confer jurisdiction by their agreement, knowingly or unknowingly, on a court which it does not possess under the Code of Civil Procedure.” The judges observed that while contracting parties may choose one among multiple competent jurisdictions, such choice cannot extend to a court lacking inherent jurisdiction.
Referring to Section 20 of the CPC, the Court stated that jurisdiction depends on where the defendant resides, carries on business, or where the cause of action arises. It noted that Daimler’s registered office was at SIPCOT Industrial Growth Centre, Kanchipuram District, and its corporate office was in Perungudi, falling under Chengalpattu District, not within the Chennai district’s civil court limits.
The Bench observed that “Perungudi as a territorial entity does not fall within the territorial limits of Chennai Civil Courts.” It referred to the Madras High Court (Jurisdictional Limits) Act, 1927 and the Chennai City Civil Court Act, 1892, concluding that the Chennai courts had no authority over areas outside their defined limits, despite their inclusion in the Greater Chennai Corporation for administrative purposes.
The judgment cited the Madras High Court judgement in T. Ekambaram v. Bhavani Sagari (2013 SCC Online Mad 1308), noting that “mere addition of new areas to the Chennai City Corporation for the purpose of local administration will not have any bearing in the matter of the territorial jurisdiction of the Madras High Court or the City Civil Court, Chennai.”
The Division Bench further relied on Supreme Court precedents such as A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies (1989) 2 SCC 163, and InterGlobe Aviation Ltd. v. N. Satchidanand (2011) 7 SCC 463, reiterating that a contractual clause granting jurisdiction to a court lacking competence is invalid. It also cited Rakesh Kumar Verma v. HDFC Bank Ltd. (2025 SCC Online SC 752), stating that “the Court that has been given exclusive jurisdiction must be competent to have such jurisdiction in the first place… a Court not having jurisdiction as per the statutory regime cannot be bestowed jurisdiction by means of a contract.”
The Court observed, “We have reached to an ineluctable conclusion that the suit, in the present case, could have been filed by the appellant before any of the competent court at Kanchipuram District or at Chengalpattu Judicial District or at Jammu, where the cause of action has accrued to the appellant.”
“As such, the order impugned is not sustainable in the eyes of law and the same is set aside. The matter is remanded back to the learned trial court for disposal in accordance with law. The interim directions issued by this court are vacated and the interim directions issued by the learned trial court are restored. The amount deposited by the appellant/plaintiff be released in his favour. The learned trial court is requested to decide the application for grant of interim relief within the statutory period and no un-necessary adjournments be granted to either of the parties. Parties to appear before the learned trial court on 15.09.2025.”
Advocates Representing The Parties
For the Appellant (Plaintiff): Mr. Amit Sibal, Senior Advocate with Mr. Rohan Jaitley, Mr. Pranav Kohli, Senior Advocate with Mr. Vishnu Mahajan, Ms. Neha Nagpal, Mr. Vastav Sharma, Mr. Aftab Malik, Mr. Ankit Handa, and Ms. Avantika Sharma.
For the Respondent (Defendant): Mr. Niranjan Reddy, Senior Advocate with Ms. Shreya Sarkar; Mr. Vikram Sharma, Senior Advocate with Ms. Anju Sharma; Mr. Siddarth Sethi, Mr. Sachin Dev Singh, and Mr. Kunal Saini.
Case Title: PAL Sales and Service Pvt. Ltd. v. Daimler India Commercial Vehicles Pvt. Ltd.
Case Number: MA No. 37/2025
Bench: Justice Rajnesh Oswal and Justice Rahul Bharti
