Case Analysis : Hakam Singh v. M/s. Gammon (India) Ltd. [1971] INSC 9 (8 January 1971)

Citation	1971 AIR 740, 1971 SCC (1) 286
Date	08 January 1971
Court Name	Hon’ble Supreme Court of India
Plaintiff / appellant / petitioner	Hakam Singh
Defendant / respondent.	M/s. Gammon (India) Ltd. (a construction Company)
Judges	Hon’ble Forum Chief justice J.C Shah and Hon’ble Justice K.S. Hegde

Introduction

The case of Hakam Singh v. M/s. Gammon (India) Ltd. is a landmark judgment by the Supreme Court of India that addresses the validity and enforceability of jurisdiction clauses in contracts. This case is significant in shaping contractual law, especially regarding the ability of parties to agree on a specific jurisdiction for dispute resolution.

This case primarily dealt with whether a contractual clause that limits the jurisdiction of courts to a particular location is legally binding when multiple courts have jurisdiction under Section 20 of the Civil Procedure Code, 1908 (CPC). The Supreme Court’s ruling in this case has had far-reaching implications on commercial contracts and the resolution of disputes in India.

FACTS OF THE CASE

M/s. Gammon (India) Ltd. was a reputed construction company engaged in multiple infrastructure projects across India. The company entered into a contractual agreement with Hakam Singh, an individual contractor, for the execution of certain construction work.

The contract between the two parties included a specific jurisdiction clause, which stipulated that any disputes arising out of the agreement would be subject to the jurisdiction of Mumbai courts only. This clause effectively meant that in the event of any legal dispute, neither party could approach a court outside Mumbai.

Dispute Between the Parties

A dispute arose between Hakam Singh and M/s. Gammon (India) Ltd. regarding the execution and performance of the contract. Dissatisfied with certain aspects of the agreement and possibly the way the work was progressing, Hakam Singh decided to initiate legal proceedings against Gammon (India) Ltd.

However, instead of filing the case in Mumbai, as per the contractual agreement, Hakam Singh filed a suit in a court outside Mumbai, in a jurisdiction where he believed a part of the cause of action had arisen.

M/s. Gammon (India) Ltd. challenged the maintainability of the suit in a court outside Mumbai. The company argued that:

The contract explicitly mentioned that only Mumbai courts would have jurisdiction over any disputes arising from the agreement.

Since both parties had voluntarily agreed to this clause at the time of signing the contract, it should be binding.

The suit filed outside Mumbai was therefore not maintainable and should be dismissed on the grounds of lack of jurisdiction.

ISSUES OF THE CASE

1. Can parties to a contract, by mutual agreement, restrict jurisdiction to a particular court even when multiple courts have jurisdiction under Section 20 of the Civil Procedure Code, 1908?
2. Whether the Varanasi Court had jurisdiction to hear the suit, despite the contractual agreement specifying Bombay courts.
3. Interpretation of Section 28 of the Indian Contract Act, 1872, which deals with agreements in restraint of legal proceedings.

JUDGMENT: 

Legal Precedents Established by the Judgment

This case set a strong precedent in contract law and civil procedure, particularly regarding jurisdiction clauses in commercial agreements. The key principles established include:

Enforceability of Jurisdiction Clauses – When parties voluntarily agree to restrict jurisdiction, such a clause will be upheld unless it conflicts with statutory provisions.

The Supreme Court examined Section 20 of the Code of Civil Procedure (CPC), 1908, which governs where a civil suit can be filed. The provision states that a suit can be instituted in a court:

1. Where the defendant resides or carries on business; or
2. Where the cause of action arises (either wholly or in part).

In this case, both Varanasi and Bombay were potential jurisdictions because the contract was executed in Bombay (favoring Bombay’s jurisdiction). Hakam Singh was based in Varanasi, and some work may have been executed there. Thus, in the absence of an agreement, Hakam Singh could have filed the suit in either Bombay or Varanasi.

Clarity in Business Contracts – The ruling reinforced the importance of certainty in contractual terms, ensuring businesses can rely on jurisdiction clauses to avoid unnecessary litigation in multiple courts.

Distinction Between Permissible and Impermissible Jurisdiction Clauses – 

• If multiple courts have jurisdiction, parties can select one through a contract.
• If only one court has jurisdiction, parties cannot select a different court. 

The main legal issue was whether parties can limit jurisdiction to only one court when multiple courts have jurisdiction. The Supreme Court ruled that:

If a contract states that only one court will have jurisdiction, the clause must be honored.

This is not an “ouster” of jurisdiction but a valid contractual agreement.

Parties cannot confer jurisdiction on a court that otherwise does not have it, but they can restrict jurisdiction to a court that is already competent.

Why did the Supreme Court uphold the jurisdiction clause?

The clause did not remove jurisdiction from all courts; it narrowed the options to one. Since Bombay was already a valid jurisdiction under CPC, the restriction was lawful. Thus, the suit should have been filed in Bombay, not Varanasi.

Interpretation of Section 28 of the Indian Contract Act

Hakam Singh argued that restricting him to Bombay courts violated Section 28 of the Indian Contract Act, 1872, which states:

“Every agreement by which any party is restricted absolutely from enforcing their legal rights in the ordinary tribunals is void.”

The Supreme Court disagreed, clarifying that:

The clause did not completely prevent Hakam Singh from suing; it only required him to file the suit in Bombay. Since Bombay was already a valid jurisdiction, this was not an “absolute” restriction.

Thus, the jurisdiction clause was valid and did not violate Section 28.

Impact of the Judgment

The decision in Hakam Singh v. M/s. Gammon (India) Ltd. has had a lasting impact on contract law and dispute resolution in India:

Strengthening Contractual Autonomy – It affirmed that courts will uphold agreements where parties mutually decide on a jurisdiction, fostering legal certainty in commercial transactions.

Guidance for Future Commercial Disputes – Many businesses now ensure that their contracts have clear jurisdiction clauses to avoid unnecessary jurisdictional disputes.

Reference in Arbitration and Commercial Cases – This judgment has been frequently cited in subsequent cases involving jurisdictional challenges, arbitration agreements, and other commercial disputes.

Conclusion: The Supreme Court’s ruling in Hakam Singh v. M/s. Gammon (India) Ltd. is a cornerstone case in Indian contract law. By upholding the validity of jurisdiction clauses, the decision reinforced the importance of contractual certainty and judicial discipline in commercial disputes. The ruling continues to guide courts in adjudicating cases where jurisdiction clauses are challenged, ensuring that contractual commitments are honoured unless they conflict with legal provisions.

This judgment remains a foundational precedent for businesses and legal practitioners in India when drafting and interpreting contracts with jurisdiction clauses.

REASONING

The Supreme Court of India ruled in Favor of M/s. Gammon (India) Ltd., holding that:

Contractual Jurisdiction Clauses Are Valid and Enforceable – If multiple courts have jurisdiction under Section 20 of CPC, parties can choose to restrict jurisdiction to one specific court through a contract.

Jurisdiction Cannot Be Arbitrarily Conferred – If only one court has jurisdiction based on Section 20 CPC, parties cannot confer jurisdiction on another court through an agreement.

Hakam Singh’s Suit Was Not Maintainable – Since the contract specifically restricted jurisdiction to Mumbai courts, any suit filed outside Mumbai violated the contract and was, therefore, not maintainable.

Section 28 prohibits agreements that absolutely restrain a party from enforcing their legal rights. The Supreme Court clarified that restricting jurisdiction to one of the multiple competent courts is not an absolute restraint, and therefore, such clauses are valid.

Since both Varanasi and Bombay had jurisdiction under CPC, and the contract specifically designated Bombay courts as having exclusive jurisdiction, the Court held that this clause must be upheld. Thus, the Varanasi court had no jurisdiction, and the suit was wrongly filed there.

The Supreme Court dismissed Hakam Singh’s suit and upheld the jurisdiction clause in the contract.

Conclusion:

The Supreme Court’s ruling in Hakam Singh v. M/s. Gammon (India) Ltd. is a cornerstone case in Indian contract law. By upholding the validity of jurisdiction clauses, the decision reinforced the importance of contractual certainty and judicial discipline in commercial disputes. The ruling continues to guide courts in adjudicating cases where jurisdiction clauses are challenged, ensuring that contractual commitments are honored unless they conflict with legal provisions. It upholds the principle that commercial agreements should be enforced as written, provided they do not violate statutory law.

This judgment remains a foundational precedent for businesses and legal practitioners in India when drafting and interpreting contracts with jurisdiction clauses.

References

1. https://lextechsuite.com/Hakam-Singh-Versus-Messrs-Gammon-India-Limited-1971-01-08
2. https://brieflaws.com/case-briefs/hakam-singh-vs-m-s-gammon-india-ltd
3. https://www.lawfinderlive.com/archivesc/108333.htm?AspxAutoDetectCookieSupport=1
4. https://www.advocatekhoj.com/library/judgments/index.php?go=1971/january/9.php
5. A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies (1989) – The Supreme Court applied the principles from Hakam Singh, stating that exclusive jurisdiction clauses must be clearly worded to be enforceable.
6. Swastik Gases v. Indian Oil Corporation Ltd. (2013) – Reaffirmed that parties can agree on a jurisdiction clause, and courts should respect such agreements unless there is a compelling reason to override them.
7. B.E. Simoes Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd. (2015) – Clarified that jurisdiction clauses cannot override statutory provisions that exclusively grant jurisdiction to specific courts.
8. Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. (2017) – The Court expanded on Hakam Singh’s ruling, stating that arbitration agreements can also include exclusive jurisdiction clauses. This case clarified that when an arbitration agreement specifies a location, only courts in that location will have jurisdiction. 

Written By: Bhavya Arora, an intern under Legal Vidhiya.

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