When Two Or More Courts Have Jurisdiction, Parties' Choice Of Court Prevails Even If Cause Of Action Arises Elsewhere: Karnataka High Court

Setting aside the interim injunction granted by the commercial court at Bengaluru, the Division Bench comprising Chief Justice Vibhu Bakhru and Justice C.M. Poonacha held that the Debenture Trust Deed (DTD) clearly conferred exclusive jurisdiction on a court located at Mumbai thereby ousting the jurisdiction of other courts.

It held that “Where more than one Court has jurisdiction, and the parties agree that one or more of those Courts would have exclusive jurisdiction to decide disputes, such agreement is lawful and binding".

Background:

The appeal was filed by Baboon Investments Holding B.V., a Netherlands-based investor against an interim injunction order passed by Bengaluru Commercial Court in favor of Atria Brindavan Power Pvt. Ltd. The plaintiff had sought to restrain the defendants including the appellant from exercising rights under the DTD and enforcing related securities.

The trial court granted injunctions holding that it had jurisdiction to entertain the application as the cause of action had arisen within Bengaluru. The court further held that since Defendant No. 3 was not a signatory to the DTD, the jurisdiction clause could not bind it.

Findings:

The court disagreed with the view taken by the commercial court holding that the wording of clause 72.1 of the DTD was clear, unambiguous and binding which left no doubt for parallel proceedings in Bengaluru. “The DTD expressly provides that the Courts and Tribunals in Mumbai shall have exclusive jurisdiction to settle disputes arising out of or in connection with the Debenture Documents. The expression 'arising out of or in connection with' must be construed in the widest terms,” the Bench observed.

The court relied on the Supreme Court's judgment in Renusagar Power Co. Ltd where the Apex Court interpreted the phrase arising out of or in connection with to encompass all disputes that require the reference to the terms of the contract for their adjudication. “If the terms of the DTD are required to be examined to address the issues raised in the suit, the dispute would certainly fall within the scope of that expression,” the Court said.

The court further held that where two or more courts have jurisdiction, the parties are free to confer jurisdiction on any of the courts and such choice is enforceable. It held that “It is trite law that where more than one court has jurisdiction, the parties may agree that one or more of those courts will have exclusive jurisdiction. Such an agreement is lawful and does not offend either Section 23 or Section 28 of the Contract Act".

The court further relied on the Supreme Court's judgment in Swastik Gases where it was held that even if words like exclusive or only are absent from the agreement, an agreement stating that a contract is subject to the jurisdiction of a particular court means that only that court will have jurisdiction. It held that “By providing that the DTD is subject to the jurisdiction of courts at Mumbai, the parties have impliedly excluded the jurisdiction of all other courts".

The court also rejected the commercial court's reasoning that since the defendant no 3 was not a signatory to the contract, jurisdiction clause did not apply holding that the rights of the defendant No. 3 flowed from Defendant No. 1 who was a signatory to the DTD. The court held that “Defendant No.3 is not claiming any independent rights, but only claims under Defendant No.1, which is a party to the DTD. Therefore, the jurisdiction clause squarely applies”.

Accordingly, the present appeal was allowed and the impugned order was set aside.

Case Title: BABOON INVESTMENTS HOLDING Versus M/S. ATRIA BRINDVAN POWER PRIVATE LIMITED

Case Number:COMMERCIAL APPEAL NO. 209 OF 2024

Judgment Date: 15/10/2025

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