Authors: Mr. Samir Malik (Partner), Mr. Mahip Singh (Associate Partner) and Ms. Ayushi Pandey (Associate)
Introduction
Despite over three decades of settled jurisprudence, Indian commercial litigation continues to suffer from a basic and recurring jurisdictional error: the assumption that a suit can be validly instituted merely because the defendant’s registered office is located within the territorial limits of a particular court. This misconception is often compounded by an uncritical reliance on exclusive jurisdiction clauses, which are treated as jurisdiction-conferring instruments rather than what they truly are, forum-selecting clauses operating within statutory limits.
The result is predictable. Commercial suits are routinely filed in courts which, upon closer scrutiny, lack territorial jurisdiction. The inevitable consequence is dismissal of the suit at the threshold and return of the plaint under Order VII Rule 10 of the Code of Civil Procedure, 1908 (CPC) which results in wastage of judicial time, escalation of costs and strategic setbacks for litigants who otherwise may have had a strong case on merits.
Section 20 CPC: The Statutory Anchor Of Territorial Jurisdiction
Section 20 of the CPC governs territorial jurisdiction in civil and commercial suits. Broadly, it permits a suit to be instituted in a court within whose local limits the defendant resides, carries on business, or personally works for gain, or where the cause of action, wholly or in part, arises. In the case of corporate defendants, the Explanation to Section 20 introduces a legal fiction by deeming a company to carry on business at its sole or principal office in India, or at a subordinate office provided the cause of action arises at that place.
What is often missed, however, is that this Explanation is not expansive in nature. It does not multiply forums or create parallel jurisdictions. On the contrary, it is restrictive, in that it identifies the appropriate court depending on the relationship between the place where the cause of action arises and the location of the company’s offices. The Explanation does not confer a choice between the principal and subordinate office, rather it determines which one is legally relevant in a given factual situation.
This construction was unequivocally settled by the Supreme Court in Patel Roadways Ltd. v. Prasad Trading Co., (1991) 4 SCC 270. The Court held that where a corporation has its principal office at one place and a subordinate office at another, and the cause of action arises at the place where the subordinate office is situated, the suit must be instituted only in the court within whose jurisdiction the subordinate office is located. In such a situation, the court within whose jurisdiction the principal office is situated would have no jurisdiction at all. The Court further clarified that the Explanation to Section 20 CPC provides an alternative locus for the corporation’s place of business, not an additional one.
Thus, the Supreme Court, in effect, contemplated four distinct factual situations while interpreting the Explanation to Section 20. First, where the defendant corporation has a sole office, the suit may be instituted at the place of that office, even if the cause of action has arisen elsewhere. Second, where the defendant has a principal office at one place and a subordinate office at another, and the cause of action arises at the place of the principal office, the suit can be instituted at the place of the principal office, but not at the place of the subordinate office. Third, where the defendant has a principal office at one place and the cause of action arises at the place where its subordinate office is located, the corporation is deemed to carry on business only at the place of the subordinate office, and in such a case, the suit must be filed there and not at the place of the principal office. Fourth, where the cause of action arises at a placeunconnected with either the principal office or the subordinate office, the corporation is deemed to carry on business at the place of its principal office, and the suit can be instituted there, but not at the place of the subordinate office. These four situations, distilled from Patel Roadways, are set out in the table below for ease of reference and clarity:
| S. No. | Place of defendant’s Principal Office (Sole office in s. no. 1) | Place of defendant’s Subordinate/Branch Office | Place where cause of action arose | Place where Plaintiff can sue under S. 20 CPC |
| 1. | A | — | C | A, C |
| 2. | A | B | A | A |
| 3. | A | B | B | B |
| 4. | A | B | C | A, C |
Despite the settled position in Patel Roadways, commercial suits routinely proceed on the erroneous assumption that the situs of a registered office, by itself, furnishes territorial jurisdiction, a practice that stands in direct contravention with the statutory scheme of Section 20 CPC.
Exclusive Jurisdiction Clauses Don’t Create Jurisdiction
This is where many contracts go wrong.
There is a common belief that once parties agree to an “exclusive jurisdiction” clause, the chosen court automatically gains authority. However, this belief has been rejected by Indian courts time and again.
The Supreme Court decisively addressed this misconception in A.B.C. Laminart (P) Ltd. v. A.P. Agencies, (1989) 2 SCC 163, wherein the Court held that parties may, by agreement, choose one among several courts that otherwise have jurisdiction. However, parties cannot, by consent, confer jurisdiction upon a court which does not have jurisdiction under the law.
In other words, an exclusive jurisdiction clause operates only where multiple competent courts exist. It is a tool of exclusion, not creation. Where no part of the cause of action arises at the chosen place, the clause is legally ineffective, irrespective of the language employed.
More recently, the Delhi High Court reaffirmed this position in Jain Irrigation Systems Ltd. v. Pragyawan Technologies (P) Ltd., 2024 SCC OnLine Del 6514. In this case, even though the contract stated that the courts in Delhi will have exclusive jurisdiction to try any dispute arising out of the contract and the defendant’s registered office was also located in Delhi, the plaint was returned, because no part of the cause of action had arisen in Delhi. Instead, the cause of action arose in another city where the defendant maintained a subordinate office, thereby conferring jurisdiction on that court under Section 20 of the CPC.
Why The Error Persists?
The persistence of this jurisdictional error can be attributed to three factors. First, convenience-driven litigation encourages filing where counsel or corporate headquarters are located. Second, there is a perception that metropolitan commercial courts are more efficient or favourable. Third, there is excessive faith in contract drafting as a jurisdictional panacea. None of these considerations, however, survive judicial scrutiny.
The Practical Cost Of Getting Jurisdiction Wrong
Getting jurisdiction wrong is not a technical slip-up, it has very real, and often expensive, consequences. A suit filed in the wrong court can sit there for months, sometimes years, before the objection is even decided. During this time, pleadings are exchanged, interim applications are argued, and clients incur substantial legal costs, all of which ultimately come to nothing. When the plaint is returned, the entire exercise has to begin afresh in the correct court, as settled by the Supreme Court in EXL Careers v. Frankfinn Aviation Services Pvt. Ltd., 2020 SCC OnLine SC 621. What looked like progress on paper turns out to be lost time.
There is also a strategic cost that is easy to overlook. Filing in the wrong jurisdiction signals a lack of clarity on foundational issues and gives the opposite side an early advantage. Jurisdiction objections become a ready-made defence, diverting attention from the merits of the dispute and allowing the defendant to control the pace of the proceedings. In commercial litigation, where speed and certainty matter, a jurisdictional misstep can derail timelines, drain resources, and weaken a party’s overall position long before the court ever reaches the substantive issues.
Conclusion
Thus, the law on territorial jurisdiction is settled beyond doubt. The presence of a registered office, by itself, does not confer jurisdiction upon a court. Nor can an exclusive jurisdiction clause vest a court with authority where none exists in law. Jurisdiction must ultimately trace back to the cause of action, wholly or in part, as recognized under Section 20 of the CPC. As courts increasingly insist on this statutory discipline, litigants must align their strategies accordingly. A suit cannot be instituted in a forum merely because it is convenient, contractually designated, or commercially desirable. Territorial jurisdiction, at its core, is not a matter of party autonomy, but of judicial competence.
Disclaimer: This article represents our understanding and interpretation of the relevant laws as on the date hereof and is provided without expressing any opinion, advice, or recommendation. The interpretations set out herein are subject to change, and there can be no assurance that any regulator, authority, or judicial body will concur with or adopt a position consistent with our views expressed in this article. This article is furnished solely for academic and informational purposes and should not be construed as legal advice or relied upon for any purpose whatsoever.