Jammu and Kashmir High Court Overturns Trial Court's Decision on Jurisdiction in Dealership Dispute

High Court rules that exclusive jurisdiction clause in Dealer Agreement with Daimler India is invalid, allowing Pal Sales to pursue case in Jammu.

In a significant ruling, the Jammu and Kashmir High Court has set aside an order by the Additional District Judge (Commercial Court), Jammu, which had returned the plaint filed by Pal Sales and Service Pvt Ltd. for presentation before the courts in Chennai. The High Court held that the exclusive jurisdiction clause in the Dealer Agreement with Daimler India Commercial Vehicles Pvt. Ltd., which designated Chennai courts as having exclusive jurisdiction, was invalid as those courts lacked the necessary territorial jurisdiction.

The case involved a dispute over a Dealer Agreement dated August 30, 2021, where Pal Sales sought damages amounting to INR 35.65 crores from Daimler India, among other reliefs. The disagreement centered around the jurisdictional clause of the agreement that stipulated disputes would be resolved exclusively by Chennai courts. However, the High Court found that neither the corporate nor the registered office of Daimler India was within the jurisdiction of Chennai courts.

The High Court, comprising Justices Rajnesh Oswal and Rahul Bharti, emphasized that jurisdiction cannot be conferred by agreement on a court that lacks jurisdiction under the law. The court cited the principles laid down in previous Supreme Court rulings, stating that while parties can agree to submit disputes to a specific court with jurisdiction, they cannot confer jurisdiction on a court that inherently lacks it.

Justice Oswal, delivering the judgment, outlined that since the corporate office of Daimler India is located in Chengalpattu District, outside the territorial limits of Chennai, the jurisdiction clause was invalid. The court noted that the suit could legitimately be filed in courts having jurisdiction in Kanchipuram District, Chengalpattu Judicial District, or Jammu.

The ruling followed an appeal by Pal Sales against the trial court's decision, arguing that the cause of action arose within the Union Territory of Jammu and Kashmir, where the dealership operated under the Dealer Agreement. The High Court's decision effectively allows Pal Sales to continue its legal proceedings in Jammu.

The case has been remanded back to the trial court in Jammu for further proceedings, with instructions to decide the application for interim relief promptly. The parties are set to appear before the trial court on September 15, 2025.

Bottom Line:

Civil Procedure Code - Territorial jurisdiction - Parties cannot confer jurisdiction by agreement on a court that inherently lacks jurisdiction - Even if a contract provides for exclusive jurisdiction of a particular court, the court must have jurisdiction under the law to entertain the dispute.

Statutory provision(s): Civil Procedure Code, 1908, Section 20

Pal Sales And Service Pvt Ltd. v. Daimler India Commercial Vehicles Pvt. Ltd., (Jammu And Kashmir)(DB) : Law Finder Doc Id # 2776208