Mandatory Pre-Litigation Mediation in Commercial Suits

In the landmark Judgement, Supreme Court of India held that pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015 is mandatory. Thus, any commercial suit instituted before a Commercial Court under the 2015 Act without first exhausting the remedy of pre-litigation mediations shall be rejected under Order VII Rule 11 of the Civil Procedure Code, 1908. Additionally, court can exercise suo moto power under such cases.

While deciding the case, Patil Automation Private Limited v. Raheja Engineers Private Limited (17 August 2022), the Supreme Court delved into the legislative intent of Parliament in introducing Section 12A, opining:

Exhausting pre-institution mediation by the plaintiff, with all the benefits that may accrue to the parties and, more importantly, the justice delivery system as a whole, would make Section 12A not a mere procedural provision. The design and scope of the Act, as amended in 2018, by which Section 12A was inserted, would make it clear that Parliament intended to give it a mandatory flavour. Any other interpretation would not only be in the teeth of the express language used but, more importantly, result in frustration of the object of the Act and the Rules.

A bench comprising Justices KM Joseph and Hrishikesh Roy made this declaration effective from August 22, 2022 so that concerned stakeholders became sufficiently informed.

Further, the Court made following clarifications:

  • in case plaints have been already rejected and no steps have been taken within the period of limitation, the matter cannot be reopened on the basis of this declaration.
  • if the order of rejection of the plaint has been acted upon by filing a fresh suit, the declaration of prospective effect will not avail the plaintiff.
  • if the plaint is filed violating Section 12A after the jurisdictional High Court has declared Section 12A mandatory also, the plaintiff will not be entitled to the relief.

In the present case, the appellants had sought the rejection of the plaint under Order VII Rule 11 CPC on the ground that the suit was filed by the respondents without exhausting the remedy of pre-litigation mediation. However, the Commercial Court dismissed the application to reject the plaint. The Supreme Court answered in the affirmative & held that to the extent, a suit cannot be filed before a Commercial Court before parties have exhausted the option of settling the dispute through the mediation process. 

The Judgment further observed: 

It is noteworthy that Section 12A provides for a bypass and a fast-track route without for a moment taking the precious time of a court. At this juncture, it must be immediately noticed that the Law-giver has, in Section 12A, provided for preinstitution mediation only in suits, which do not contemplate any urgent interim relief. Therefore, preinstitution mediation has been mandated only in a class of suits. We say this for the reason that in suits which contemplate urgent interim relief, the Law-giver has carefully vouch-safed immediate access to justice as contemplated ordinarily through the courts. The carving out of a class of suits and selecting them for compulsory mediation, harmonises with the attainment of the object of the law. The load on the Judges is lightened. They can concentrate on matters where urgent interim relief is contemplated and, on other matters, which already crowd their dockets. 

The judgment further stated that ““A trained Mediator can work wonders. Mediation must be perceived as a new mechanism of access to justice.”


Source: SCC Online, Live Law.

Leave a Reply

Your email address will not be published. Required fields are marked *