The 2018 Amendment added Chapter III-A (Pre-Institution Mediation and Settlement) to
the Act, requiring a party to exhaust the remedy of mediation in accordance with the rules
prescribed, before initiating proceedings under the Act, with the limited exception of
cases where “urgent” interim relief has been sought. In terms of the said provision the
government has notified the Commercial Courts (Pre-Institution Mediation and
Settlement) Rules, 2018 which sets out the detailed procedure for conducting mediation.
PROCEDURE
A. Procedure to be followed in such mediation proceedings is set out in the
Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018
(“Rules”).
i) The plaintiff must file an application with the State Legal Services Authority
or the District Legal Services Authority constituted under the Legal Services
Authorities Act, 1987 (“Authority”) to initiate mediation.
ii) After receiving of application the Authority will issue notice to the opposite
parties to appear within 10 days of receiving of notice.
iii) If the opposing party agrees to participate, then the mediation process begins.
MANDATORY OBLIGATION ?
B. What are the consequences of not exhausting pre-mediation remedies before
initiating proceedings under the Act?
i) If the provision is mandatory then the suit is not acceptable
ii) It the provision is merely directory then the suit survives.
CONFLICTING JUDICIAL OPINIONS ON THE POINT AS TO WHETHER
THE PROVISION OF SECTION 12A OF THE ACT IS MANDATORY OR
DIRECTORY
C. The Bombay High Court in Deepak Raheja v. Gango Taro Vazirani 1 holding that
Section 12A of the Act is mandatory and not directory. Accordingly, the doctrine
of substantial compliance or waiver cannot be invoked in the context of Section
12 of the Act.
1
Deepak Raheja v. Gango Taro Vazirani 2021 SCC Online Bom 3124
D. The Madras High Court2 has held that the provision of Section 12A of the Act is
not mandatory since, in its view, the right to access justice is a constitutional
right, which cannot be denied or deprived for not resorting to mediation.
“14. Relying upon the judgment of the Hon'ble Supreme Court in Sambhaji
and others -vs- Gangabai and others reported in (2008) 17 SCC 117,
Surinder Kumar and others -vs- Praveen Kumari reported in 2017 SCC
OnLine HP 1135 and Salem Advocate Bar Association T.N -vs- Union of
India reported in (2005) 6 SCC 344. The Learned Counsel for the plaintiff
would submit that the procedure are hand made of justice. Non-compliance
of Section 12-A of Commercial Court Act, cannot be the ground to reject
the plaint. If strict interpretation of Section 12-A of Commercial Court Act,
is made, then it will lead to miscarriage of Justice. A defendant who
genuinely desires to resolve the dispute through mediation, can always
request the Court to refer the matter for mediation. Instead cannot seek
dismissal of the suit. The Learned Counsel would submit that provisions of
law should enable the citizens to have access to justice and not denial of
access to justice. If the word 'shall' in Section 12-A of the Commercial
Court Act, has to be construed as mandatory provision, then it will lead to
denial of justice, punitive for not resorting to Mediation before approaching
the Court.
24. Though, the word 'shall' in Section 12-A of the Act, sounds Prelitigation
mediation is mandatory on the part of the plaintiff to explore Settlement
before filing suit under Commercial Court Act, the Rule framed use the
word 'Shall' and makes it an optional. Also even if one party go for pre-
litigation mediation the other party may conveniently abstain from
participating in the mediation and make it a non-starter. Even otherwise,
mediator can proceed only if the both the parties appear and give consent to
participate in the mediation process. Thus, it is very clear that on combined
reading of the Commercial Courts Act and the Rules framed thereunder,
pre-litigation mediation is subject to urgency for any interim relief and the
consent of the sparing parties.
25. In such circumstances, the Harmonious Interpretation takes us to the
irresistible conclusion that Section 12-A of the Commercial Courts Act, is
not a mandatory provision. The right to access justice which is a
Constitutional Right cannot be denied or deprived for not resorting to
mediation. The Court is not substitute to Alternative Dispute Redressal, it is
otherwise. The litigant cannot be denied the doors of justice for directly
approaching the Court without exploring the possibility of mediation. There
can be no prejudice to the defendant, if the defendant is ready for mediation,
even after Institution of the suit. Also there is no impediment either for the
party or for the Court to refer the pending matter to be resolved through
mediation or any other Alternative Dispute Redressal mechanism. This
provision is meant for the parties to work out an amicably settlement
without involving in the adversary system of litigation. The intention of this
Section is not to prevent access to justice or to aid anyone who refuse to
subject himself to the judicial process. The intention is to avoid the
2
Shahi Exports Pvt. Ltd. v. Gold Star Line Ltd. A No. 35 of 2021 in C.S. No. 669 of 2019 judgment dt.
09.08.2021
procedural rigor and to arrive an amicable win-win settlement. Any other
interpretation to Section 12-A of the Act contrary to the intention will
amount to miscarriage of Justice. Therefore, this Court holds that there is no
ground to entertain this Application seeking rejection of plaint. Hence,
Application is dismissed with costs of Rs. 10000”
E. The Allahabad High Court3 after gathering the intent of the legislature, including
by way of reference to the prohibitive words used in Section 12-A of the Act, has
held that the pre-institution mediation is mandatory.
RELIEF SOUGHT IS URGENT
A. Recently in the case of Upgrad Education Pvt Ltd. v. Intellipaat Software
Solutions Private Ltd. 2022 SCC Online Del. 644. : has directed that in suit
filed before the Intellectual Property Division, wherein application for interim
injunctions are filed and urgent interim relief is sought, such application seeking
dispensation would not be required and leave would be presumed in view of the
language of Section 12A of the Act.
B. Changsha Sinocare INC v. Rajesh Kumar, [CS (COMM) 27/2022, decided on
14th January 2022], a ld. Single Judge was considering a suit where recovery of
money was sought and exemption under Section 12A was sought on the ground
that the legal notice issued by the Plaintiff did not evince any positive response
from the Defendant. In those facts, the Court observed:
“6. However, this Court is of the view that it is when there is a difference
of opinion regarding mutual liabilities that a dispute arises. In this case,
the refusal of the defendant to pay the amount demanded by the plaintiff
has resulted in a dispute and in terms of Section 12A of Commercial
Courts Act, 2015, this dispute had to be first tackled through mediation.
7. Since no reason has been given for seeking exemption, the application
[I.A. 688/2022] is dismissed.”
3
Awasthi Motors v. M/s. Energy Electricals Vehicle & Anr. 2021 SCC Online All 256.
