Shashwati Chowdhury
Published on: August 18, 2022 at 16:44 IST
In a significant judgement, the Supreme Court of India ruled on Wednesday that pre-institution mediation under Section 12A of the Commercial Courts Act 2015 is mandatory in nature and that lawsuits that do not follow it are liable to have their suits rejected under Order VII Rule 11 of the Code of Civil Procedure (CpC) [Patil Automation Pvt. Ltd vs. Rakhija Engineers].
However, the Court has declared that this will take effect from August 22, 2022.
This ruling was made by a bench comprising of Justices KM Joseph and Hrishikesh Roy.
Whether the mandatory pre-litigation mediation contemplated by Section 12A of the Commercial Courts Act, 2015 is mandatory in this case was the main question that needed to be addressed.
The Bench determined the following answer affirmative to the issue:
“We declare that Section 12A of the Act is mandatory and hold that any suit instituted violating the mandate of Section 12A must be visited with a rejection of the plaint under Order VII Rule 11. This power can be exercised even suo moto by the court.”
Any settlement reached during the mediation may be executed just like an award passed under the 1996 Arbitration and Conciliation Act. The 2018 amendment, which took effect on July 3, 2018, added this provision to the Act.
In the matter before the Supreme Court, the appellants sought that the plaint be rejected in accordance with Order VII Rule 11 CPC on the grounds that the respondents had brought the lawsuit without using the pre-litigation mediation mechanism. The Commercial Court, however, denied the application to dismiss the plaint. The case was considered by the Supreme Court along with other appeals addressing the same issue.
Unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with the manner and procedure that may be specified by rules set by the Central Government, no suit that does not contemplate any urgent interim relief under the Commercial Courts Act may be brought. Such mediation must be conducted before the Central Government-approved authority.
The appellants were represented by Senior Advocate Sanjeev Anand and Advocates Ayush Negi and Sharath Chandran, who argued that Section 12A was mandatory. The respondents’ advocate, Saket Sikri, contended that the provision was directory.
In its judgment, the Supreme Court noted that Section 12A cannot be described as a mere procedural law.
According to the Judgement, in an era of docket explosion, mediation is a “meaningful choice.”
