The Supreme Court has decided to examine a crucial legal question: Should a commercial suit be rejected at the threshold under Order VII Rule 11 CPC if pre-institution mediation, as mandated by Section 12A of the Commercial Courts Act, 2015, has not been followed?

Case Background

This issue arose in the case of NOVENCO BUILDING AND INDUSTRY A/S vs. XERO ENERGY ENGINEERING SOLUTIONS PRIVATE LIMITED & ANR. During the hearing, a bench comprising Chief Justice of India Sanjiv Khanna and Justice PV Sanjay Kumar observed:

"The question that requires consideration by this Court is whether, due to non-compliance with Section 12A of the Commercial Courts Act, 2015, a suit should be dismissed under Order VII Rule 11 CPC or whether it should be kept in abeyance, directing the parties to first explore the possibility of settlement through mediation."

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In M/s Patil Automation Private Limited vs. Rakheja Engineers Private Ltd (2022 LiveLaw SC 678), the Supreme Court had already ruled that:

"Section 12A of the Commercial Courts Act is mandatory, and any suit instituted in violation of this provision must be rejected under Order VII Rule 11 CPC. This power can also be exercised suo moto by the court."

During the hearing of SLP(C) No. 2753/2025, the Supreme Court issued the following directives:

A notice has been issued, returnable in the week commencing March 24, 2025.

The notice will be served through all possible modes, including dasti (hand delivery).

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Novenco Building and Industry A/S is directed to approach the Mediation Centre attached to the High Court of Himachal Pradesh for the appointment of a mediator and to request the respondent to participate in the mediation process.

If the Supreme Court upholds that non-compliance with Section 12A warrants dismissal of a suit, it will reinforce the mandatory nature of pre-institution mediation in commercial disputes. This would encourage businesses to opt for alternative dispute resolution methods before initiating litigation, ultimately reducing the burden on courts and ensuring quicker dispute resolution.