The Supreme Court of India has clarified the application of Section 12A of the Commercial Courts Act, 2015, regarding pre-institution mediation for commercial suits. In a judgment delivered on May 15, the Court confirmed that pre-institution mediation is mandatory, as established in the case of Patil Automation Private Limited v. Rakheja Engineers Private Limited (2022) 10 SCC 1. However, the Court specified that this requirement applies prospectively from August 20, 2022.
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The Court emphasized that Section 12A is a mandatory provision, and non-compliance would generally result in the rejection of the plaint under Order VII Rule 11(d) of the Code of Civil Procedure (CPC). But this strict rule applies only to suits filed on or after August 20, 2022. For cases filed before this date, where mediation infrastructure was not well-established, a more flexible approach is adopted.
The bench comprising Justices JB Pardiwala and R Mahadevan directed that commercial suits filed before August 20, 2022, without complying with Section 12A, should be kept in abeyance and parties should be encouraged to explore mediation. The court stated:
"In suits instituted without complying with Section 12A of the 2015 Act prior to 20.08.2022 which are pending adjudication before the trial court, the court shall keep the suit in abeyance and refer the parties to time-bound mediation."
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The Court clarified two scenarios:
- Suits Filed on or After 20.08.2022: Must comply with Section 12A. Non-compliance leads to rejection under Order VII Rule 11, CPC.
- Suits Filed Before 20.08.2022: To be kept on hold for mediation if not falling under exceptional categories mentioned in the judgment.
The Court highlighted certain exceptional cases where the rule of mandatory mediation may not apply. These include:
- Suits already rejected without any steps taken within the limitation period.
- Cases where rejection was followed by filing a new suit.
- Suits filed after a High Court declared Section 12A mandatory.
The Supreme Court dismissed the appeal and upheld the High Court's decision to allow mediation for the suit in question. The Court directed that the mediation should be completed within three months, with an option to extend it by two more months as per the PIMS Rules.
Case Title: M/S DHANBAD FUELS PRIVATE LIMITED VERSUS UNION OF INDIA & ANR.
Appearance:
For Petitioner(s) : Mr. Vikas Singh, Sr. Adv. Mr. Pradip K.tarafder, Sr. Adv. Ms. Deepeika Kalia, Adv. Ms. V. Singh, Adv. Mr. Sudeep Chandra, Adv. Mr. Shambudha Dutta, Adv. Mrs. Anjani Aiyagari, AOR
For Respondent(s) : Mr. Tushar Mehta, Solicitor General (N.P.) Ms. Archana Pathak Dave, A.S.G. Ms. Harshita Choubey, Adv. Mr. Sudarshan Lamba, AOR Mr. Aaditya Dixit, Adv. Ms. Mili Baxi, Adv. Mr. Bhuvan Kapoor, Adv.
