1. In recent years, there has been an attempt on part of the legislature to provide impetus to other forms of dispute resolution methods including mediation. In 2018, chapter IIIA was introduced in the Commercial Courts Act, 2015 ("Act") which introduced section 12A ("12A") mandating pre institution mediation in case of a commercial suit of specified value, which does not contain any application for urgent interim relief. However this section has been a subject matter of debate as to whether the same is mandatory or only directory in nature.
2. This article contains an analysis of a recent Bombay High Court judgement, the approach taken by some of the High Courts and certain recent developments in this area.
3. In this regard, the Division Bench of the Bombay High Court (Nitin Jamdar and C.V. Bhadang, JJ.) in Deepak Raheja v. Ganga Taro Vazirani (2021 SCC OnLine Bom 3124) held that Section 12A of the Act is mandatory in case of a commercial suit of specified value, which does not contain any application for urgent interim relief, as such a proceeding cannot be instituted unless pre-institution mediation has been exhausted by the plaintiff. The Division Bench ruled that the findings of the Learned Single Judge of the Bombay High Court in Ganga Taro Vazirani v. Deepak Raheja (2021 SCC OnLine Bom 195) are contrary and accordingly they have been set aside.
4. It is pertinent to note that while some of the High Courts have interpreted 12A in similar manner, the Madras High Court has taken a contrary view.
5. Ganga Taro Vazirani ("Plaintiff") filed a Commercial Summary Suit ("CSS") against Deepak Raheja ("Defendant") under the provisions of Order XXXVII of the Code of Civil Procedure, 1908 ("CPC") seeking a decree against the Defendant along with a Summons for Judgment seeking a decree for Rs. 5,54,00,000/- (Rupees five crore fifty-four lac only). Pertinently, in this case no application for urgent reliefs was filed by the Plaintiff. The Learned Single Judge of the Bombay High Court held inter alia that the provisions of Section 12A were procedural in nature and should be interpreted keeping in mind the doctrine of substantial compliance. This judgment had raised many eyebrows because the Learned Single Judge observed that the provision that "compulsorily" requires disputing parties to attempt an amicable settlement through mediation is procedural and there is no absolute prohibition to file a suit before attempting mediation. Thereafter, the Defendant filed Commercial Appeal (L) No. 11950 of 2021 against the judgment of the Learned Single Judge in Ganga Taro Vazirani (supra).
The Division Bench of the Bombay High Court in Deepak Raheja (supra):
6. In Deepak Raheja (supra), the Division Bench of the Bombay High Court observed that the provisions of the Act should be strictly construed to aid speedy disposal of commercial cases, and a liberal interpretation must be avoided1. The Division Bench categorised commercial disputes under Section 12A as two types, one in which an urgent relief is not intended and the second where urgent relief is intended. If there is no urgent interim relief pursued, the pre-institution mediation must be first exhausted. In cases where there is urgent interim relief contemplated, the party can approach the court directly. It was observed by the Court that the segregation at the stage of inception is the legislative instrument to speed up disposal of commercial disputes.
7. Among other submissions, the Division Bench rejected the submission that the negotiations between the parties which took place after filing the CSS would tantamount to substantial compliance of the provision. It was held that the parties can negotiate themselves or through a private person or machinery provided under the statute. Once the authority conducts the mediation under Section 12A, the mutually acceptable outcome can be enforced like an arbitral award. With regard to waiver, it was held that considering the object and purpose of Section 12A, there was no question of the requirement of pre-institution mediation being waived by any party.
Other High Courts in India that held the provisions of Section 12A as mandatory:
8. The Learned Single Judge Calcutta High Court in Laxmi Polyfab v. Eden Realty2 observed inter alia that a plaintiff does not have an unconditional right to approach the Commercial Court or a Commercial Division of a High Court to have an issue involving a 'commercial dispute' within the meaning of the Act of 2015 decided by such Court without adhering to the provision of Section 12A of the Act of 2015. The same bench of the Calcutta High Court in Dredging and Desiltation Company Pvt. Ltd. v. Mackintosh Burn and Northern Consortium3 observed inter alia that the object of the Act of 2015 is to expedite the disposal of a commercial dispute. Such object is achieved through compulsory pre-institution mediation. The time frame provided under the compulsory pre-institution mediation allows a commercial dispute to be successfully resolved consuming such a time span within which it is not possible for the Court to finally adjudicate the suit.
9. Accordingly, in both Laxmi Polyfab (supra) and Dredging and Desiltation Company Pvt. Ltd. (supra), it was held that the provisions of Section 12A of the Act are mandatory in nature. A similar view has been expressed by the Allahabad High Court in Awasthi Motors v. Managing Director M/s. Energy Electricals Vehicle and Another4.
Madras High Court's view on Section 12A of Act:
10. Contrary to the abovementioned judgments, in Shahi Exports Private Limited v. Goldstar Line Limited & Others5 the Madras High Court observed that the right to access justice which is a constitutional right cannot be denied or deprived for not resorting to mediation. Further, that the Court is not a substitute to alternative dispute redressal mechanisms but it is the other way round and the use of the word 'shall' in Rule 3(1) of Commercial Courts, (Pre-Institution Mediation and Settlement) Rule, 2019 ("Commercial Courts Rules") was taken into consideration.
11. Considering a harmonious interpretation of Section 12A of the Act with the Rule 3 (1) of the Commercial Courts Rules, the Court concluded that Section 12A of the Commercial Courts Act, was not a mandatory provision. A litigant could not be denied the doors of justice for directly approaching the Court without exploring the possibility of mediation.
12. The recent judgment passed by the Division Bench of the Bombay High Court in Deepak Raheja (supra) analysed in detail the purpose and objective of the Act and in particular Section 12A thereof. This judgment as well as the view adopted by the Calcutta High Court in Laxmi Polyfab (supra) and Dredging and Desiltation Company Pvt. Ltd. (supra) and Allahabad High Court in Awasthi Motors (supra) reflect a clear pro-mediation approach . However, a diametrically opposing view was adopted by the Madras High Court in Shahi Exports (supra) that the right to access justice, being a constitutional right, cannot be denied or deprived for not resorting to mediation.
13. The authors are of the view that the interpretation by the Bombay High Court as well as Calcutta and Allahabad High Courts point in the right direction. Respectfully, it is submitted that there is no quarrel with the proposition that the right to justice cannot and should not be denied to anyone, however, sending parties to compulsory mediation in no way denies that right since parties can always approach the court in case such mediation fails. Further, the legislature has anyway carved out the exception in cases where urgent interim reliefs are sought.
14. Considering the different views adopted by the High Courts, it seems that this issue would finally have examined and settled by the Supreme Court.
1. Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP ((2020) 15 SCC 585)
2. 2021 SCC OnLine Cal 1457
3. 2021 SCC OnLine Cal 1458
4. 2021 SCC OnLine All 256
5. Judgment dated 17 August 2021 passed by The Honourable Dr. Justice G. Jayachandran in A.No.35 of 2021 in C.S.No.669 of 2019
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