The Mediation Mandate: A Jurisprudential Analysis Of Section 12A Of The Commercial Courts Act, 2015

1. Introduction

In the global pursuit of economic growth, the efficiency and predictability of a nation's legal system serve as a critical barometer for investors. India's concerted efforts to improve its ranking on the World Bank's 'Ease of Doing Business' index have catalysed significant legal reforms, chief among them being the enactment of the Commercial Courts Act, 2015 ("the Act").

A pivotal moment in this reformative journey was the Commercial Courts (Amendment) Act of 2018. This amendment not only drastically lowered the specified value of commercial disputes from ₹1 Crore to ₹3 Lakhs, thereby expanding the Act's ambit, but also introduced a novel procedural gatekeeper: Section 12A. This provision mandated that a plaintiff, in a suit not contemplating "any urgent interim relief," must first exhaust the remedy of pre-institution mediation before approaching the court. The legislative intent was clear, to promote alternative dispute resolution (ADR), filter out cases amenable to settlement, and thereby decongest the already burdened civil / commercial courts.

However, the introduction of this seemingly straightforward mandate spawned a wave of litigation, raising fundamental questions that struck at the heart of procedural law and access to justice. Did this pre-litigation step a non-negotiable prerequisite, the violation of which would be fatal to a suit? Or was it a directory provision, a procedural guideline that could be substantially complied with post-institution? More elusively, what was the judicial yardstick for measuring a suit that "contemplates any urgent interim relief"? Did the mere filing of an injunction application suffice, or was the court empowered to look behind the prayer to discern its true intent?

This article charts the jurisprudential voyage of Section 12A, analyzing the key judicial pronouncements that have shaped its interpretation. It begins by examining the legislative architecture of the provision, followed by a deep dive into the Supreme Court's watershed decision in Patil Automation, which cemented the mandatory nature of the mediation requirement. It then explores subsequent cases, including Yamini Manohar, that have meticulously defined the contours of the "urgent interim relief" exception. The analysis further considers the special considerations for continuing wrongs, such as intellectual property infringement, as laid down in Novenco Building, and concludes with the practical reconciliation offered in Dhanbad Fuels for legacy cases.

2. The Legislative Architecture of Pre-Institution Mediation

The 2018 amendment inserted Chapter III-A into the Act, comprising the solitary Section 12A. The provision's structure reveals a carefully designed, self-contained code for pre-litigation mediation.

Section 12A(1) lays down the core mandate, using prohibitive language: "A suit... shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation." This is not a mere suggestion but a conditional bar on the very institution of legal proceedings. The procedure is governed by the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 ("PIMS Rules"), which outline the mechanics of the process. A party initiates mediation by making an application to an authorized body, typically the authorities constituted under the Legal Services Authorities Act, 1987.

The process is strictly time-bound. Section 12A(3) prescribes a three-month period for the completion of mediation, which can be extended by another two months only with the mutual consent of the parties. To ensure that this mandatory process does not prejudice a plaintiff's rights, the second proviso to Section 12A(3) explicitly states that the time spent in mediation "shall not be computed for the purpose of limitation under the Limitation Act, 1963." This statutory exclusion of the limitation period is a critical feature, mitigating the risk that the mediation process could inadvertently extinguish a plaintiff's claim.

The PIMS Rules further detail the process, including the issuance of notice to the opposing party and the consequences of non-participation. If the opposing party refuses to participate or fails to appear, the authority is required to issue a "non-starter" report, at which point the plaintiff is deemed to have exhausted the remedy and can proceed to file a suit.

Perhaps the most significant feature of this regime is the legal status accorded to a successful settlement. Section 12A(5) provides that a settlement agreement reached through this process "shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of Section 30 of the Arbitration and Conciliation Act, 1996." This provision elevates the settlement from a mere private contract to a decree of the court, making it directly enforceable and significantly reducing the hurdles to its execution. This enforceability mechanism was designed to make mediation a genuinely attractive and final alternative to litigation, rather than just another procedural step.

In essence, the legislative architecture of Section 12A creates a compulsory, time-bound, and legally potent ADR mechanism, with a single, narrowly defined escape hatch for matters of genuine urgency.

3. Establishing the Mandatory Nature of Section 12A in Patil Automation

Despite the seemingly clear legislative language, the initial years of Section 12A were marked by judicial divergence. Some High Courts interpreted the provision as directory, allowing for post-institution mediation as substantial compliance, while others insisted on its mandatory character. This conflict was definitively resolved by the Hon'ble Supreme Court of India in Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited (2022) 10 SCC 1¹

1. The Pre-Patil Conundrum

The conflicting interpretations created significant uncertainty for litigants. For instance, a learned Single Judge of the Bombay High Court in Ganga Taro Vazirani v. Deepak Raheja ²held the provision to be procedural and directory, suggesting that non-compliance could be waived by the defendant. Conversely, a Division Bench of the same court later reversed this view in Deepak Raheja v. Ganga Taro Vazirani³, declaring the provision mandatory and rooted in public interest, thus precluding waiver. The High Court of Punjab & Haryana, High Court of Madras in the order that was appealed in Patil Automation, had reasoned that the use of the word "may" in the PIMS Rules made the process optional, and that the constitutional right to access justice could not be denied for not resorting to mediation. This judicial dissonance necessitated an authoritative pronouncement from the apex court.

2. The Supreme Court's Definitive Ruling

The Supreme Court in Patil Automation undertook a meticulous examination of the provision, grounding its analysis in established principles of statutory interpretation. The Court's declaration that Section 12A is mandatory was built on several pillars of reasoning:

1. Legislative Intent and Object: The Court gave primacy to the legislative intent, as discernible from the Statement of Objects and Reasons of the 2018 Amending Act. It highlighted the explicit goal of introducing "compulsory mediation" to improve India's business environment and manage the anticipated surge in litigation following the reduction of the specified value. The Court viewed Section 12A not merely as a procedural formality but as a substantive part of a "unique experiment to push the pace of disposal of commercial disputes."
2. Imperative Language and Prohibitive Structure: The Court found the language "shall not be instituted" to be "plainly imperative." It reasoned that such prohibitive or negative language is a strong indicator of mandatory intent. The argument that the use of "may" in the subordinate PIMS Rules could dilute the mandatory nature of the parent Act was firmly rejected. The Court clarified that Rule 3 merely provides discretion in the mode of making the application (online, post, or by hand), not in the requirement of making the application itself.
3. Statutory Analogies: The Court drew compelling parallels with other statutory bars to the institution of suits, most notably Section 80 of the Code of Civil Procedure, 1908 (notice to government) and Section 69 of the Indian Partnership Act, 1932 (bar on suits by unregistered firms). It noted that these provisions, despite not specifying a penalty for non-compliance, have been consistently interpreted as mandatory. The Court held that the right to file a suit is not absolute and can be subjected to pre-conditions by the legislature.
4. Consequences of Non-Compliance: The Court was unequivocal about the consequence of violating this mandate. It declared that a suit instituted without exhausting pre-institution mediation "must be visited with rejection of the plaint under Order VII Rule 11." This established non-compliance as a legal bar to the suit, falling squarely within the ambit of Order VII Rule 11(d). The Court explicitly rejected the idea of "substantial compliance" through post-institution mediation, as adopted by some High Courts. It reasoned that such an approach would defeat the core purpose of pre-institution mediation, which is to resolve disputes before they enter the court system and consume judicial resources. Furthermore, the Court affirmed that the power to reject the plaint could be exercised suo motu by the court, even before summons are issued, as part of its duty to ensure that a suit is duly instituted.

3. Prospective Application: A Pragmatic Approach

While laying down the law in absolute terms, the Court demonstrated judicial pragmatism by invoking the doctrine of prospective overruling. Recognizing the "cleavage of opinion among the High Courts" and the "teething problems" of a nascent law, the Court declared that its ruling would be effective from 20 August 2022. This was a crucial step to prevent the mass rejection of suits filed in good faith during the period of legal uncertainty, which would have resulted in the loss of court fees and potential limitation issues for plaintiffs. The Court, however, carved out specific exceptions, stating that the benefit of prospectivity would not apply where a plaint had already been rejected, where a fresh suit had been filed post-rejection, or where the suit was filed in a jurisdiction where the High Court had already settled the law on the mandatory nature of Section 12A.

The Patil Automation judgment thus stands as the foundational precedent on Section 12A. It not only settled the mandatory-versus-directory debate but also prescribed a clear, stringent consequence for noncompliance. However, by consciously refraining from defining the "urgent interim relief" exception, it left a critical door open for future judicial exploration.

4. The "Urgent Interim Relief" Exception: Defining the Contours of Urgency

With the mandatory nature of Section 12A settled, the litigation focused on the scope of its sole exception: suits that "contemplate any urgent interim relief." Plaintiffs increasingly began to frame their suits with prayers for interim injunctions, prompting courts to develop a test to distinguish genuine urgency from procedural ploys designed to circumvent mediation.

1. The Supreme Court's Guidance in Yamini Manohar

The Supreme Court provided the much-needed analytical framework in Yamini Manohar v. T.K.D. Keerthi 2023⁴ Addressing the very concern it had flagged in Patil Automation supra that the exception could be misused, the Court laid down a nuanced test for commercial courts.

The Court held that the plaintiff does not have an "absolute choice and right to paralyse Section 12-A." Instead, the commercial court is tasked with a "precise and limited exercise" to determine if the suit genuinely contemplates urgency. The key principles articulated were:

1. Holistic Examination from the Plaintiff's Standpoint: The court must examine the "nature and the subject-matter of the suit, the cause of action, and the prayer for interim relief." This assessment must be done "holistically from the standpoint of the plaintiff." The test is not whether the court would ultimately grant the relief, but whether the plaintiff's contemplation of urgency is plausible and bona fide based on the pleadings.
2. Scrutiny for Disguise and Camouflage: The Court explicitly warned that the "prayer for urgent interim relief should not be a disguise or mask to wriggle out of and get over Section 12-A." It empowered courts to check for "camouflage and guise to bypass the statutory mandate... when deception and falsity is apparent or established."
3. De-linking Urgency from Merits: A crucial clarification was that the outcome of the interim relief application is irrelevant to the Section 12A analysis. The Court stated that the non-grant of interim relief, either at the ad-interim stage or after a full hearing, would not justify a retrospective dismissal of the suit for non-compliance. This ensures that a plaintiff who genuinely, though perhaps unsuccessfully, sought urgent relief is not penalized.

2. Application of the Test: Bald Averments vs. Specific Pleadings

The principles from Yamini Manohar were subsequently applied by High Courts, leading to a clear distinction between suits with genuine urgency and those with merely cosmetic prayers for interim relief.

In Ekta Housing Private Limited v. Shradhha Shelters Private Limited 2024, the Bombay High Court examined a money suit where the plaintiff sought an attachment before judgment. The defendant highlighted a three-year delay between the demand and the suit, arguing it negated urgency. The Court, conducting the "limited exercise" mandated by the Supreme Court, scrutinized the plaint and found the averments on urgency to be "bald, vague and baseless" and "devoid of bare minimum particulars." It held that merely reproducing the language of Order XXXVIII Rule 5 CPC was insufficient to demonstrate a genuine apprehension. Concluding that the interim application was a "mere eyewash" and an "afterthought to evade compliance," the Court rejected the plaint.

A similar outcome was reached by the Calcutta High Court in Skipper Ltd. v. Prabha Infra (P) Ltd 2023 SCC OnLine Cal 5482. There too, in a money suit, the Court found that a "holistic reading of the plaint" revealed that the statements supporting urgency were "not only bold but devoid of bare minimum particulars." The Court concluded that the plaintiff had used "clever drafting" in an attempt to "wriggle out or get over the provision of Section 12-A," and accordingly, rejected the plaint.

In contrast, in Lakhani Realty LLP v. Kalina Vihar Darshan Co-operative Housing Society2025,⁵the Bombay High Court found the contemplation of urgency to be genuine. The suit concerned a redevelopment project in which a majority of residents had vacated, but a minority was holding out, causing the developer to incur significant recurring rent costs for the displaced residents. The Court held that the plaintiff's prayer for a mandatory injunction to vacate the remaining premises, seen from the plaintiff's standpoint, was contemplable as urgent, given the mounting financial prejudice and the hardship caused to the majority of the society's members.

These cases collectively illustrate that courts will not take averments of urgency at face value. A plaintiff seeking to bypass mediation must plead specific, credible facts that demonstrate an imminent and substantial prejudice that cannot await the conclusion of the time-bound mediation process.

5. Managing the Transition: Prospective Application and Legacy Cases in Dhanbad Fuels

The final piece of the jurisprudential puzzle was put in place by the Supreme Court in Dhanbad Fuels Private Limited v. Union of India and Another 2025 ⁶This case addressed the practical and procedural consequences of the prospective application of the Patil Automation ruling, specifically for suits instituted before the cut-off date of 20 August 2022.

The suit in Dhanbad Fuels was filed in 2019 without pre-institution mediation. The defendant's application to reject the plaint was dismissed by the trial court, and the High Court, instead of rejecting the plaint, kept the suit in abeyance and referred the parties to mediation. The Supreme Court was tasked with determining the correct approach for this category of "legacy" cases.

The Court's decision provided a clear and pragmatic roadmap:

1. Affirming the Prospective Declaration: The Court reiterated its holding in Patil Automation supra that the consequence of plaint rejection for non-compliance with Section 12A would apply only to suits instituted on or after 20 August 2022. This meant that suits filed before this date were protected from automatic rejection on this ground.
2. Endorsing the "Keep in Abeyance" Approach: For pending suits filed before the cut-off date, the Court endorsed the approach taken by the High Court. It held that in such cases, where an objection regarding non-compliance is raised, the appropriate course is for the court to "keep the suit in abeyance and refer the parties to time-bound mediation." This, the Court reasoned, strikes a "perfect balance" between upholding the mandatory spirit of Section 12A and giving meaningful effect to the prospective nature of the Patil Automation It ensures that the opportunity for mediation is not lost, while preventing the harsh consequence of plaintiff rejection for litigants who acted during a period of legal uncertainty.
3. Acknowledging Practical Impossibility: The Court also gave weight to the argument that in the initial period after the 2018 amendment, the necessary infrastructure for mediation (such as trained mediators and Standard Operating Procedures) was not yet in place in many jurisdictions. Invoking the maxim lex non cogit ad impossibilia (the law does not compel the impossible), the Court acknowledged that compliance may have been factually impossible for some early litigants, providing an equitable basis for not penalizing them.

The Dhanbad Fuels judgment provides essential guidance for the orderly management of a transitional phase in the life of Section 12A. It ensures that the principles laid down in Patil Automation are applied in a manner that is both legally sound and equitably just, preventing procedural chaos and protecting the interests of litigants who filed suits before the law was definitively settled.

6. The Special Case of Intellectual Property Rights and Continuing Wrongs

A significant and specialized dimension was added to the Section 12A jurisprudence by the Supreme Court's decision in Novenco Building and Industry A/S v. Xero Energy Engineering Solutions Private Ltd. & Anr.2025 ⁷, which dealt with the application of the urgency exception in the context of intellectual property (IP) infringement.

The High Court in Novenco had earlier rejected the plaint for patent and design infringement, citing the delay between the plaintiff's discovery of the infringement and the filing of the suit as evidence of a lack of urgency. The Supreme Court reversed this decision, establishing a distinct analytical framework for cases involving continuing wrongs.

The Court's reasoning was twofold:

1. Inherent Urgency in Continuing Wrongs: The Court held that in cases of continuing infringement, such as in IP matters, the urgency is inherent in the nature of the wrong itself. It observed that "each act of manufacture, sale, or offer for sale of the infringing product constitutes a fresh wrong and recurring cause of action." This conceptualization shifts the focus from the date of the first infringement to the ongoing nature of the harm. The Court drew a crucial distinction between the "age of the cause" and the "persistence of the peril," holding that mere delay in approaching the court does not extinguish the urgency associated with a continuing violation.
2. Public Interest Dimension: The Court introduced a public interest element, particularly relevant to IP law. It noted that IP infringement is not merely a private dispute; it "sows' confusion among consumers, taints the marketplace and diminishes faith in the sanctity of the trade." This public interest in preventing deception and protecting consumers "imparts a colour of immediacy to the reliefs sought."

Based on this reasoning, the Supreme Court concluded that insisting on pre-institution mediation in a situation of ongoing infringement would be anomalous, as it would "render the plaintiff remediless, allowing the infringer to continue to profit under the protection of procedural formality." The Novenco judgment thus provides a vital clarification for a significant category of commercial disputes. It establishes that for continuing torts like IP infringement, the ongoing nature of the harm itself is a powerful indicator of urgency, and courts should be slow to reject a plaintiff on the ground of delay alone.

7. Conclusion

The judicial interpretation of Section 12A of the Commercial Courts Act, 2015, has been a compelling journey from ambiguity to clarity. In a relatively short span, the Indian judiciary, led by the Supreme Court, has constructed a robust and nuanced framework for a provision that is central to the modern architecture of commercial dispute resolution.

The jurisprudence, culminating in the quartet of Patil Automation, Yamini Manohar, , Dhanbad Fuels, and Novenco Building has firmly established a set of guiding principles. First, the mandate for pre-institution mediation is absolute and non-negotiable for suits not contemplating urgent relief. Second, the consequence of non-compliance for suits filed post-August 2022 is the certain rejection of the plaint. Third, the exception for "urgent interim relief" is not a loophole to be exploited but a narrow gateway guarded by judicial scrutiny, requiring specific and credible pleadings of imminent harm, assessed from the plaintiff's standpoint. Fourth, in cases of continuing wrongs like IP infringement, the persistence of the harm itself constitutes a form of inherent urgency that can justify bypassing mediation. Finally, a pragmatic and equitable solution has been devised for legacy cases, ensuring that the spirit of mediation is honoured without unfairly penalizing litigants from the pre-Patil Automation era.

This body of case law reflects a mature judicial balancing act. It upholds the clear legislative intent to promote ADR and reduce the judicial caseload, while simultaneously safeguarding the fundamental right of access to justice in genuinely urgent situations. As this framework is consistently applied, Section 12A of the Act is poised to fulfill its intended role as a vital instrument in making India a more efficient and attractive forum for commercial dispute resolution.

Footnotes

1 Hon'ble Supreme Court of India in Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited (2022) 10 SCC 1

2 Ganga Taro Vazirani v. Deepak Raheja (2021) SCC OnLine Bom 3124

3 Deepak Raheja v. Ganga Taro Vazirani (2021) SCC OnLine Bom 3124

4 Yamini Manohar v. T.K.D. Keerthi 2023 SCC OnLine SC 1382

5 Lakhani Realty LLP v. Kalina Vihar Darshan Co-operative Housing Society (2025): BHC-OS:19816 (Bombay High Court)

6 Dhanbad Fuels Private Limited v. Union of India and Another (2025) INSC 696

7 Novenco Building and Industry A/S v. Xero Energy Engineering Solutions Private Ltd. & Anr.(2025 INSC 1256)

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