Introduction
Since its introduction by way of an amendment in 2018, Section 12A of Commercial Courts Act, 2015 (Act) has garnered significant attention, specifically regarding the mandatory requirement for pre-institution mediation. Further a question arose as to whether suits instituted without recourse to mandatory pre-institution mediation ought to be rejected upon an application being filed under Order VII Rule 11 of the Code of Civil Procedure, 1908[ᶦ](CPC). While some considered the statutory requirement under Section 12A to be mandatory, others considered it to be directory.
The Supreme Court of India in the case of Patil Automation Private Limited and Ors. v. Rakheja Engineers Private Limited (Patil Automation Case), settled this debate by holding that Section 12A of the Act mandates pre-institution mediation and that any suit violating this mandate must be rejected unless it contemplates urgent interim relief (our views on the same can be accessed here).
In the present article, we discuss a recent case of Yamini Manohar v. T K D Keerthi where the Supreme Court provided further clarification on the scope of Section 12A of the Act and spelt out the scope of investigation to be undertaken by the commercial courts in case of pleading of urgent interim relief.
Facts
In the present case, the petitioner filed an application under Order VII Rule 11 of CPC seeking rejection of suit on the ground that there was no application filed by the respondent seeking exemption under Section 12A of the Act. However, the Delhi High Court rejected this application, and the order was subsequently challenged before the Supreme Court.
Decision of the Supreme Court
The Supreme Court relied on the Patil Automation Case and made the following observations:
(i) When a plaint is filed under the Act with a prayer for an urgent interim relief, the commercial court should examine the nature, subject matter, cause of action, and the prayer for interim relief in the suit.
(ii) No specific application needs to be filed to waive the process of pre-litigation mediation and courts can consider the matter on the basis of pleadings filed in the suit.
(iii) The prayer for urgent interim relief should not be a farce to escape the statutory provision of Section 12A. Further, facts and circumstances of the case have to be considered from the plaintiff’s point of view. Non-grant of interim relief at the ad-interim stage (registration / admission and examination), will not justify dismissal of the suit since interim relief may be granted after issuance of notice in suitable cases.
(iv) The suit also cannot be dismissed post arguments, as interim relief may only be denied on merits and on examination of three principles, namely: (a) prima facie case, (b) irreparable harm and injury, and (c) balance of convenience.
In the present case, the Supreme Court noted that an urgent interim relief had been prayed for and that the plaint ‘contemplated’ an urgent interim relief. Therefore, it held that the order of the Delhi High Court rejecting the application under Order VII, Rule 11 of the CPC was correct and dismissed the challenge.
Our thoughts
In commercial disputes, it is vital for parties to mediate earnestly and in good faith to reach an amicable settlement. It should be noted that the Mediation Act, 2023 received the presidential assent on 15 September 2023 with the aim to promote and regulate mediation as primary means of resolving disputes (our FAQ’s on the same can be accessed here). The Mediation Act, 2023 has incorporated provisions related to the Act which mandates that suits cannot be initiated without first undergoing pre-institution mediation, except when urgent interim relief is needed. Thus, the law on mediation is constantly evolving in India and may soon make a visible difference if the stakeholders implement the law in a purposeful manner.
Authors: Renjith Nair and Altamash Qureshi
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[i] Order VII, Rule 11 of CPC provides the following grounds for rejection of a plaint: (i) non-disclosure of cause of action; (ii) under-valuation of relief claimed; (iii) where the relief claimed is properly valued but the plaint is on insufficiently stamped paper; (iv) suit barred by law; (v) suit not filed in duplicate; and (vi) non-compliance with Order VII, Rule 9 of CPC