Firms Directly Moving The Court Will Face Junked Plea: SC

Suggesting companies to go for mediation before moving the courts, the Supreme Court said that if companies involved in disputes do not follow the pattern, the matter will automatically be rejected. The development assumes significance as in cases of disputes companies are required to do the same under Section 12A of the Commercial Courts Act 2015. However, they rarely do so and directly approach courts.

The statutory pre-litigation mediation contemplated under Section 12A of the Commercial Courts Act, 2015 as amended by the Amendment Act of 2018 is mandatory and the courts can reject the plaints if the procedure as contemplated by the provision is not complied with, a Bench comprising Justices KM Joseph and Hrishikesh Roy held.

According to the judges, mediation can become a potent alternate dispute resolution device. The chief advantage and highlight of mediation is that if successful, it is a win-win for all sides, the judgment said. However, it said that there are a few indispensable requirements like existence of adequate infrastructural facilities and availability of trained and skilled mediators.

“We declare that Section 12A of the Act is mandatory and hold that any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11. We, however, make this declaration effective from August 20, 2022 so that concerned stakeholders become sufficiently informed. … Finally, if the plaint is filed violating Section 12A after the jurisdictional High Court has declared Section 12A mandatory also, the plaintiff will not be entitled to the relief,” the apex court said.

“If the parties were to exhaust mediation under Section 12A, the opposite side may be, if mediation is successful, saved from the ordeal of a proceeding in court, which, undoubtedly, would entail costs, whereas, the mediation costs is minimal, and what is more, a one-time affair, and still further, to be shared equally between the parties. Each time the plaintiff is compelled to go in for mediation under Section 12A, there is a ray of hope that the matter may get settled,” it stated.

What Does Section 12A Say?

According to Section 12A, any suit, which does not contemplate any urgent interim relief under the Commercial Courts Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government. Such mediation has to be done before the authorities authorized by the Central Government.

The provisions gives the authorities a three-month deadline for the completion of mediation, which can be further extended by two months with the consent of the parties. The mediation period will not be counted for the purposes of limitation under the Limitation Act.