On May 15, 2025, the Supreme Court of India issued a significant ruling concerning the mandatory nature of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015. This provision mandates that, unless a suit seeks urgent interim relief, parties must exhaust the remedy of pre-institution mediation before instituting a commercial suit. The Court's decision aimed to address the procedural implications for suits filed before the provision's enforcement date.
In the landmark case of Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022), the Supreme Court had declared that Section 12A is mandatory, and non-compliance would result in the rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure. However, this declaration was given prospective effect from August 20, 2022, to avoid disrupting pending cases.
The recent judgment addressed the situation of suits filed before this date without adhering to the pre-institution mediation requirement. The bench, comprising Justices JB Pardiwala and R. Mahadevan, recognized that the strict application of Section 12A to such suits could lead to unintended consequences, especially considering the evolving infrastructure for mediation at the time of filing. Therefore, the Court directed that these suits be kept in abeyance and referred to time-bound mediation, allowing parties an opportunity to resolve disputes amicably before proceeding with litigation.
The Court emphasized that this approach aligns with the legislative intent behind Section 12A, which seeks to promote alternative dispute resolution methods and reduce the burden on courts. By facilitating mediation, the judiciary aims to decongest court dockets and encourage settlements, thereby enhancing the efficiency of the legal system.
This directive underscores the judiciary's commitment to fostering a more collaborative and less adversarial legal environment in commercial disputes. It also highlights the importance of aligning procedural requirements with the practical realities of dispute resolution, ensuring that legal provisions serve their intended purpose without causing undue hardship to litigants.
In conclusion, the Supreme Court's ruling reflects a balanced approach to enforcing mandatory pre-institution mediation, considering both the need for efficient dispute resolution and the practical challenges faced by parties in earlier filed suits. This decision is poised to have a lasting impact on the landscape of commercial litigation in India.
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