Must for companies to try mediation before moving courts in commercial litigation: SC

The Supreme Court on Wednesday made it mandatory for the companies to go for mediation before moving the courts, in a significant decision impacting all future commercial litigations in the country

The top court said that suits filed by those violating the mandate of Section 12A of the Commercial Courts Act 2015 will be liable to be rejected at the threshold.

This mandate will be effective prospectively from August 20.

“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,” a bench of Justices K M Joseph and Hrishikesh Roy said.

The court held that 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 below can reject the plaints if the procedure as contemplated by the provision is not complied with.

"There was a pressing need to decongest the trial courts, in commercial matters in particular, as they bear the brunt of docket explosion. It is noteworthy that Section 12A provides for a bypass and a fast-track route without for a moment taking the precious time of a court," the bench said.

The bench further noted that Section 12A provided for pre-institution mediation only in suits, which do not contemplate any urgent interim relief.

"Therefore, pre-institution mediation has been mandated only in a class of suits. In suits which contemplate urgent interim relief, the law-giver has carefully vouch-safed immediate access to justice as contemplated ordinarily through the courts. The carving out of a class of suits and selecting them for compulsory mediation, harmonises with the attainment of the object of the law. The load on the Judges is lightened. They can concentrate on matters where urgent interim relief is contemplated and, on other matters, which already crowd their dockets,” the bench added.

The top court also pointed out mediation can become a potent alternate dispute resolution device and it is a win-win for all sides, if the mediation is successful.

However, there are a few indispensable requirements like existence of adequate infrastructural facilities and availability of trained and skilled mediators, the bench added.