Pre-institution mediation under Section 12A of Commercial Courts Act mandatory: Supreme Court

In a significant ruling, the Supreme Court of India on Wednesday held that pre- institution mediation under Section 12A of the Commercial Courts Act 2015 is mandatory in nature and suits not adhering to it will be liable to be rejected under Order VII Rule 11 of the Code of Civil Procedure (CpC) [Patil Automation Pvt Ltd vs Rakhija Engineers]..A bench of Justices KM Joseph and Hrishikesh Roy held that any reluctance on the part of the Court to give Section 12A a mandatory interpretation would result in defeating the object and intention of the parliament."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. This power can be exercised even suo moto by the court as explained earlier in the judgment," the Court said.The fact that the mediation can become a non-starter cannot be a reason to hold the provision not mandatory, the Court added..However, the Court clarified that this ruling will come into effect from August 20, 2022, so that concerned stakeholders are sufficiently informed..Further, the apex court directed that in case plaints have been already rejected and no steps have been taken within the period of limitation, the matter cannot be reopened on the basis of this declaration.The Court also stated that if the order of rejection of the plaint has been acted upon by filing a fresh suit, "the declaration of prospective effect will not avail the plaintiff." .The bench also said that if a plaint is filed violating Section 12A after the jurisdictional High Court has declared Section 12A mandatory, the plaintiff will not be entitled to the relief..The moot question in the case before Supreme Court was whether the statutory pre-litigation mediation contemplated under Section 12A of the Commercial Courts Act, 2015 is mandatory and whether the courts below erred in not allowing the applications filed under Order VII Rule 11 of the CPC to reject the plaints filed without complying with the procedure under Section 12A of the Act..Section 12A (1) reads as follows:Pre-Institution Mediation and Settlement—(1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of preinstitution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government..The top court in its ruling noted that mediation offers a completely new approach to attaining the goal of justice. "The realisation has been growing over a period of time, that formal court rooms, long drawn-out proceedings, procedural wrangles, mounting and crippling costs, delay, which never wanes but only increases with the day that at least, in certain categories of cases, mediation can be the way out," the Court opined..The two-judge bench said that it can no longer afford to remain in the past and a clean break with the past is urgently needed and that what was a mere writing on the wall as early as in the last decades of the previous century has become the harsh reality."It is important that the courts also adapt to the changing times. At least when the parliament has decided to move ahead, it becomes the court’s duty not to greet it with undue scepticism. It becomes necessary to fulfil the intention of the parliament by realising the true role of judiciary," the Supreme Court stated. .Section 12A, the Court underlined, cannot be perceived as merely intended to deliver quicker justice and that it was introduced to produce a vital and significant effect on the very interest of the nation."A trained Mediator can work wonders. Mediation must be perceived as a new mechanism of access to justice," the top court said..The lead case was argued by advocates Ayush Negi, Saket Sikri along with Advocates Vishakha Upadhyaya, Pratibha Tripathi, Chaitanya Nikte, Himanshu Tyagi and Varnita Ojha..[Read Judgment]