Key points
- Section 12A requires a plaintiff to exhaust pre-institution mediation before filing a commercial suit, unless the suit seeks urgent interim relief.
- The mediation runs through the Delhi Legal Services Authority and must be completed within three months, extendable by two months with consent.
- The period spent in mediation is excluded from limitation.
The requirement
The Commercial Courts Act, 2015 applies to commercial disputes of a specified value of three lakh rupees or more, covering most business contracts, banking, construction, IP, sale of goods and similar disputes. Section 12A, introduced in 2018, bars institution of a commercial suit that does not contemplate urgent interim relief unless the plaintiff has first exhausted pre-institution mediation. In Patil Automation v. Rakheja Engineers (2022) the Supreme Court held the provision mandatory and directed that non-compliant plaints be rejected under Order VII Rule 11.
The urgent relief exception
A plaintiff seeking urgent interim relief, for example an injunction against encashment of a bank guarantee or against infringement, can file directly. Courts examine whether the urgency is genuine and not a device to avoid mediation, following Yamini Manohar v. T.K.D. Keerthi (2023).
The process in Delhi
The plaintiff applies to the Delhi Legal Services Authority with the prescribed form and fee. Notice goes to the opposite party; if they do not participate, a non-starter report is issued and the suit can be filed. If mediation proceeds, it must conclude within three months, extendable by two. A settlement has the status of an arbitral award on agreed terms under Section 30(4) of the Arbitration Act.
Planning
Because limitation is suspended during mediation, the process does not cost time in the legal sense, but it does delay the suit by two to five months. Where a claim is close to being time-barred, the application should be filed well before expiry.
Frequently asked questions
Does Section 12A apply to counter-claims?
The provision applies to institution of a suit by a plaintiff; courts have generally not required a defendant to mediate before filing a counter-claim.
What if the other side refuses to mediate?
The Authority issues a report recording that mediation could not proceed, and the suit can be filed with that report.
Related practice area: Commercial Litigation & Arbitration
This article is for general information and does not constitute legal advice. Laws, rules and limitation periods change and depend on the facts; please take advice on your own situation before acting. Reading this article does not create a lawyer-client relationship with Akhtars Legalitarian.