Mandatory ‘Pre Institution Mediation’ In Commercial Suits

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. This is the text of Section 12A of the Commercial Courts Act 2015.

Literally, this means, the plaintiff can institute a suit before a Commercial Court only after exhausting remedy of pre-institution mediation. Only exception is given to a suit which does not contemplate urgent interim relief. In  Patil Automation Private Limited and Ors. v. Rakheja Engineers Private Limited: 2022 SCC OnLine SC 1028, the Supreme Court declared that Section 12A is mandatory and that any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11 CPC.

In  Chandra Kishore Chaurasia v. R A Perfumery Works Private Ltd, 2022 SCC OnLine Del 3529, the Delhi High Court observed that, when the plaintiff has sought urgent interim reliefs, it is not necessary for him to have exhausted the remedy of pre-institution mediation as contemplated under Section 12A(1). It is implicit that it is only the plaintiff, that can contemplate the relief that it seeks in a suit, the court said.

However, in our view, there is a danger in laying down such a simple test which enables a plaintiff to maintain a suit without exhausting the mandatory pre-institution mediation just by including a prayer seeking urgent interim relief. Thus, the Calcutta High Court in a recent judgment ( Odisha Slurry Pipeline Infrastructure Ltd. & Anr. V. IDBI Bank Ltd) held that the court, in such situations, can apply its mind and enquire into whether the circumstances for grant of urgent interim relief has been made out by the plaintiff through pleadings. “Any other Course adopted by the Court would give a free handle to an unscrupulous plaintiff to override the mandatory provision of Section 12A by incorporating a relief which cannot be said to be an urgent interim reliefs nor the facts and circumstances or the cause of action pleaded in the plaint entitles the plaintiff to such relief on a bare reading of the averments made in the plaint. Often an application for urgent interim reliefs are filed in the suit and ultimately if the Court may not find any justification in passing such interim relief yet it would sub-serve the motive and the purpose of avoiding the pre-institution mediation as mandated under Section 12A of the Code.”, the High Court observed.

The Madras High Court, in this context, [K. Varathan vs. Mr. Prakash Babu Nakundhi Reddy] laid down certain tests/parameters (illustrative, not exhaustive) to be looked into to see if a relief was an “urgent interim relief”:

(a)whether the prayer for interim relief is a product of profound thinking carefully about the possibility of the happening;

(b)whether the matter demands prompt action and that promptitude is of such nature that exhausting the remedy of pre institution mediation without any intervention in the mean time can lead to a irreversible situation, i.e., a situation where one cannot put the clock back;

(c)where the urgency is of plaintiff’s own doing, if that be so the plaintiff cannot take advantage of its own doing;

(d)high standard is required to establish the requirement of this prompt action (urgency);

(e)plaintiff should be on fair ground in urging urgency and an interim measure;

(f)actual or apprehended wrong or injury should be so imminent that the plaintiff should be able to satisfy the court that plaintiff should not be made to stand and suffer the same.

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