-Abhianv Shrivastava & Nirmal Prasad
Mediation has been seen as an effective way of conflict resolution. Keeping in mind its progress, Section 12A of the Commercial Courts Act, 2015 (hereinafter referred to as “the Act”) has been added as a provision to resolve commercial disputes through pre-institution mediation before such cases are taken up by the courts. The Act was introduced to solve commercial disputes through establishment of specialised commercial courts, with an aim to increase the ease of doing business in India.
The establishment of commercial courts in India is widely seen as a stepping stone to bring about reform in the civil justice system in India. In the year 2003, the Seventeenth Law Commission of India took up the issue of setting up Commercial Divisions in High Courts and submitted its recommendations.[1] Section 12A of the Act provides parties with an alternate mechanism to resolve disputes by negotiating in the presence of a mediator.
Different High Courts have given varied interpretations of Section 12A. One such a case was of the Bombay High Court where the court held inter alia that the provision of pre-mediation institution under section 12A is procedural in nature and must be interpreted and applied in cases keeping in mind the doctrine of substantial compliance. The court held that engaging in mediation is merely procedural in nature and does not impose any absolute obligation on the parties to engage in any sort of mediation. The Division Bench of the Bombay High Court in the appeal filed by Defendant, held that provisions of the act should be strictly interpreted with an aim to ensure speedy and timely disposal of commercial cases hence in order to avoid any delay liberal interpretation by courts must be avoided. The division bench categorised commercial disputes mainly into two categories, one where urgent relief is demanded and second where no urgent relief is demanded. In cases where urgent relief has been requested by the plaintiff the parties, then there exists the liberty to approach the court directly for resolving the dispute. Since in this case urgent relief has not been requested to the court by the petitioner therefore the option of pre mediation institution must be exhausted by the parties.
Additionally, other High Courts have interpreted Section 12A of the Act as mandatory. The single judge bench of the Calcutta High court in Laxmi Polyfab v. Eden Realty[2] observed that a plaintiff does not have a conditional right to approach a commercial court or a commercial division of a high court in case of a commercial dispute falling within the ambit of the Commercial Courts Act without exhausting the option of pre-institution mediation.
Thereafter, the Calcutta High Court in the case Dredging and Desiltation Company Pvt. Ltd. v. Mackintosh Burn and Northern Consortium[3] observed that the purpose of the Act is to accelerate the disposal of commercial disputes. Such an object can be achieved only when pre institution mediation is compulsorily imposed on the parties. The given time from for the mediation is sufficient to resolve the dispute between the parties in a successful way which cannot be efficiently and effectively done by the courts via adjudication within the same timeframe and solve the commercial dispute. Accordingly, in both cases, it was held that the provisions of Section 12A of the Act are mandatory in nature.
A similar view has been expressed by the Allahabad High Court in Awasthi Motors v. Managing Director M/s. Energy Electricals Vehicle and Another[4] where the court laid emphasis on the mandatory imposition of pre institution mediation under section 12A of the commercial courts act to ensure efficient disposal of commercial disputes.
Contrary to the judgements given by the aforementioned High Courts, the Madras and Telangana High court have given a different interpretation of section 12A via its judgements. In Shahi Exports Private Limited v. Goldstar Line Limited & Others[5], the Madras High Court observed that the right to justice, which is a constitutional right, cannot be denied or deprived merely because the parties resorted not resolve disputes through mediation and approached the courts directly. It was noted that the Court is not a substitute to alternative dispute redressal mechanisms and the use of the word ‘shall’ in Rule 3(1) of Commercial Courts, (Pre-Institution Mediation and Settlement) Rule, 2019 (“Commercial Courts Rules”) was taken into consideration. Keeping in mind an agreeable interpretation of Section 12A of the Act with the Rule 3 (1) of the Commercial Courts Rules, the Court concluded that Section 12A of the Commercial Courts Act, was not a mandatory provision. A person approaching the for seeking resolution of commercial disputes could not be denied the doors of justice for directly approaching the Court merely because the party failed to explore an alternative option of mediation.
In the case of M/s M.K. Food Products v. M/s S.H. Food Products,[6] the lower court declined the plaintiff a chance to take the case forward in the court as the parties did not engage in pre-institution mediation and the case filed did not demand any urgent relief. The suit was concerned with an injunction on copyright infringement. The Telangana High Court in this case observed that a suit of such a nature would fall under the category of suit contemplating urgent interim relief and the plaint should not have been rejected on the ground of non-exhaustion of pre-institution mediation.
Considering the fact that the interpretations made by different High courts are conflicting in nature, this issue with respect to the correct interpretation of section 12A should be resolved by the Supreme Court. Pre-institution mediation was introduced with an aim to increase the ease of doing business in India hence giving a boost to the economy. Mediation plays a crucial role in reducing the burden on the judiciary as before these commercial disputes are taken up by the court, the parties will go for mediation. Pre-institution mediation is a policy that has been introduced by the government, therefore it is the duty of the courts to act within the domain of their jurisdiction and must not interfere in the policies that are being legislated upon by the parliament.
Furthermore, the legislature has anyway carved out the exception in cases where urgent interim reliefs are sought hence striking a balance between rigidity and flexibility making sure that no person who is in urgent need of relief is not denied justice. In the case of GSD Constructions Pvt. Ltd v Balaji Febtech Engineering[7], the court held that the plaintiff was running against time and seeking urgent interim relief hence, he doesn’t need to exhaust the option of pre-institution mediation. Thus, the courts have dispensed with pre-institution mediation in such cases where making the party go through mediation would result in an irreparable loss; irreparable loss being one of the essential elements for the grant of an injunction. It has been submitted that there is no quarrel with the proposition that the right to justice cannot and should not be denied to anyone, however, sending parties to compulsory mediation in no way denies that right since parties can always approach the court in case such mediation fails. The policy of pre institution mediation has been made by the government for reducing burden on the judiciary as well as ensuring that justice is not denied. Hence the courts should abide by the strict interpretation of section12A without any loophole for ambiguity.
[1] Law Commission of India, “Proposals for Constitution of Hi-tech Fast Track Commercial Divisions in High Courts”, Report No. 188 , available at https://lawcommissionofindia.nic.in/reports/188th%20report.pdf.
[2] 2021 SCC OnLine Cal 1457.
[3] 2021 SCC OnLine Cal 1458.
[4] 2021 SCC OnLine All 256.
[5] Judgment dated 17 August 2021 passed by The Honourable Dr. Justice G. Jayachandran in A.No.35 of 2021 in C.S.No.669 of 2019.
[6] CIVIL REVISION PETITION No.3690 of 2018.
[7] MANU/MP/0451/2019.
Abhinav Shrivastava is Co-Founding Partner of GSL Chambers and an Advocate on Record of Supreme Court of India. Nirmal Prasad is an Associate with GSL Chambers.
The establishment of commercial courts in India is widely seen as a stepping stone to bring about reform in the civil justice system in India. In the year 2003, the Seventeenth Law Commission of India took up the issue of setting up Commercial Divisions in High Courts and submitted its recommendations.[1] Section 12A of the Act provides parties with an alternate mechanism to resolve disputes by negotiating in the presence of a mediator.
Different High Courts have given varied interpretations of Section 12A. One such a case was of the Bombay High Court where the court held inter alia that the provision of pre-mediation institution under section 12A is procedural in nature and must be interpreted and applied in cases keeping in mind the doctrine of substantial compliance. The court held that engaging in mediation is merely procedural in nature and does not impose any absolute obligation on the parties to engage in any sort of mediation. The Division Bench of the Bombay High Court in the appeal filed by Defendant, held that provisions of the act should be strictly interpreted with an aim to ensure speedy and timely disposal of commercial cases hence in order to avoid any delay liberal interpretation by courts must be avoided. The division bench categorised commercial disputes mainly into two categories, one where urgent relief is demanded and second where no urgent relief is demanded. In cases where urgent relief has been requested by the plaintiff the parties, then there exists the liberty to approach the court directly for resolving the dispute. Since in this case urgent relief has not been requested to the court by the petitioner therefore the option of pre mediation institution must be exhausted by the parties.
Additionally, other High Courts have interpreted Section 12A of the Act as mandatory. The single judge bench of the Calcutta High court in Laxmi Polyfab v. Eden Realty[2] observed that a plaintiff does not have a conditional right to approach a commercial court or a commercial division of a high court in case of a commercial dispute falling within the ambit of the Commercial Courts Act without exhausting the option of pre-institution mediation.
Thereafter, the Calcutta High Court in the case Dredging and Desiltation Company Pvt. Ltd. v. Mackintosh Burn and Northern Consortium[3] observed that the purpose of the Act is to accelerate the disposal of commercial disputes. Such an object can be achieved only when pre institution mediation is compulsorily imposed on the parties. The given time from for the mediation is sufficient to resolve the dispute between the parties in a successful way which cannot be efficiently and effectively done by the courts via adjudication within the same timeframe and solve the commercial dispute. Accordingly, in both cases, it was held that the provisions of Section 12A of the Act are mandatory in nature.
A similar view has been expressed by the Allahabad High Court in Awasthi Motors v. Managing Director M/s. Energy Electricals Vehicle and Another[4] where the court laid emphasis on the mandatory imposition of pre institution mediation under section 12A of the commercial courts act to ensure efficient disposal of commercial disputes.
Contrary to the judgements given by the aforementioned High Courts, the Madras and Telangana High court have given a different interpretation of section 12A via its judgements. In Shahi Exports Private Limited v. Goldstar Line Limited & Others[5], the Madras High Court observed that the right to justice, which is a constitutional right, cannot be denied or deprived merely because the parties resorted not resolve disputes through mediation and approached the courts directly. It was noted that the Court is not a substitute to alternative dispute redressal mechanisms and the use of the word ‘shall’ in Rule 3(1) of Commercial Courts, (Pre-Institution Mediation and Settlement) Rule, 2019 (“Commercial Courts Rules”) was taken into consideration. Keeping in mind an agreeable interpretation of Section 12A of the Act with the Rule 3 (1) of the Commercial Courts Rules, the Court concluded that Section 12A of the Commercial Courts Act, was not a mandatory provision. A person approaching the for seeking resolution of commercial disputes could not be denied the doors of justice for directly approaching the Court merely because the party failed to explore an alternative option of mediation.
In the case of M/s M.K. Food Products v. M/s S.H. Food Products,[6] the lower court declined the plaintiff a chance to take the case forward in the court as the parties did not engage in pre-institution mediation and the case filed did not demand any urgent relief. The suit was concerned with an injunction on copyright infringement. The Telangana High Court in this case observed that a suit of such a nature would fall under the category of suit contemplating urgent interim relief and the plaint should not have been rejected on the ground of non-exhaustion of pre-institution mediation.
Considering the fact that the interpretations made by different High courts are conflicting in nature, this issue with respect to the correct interpretation of section 12A should be resolved by the Supreme Court. Pre-institution mediation was introduced with an aim to increase the ease of doing business in India hence giving a boost to the economy. Mediation plays a crucial role in reducing the burden on the judiciary as before these commercial disputes are taken up by the court, the parties will go for mediation. Pre-institution mediation is a policy that has been introduced by the government, therefore it is the duty of the courts to act within the domain of their jurisdiction and must not interfere in the policies that are being legislated upon by the parliament.
Furthermore, the legislature has anyway carved out the exception in cases where urgent interim reliefs are sought hence striking a balance between rigidity and flexibility making sure that no person who is in urgent need of relief is not denied justice. In the case of GSD Constructions Pvt. Ltd v Balaji Febtech Engineering[7], the court held that the plaintiff was running against time and seeking urgent interim relief hence, he doesn’t need to exhaust the option of pre-institution mediation. Thus, the courts have dispensed with pre-institution mediation in such cases where making the party go through mediation would result in an irreparable loss; irreparable loss being one of the essential elements for the grant of an injunction. It has been submitted that there is no quarrel with the proposition that the right to justice cannot and should not be denied to anyone, however, sending parties to compulsory mediation in no way denies that right since parties can always approach the court in case such mediation fails. The policy of pre institution mediation has been made by the government for reducing burden on the judiciary as well as ensuring that justice is not denied. Hence the courts should abide by the strict interpretation of section12A without any loophole for ambiguity.
[1] Law Commission of India, “Proposals for Constitution of Hi-tech Fast Track Commercial Divisions in High Courts”, Report No. 188 , available at https://lawcommissionofindia.nic.in/reports/188th%20report.pdf.
[2] 2021 SCC OnLine Cal 1457.
[3] 2021 SCC OnLine Cal 1458.
[4] 2021 SCC OnLine All 256.
[5] Judgment dated 17 August 2021 passed by The Honourable Dr. Justice G. Jayachandran in A.No.35 of 2021 in C.S.No.669 of 2019.
[6] CIVIL REVISION PETITION No.3690 of 2018.
[7] MANU/MP/0451/2019.
Abhinav Shrivastava is Co-Founding Partner of GSL Chambers and an Advocate on Record of Supreme Court of India. Nirmal Prasad is an Associate with GSL Chambers.
