Commercial
Courts Act- Invocation of section 12 A IS mandatory for counter claim?
The
Commercial Courts Act 2015 (In short referred to as “CCA”) has its own rigour
and with a view to ensure speedy trial in such cases, the compliance of its
terms is perceived to be mandatory. The aim and object of the CCA is too
obvious to need any further elucidation herein. The Section 12 A of CCA entails
mandate of pre-litigation mediation, in case, the suit contemplated to be
preferred does not seek urgent relief. Even the urgent relief sought to be
prayed for, should be emanating from the plaint as such and it should not
merely be a ritualistic exercise, if a plaintiff seeks to extricate itself from
the rigour of Section 12 A of CCA 2015. In all cases, where no urgent relief is
prayed for, the invocation of section 12 A of CCA is held to be mandatory. The
underlying object, of course, in the context is to explore the possibility of
the prospective resolution of dispute. However, interesting situation herein as
emerged is what if the counter claim is filed by the defendant in a commercial
suit? Whether a counter claim which is to be registered as a separate suit by
the mandate of law, in the context of section 12 A of CCA, whether at that
stage, also, the pre-litigation mediation shall be compulsory? Or, the requirement
of pre-litigation mediation, as contained in section 12 A of CCA shall only
relate to filing of a suit and not to a counter claim?
Statement of
Objects and Reasons
The
Statement of Objects and Reasons of the Amending Act which brought into
existence section 12-A of Commercial Courts Act 2015.
“Statement
of Objects and Reasons. —The Commercial Courts,
Commercial Division and Commercial Appellate Division of High Courts Act, 2015
was enacted for the constitution of Commercial Courts, Commercial Division and
Commercial Appellate Division in the High Courts for adjudicating commercial
disputes of specified value and for matters connected therewith or incidental
thereto.
The
global economic environment has since become increasingly competitive and to
attract business at international level, India needs to further improve its
ranking in the World Bank “Doing Business Report” which, inter alia,
considers the dispute resolution environment in the country as one of the
parameters for doing business. Further, the tremendous economic development has
ushered in enormous commercial activities in the country including foreign
direct investments, public private partnership, etc. which has prompted
initiating legislative measures for speedy settlement of commercial disputes,
widen the scope of the courts to deal with commercial disputes and facilitate
ease of doing business. Needless to say that early resolution of commercial
disputes of even lesser value creates a positive image amongst the investors
about the strong and responsive Indian legal system.
It
is, therefore, proposed to amend the Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015.
As
Parliament was not in session and immediate action was required to be taken to
make necessary amendments in the Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015, to further improve
India's ranking in the “Doing Business Report”, the President promulgated the
Commercial Courts, Commercial Division and Commercial Appellate Division of
High Courts (Amendment) Ordinance, 2018 on 3-5-2018. It is proposed to
introduce the Commercial Courts, Commercial Division and Commercial Appellate
Division of High Courts (Amendment) Bill, 2018 to replace the Commercial
Courts, Commercial Division and Commercial Appellate Division of High Courts
(Amendment) Ordinance, 2018, which inter alia, provides for the following
namely—
(i)
to reduce the specified value of commercial disputes from the existing one
crore rupees to three lakh rupees, and to enable the parties to approach the
lowest level of subordinate courts for speedy resolution of commercial
disputes;
(ii)
to enable the State Governments, with respect to the High Courts having
ordinary original civil jurisdiction, to constitute commercial courts at
District Judge level and to specify such pecuniary value of commercial disputes
which shall not be less than three lakh rupees and not more than the pecuniary
jurisdiction of the district courts;
(iii)
to enable the State Governments, except the territories over which the High
Courts have ordinary original civil jurisdiction, to designate such number of
Commercial Appellate Courts at district judge level to exercise the appellate
jurisdiction over the commercial courts below the district judge level;
(iv)
to enable the State Governments to specify such pecuniary value of a commercial
dispute which shall not be less than three lakh rupees or such higher value,
for the whole or part of the State; and
(v)
to provide for compulsory mediation before institution of a suit, where no
urgent interim relief is contemplated and for this purpose, to introduce the
pre-institution mediation and settlement mechanism and to enable the Central
Government to authorise the authorities constituted under the Legal Services
Authorities Act, 1987 for this purpose.
Commercial Courts (Pre-Institution Mediation and
Settlement) Rules, 2018
In
conjunction with the provision as contained in Section 12 A of CCA 2015, the
rules framed under the CCA 2015 may also have to be referred to for true
import.
Rule 3. Initiation of mediation
process.—
(1)
A party to a commercial dispute may make an application to the Authority as per
Form 1 specified in Schedule I, either online or by post or by hand, for
initiation of mediation process under the Act along with a fee of one thousand
rupees payable to the Authority either by way of demand draft or through
online;
(2)
The Authority shall, having regard to the territorial and pecuniary
jurisdiction and the nature of commercial dispute, issue a notice, as per Form
2 specified in Schedule I through a registered or speed post and electronic
means including e-mail and the like to the opposite party to appear and give
consent to participate in the mediation process on such date not beyond a
period of ten days from the date of issue of the said notice.
(3)
Where no response is received from the opposite party either by post or by
e-mail, the Authority shall issue a final notice to it in the manner as
specified in sub-rule (2).
(4)
Where the notice issued under sub-rule (3) remains unacknowledged or where the
opposite party refuses to participate in the mediation process, the Authority
shall treat the mediation process to be a non starter and make a report as per
Form 3 specified in the Schedule I and endorse the same to the applicant and
the opposite party.
(5)
Where the opposite party, after receiving the notice under sub-rule (2) or (3)
seeks further time for his appearance, the Authority may, if it thinks fit, fix
an alternate date not later than ten days from the date of receipt of such
request from the opposite party.
(6)
Where the opposite party fails to appear on the date fixed under sub rule (5),
the Authority shall treat the mediation process to be a non starter and make a
report in this behalf as per Form 3 specified in Schedule I and endorse the
same to the applicant and the opposite party.
(7)
Where both the parties to the commercial dispute appear before the Authority
and give consent to participate in the mediation process, the Authority shall
assign the commercial dispute to a mediator and fix a date for their appearance
before the said mediator.
(8)
The Authority shall ensure that the mediation process is completed within a
period of three months from the date of receipt of application for
pre-institution mediation unless the period is extended for further two months
with the consent of the applicant and the opposite party.
As
regards the definition of “opposite party” the same finds mention in Rule 2(g)
of the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.
The Opposite Party means a party against whom relief is sought in a
commercial dispute‖. Palpably, the
scheme of the Rules and the intent of the Legislature was never to oust the
requirement of pre-institution mediation and settlement for any party and
wherever there is a commercial dispute, the concerned applicant must initiate
mediation process against the “opposite party”
within the definition in Rule 2(g) in a procedure laid out in Rule 3 of the
Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.
The
Delhi High Court in a matter captioned as Aditya Birla Fashion and Retail
Ltd Vs Mrs Saroj Tandon CM(M) 459/2023 had the occasion to
comprehensively deal with the issue and adjudicated it. The original plaintiff before
the District Judge (Commercial Courts) had raised the plea of rejection of
plaint (counter claim), under Order VII Rule 11 of Code of Civil Procedure, for
want of mandatory compliance as envisaged under Section 12 A CCA 2015, on the
premise that a counter claim is registered as a suit and therefore, pre-institution
mediation shall be a must. The ld District Commercial Court, however, had
dismissed the plea of original plaintiff. The original plaintiff, thus, had
approached the high court under Article 227 of the Constitution of India, impugning
the said order, while contending that even in counter claim, the pre-litigation
mediation shall be obligatory.
Whether counter claim shall be treated as a separate
suit?
In
the context as set out above, it is imperative to reproduce the provisions as
contained in Order VIII Rule 6A CPC and that reads as under: ―
(1)
A defendant in a suit may, in addition to his right of pleading a set off under
rule 6, set up, by way of a counter claim against the claim of the plaintiff,
any right or claim in respect of a cause of action accruing to the defendant
against the plaintiff either before or after the filing of the suit, but,
before the defendant has delivered his defence or before the time limited for
delivering his defence has expired, whether such counterclaim is in the nature
of a claim for damages or not;
Provided
that such counter-claim shall not exceed the pecuniary limits of the
jurisdiction of the Court.
(2)
Such counter-claim shall have the same effect as a cross-suit so as to enable
the Court to pronounce a final judgment in the same suit, both on the original
claim and on the counter-claim. (3) The plaintiff shall be at liberty to file a
written statement in answer to the counter-claim of the defendant within such
period as may be fixed by the Court.
(4)
The counter claim shall be treated as a plaint and governed by the rules
applicable to plaints.
The
Order IV Rule 1 & 2 CPC requires every plaint to be registered by
the Court. The said provision reads as under: ―
1. Suit to be commenced by plaint
–
(1)
Every suit shall be instituted by presenting a plaint in duplicate to the Court
or such officer as it appoints in this behalf.
(2)
Every plaint shall comply with the rules contained in Orders VI and VII, so far
as they are applicable.
(3)
The plaint shall not be deemed to be duly instituted unless it complies with
the requirements specified in subrules (1) and (2)
2. Register of suits-
The
Court shall cause the particulars of every suit to be entered in a book to be
kept for the purpose and called the register of civil suits. Such entries shall
be numbered in every year according to the order in which the plaints are
admitted.
From
a bare perusal of the aforesaid provisions leaves no scope of doubt that a
counter-claim is also a suit in its individual and distinct capacity. No doubt,
a counter claim shall be predicated on the confines of order VIII Rule 6A CPC. Once,
a counter claim is lodged it has to be treated as a regular suit for all
practical and procedural purposes. In commercial suits also, it makes no
difference, since a counter claim shall continue to be a counter claim in a
nature of separate suit. What thus emerge is that any such counter-claim,
pertaining to a commercial dispute has to, mandatorily, follow the rules and
procedures prescribed for a commercial suit. Therefore, like any other
commercial suits, a counter claim shall also have to mee the stipulated rigors
scrupulously, as may be prescribed for any general commercial suit. Thus, no
exception could be carved out on a counter claim, simply because, it is a
counter-claim and therefore, it cannot be relieved of adhering to any such
legal obligation. What is also implicit is that once a counter claim is filed,
the rules and procedures for filing written statement, prescribed time-line for
filing the same, mode and manner of filing the same and the mandate of filing
requisite affidavit and all other stipulations such as declaration in the
nature of statement of truth and admission denial affidavits would also be
required to be adhered to, with no exception, by the defendants concerned in the counter claim. Needless to
say that the Commercial Courts Act 2015 and Civil Procedure Code (CPC) do not
contain any provision providing for any different treatment for such
counter-claim and even during the trial till its final adjudication, the rules shall
have to remain the same and similar for any plaint and counter claim, as the
case may be.
SECTION 12 A OF CCA
& ITS APPLICABILITY
As
it is made abundantly clear that there is a pre-requisite to abide by the
mandatory provision of Section 12-A of the Commercial Courts Act, prior to the
filing of the counter-claim and hence, the moot question is can it be
given a go bye?
Section 12-A of Commercial Courts Act
reads as under: -
12-A. 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 pre
institution mediation in accordance with such manner and procedure as may be
prescribed by rules made by the Central Government.
(2)
The Central Government may, by notification, authorise the Authorities
constituted under the Legal Services Authorities Act, 1987 (39 of 1987), for
the purposes of pre-institution mediation.
(3)
Notwithstanding anything contained in the Legal Services Authorities Act, 1987
(39 of 1987), the Authority authorised by the Central Government under
sub-section (2) shall complete the process of mediation within a period of
three months from the date of application made by the plaintiff under
sub-section (1):
Provided
that the period of mediation may be extended for a further period of two months
with the consent of the parties: Provided further that, the period during which
the parties remained occupied with the pre-institution mediation, such period
shall not be computed for the purpose of limitation under the Limitation Act,
1963 (36 of 1963).
(4)
If the parties to the commercial dispute arrive at a settlement, the same shall
be reduced into writing and shall be signed by the parties to the dispute and
the mediator.
(5)
The settlement arrived at under this section shall have the same status and
effect as if it is an arbitral award on agreed terms under sub-section (4) of
Section 30 of the Arbitration and Conciliation Act, 1996 (26 of 1996).‖
RELIANCE ON PATIL AUTOMATION
No
doubt, counter claimant shall have an indefeasible legal right to participate
in mediation‟ prior to the institution of
counter-claim. The Hon‟ble Supreme Court in Patil
Automation Private Limited v. Rakheja Engineers Private Limited: 2022 SCC
OnLine SC 1028 has, categorically held that the process is mandatory and
its non- compliance would entail rejection of the plaint. The relevant pars
read as under: -
“48.
In contrast, Section 12-A cannot be described as a mere procedural law.
Exhausting pre-institution mediation by the plaintiff, with all the benefits
that may accrue to the parties and, more importantly, the justice delivery
system as a whole, would make Section 12-A not a mere procedural provision. The
design and scope of the Act, as amended in 2018, by which Section 12-A was
inserted, would make it clear that Parliament intended to give it a mandatory
flavour. Any other interpretation would not only be in the teeth of the express
language used but, more importantly, result in frustration of the object of the
Act and the Rules….”
74.
It is noteworthy that Section 12-A provides for a bypass and a fast track route
without for a moment taking the precious time of a court. At this juncture, it
must be immediately noticed that the lawgiver has, in Section 12-A, 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. We say this for the reason that in suits which
contemplate urgent interim relief, the lawgiver has carefully vouchsafed
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.
83.
We may proceed on the basis that if the suit is brought without complying with
Section 12-A, where no urgent interim relief is sought, may not in one sense,
affect the legal right of the defendant. But this argument overlooks the larger
picture which is the real object of the law. This object is not to be viewed
narrowly with reference to the impact on the parties alone. This is apart from
also remembering that if the parties were to exhaust mediation under Section
12-A, the opposite side may be, if mediation is successful, saved from the
ordeal of a proceeding in court, which, undoubtedly, would entail costs,
whereas, the mediation costs, as we have noticed, is minimal, and what is more,
a one-time affair, and still further, to be shared equally between the parties.
Each time the plaintiff is compelled to go in for mediation under Section 12-A
there is a ray of hope that the matter may get settled. The chief advantage and
highlight of mediation is that it is a win-win for all sides, if the mediation is
successful. Therefore, it cannot, in one sense, be argued that no legal right
of the defendant is infracted.”
113.1.
We declare that Section 12-A of the Act is mandatory and hold that any suit
instituted violating the mandate of Section 12-A must be visited with rejection
of the plaint under Order 7 Rule 11. This power can be exercised even suo motu
by the court as explained earlier in the judgment. We, however, make this
declaration effective from 20-8-2022 so that stakeholders concerned become
sufficiently informed. Still further, we however direct 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.
Still further, 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.
113.2.
Still further, we however direct 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. Still further, 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.
113.3.
Finally, if the plaint is filed violating Section 12-A after the jurisdictional
High Court has declared Section 12-A mandatory also, the plaintiff will not be
entitled to the relief.
114.
In civil appeal arising out of SLP (C) No. 14697 of 2021 taking note of the
fact that it is a case where the appellant would have succeeded and the plaint
rejected, it is also necessary to order the following. The written statement
filed by the appellant shall be treated as the application for leave to defend
filed within time within the meaning of Order 37 and the matter considered on
the said basis.
CONTENTIONS OF THE PARTIES &
FINDING OF THE HIGH COURT
The
finding of the Delhi High Court in Aditya Birla Fashion
and Retail Ltd (Supra) based on the rival contentions are
as under:
The
contentions of defendant/counter claimant:
(i)
Though, it was contended by the defendant/counter claimant in the above case
that both the parties have already mediated the matter at the stage of
institution of the originally filed suit and such process proved to be
unsuccessful or non-starter, the same parties cannot be compelled to go through
the entire process of mediation all over again and then to wait for another
report unnecessarily which would be, in all probabilities, the same one, as was
in the earlier round.
(ii)
Moreover, such a compulsion would only lead to absurdity and undue harassment
for the parties, thereby defeating the intention behind the provision. Thus, in
any such situation, the gates of mediation should be deemed to be closed,
thereby making provision of pre-institution mediation an optional ritual.
(iii)
To initiate pre-institution mediation before filing of a counter-claim may be
akin to a futile exercise and may run counter to the objective of speedy trial
and, therefore, the provision cannot be stretched to be interpreted to be made
applicable for counter claim and the provision is required to be read in its
liberal sense.
FINDINGS OF THE HIGH COURT
(i)
Admittedly, before filing of any commercial suit, which does not contemplate
any urgent relief, the concerned plaintiff has to mandatorily go through the
process of pre-institution mediation. During such process, the opposite side
may or may not appear. The eventual outcome may be either that of “non-starter‟
or it may be settled.
(ii)
During the first process of mediation, the process was sent to counter-claimant
twice to participate, but, it did not choose to appear and, therefore, it was
returned as a non starter‟.
(iii)
The said counter claimant who avoided the process of prior institution cannot
be oblivious to the same requirement i.e the obligatory requirement, when it
comes to his own suit, on the pretext that such remedy has been exhausted.
(iv)
Though, it may be reflective of total disinclination of the defendant/counter
claimant, towards any settlement, still, the indispensable provision cannot be
kept aside on whims and fancies of a party to the lis.
(v)
Merely because, such option was availed/ attempted to be availed in the initial
stage and proved to be unsuccessful or returned non-starter, would not suggest
and signify that any counter-claimant can straightaway file a commercial suit,
not contemplating any urgent relief.
(vi)
It is difficult to fathom that in counter-claim, the nature of relief can be
dissimilar and the subject matter may also be somewhat different. The approach
of the original plaintiff in the main suit cannot be anticipated in a
mechanical manner. Merely because the defendant, in the earlier round, did not
show any interest in settling the matter would not ipso facto mean that
either such defendant (counter claimant) is relieved of availing such mandate
of law or that it would be an illusory exercise on the assumption that its
adversary may also, in all likelihood, adopt similar approach or tactic and may
not participate in such process. The state of mind of any such party cannot be
decoded mechanically.
(vii)
The
mere fact that the same parties had already participated or had opportunity to
participate in the pre-institution mediation would not render the provision
nugatory in the context of any such counter-claim, not contemplating any urgent
relief.
(viii) It may also happen that main suit might be
contemplating some urgent relief, whereas, the counter-claim, emanating from
such suit, may not. Thus, in such a situation, in a main suit, whereas pre-institution
mediation may not be necessary, it would, nevertheless, become obligatory for
the counter-claimant to exhaust such process first and then to file.
(ix)
In a given situation, a suit may, though, not get settled but a counter-claim,
emanating from there, may get settled during mediation process and presumption
of foreclosing the option is not warranted.
In
the perspective as set out above, the Delhi High Court in Aditya Birla Fashion
and Retail Ltd (Supra) has held as under:
“50.
All in all, merely because the parties had earlier opportunity would pale into
significance, particularly in view of the fact that the subject matter of
counter-claim cannot always be envisioned during the earlier round of
pre-institution mediation. The nomenclature of the parties gets reversed and
the issues may also be diverse. Of course, when parties participate, they can
settle their disputes in a comprehensive manner and can, very well, go even
beyond. But, in that case, when there is a comprehensive settlement, there is,
virtually, no chance of any counter claim being filed”.
The
objective behind pre-institution mediation is a benevolent one. It is thus
held:
54.
It does not frustrate speedy trial at all. On the contrary, it aims and
visualizes a situation where there may not be institution of any fresh case,
once the matter is settled through such pre-institution mediation. 55. Thus, it
cannot be labelled as a futile exercise.
56.
Moreover, there is no point in construing a mandatory provision liberally. This
would rather contradict and undermine the legislative mandate as such
(mis)interpretation would transform its nature from “mandatory‟
to “optional‟.
The
High Court had while adjudicating the petition as per above had also referred
as under:
61.
This court may, however, usefully refer to Harey Krishna Corporation Versus
Servotech Power Systems Ltd. and Another: 2024 SCC OnLine Del 3526.
In the above recent pronouncement, the learned Division bench of this Court
while referring to other precedents of this court, reiterated the mandatory
nature of section 12A of Commercial Courts Act and also held the cut-off date,
in context of rejection of suit, as 20th August, 2022, as stated in Patil
Automation Private Ltd. (supra).
62.
Therefore, it will be in the fitness of things, if the abovesaid prospective
date i.e. 20th August, 2022, as declared in Patil Automation Private Ltd.
(supra), is held as cut-off date for the case in hand as well.
It
was thus concluded as under:
57.
In view of above said discussion, it clearly emerges out that process of
pre-institution mediation is mandatory for every suit involving a commercial
suit and no distinction can be drawn when it comes to a counter-claim involving
a commercial dispute and not contemplating any urgent relief. As per the
mandate of Patil Automation Private Ltd. (supra), any such suit, which
has been filed without taking recourse of Section 12-A of Commercial Courts
Act, needs to be rejected under Order VII Rule 11 CPC”.
Though,
the Delhi High Court in a detailed judgment has held that even in counter
claim, the pre-institution mediation in terms of Section 12 A of The Commercial
Courts Act 2015 (as amended in 2018) shall be mandatory, still, the matter was agitated
before the Supreme Court in Special Leave Petition bearing SLP (Civil) No.25893/2024
and the same was dismissed in limine vide order dated November 11th
2024.
THE DIVISION BENCH RULING
The
aforesaid issue remained far from settled, though. The Division bench of Delhi
High Court, however, in spite of above, had further deliberated on the aspect. The hon’ble Division bench in a matter
reported as Sanjana Agarwal Vs Namoshivai Apparels Pvt Ltd 2024
SCC Online Del 9272 (judgment rendered on 24th December 2024) has
held that in a counter claim pre-institution mediation shall not be necessary.
What may be noted that the though the Supreme Court has earlier upheld the
judgment in Aditya Birla Fashion Retail Ltd (Supra), but that was
at the stage of granting of leave itself and no order on merit was passed in
the context. The Division bench of Delhi High Court has analysed the object and
statement of reasons of the CCA and law enunciated in this regard.
Reliance was placed on:
(i)
Patil Automation Private Limited v. Rakheja Engineers Private Limited: 2022 SCC
OnLine SC 1028 = (2022) 10 SCC 1
(ii) Yamini Manohar vs. T.K.D Keerthi
2024 (5) SCC 815
In
para no.23 in Sanjana Agarwal (Supra) the Division bench has observed in
the context of pre-institution mediation vis a vis on prayer for urgent/interim
relief as under:
23.
The Supreme Court in the judgment of Yamini Manohar vs. T.K.D Keerthi, relying
on the M/s. Patil Automation case, has held that pre-litigation
mediation is mandatory unless the suit contemplates urgent relief. It was
further held that a plaintiff should not be permitted to file an application
for interim relief as a subterfuge to wriggle out of the requirement of
mandatory pre-institution mediation. The Court held that in order that the
provision is not bypassed, the learned Commercial Court has a role, although a
limited one, to examine whether the suit contemplates an urgent relief so as to
keep a check that legislative intent behind the enactment of Section 12A of the
CC Act is not defeated. The relevant extract of the decision in Yamini Manohar
case is set out below:
“11.
Having stated so, it is difficult to agree with the proposition that the
plaintiff has the absolute choice and right to paralyse Section 12 A of the CC
Act by making a prayer for urgent interim relief. Camouflage and guise to
bypass the statutory mandate of pre litigation mediation should be checked when
deception and falsity is apparent or established. The proposition that the
commercial courts do have a role, albeit a limited one, should be accepted,
otherwise it would be up to the plaintiff alone to decide whether to resort to
the procedure under Section 12-A of the CC Act. An “absolute and unfettered
right” approach is not justified if the pre-institution mediation under Section
12-A of the CC Act is mandatory, as held by this Court in Patil Automation
[Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd., (2022) 10 SCC 1 :
(2023) 1 SCC (Civ) 545].
12.
The words “contemplate any urgent interim relief” in Section 12 A(1) of the CC
Act, with reference to the suit, should be read as conferring power on the
court to be satisfied. They suggest that the suit must “contemplate”, which
means the plaint, documents and facts should show and indicate the need for an
urgent interim relief. This is the precise and limited exercise that the
commercial courts will undertake, the contours of which have been explained in
the earlier paragraph(s). This will be sufficient to keep in check and ensure that the legislative object/intent behind the
enactment of Section 12 A of the CC Act is not defeated.”
25.
There is no cavil that under the provisions of the Code of Civil Procedure,
1908, a counter-claim is to be treated as a plaint and governed by the rules
applicable to plaint. However, in the case of commercial disputes to say that
each counter-claim will be subject to pre-institution mediation process
separately when the Plaintiff has already exhausted the remedy of
pre-institution mediation, may not be apposite. The object of the CC Act is to
ensure speedy resolution of commercial disputes to accelerate economic growth
and improve the international image of the Indian Justice System and to restore
the faith of the investors. Once a party has taken steps to exhaust the remedy
of pre-institution mediation to then ask the opposite party in a case where the
subject matter of dispute is entirely the same, to once again undertake
pre-institution mediation, prior to filing its counter-claim would defeat the
very purpose of the CC Act and delay adjudication of the commercial dispute
between the parties.
The
division bench in Sanjana Agarwal (Supra) has further held as
under:
“26.
In the present case, non-starter report which is available shows that the
service of the pre-institution mediation was done through email to NAPL and
that there was no appearance of NAPL leading to the closure of the
pre-institution mediation”.
“26.1
There is another reason as well. In the present case as both the plaint and the
counter-claim emanate from the same series of transactions between the parties.
The dispute revolved around the 5 disputed invoices and to that extent the
counter-claim is an integral part of NAPL’s defence to Molmek’s claim as
articulated in the plaint. In such a scenario, to relegate the parties a period
to a second round of pre institution mediation would be contrary to the object
of the CC Act for a speedy resolution of commercial disputes”.
“26.2
In any event, as stated above, although initially an objection on this aspect
was taken by Molmek before the learned Commercial Court, Molmek conceded that
the remedy of pre-institution mediation prior to filing the counter-claim was
not requisite. Thus, Molmek is now precluded from raising such a challenge”.
REMARK
What
bears emphasis herein is that the hon’ble Division bench of Delhi High Court in
Sanjaa Agarwal (Supra) has categorically held in para 26.1 that it
is not worthwhile to relegate the parties for second tier of pre-institution
mediation, as regards the counter claim in the above term. That being so, the judgment
in Aditya Birla Fashion Retail Ltd (Supra) in essence, appears to have
been overruled in as much as it is held that in a counter claim there is no
need to go for pre-institution mediation, being not mandatory for the counter
claim.
The
situation is thus crystal clear. In the event of seeking urgent interim relief,
the mandate of Section 12 A of CCA 2015 (as amended in 2018 shall not be
applicable, though the relief has to be urgent and emergent and in real sense
of term and not just to obviate the rigour of section 12 A of CCA. Secondly, in
case, there is no emergent/urgent relief sought in a plaint invocation of pre-institution
mediation as contemplated under Section 12 A of CCA shall be mandatory. The
counter claim, for all purposes shall have to be treated as a suit and if that is
so, even in respect of counter claim, pre-institution mediation may be
necessary and it was also held so by the Delhi High Court in Aditya Birla
Fashion Retail Ltd (Supra), however, in Sanjana Agarwal (Supra), the Division
bench of Delhi High Court has held that in the event of counter claim, the rigour
of section 12 A CCA shall not be applicable and hence, as it stands today, the invocation
of section 12 A of CCA in counter claim shall not be mandatory in the perspective
as set out in Sanjana Agarwal (Supra) case.
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Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
