Wednesday, October 1, 2025

Commercial Courts Act- Invocation of section 12 A IS mandatory for a counter claim?

 

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 Honble 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                    

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Commercial Courts Act- Invocation of section 12 A IS mandatory for a counter claim?

  Commercial Courts Act- Invocation of section 12 A IS mandatory for counter claim? The Commercial Courts Act 2015 (In short referred to a...