Mandatory Pre-Litigation Mediation Under Section 12A Of Commercial Courts Act Reaffirmed By Supreme Court

Summary:

^[1]The Supreme Court allowed the appeal filed by Dhanbad Fuels Pvt. Ltd., holding that the commercial suit instituted by the Union of India without availing pre-institution mediation, as mandated under Section 12A of the Commercial Courts Act, 2015, was not maintainable. The Court set aside the orders of the High Court and the Commercial Court which had allowed the suit to continue, despite the admitted failure to undertake pre-suit mediation. The judgment reinforces the mandatory nature of Section 12A and mandates rejection of the plaint for non-compliance.

Facts:

• The Union of India filed Money Suit No. 28 of 2019 in the Commercial Court, Alipore, claiming ₹8.73 crores from Dhanbad Fuels for differential freight and penalties. No urgent interim relief was sought.
• Dhanbad Fuels raised a preliminary objection under Order VII Rule 11(d) CPC read with Section 12A, arguing that the suit was barred due to non-compliance with mandatory pre-institution mediation.
• The Commercial Court refused to reject the plaint, citing the early stage of litigation, lack of mediation infrastructure at the time of filing, and possible delay in justice if the plaint were rejected. It instead referred the dispute to post-institution mediation.
• The High Court upheld this view, keeping the suit in abeyance for seven months while directing mediation. The High Court acknowledged infrastructural gaps in 2019 and interpreted Section 12A as a procedural tool rather than a jurisdictional bar.

Issues:

1. Whether the High Court erred in not rejecting the plaint despite non-compliance with Section 12A of the Commercial Courts Act, 2015?
2. Whether infrastructural deficiencies at the time of suit institution justified bypassing the mandatory pre-suit mediation requirement?

Held:

The Supreme Court held that:

1. Section 12A of the 2015 Act is mandatory for all suits that do not seek urgent interim relief, and non-compliance mandates rejection of the plaint under Order VII Rule 11(d) CPC.
2. The High Court’s approach to allow the suit to proceed despite admitted non-compliance was contrary to the binding precedent in Patil Automation v. Rakheja Engineers (2022) 10 SCC 1.
3. Infrastructural gaps do not justify overlooking statutory mandates, particularly when the doctrine of lex non cogit ad impossibilia (law does not compel the impossible) was inapplicable in the facts.
4. Pre-institution mediation was intended to ease the burden on courts and foster early settlement—an objective that cannot be diluted through procedural leniency.
5. Accordingly, the appeal was allowed and the plaint was ordered to be rejected.

Analysis:

The judgment provides much-needed clarity on the applicability of Section 12A. While lower courts sought to balance procedural fairness with practical hurdles, the Supreme Court emphasized the statutory mandate and uniform application of law. By rejecting excuses for non-compliance and reinforcing mediation as a condition precedent, the decision promotes discipline in commercial litigation and upholds legislative intent to streamline dispute resolution.

^[1] BEFORE THE HON’BLE SUPREME COURT OF INDIA

M/s DHANBAD FUELS PRIVATE LIMITED vs. UNION OF INDIA & ANR.

Civil Appeal No. 6846 of 2025 (@SLP (C) No. 4980 of 2021)

Judgment Date: May 15, 2025