Commercial Litigation · Procedure
Commercial Courts Act, 2015 — Practical Drafting Under Section 12A
Since 2018, a commercial suit that does not seek urgent interim relief cannot be instituted until the plaintiff has attempted pre-institution mediation. Since the Supreme Court's decision in 2022, a plaint that skips this step can be rejected. This note sets out how the requirement works and how to draft around it without inviting an objection.
The Provision
What Section 12A requires
Section 12A of the Commercial Courts Act, 2015 was inserted by the 2018 amendment. It provides that a suit which does not contemplate any urgent interim relief under the Act shall not be instituted unless the plaintiff has exhausted the remedy of pre-institution mediation, in the manner and procedure prescribed. The prescribed procedure is the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.
The mediation is conducted by the Legal Services Authority authorised for the purpose. In Delhi that means the Delhi State Legal Services Authority or the District Legal Services Authority of the relevant district. The plaintiff applies in the prescribed form, the authority issues notice to the opposite party, and the process runs for a fixed period unless it ends sooner.
A settlement reached in this process is treated as if it were an arbitral award on agreed terms, which makes it enforceable without a further suit. The section applies to a commercial dispute as defined in Section 2(1)(c) of the Act. Disputes below or outside that definition do not attract it.
Consequence
Why the drafting matters: rejection of the plaint
For some years the High Courts differed on whether Section 12A was mandatory or directory. In Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022) the Supreme Court held it mandatory. A suit instituted in breach of it is liable to be rejected under Order VII Rule 11(d) of the Code of Civil Procedure, as barred by law. The Court made the decision prospective, from 20 August 2022, so it does not disturb suits filed before that date.
In practice this moves the question from the merits to the plaint. The defendant's first application is often under Order VII Rule 11, and it can be filed before any written statement. A plaint that does not plead compliance, or does not plead a genuine reason for exemption, gives that application its footing. Rejection is not a decision on the claim, but it costs time and fees and, if limitation has run in the meantime, can cost the claim itself.
The Exception
Urgent interim relief: pleading it honestly
The exemption is for a suit that contemplates urgent interim relief. It is not an exemption for a suit that merely contains an interim prayer. In Yamini Manohar v. T.K.D. Krishna (2023) the Supreme Court said the court must look at the nature and subject matter of the suit and the facts pleaded, and must not treat the presence of an interim prayer as decisive. An injunction application filed to avoid mediation, with no facts showing why relief cannot wait, invites the objection the Court had in mind.
Draft the urgency as facts. State what is about to happen and when: a sale deed listed for registration, a guarantee about to be invoked, goods about to be moved, a trade mark in ongoing use by the defendant, funds being diverted. Refer to the documents that show it. Then frame the interim prayer so that it corresponds to that risk. A prayer that does not match the pleaded urgency undermines it.
Where the interim application is later refused, that alone does not make the suit non-compliant, because the test looks to what was contemplated when the suit was filed. But do not treat that as a safe harbour. If the urgency is thin, the safer course is to attempt mediation first and file once the report is in hand.
The Plaint
What to plead and annex when mediation has been attempted
Plead the mediation in its own paragraph rather than folding it into the cause of action. State the date of the application, the authority to which it was made, the date on which notice went to the defendant, and how the process ended: a failure report after an unsuccessful mediation, or a non-starter report where the defendant did not participate. Annex the report and give it an exhibit or annexure number so the court can find it.
Check that the report relates to the same parties and the same dispute as the suit. A report obtained against one defendant does not cover another who was not named in the application. A suit that adds a claim or a party afterwards should ask whether a fresh application is needed for that part.
Keep the application, the proof of service and the authority's correspondence in the file. The defendant may dispute whether mediation was genuinely attempted, and these are the documents that answer it.
Time
Limitation and the mediation period
Section 12A provides that the time during which the parties were occupied with pre-institution mediation is not computed for limitation under the Limitation Act, 1963. The exclusion protects a plaintiff who acts on the process in good faith.
It should not be stretched. Compute limitation from the cause of action first, then decide on the route. A claim close to the end of its period leaves two options: file with a properly pleaded urgent relief, or apply for mediation immediately and rely on the exclusion. Do not assume that a marginal case will satisfy the first, or that a delay in applying for mediation will be forgiven under the second. Where a demand or legal notice is required or useful, send it before the application, so that the mediation has something to respond to.
Forum
Which court, and what falls outside Section 12A
In Delhi, a commercial suit of specified value above ₹2 crore goes to the Commercial Division of the Delhi High Court, and one between ₹3 lakh and ₹2 crore to the Commercial Courts in the district courts. The specified value is the value of the subject matter as pleaded, and it should be confirmed against the current notification before filing.
Some proceedings that touch commercial disputes are not suits and do not need mediation first. A cheque dishonour complaint under Section 138 of the Negotiable Instruments Act is a criminal complaint; see our cheque bounce page. An application for interim relief before an arbitration begins is made under Section 9 of the Arbitration and Conciliation Act, 1996, and is covered in our note on Section 9 and Section 17. Before choosing between a suit and arbitration, read the dispute resolution clause in the contract, as set out on our contract dispute page.
Checklist
Before the plaint is filed
Confirm the dispute is commercial within Section 2(1)(c) and above the specified value. Decide whether the facts support urgent interim relief, and if they do, plead them as facts with documents. If not, apply to the Legal Services Authority and wait for the report. Name every defendant in the application. Plead the mediation in a separate paragraph and annex the report. Compute limitation on the cause of action, and treat the mediation exclusion as a cushion rather than a plan.
Details of the mediation framework have been amended since 2018, and the courts continue to refine the scope of the urgency exception. Confirm the current text and recent decisions before relying on this note for a particular filing. Our commercial litigation practice acts for both plaintiffs and defendants in commercial suits before the Delhi High Court and the district courts.
Questions
Frequently asked
- Every commercial suit that does not contemplate urgent interim relief must be preceded by pre-institution mediation under Section 12A of the Commercial Courts Act, 2015. In Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022), the Supreme Court held the requirement mandatory, with the consequence that a plaint filed without it is liable to rejection under Order VII Rule 11(d) of the Code of Civil Procedure. The Court made that holding prospective, from 20 August 2022.
- The Act does not define it. The Supreme Court in Yamini Manohar v. T.K.D. Krishna (2023) held that the court must look at the nature and subject matter of the suit and the facts pleaded, not merely at whether an interim prayer appears in the plaint. A prayer for injunction added as a device to avoid mediation is not enough. The urgency has to be real and supported by the pleaded facts, such as an imminent transfer of the asset, dissipation of funds or an ongoing infringement.
- The Legal Services Authority authorised by the Central Government for the purpose, which in practice means the Delhi State Legal Services Authority or the District Legal Services Authority of the relevant district. The procedure is set out in the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018. The application is made to the authority in the prescribed form, and the authority issues notice to the opposite party.
- The Rules provide a period of three months from the date of the application, which may be extended by up to two months with the consent of the parties. The mediation is ended earlier if a settlement is reached or if it is clear that there will be none. Check the current text of the Act and the Rules before relying on these periods, because the mediation framework has been amended since 2018.
- Section 12A provides that the period during which the parties were occupied with pre-institution mediation is not computed for limitation under the Limitation Act, 1963. That is a protection for the plaintiff, not permission to delay. A claim that is close to the end of its limitation period should be filed with a considered decision on whether the urgent relief route is genuinely available, rather than on the assumption that the exclusion will always cover the gap.
- The authority records the non-participation and issues a report, commonly called a non-starter report, to the applicant. That report, or the failure report issued after an unsuccessful mediation, is what the plaintiff annexes to the plaint to show that the remedy has been exhausted. The plaintiff should keep the application, the notices and the proof of service, because the court may ask for them.
- Section 12A applies to suits. A complaint under Section 138 of the Negotiable Instruments Act is a criminal complaint, not a suit, and the Commercial Courts Act does not require mediation before it. A petition for interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 is likewise not a suit. Whether a particular proceeding is a suit within Section 12A should be confirmed against the current decisions of the court concerned.
- Commercial suits of specified value above ₹2 crore are filed in the Commercial Division of the Delhi High Court, and those between ₹3 lakh and ₹2 crore before the Commercial Courts in the district courts. The specified value and the definition of a commercial dispute in Section 2(1)(c) of the Act govern this, and the figures should be checked against the current notification before filing.