In India, the preferred adversarial process has long been to attempt to mediate the disputes between the parties whereas today we see that interest in mediation spreading the world over. In India, pre-institution mediation has been made a pre-requisite before approaching courts for commercial disputes under the Commercial Courts Act, 2015, showcasing its evolution from the basic statutory and court mandated mediation to its acceptance as a significant method of dispute resolution in the adjudication process.
Pre-institution mediation means that prior to bringing a case before the commercial courts, the parties are bound to try and settle the dispute at hand by mediation. It has been envisaged to reduce the time taken to decide lawsuits in court that make up a sizeable portion of court cases today. It has been mandated under the Commercial Courts Act, 2015 to ensure speedy resolution of commercial disputes and promote ease of doing business.
‘Urgent interim relief’ under Section 12A:
Section 12A subsection (1) states that:
“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.”
The term “urgent” is not defined in the Act, however this section is to serve a condition where time is of essence, or the situation makes it necessary to approach the Court to protect an imminent injury to the rights of the plaintiff. It has however, become a common practice to misinterpret subsection (1) of Section 12A of the Commercial Courts Act, 2015 whereby upon applying for urgent interim relief, several parties try and bypass the required recommended mediation.
Time bound completion of the process:
Section 12(3) states that the process of pre-institution mediation must be completed within a period of three months, extendable by two months with consent of the parties, from the date of application made by the Plaintiff.
Exception under Limitation Act
The proviso to sub-section 3 lays down that time spent in pre-institution mediation shall not be computed for the purpose of limitation under the Limitation Act, 1963.
Settlement between the parties:
If the parties to the commercial dispute reach a settlement, it must be put forth in writing & signed by the mediator, the parties to the dispute, and the parties to the settlement. The Settlement reached in accordance with this clause must be treated as, and have the same rights and obligations as, an arbitral award on terms agreed upon pursuant to subsection (4) of Section 30 of the Arbitration and Conciliation Act, 1996.
Patil Automation Private Limited and Ors. VS. Rakheja Engineers Private Limited [SLP(C) 14697 of 2021]
In this particular case, the Hon’ble Supreme Court of India bench of Justice KM Joseph and Justice Hrishikesh Roy held that any lawsuit filed in violation of Section 12A will lead to the plaint getting rejected under Order VII Rule 11 of the Civil Procedure Code, 1908. In fact, the court may even exercise this authority suo moto.
The Hon’ble Court had stated that
“Section 12A of the 2015 Act has been inserted in the Act by amendment in the year 2018 as a compulsory provision. The object of the Act and the Amending Act of 2018, unerringly point to at least partly imposing compulsory mediation on a plaintiff who does not contemplate urgent interim relief. The provision has been contemplated only with reference to plaintiffs who do not contemplate urgent interim relief.”
Additionally, the court also interpreted stated the word ‘shall’ in Section 12A of the 2015 Act, to hold that the provision for pre-institution mediation is mandatory.
The Apex Court also observed that “it is an undeniable reality that Courts in India are reeling under an extraordinary docket explosion.” Mediation, as an Alternative Dispute Mechanism, has been identified as a workable solution in commercial matters. Hence, any reluctance on the part of the Court to give Section 12A, a mandatory interpretation, would result in defeating the object and intention of the Parliament. The fact that the mediation can become a non-starter, cannot be a reason to hold the provision not mandatory.
The entire procedure for carrying out the mediation, has been described in the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 and the Commercial Courts (Statistical Data) Rules, 2018.
- The parties are free to engage Counsel during mediation.
- The expenses, as far as the fee payable to the Mediator, is concerned, is limited to a one-time fee, shared equally between parties.
Mediation would save time, make use of resources judiciously and lessen the burden on Courts in India. The law implementing pre-institution mediation by introducing Section 12A in the Commercial Courts Act, 2015 is the first step to popularise this dispute settlement remedy. However, there is still a long way to go, and the Hon’ble Court’s interpretation serves as a platform to strengthen the provision. A precise definition of “urgent relief” is necessary to restrict parties to frequently invoke the exception to circumvent the mediation process. It is necessary that mediation is seen as the solution to dispute and not just a formality in order to move to Courts later.