Plaintiff Must Demonstrate Need For 'Urgent Interim Relief' To Avoid Pre-Litigation Mediation U/S 12A Commercial Courts Act: Calcutta High Court

The Calcutta High Court on Thursday in deciding an interlocutory application seeking leave to file a commercial suit without exhausting the remedy of mandatory pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015 reaffirmed the position of law that the statutory scheme of Section 12A contemplates the prerequisite requirement of exhausting the remedy of mandatory pre-litigation mediation to be dispensed with only when the commercial suit sought to be instituted contemplates urgent interim reliefs which the plaintiff/petitioner must demonstrate to the Court.The instant proceedings arose out of a dispute in respect of a credit facility agreement of March 24, 2017 executed between the petitioner and respondents whereby the petitioner advanced a sum of Rs. 150 crores with the assurance that that the respondents would repay the said amount within two years by selling the treasury shares of the respondent no. 6 which the respondents, jointly and severally, neglected to do and in response whereto the plaintiff/petitioner filed a suit praying for a decretal amount of Rs. 132,00,04,279 along with interest and allied prayers against the respondents, jointly and severally, as also applications for grant of ad interim relief and leave to file the said suit by dispensing with the statutory preconditions of S. 12A.Counsels for the petitioner contended that the urgency for the applications for injunctive interim reliefs and dispensing with S.12A arose from the apprehension that the respondents will continue to illegally transfer/dispose of treasury shares of the respondent no. 6 and divert the proceeds thereof which would render a decree in favour of the petitioner, a mere paper decree incapable of execution. Counsels for the respondents contended that additional documents which were introduced through the application for seeking leave to file the suit by dispensing with S.12A was in violation of Order XI Rule 1 of the Code of Civil Procedure ("CPC") and the same could not be relied upon to plead urgency of the interim reliefs sought in the plaint on the basis that the plaint did not contain any document to support the ingredients of Order XXXVIII Rule 5 of CPC. The respondents further contended that no basis for urgency was made out by the petitioner and the same contention ought to have been rejected as the petitioner became aware of the default of the respondents as early as in the year 2017 and consequently there could have been no urgency after expiry of five years hence.Deciding on merits the application seeking leave to file the suit by dispensing with S. 12A, Justice Krishna Rao contradistinguished the two types of commercial suits contemplated within the statutory scheme of sub-section (1) of Section 12A: (i) firstly, suits which necessitate, contemplate or plead for urgent relief and are exempt from the mandatory route of pre-litigation mediation under Section 12A and (ii) secondly, suits which do not necessitate, contemplate or plead for urgent relief and are statutorily mandated to exhaust the remedy mandatory pre-litigation mediation under Section 12A prior to its institution, observing:"The two categories of the suits under Section 12A of the Act of 2015 are treated differently. In the category of suits where the plaintiff does not seek urgent relief, the plaintiff is statutorily required to exhaust pre-institution mediation, whereas a plaintiff seeking urgent interim relief is not required to do so. In a suit where the plaintiff does not seek urgent reliefs, limitation is extended or kept in abeyance, as one may perceive it, till the conclusion of the statutorily mandated period of mediation while in the other category no such benefit is extended.Given the nature of the language used in the Section 12A of the Act of 2015, and the two categories of suits being dealt with thereunder, and taking into consideration the distinction between 'filing' of a suit and its 'institution' in my view, it requires the Court to apply its mind at the time of the suit being presented before it, as to whether the plaintiff in a suit which does not contemplate any urgent interim relief under the Act of 2015 exhausted the remedy of pre-institution mediation in accordance with the manner and the procedure prescribed or not. Sub-Section (1) of Section 12A of the Act of 2015 casts a duty upon the Court to ensure that a suit is instituted by a plaintiff in accordance with procedure laid down therein. The duty is akin to a duty under Section 3 of the Limitation Act, 1963. A plaintiff may not undertake pre-institution mediation if the plaintiff is in a position to demonstrate that, the plaintiff requires urgent interim relief. In order to do so, the plaintiff has to approach the Court before which the suit is to be instituted and satisfied the Court that it needs to institute such suit without undertaking a pre-institution mediation in view of the...

Plaintiff Must Demonstrate Need For 'Urgent Interim Relief' To Avoid Pre-Litigation Mediation U/S 12A Commercial Courts Act: Calcutta High Court

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Plaintiff Must Demonstrate Need For 'Urgent Interim Relief' To Avoid Pre-Litigation Mediation U/S 12A Commercial Courts Act: Calcutta High Court

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