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Non-Participation Of Defendant Is Good For Compliance Of Sec 12-A Of The Commercial Courts Act: Delhi High Court

Ausaf Ayyub
20 Nov 2022 1:00 PM GMT
Non-Participation Of Defendant  Is Good For Compliance Of Sec 12-A Of The Commercial Courts Act: Delhi High Court
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The High Court of Delhi has held that the failure of the defendant to participate in the Pre-Institution Mediation suffice the requirement of Section 12-A of the Commercial Courts Act, 2015.

The bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad held that the consent of the plaintiff for instituting the pre-suit meditation would be irrelevant if the defendant refuses to participate to take part in the proceedings.

The Court held that the only requirement for the plaintiff is to institute the mediation and the consequent Non-Starter Report with an observation that both the parties are not interested in pursing the mediation would not mean that the requirement of Section 12-A is not satisfied.

Facts

The Appellant herein runs a business of sale and purchase of fabric in the name and style of M/s Kapil Creations. The Respondents herein had purchased fabric from the Appellant herein on credit basis and defaulted in the payment of Rs.17,98,319/-.

Accordingly, the appellant, before instituting a suit, approached the Delhi Legal Services Authority (DLSA) under Rule 3(1) of the Commercial Courts (Pre-Mediation and Settlement) Rules, 2018 for initiating the pre-suit mediation as provided under Section 12-A of the Commercial Courts Act, 2015.

DLSA gave a non-starter report for mediation with an observation that both the parties are not interested in pursuing the mediation.

Thereafter, the appellant filed a Civil Suit for the recovery of the due amount along with interest. The District Judge dismissed the suit for non-compliance with Section 12A. The lower court held that the appellant had instituted the mediation as a mere formality, however, it was not seriously interested in pursing the same, therefore, it has not fulfilled the mandatory requirement.

Aggrieved by the impugned order, the appellant approached the High Court.

Contention of the Parties

The appellant challenged the impugned order of the lower court on the following grounds:

  • The appellant had approached the appropriate authority to institute the mediation process as provided under the relevant rules.
  • A non-starter report was prepared by the authority under Rule 3(6) due to the non-participation of the respondent and it was not that the appellant was not interested in pursuing the mediation.

The respondent raised the following objections:

  • The lower court has rightly rejected the suit for non-compliance with Section 12-A as the appellant was not interested in pursuing the mediation but merely gone through the formality of approaching the appropriate authority and getting the notice issued.

Analysis by the Court

The Court observed that the appellant had approached the appropriate authority as required under the 2018 Rules. The authority had also issued notices on the respondent, however, it did not appear before the authority to give its consent for mediation, accordingly, the authority prepared a Non-stater report under Rule 3(4) and 3(6) of the 2018 Rules.

The Court held that Rule 3 of the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 demonstrates that when mediation process is initiated, the authority is required to issue notice to the opposite party in order for them to appear and give consent to participate in the mediation process on such days not beyond the period of 10 days from the date of issue of the said notice. If no response is received from the opposite party, then the authority is required to issue a final notice to it. However, if the final notice issued remain unacknowledged or the opposite party refuses to participate in the mediation process, then the authority is required to treat the mediation process to be a Non-starter and make a report on the same. Sub-Section 6 of Rule 3 also places the burden on the opposite party to appear on the date fixed in case it does not want the mediation process to be a Non-starter.

The Court held that all the plaintiff is required to do is to initiate the mediation process and once the said requirement the suit would not be barred by law regardless of the observation in the Non-starter report that both the parties are not interested in pursuing the mediation.

The Court held that the failure of the defendant to participate in the Pre-Institution Mediation suffice the requirement of Section 12-A of the Commercial Courts Act, 2015.

The Court held that the consent of the plaintiff for instituting the pre-suit meditation would be irrelevant if the defendant refuses to participate to take part in the proceedings.

Accordingly, the Court set aside the order of the lower court and restored the suit to its original number.

Case Title: Kapil Goel v. Ram Dulare Yadav, RFA(COMM) 14 of 2022

Date: 16.11.2022

Counsel for the Appellant: Mr. Abhishek Kumar, Mr. Sumit Kashyap and Ms. Vedika Sharma, Advocates.

Counsel for the Respondent: Appearance not given

Click Here To Read/Download Order

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