Commercial Courts Should Examine If Plea For Urgent Interim Relief Is A Disguise To Circumvent Pre-litigation Mediation Under S.12A : Supreme Court

While reiterating the mandatory nature of Section 12A of the Commercial Suits Act, which mandates pre-litigation mediation unless the suit contemplates urgent relief, the Supreme Court stated that plaintiff has no absolute choice to avoid pre-litigation mediation by merely making a prayer for urgent interim relief.

The Commercial Court should examine that the prayer for urgent interim relief is not a "disguise or mask to wriggle out of and get over Section 12A of the CC Act." 

Section 12A of the Commercial Suits Act says that a suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted without exhausting the remedy of pre-litigation mediation.

In M/s Patil Automation Private Limited and others versus Rakheja Engineers Private Ltd 2022 LiveLaw (SC) 678, the Supreme Court held that Section 12A is mandatory and the suits which are filed without following that condition are liable to be rejected.

In the present case, the Supreme Court was hearing an appeal against an order of the Delhi High Court which refused to reject a commercial suit under Order VII Rule 11 of the Code of Civil Procedure for not availing pre-litigation mediation. The High Court refused to reject the suit since it contemplated urgent interim relief.

While upholding the High Court's order, a bench comprising Justices Sanjiv Khanna and SVN Bhatti made certain significant remarks regarding the approach the Commercial Suits should take with respect to prayer for urgent interim relief.

No application seeking waiver of pre-litigation mediation required; pleadings and oral request sufficient

The bench said that no specific application need to be filed to waive the process of pre-litigation mediation and that the Court can decide on the basis of pleadings in the suit. The bench noted that unlike Section 80 of the CPC - which specifically say that the leave of the Court should be obtained to institute the suit without following the notice requirement- Section 12A does not prescribe such a conditition.

"An application seeking wavier on account of urgent interim relief setting out grounds and reasons may allay a challenge and assist the court, but in the absence of any statutory mandate or rules made by the Central Government, an application per se is not a condition under Section 12A of the CC Act; pleadings on record and oral submissions would be sufficient," observed the bench. 

Court should holistically consider

The bench further observed :

"We are of the opinion that when a plaint is filed under the CC Act, with a prayer for an urgent interim relief, the commercial court should examine the nature and the subject matter of the suit, the cause of action, and the prayer for interim relief. The prayer for urgent interim relief should not be a disguise or mask to wriggle out of and get over Section 12A of the CC Act. The facts and circumstances of the case have to be considered holistically from the standpoint of the plaintiff."

Suit cannot be dismissed solely because interim relief was not ultimately granted.

"Non-grant of interim relief at the ad-interim stage, when the plaint is taken up for registration/admission and examination, will not justify dismissal of the commercial suit under Order VII, Rule 11 of the Code; at times, interim relief is granted after issuance of notice. Nor can the suit be dismissed under Order VII, Rule 11 of the Code, because the interim relief, post the arguments, is denied on merits and on examination of the three principles, namely, (i) prima facie case, (ii) irreparable harm and injury, and (iii) balance of convenience. The fact that the court issued notice and/or granted interim stay may indicate that the court is inclined to entertain the plaint."

Plaintiff cannot circumvent Section 12A by merely seeking urgent interim relief.

"It is difficult to agree with the proposition that the plaintiff has the absolute choice and right to paralyze Section 12A of the CC Act by making a prayer for urgent interim relief. Camouflage and guise to bypass the statutory mandate of pre-litigation mediation should be checked when deception and falsity is apparent or established. The proposition that the commercial courts do have a role, albeit a limited one, should be accepted, otherwise it would be up to the plaintiff alone to decide whether to resort to the procedure under Section 12A of the CC Act. An 'absolute and unfettered right' approach is not justified if the pre-institution mediation under Section 12A of the CC Act is mandatory, as held by this Court in Patil Automation Private Limited (supra). The words 'contemplate any urgent interim relief' in Section 12A(1) of the CC Act, with reference to the suit, should be read as conferring power on the court to be satisfied. They suggest that the suit must “contemplate”, which means the plaint, documents and facts should show and indicate the need for an urgent interim relief. This is the precise and limited exercise that the commercial courts will undertake, the contours of which have been explained in the earlier paragraph(s). This will be sufficient to keep in check and ensure that the legislative object/intent behind the enactment of section 12A of the CC Act is not defeated."

Case Title : Yamini Manohar v. TKD Keerthi

Citation : 2023 LiveLaw (SC) 906

Click here to read the judgment