This document summarizes Section 12A of the Commercial Courts Act regarding pre-institution mediation and settlement. Key points include:
- A commercial suit that does not seek urgent interim relief must first exhaust the remedy of pre-institution mediation.
- The Central Government authorizes authorities under the Legal Services Authorities Act to handle pre-institution mediation. Mediation must be completed within 3 months but can be extended by 2 months if parties consent.
- If parties settle in mediation, the settlement is reduced to writing and has the same effect as an arbitral award on agreed terms.
- Only if a suit seeks urgent interim relief can the plaintiff avoid pre-institution mediation. The phrase
3. By way of an Amendment to the
Commercial Courts, Commercial
Division and Commercial
Appellate Division of High Courts
Act, 2015, Chapter III-A titled
Pre-Institution Mediation and
Settlement - (PIMS) was
introduced and was made
retrospectively applicable from
03.05.2018.
4. Section 12A of the the Commercial Court
Act (for short the Act) reads as under:-
12A. Pre-Institution Mediation and
Settlement.
(1) 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.
5. (2) The Central
Government may, by
notification, authorise the
Authorities constituted
under the Legal Services
Authorities Act, 1987,
for the purposes of pre-
institution mediation.
6. (3) Notwithstanding anything
contained in the Legal Services
Authorities Act, 1987, the
Authority authorised by the
Central Government under sub-
section (2) shall complete the
process of mediation within a
period of three months from
the date of application made
by the plaintiff under sub-section
(1).
7. Provided that the period
of mediation may be
extended for a further
period of two months
with the consent of
the parties:
8. Provided further that, the
period during which the
parties remained occupied
with the pre-institution
mediation, such period
shall not be computed for
the purpose of limitation
under the Limitation Act,
1963.
9. (4) If the parties to the
commercial dispute
arrive at a settlement,
the same shall be
reduced into writing and
shall be signed by the
parties to the dispute
and the mediator.
10. (5) The settlement arrived
at under this section shall
have the same status and
effect as if it is an arbitral
award on agreed terms
under sub-section (4) of
section 30 of the
Arbitration and Conciliation
Act, 1996.
11. Simple reading of the Section
12A(1) of the Act makes it
clear that, a suit, which does
not contemplate any Urgent
Interim Relief under the Act,
shall not be instituted, unless
the plaintiff exhausts the
remedy of the pre-institution
mediation.
12. Under the wrong notion that,
once an application for an
interim relief/injunction is
filed, plaintiff will be in a
position to obliterate the
process of exhausting the
remedy of pre-institution
mediation and agitate the suit
prayers before the Competent
Commercial Court.
14. To decide this, the
difference between
Urgent Interim
Relief and Interim
Relief needs to be
understood.
15. At this stage reference is
required to be made to the
famous observations made by
Lord Granworth in Grundy v/s.
Pinniger – 1852(1) LJ Ch 405.
This is referred to in LIC v/s.
Shree Meena, 2019 (4) SCC 479
(FB) and
Dr. K. Babapai v/s. Dr. K.V.R.
Murthy, 2016 SCC Online Guj
4702.
16. “…to adhere as closely as
possible to the literal
meaning of the words
used, is a cardinal rule
from which if we depart we
launch into a sea of
difficulties which it is not
easy to fathom.”
17. In the case of Utkal
Contractors and Joinery
Pvt. Ltd. v/s State of
Orissa, reported in
(1987) 3 SCC 279 : AIR
1987 SC 1454 Hon'ble
Supreme Court has
observed as under:-
18. No provision in the statute and no
word of the statute may be
construed in isolation. Every
provision and every word must be
looked at generally before any
provision or word is attempted to be
construed. The setting and the
pattern are important. It is
important to remember that
Parliament does not waste its breath
unnecessarily.
continue...
19. Parliament does not use any word
without meaning something, Parliament
does not legislate where no legislation is
called for. Parliament cannot be assumed
to legislate for the sake of legislation;
nor can it be assumed to make pointless
legislation. Parliament does not indulge
in legislation merely to state what it is
unnecessary to state or to do what is
already validly done. Parliament may not
be assumed to legislate unnecessarily.
Again, while the words of an enactment
are important, the context is no less
important.
20. It is cardinal principle of law that
whenever there is any confusion with
respect to the intention of the legislature
(herein this case it is with respect to the
expression ‘urgent interim relief’) the
best available way is to listen to the
debate in the any of the Houses of the
Parliament. For this purpose we may
refer to the speech delivered by Minister
for Law and Justice in the Rajya Sabha
Session 246 - Monsoon Session, held on
10th
August, 2018.
(please go to
https://youtu.be/3vpiejFuLl0 )
21. This leads us to the conclusion
that only when Urgent Interim
Relief is sought in the plaint,
plaintiff can seek to avoid the
pre-institution mediation and not
otherwise.
In other words, only if, Interim
Relief is sought, plaintiff has to
exhaust remedy of the pre-
institution mediation.
22. So the next question is
what does the phrase
“URGENT INTERIM
RELIEF” means?
23. The phrase “URGENT INTERIM RELIEF”
has not been defined anywhere. But is
just similar to the cases where court
passes order u/O 39 R.3 of the CPC.
Guidelines with respect to, in which
circumstances an order u/O 39 R.3 of the
CPC can be passed, is seen in the ratios
laid down in the cases of
(1) Desk to Desk Courier & Cargo v/s.
Union of India, 2005 (7) SCC 491
(2) Shiv Kumar Chadha v/s. Municipal
Coprpotation of Delhi, 1993 (3) SCC 161
(FB).
24. The next question which
comes up for consideration is,
as to whether a plaint can be
rejected u/O. VII Rule 11 of
the CPC, on the count that
though plaintiff has not
sought Urgent Interim
Relief he has not exhaust
remedy of the pre-institution
mediation?
25. The answer is in
affirmative. And the
reason is
mandatory bar
contained u/s 12-A
of the Act.
26. The ‘Doctrine of Exhaustion of Statutory
Remedies’, needs to be bear in mind. Hon’ble
Apex Court in the case of Whirlpool
Corporation v/s. Registrar of Trade Marks,
Mumbai, AIR 1999 SC 22 held that the power to
issue prerogative writs under Article 226 of the
Constitution is plenary in nature and is not
limited by any other provision of the
Constitution. This power can be exercised by
the High Court not only for issuing writs in the
nature of Habeas Corpus, Mandamus,
Prohibition, Quo Warranto and Certiorari for the
enforcement of any of the Fundamental Rights
contained in Part III of the Constitution but also
for “any other purpose”.
27. However, their Lordships have carved
out three contingencies, where
alternative remedy will not stand in
the way in entertaining the writ
petition under Article 226 of the
Constitution of India, viz. (1) where the
writ petition has been filed for the
enforcement of any of the
Fundamental Rights; (2) where there
has been a violation of proceedings
which are wholly without jurisdiction
and (3) where the vires of an Act is
challenged.
28. Obviously, non of the above
mentioned contingencies would
exist in the Commercial Civil Suit
that may be filed. Therefore, the
‘Doctrine of Exhaustion of
Statutory Remedies’, would
squarely apply in the case where
without exhausting the remedy
of pre-institution mediation, the
Commercial Suit is filed.
29. Reference is required to be made to the
ratio laid down in the case of Anant
Shankar Bhave v/s. Kalyan Dombivali
Municipal Corpn., reported in 2019(4)
SCC 348, wherein it has been observed
that when plaintiff has filed
misconceived suit and sought improper
and ameliorative reliefs, liberty may
granted to file fresh suit seeking proper
reliefs and with the clarification that
present proceedings would not operate
as res-judicata
30. Duty of the the judge does not end
here. Ld. Judge while passing and
order of rejection of the plaint u/O. VII
Rule 11 of the CPC is also required to
pass an order directing the plaintiff to
the exhaust remedy of the pre-
institution mediation. And, subject to
the final out come of the said
mediation process, another suit may
be filed, subject to the second
proviso of Section 12-A (3) of the
Act .
31. In pursuant to Section
12A(2) of the Act,
Central Government has
framed the the
Commercial Courts (Pre-
institution Mediation
and Settlement) Rules,
2018.
32. If during the court proceedings Ld.
Commercial Court Judge comes to
the conclusion that there exist an
element of settlement, in such a
case scenario, case may be
transferred to the Mediation Centre
and Civil Procedure Appropriate
Dispute Resolution (Gujarat) Draft
Rules, 2007 along with Mediation
Rules, 2015 shall apply.
