Background

Section 12A of the Commercial Courts Act, 2015 (“Act”) had made initiation of mediation compulsory prior to filing a commercial suit, except in cases where the plaintiff was seeking an urgent interim relief. Pursuant thereto the Pre-Institution Mediation and Settlement Rules, 2018 (“Rules”) were framed and brought into effect from 3rd July 2018.

The Hon’ble Calcutta High Court on 22nd February 2021, passed a judgment in the case of M/s. Dhanbad Fuels Ltd. v. Union of India & Ors. (C.O. No. 1678 of 2020) holding that if a plaintiff did not follow the mediation procedure prescribed under the Act and Rules prior to filing of the Suit, it was not a ground for rejection of Plaint under O. VII Rule 11 of the Code of Civil Procedure.

Brief Facts of the Case

In the said matter before the Hon’ble Calcutta High Court, the Plaintiff had in August 2019 filed a commercial suit for recovery of money before the Commercial Court at Alipore. The Defendant filed an application under O. VII Rule 11 of the Code for rejection of the Plaint. The Commercial Court at Alipore dismissed the said application and appointed a lawyer as mediator to conduct mediation during the pendency of the Suit. A Revisional Application was filed by the Orig. Defendant filed before the Hon’ble Calcutta High Court challenging the said order of dismissal. 

The Orig. Plaintiff submitted that at the time of institution of the suit i.e in August 2019 there were no trained mediators in any district for settlement of commercial disputes as contemplated under the Act and the Rules and neither was there appropriate infrastructure for the same, which fact was accepted by the Hon’ble Court. 

Held

The learned Single Judge held that “The object of Section 12A was to expedite resolution of disputes in the ease of doing business and not to scuttle the right of a litigant to approach the court. A party cannot be denied the opportunity of participating in the justice dispensation system.” 

Therefore, in tune with this reasoning, the Court ordered that the suit be kept in abeyance for seven months from or till the report of the mediator was filed, whichever was earlier. However, instead of approaching the lawyer appointed as a mediator by the lower court, the High Court directed the parties to approach the State Legal Services Authority in accordance with the Rules.

Concluding Remarks

The author must point out that while the judgment in M/s Dhanbad Fuels does provide relief to those who were unable to invoke pre-institution mediation on the grounds of lack of infrastructure at the time, there is a bit of ambiguity on whether the plaint could still be rejected if a plaintiff filed the suit after the relevant infrastructure was in place. 

On the one hand the Court does note that “The situation would have been otherwise, had there been proper infrastructure in place” but it also goes on to state in very wide terms that “..the plaint should not be rejected at this stage on the ground of non-compliance with Section 12A of the said Act when the plaintiff can still be directed to comply with the provisions of law by keeping the suit in abeyance.”

It would definitely be interesting to see how other High Courts or the Apex Court interpret section 12A of the Act particularly vis-à-vis Order VII Rule 11 of the Code. 

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Vikrant D. Shetty, is Partner at Taurus Legal, Advocates and Solicitors.

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