The Courts in India are still on a mission to achieve the objective of speedy adjudication of Commercial Disputes.Pursuant to the  same Commercial Courts (Pre Institution Mediation and Settlement) Rules, 2018 were  framed  with the purpose of resolving the matters relating to commercial disputes in an efficacious and expeditious manner.As per the said enactments, all disputes falling within the definition of “Commercial Dispute” under Section 2(1)(c) of the Commercial Courts Act, which are valued Rupees 3 Lakhs or more, shall not be instituted unless the plaintiff mandatorily exhausts the remedy of Pre-Institution Mediation, to be conducted by the Legal Services Institutions. Accordingly, the Legal Services Institutions are conducting Pre Institution Mediation in respect of Commercial Disputes across the country.Section 12A of the aforesaid Act specifically deals with pre institutional  Mediation and Settlement. “This pre-institution mediation is guided by the Commercial Courts (Pre-institution Mediation and Settlement) Rules, 2018.The Supreme Court in Patil Automation v. Rakheja Industries was hearing an appeal in previous month in which the High Court of Punjab & Haryana held that the procedure of pre-institution mediation under the 2015 Act is not mandatory.The apex court issued notice in a plea querying whether pre-institution mediation as provided under Section 12A of the Commercial Courts Act is mandatory or directory in nature”  

Procedure for Initiating Pre-Institution Mediation

“The procedure to be followed for initiating – Once an application is received, the Authority will issue notice to the opposing party to appear within 10 days of receipt of notice and give consent to participate in the mediation proceedings. The Rules provide for issuance of a final notice if the Authority does not receive a response within 10 days of the initial notice. If the opposing party fails to appear following the final notice or refuses to participate in the mediation proceedings, the Authority will treat the mediation process as a non-starter and prepare a report to that effect. If the opposing party agrees to participate, then the mediation process begins.The Commercial Courts (Pre Institution Mediation and Settlement) Rules, 2018 (“the Rules”) have been made under Section 21A(2) read with Section 12A(1) of the Commercial Courts Act, 2015. The Commercial Courts have been set up for faster resolution of “commercial disputes”. The rules prescribe the manner in which the Pre-institution mediation proceedings as envisaged under newly inserted Chapter IIIA have to take place.

Under Section 12A, no suit shall be instituted before the plaintiff exhausts the remedy of pre-institution mediation, unless it contemplates any urgent interim relief under the Act. The ‘Authorities’ to conduct the pre-institution mediation are to be constituted under the Legal Services Authorities Act,1987. The Authority under the Rules then has to appoint a ‘Mediator’ if both parties agree to undergo the mediation process and ensure the completion within a period of three months from the date of application made by the plaintiff. If the parties come to a settlement through the mediation process, then the settlement shall have the same status and effect as if it is an arbitral award on agreed terms under S.30(4) of the Arbitration and Conciliation Act, 1996.A party to a commercial dispute can appear before the Authority/Mediator, either personally or through duly authorised representative/Counsel. The Rules ensure that utmost confidentiality regarding the mediation process is maintained by the Mediator, and no stenographic/audio/video recording of the mediation sittings are allowed.The Rules also prescribe that both the Authorities and the Mediator shall not retain any hard/soft copies of documents exchanged between parties or submitted to Mediator or any notes prepared by the Mediator beyond 6 months other than application for mediation, notice issued, settlement agreement and failure report.Further under the Rules, the whole process of pre-institution mediation is made highly organized with the Authority and the Mediator being required to process several forms prescribed for institution of proceedings, issuance of notice to parties, settlement, and reporting of ‘non-starter’ process to parties, and failure report. The Rules also prescribes the time-lines for fixing of dates for hearing, with the consent of both parties may be extended for further two months.The Rules prescribe for one-time mediation fee shared equally by the parties, which is determined as per the quantum of the claim made by the plaintiff made in the suit.”

“The PIMS process recently introduced by the Act has tremendous potential to facilitate inexpensive, time-bound and amicable settlement of commercial disputes between parties.Since the 1980s, India has seen a concerted move by the legislature to popularize alternative modes of dispute resolution..In this background, one of the legislative measures introduced was court referred mediation, wherein parties could have their disputes amicably resolved with the assistance of independent and professional mediators accredited with courts. In many jurisdictions in India, these measures proved successful. This was aided in no small measure by the settlement agreement arrived at being made enforceable as a non-appealable decree of the court.Under the existing regime of Pre-Institution Mediation and Settlement (PIMS) rules, following these rules are mandatory for commercial disputes of Rs 3,00,000 or more in value where the petitioner seeks no urgent interim relief. In such cases, the petitioner is obligated to first apply for and exhaust this process before bringing a suit to claim any relief as per Section 12A of the Act. PIMS is a time bound process (must be completed within three months but extendable on mutual request) and a successful settlement of the dispute is enforceable as an arbitral award under the Arbitration and Conciliation Act, 1996.At the commencement of mediation, the parties to the dispute are required to pay a one-time mediation fee, to be shared equally amongst them. The mediation fee depends upon the quantum of the claim and is specified in one of the schedules appended to the Rules.”

Initiation -The process of pre-mediation is initiated under Rule 3(1) wherein a party to a commercial dispute may make an application to the Legal Services Authority in the specified form, either online or by Post or by hand and the requisite fee of Rs. One thousand has to be paid to the authority by way of demand draft or through online means.Under sub-rule (2) the Legal Services Authority keeps due regard to the territorial and pecuniary jurisdiction and the nature of commercial dispute and a notice is issued to the opposite party in the specified form to appear and thereby give consent to participate in the mediation process. The opposite party has to appear within ten days of the issue of the said notice.According to sub-rule (3) if no response is received from the opposite party then the Legal Services Authority issues a final notice to it as specified in sub-rule (2).If the notice issued under sub-rule (3) goes unacknowledged or if the opposite party refuses to participate in the mediation process, then under sub-rule (4) the Legal Services Authority treats the mediation process to be a non-starter and it makes a report and endorses the same to the applicant and the opposite party.If the opposite party, after receiving the notice under sub-rule (2) or (3) seeks further time for his appearance, the Legal Services Authority by virtue of sub-rule (5) may fix an alternate date which has to be within ten days from the date of receiving such request.If the opposite party fails to appear on the date fixed under sub-rule (5), then sub-rule (6) provides that the Legal Services Authority shall treat the mediation process to be a non-starter and make a report in this behalf and endorses the same to the applicant and the opposite party.If both parties to the commercial dispute appear before the Legal Services Authority and give consent to participate in the mediation process, then under sub-rule (7) the Legal Services Authority then assigns the commercial dispute to a Mediator and fixes a date for  their appearance before the said Mediator.Sub-rule(8) provides that the Legal Services Authority has to ensure that the process of mediation must be completed within a period of three months from the date of receipt of application for pre-institution mediation. The same sub-rule also provides that this period can be extended for two months with the consent of the applicant and the opposite party.According to Rule 4 the premises of the Legal Services Authority is the venue for conducting the pre-institution mediation.


Role of the Mediator in Mediation process– Rule 5 lays down the role of the mediator.Rule 6 has to appear before the Authority or Mediator, as the case may be, either personally or through his duly authorized representative or Counsel.Maintain confidentiality of negotations and discussions in the mediation process and explains the entire working procedure of the mediation process to the parties.Mediator has to fix the date and time of each mediation sitting in consultation with the parties.

The Mediator has the discretion to hold meetings with the parties jointly or separately during the course of mediation. The applicant or opposite party can share their proposed terms of settlement with the Mediator in separate sittings along with specific instructions as to what part thereof can be shared with the other party. The parties can also exchange the proposed terms of settlement either orally or in writing with each other during mediation sitting.Once both the parties reach a mutually agreed settlement, it must be reduced in writing by the Mediator and the parties and the Mediator must put down their signatures.The Mediator thereafter provides the settlement agreement, in original, to all the parties to a commercial dispute and also forwards a signed copy of the same to the Legal Services Authority.

If no settlement is arrived at between the parties within a period of three months or if the Mediator is of the opinion that the settlement is not possible, the Mediator then submits a failure report including the reasons in writing to the Legal Services Authority.The Legal Services Authority or the Mediator must not retain the hard or soft copies of the documents exchanged between the parties or submitted to the Mediator or notes prepared by the Mediator beyond a period of six months. The only documents that can be retained are the application for mediation, notice issued, the settlement agreement and the failure reapplication for mediation, notice issued, the settlement agreement and the failure report.

Rule 8 stipulates that all the parties involved therein must participate in the mediation process in good faith with an intention to settle the dispute.According to Rule 10 the District Legal Services Authority must forward the detailed data of all mediation processes to the State Legal Services Authority for maintaining the data and publishing the same on its website on a monthly basis.Before the commencement of the mediation, the parties to the dispute must pay a one-time mediation fee to the Legal Services Authority, to be shared equally, as per the quantum of claim.


Rule 12 makes it imperative for the Mediator to abide by ethical norms during the mediation process.The mediator must uphold the integrity and fairness of the mediation process. He must ensure that the parties involved therein are fairly informed and that they have an adequate understanding of the procedural aspects of the mediation process. He must make a disclosure of any financial interest or other interest in the subject-matter of the commercial dispute.He has to communicate with the parties to the commercial dispute within a manner that is characteristic of great propriety. He must be faithful and maintain a relationship of trust. He has to duly conduct the mediation process in accordance with the applicable laws for the time being in force. He must recognise and give effect to the fact that mediation is ultimately based on the principles of self-determination by the parties and depends upon the ability of parties to reach a voluntary agreement. He must absolutely refrain from promises and must not commit to providing a suitable outcome. He must not meet the parties, their representatives, or their counsels or communicate with them, privately except during the mediation sittings in the premises of the Legal Services Authority. He must not interact with the media or put out any information with regard to the details of the commercial dispute case, which is being mediated by him to maintain confidentiality.Any contravention to these norms of ethics a may result in prejudice to interests of the  parties.


Regulation was recognized The need for some sort of regulation was recognized by the Supreme Court in Salem Advocate Bar Association v. Union of India  recognizing that mediation was majorly an informal proceeding, and that ‘modalities’ for the manner in which proceedings must take place needed to be formulated. Pursuant to this, the Mediation and Conciliation Project Committee was formed. This led to the formulation of the Civil Procedure, Alternative Dispute Resolution and Mediation Rules, 2003 which are non-binding in nature. As a result, the success of mediation as an alternative form of dispute resolution has been different for different state’s Legal Service Authorities. There might be considerable obstacles to remove in implementing the mandatory pre-institution mediation effectively in India. In fact, within a week of the Rules’. Introduction the Delhi High Court has issued a notice in petition challenging to the constitutional validity of the introduction of Section 12A of the Commercial Courts Act, 2015. The grievance highlighted by the petitioner is that there is currently no effective mechanism in place for mandatory pre-institution mediation, which has left a large section of aggrieved parties remediless. Upon being directed to the Legal Service Authority (the Authorities under Section 12A), the petitioner was informed that no mechanism had been introduced till date despite the Rules having been notified on July 3rd, 2018.Thus, there is definitely a lot of ground to cover for an effective implementation of mandatory pre-institution mediation in India. This must come with the understanding that mediation, though being an informal proceeding, the successful conducting of the same requires a certain degree of speciality.

The Supreme Court answered a issued notice in a plea querying whether pre-institution mediation as provided under Section 12A of the Commercial Courts Act is mandatory or directory in nature?  Patil Automation v. Rakheja Industries. the appellants, a manufacturing company, contended before the Supreme Court that the High Court made an error in ignoring the fact that the scheme under Section 12A stipulates that when a suit which doesn’t contemplate any urgent interim relief under the Act, it shall not be instituted until and unless the plaintiff exhausts the remedy of pre-institution mediation.

The plea stated that the High court further erred in ignoring the fact that by means of passing an order for a ‘post-institution mediation,’ as done in the present matter, the “entire process of the enactment of the Commercial Courts Act will stand defeated and diluted and amount to the Commercial Court Act becoming toothless and ineffective.”

Non-Compliance of Pre-Institution Mediation under Commercial Courts Act Not a Ground for Rejection of Plaint 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 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 Order VII Rule 11 of the Code of Civil Procedure. 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.

Efficacy of Section 12A of commercial courts Act,2015 on urgent interim relief –The provision provides that in cases where a suit contemplates an urgent interim relief, one is not required to compulsorily go through pre-institution mediation. Another question concerning the kind of suits that fall under the purview of suits contemplating relief was answered by the Telangana High Court in the case of M/s M.K. Food Products v M/s S.H. Food Products, where a civil petition was filed against an order of the Commercial Court. The Commercial Court had returned the plaint and instructed the parties to go for pre-institution mediation on the ground that the suit didn’t contemplate any urgent interim relief. The suit was concerned with an injunction on copyright infringement. The Telangana High Court held that a suit of such a nature would fall under the category of suit contemplating urgent interim relief and the plaint should not have been rejected on the ground of non-exhaustion of pre-institution mediation. Similarly, in the case of GSD Constructions Pvt. Ltd v Balaji Febtech Engineering, the plaintiff had suffered because of a delay in the delivery of goods who thereby refused to take the delivery of the goods. The plaintiff then filed for an injunction to prevent the defendant from claiming any further amount with respect to the delivery. The court held that the plaintiff was running against time and seeking urgent interim relief hence, he doesn’t need to exhaust the option of pre-institution mediation. Thus, the courts have dispensed with pre-institution mediation in such cases where making the party go through mediation would result in an irreparable loss; irreparable loss being one of the essential elements for the grant of an injunction.

The existing gap in pre institution mediation – An interesting question that what would be the consequence if the party institutes the suit without opting for the said process under Section 12A of the Act. Whether the other party is entitled to take a preliminary objection in their written statement regarding the same? In practice, defendants have been taking such an objection regarding non-compliance of Section 12A by the plaintiff. The judicial opinions stand divided in so far as repercussion of this situation is concerned. One simple modus operndi of the courts is to dismiss the suit with liberty to the plaintiff to institute the suit again in accordance with Order VII Rule 13 of the CPC on the same cause of action. However, this is not a cost effective and time saving method to deal with such a circumstance. Recently, the High Court of Calcutta in the case on Dhanbad Fuels Ltd. v. Union of India & Ors  has very rightly opined that in case of non-compliance of Section 12A by the plaintiff, it is in the interests of justice and in consonance with the objective of whole Act that the plaint is kept at abeyance till the time the plaintiff exhausts the remedy under Section 12A of the Act and an order is passed in accordance with the outcome of the mediation process. This is seemingly a better method of dealing with such plaints as it saves time, efforts and money of the litigants. More so, the reading of orders from different jurisdictions dismissing the plaint for non-compliance seldom clarify / answer as to whether upon raising preliminary objection to reject / dismiss the suit, does it become mandatory for the defendant to participate in the mediation proceedings? In absence of this, it is safe to say that the suit should be kept at abeyance till the time the plaintiff exhausts the ‘pre-institution mediation’ or the plaintiff must be allowed to amend the suit appropriately if the mediation process fails or is a non-starter.Coming to the question concerning the mandatory nature of Section 12A of the Act, i.e., whether the said provision is indispensable for the institution of suit in every circumstance. A bare perusal of sub-section (1) of Section 12A stated above clarifies that the procedure of ‘pre-institution mediation’ can be skipped if and only if the plaintiff requires “urgent interim relief” from the Court. It is relevant to bear in mind that the word ‘urgent’ qualifying the term ‘interim relief’ shows that unless and until the interim reliefs sought are of an urgent nature, so much so, that non-seeking of which would very likely prejudice the plaintiff. The High Court of Delhi in a suit instituted before it without complying with Section 12A of the Act by stating that urgent interim reliefs have been sought by the plaintiff under Order XXXIX Rule 10 and Order XXXVIII Rule 5.

The Court observed that, “Mere bald averment in the application that the defendant No. 1 does not have any intention to satisfy the decree for the reason that the defendant No. 1 is in the process to dispose of the said property, does not satisfy the test of urgency”. In the case Anil Gupta v. Babu Ram Singla & Anr. Another question emanating from this issue is that whether the mandatory requirement under Section 12A of the Act can be dispensed with on any other ground (not embodied in provision). In the interests of justice and to achieve the ultimate object of Section 12A, the High Court of Bombay Ganga Taro Vazirani v. Deepal Raheja, has very recently answered this issue by carving out an exception to the effect that where an attempt has been made by serving notice under any statute (in this case Section 138 of the NI Act, 1881), then in that event, compelling the plaintiff to first exhaust the remedy of amicably settling the matter by initiating ‘pre-institution mediation’ under Section 12A of the Act will be nothing but mere surplusage. This interpretation by the Court is truly serving the intention of the legislature and must be followed as a guiding precedent in the coming days. Other provisions akin to Section 138 of the NI Act include Section 106 of the Transfer of Property Act, 1882 and Section 80 of the CPC upon which such an interpretation ought to be suitably applied.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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