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Pre-institution mediation mandatory under  Commercial Courts Act: Supreme Court

 

The mandatory nature of Section 12 A of the Commercial Courts Act was upheld by the Supreme Court through the learned bench led by HONOURABLE MR. JUSTICE K.M. Joseph in the case of M/s Patil Automation Private Limited and others versus Rakheja Engineers Private Ltd. (Special Leave Petition No.14697 of 2021)

FACTS OF THE CASE: Brief facts of the case are as follows; In the present case, the respondent filed a commercial suit under Order XXXVII of the CPC before the Additional District Judge, DistrictCourt, Faridabad, praying for the recovery of Rs. 1,00,40,291/- along with 12 per cent interest on a certain sum. The appellant is the defendant in the said suit. It filed an application under Order VII Rules 10 and 11, read with Sections 9 and 20 of the CPC, inter alia contending that the suit was filed without adhering to Section 12A of the Act. It contested the matter contending that the suit was not barred for non-compliance with Section 12A of the Act.

JUDGEMENT: After reviewing the submissions of both sides, the Hon’ble Court opined that any hesitation on the part of the Court to construe Section 12A mandatorily would contradict the goal and intent of the legislature. The Court further declared that Section 12A of the Act is mandatory and held that any suit instituted violating the mandate of Section 12A must be visited with the rejection of the plaint under Order VII Rule 11. This power can be exercised even suo moto by the Court, as explained earlier in the judgment. The Court made it clear that this decision will take effect on August 20, 2022, in order to ensure that all interested parties are properly informed. The top Court further ordered that the case cannot be reopened on the basis of this declaration if the plaints have already been dismissed and no action has been taken within the limitation period. The Court further declared that the plaintiff would not benefit from the declaration of prospective effect if the order rejecting the plaint has been followed by the filing of a new lawsuit. The bench further stated that the plaintiff would not be eligible for relief if a complaint is filed alleging a violation of Section 12A after the jurisdictional High Court has made Section 12A mandatory. The Court finally held that pre- institution mediation under Section 12A of the Commercial Courts Act 2015 is mandatory in nature, and suits not adhering to it would be liable to be rejected under Order VII Rule 11 of the Code of Civil Procedure (CPC).

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Judgement reviewed by – Abhinav Paul Mathew

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