Mandatory pre-institution mediation in commercial suits bars institution without compliance, with the ruling applied prospectively.

Pre-institution mediation under Section 12A of the Commercial Courts Act is mandatory for commercial suits that do not seek urgent interim relief, because the statutory language, scheme, and objective of speedy dispute resolution show a condition precedent to institution. Non-compliance is enforceable through rejection of the plaint under Order VII Rule 11(d) of the CPC, and post-institution efforts at settlement do not amount to substantial compliance. The Court also limited the effect of this declaration prospectively from 20.08.2022, taking into account the recent amendment, conflicting High Court views, and the practical impact on pending litigation and limitation.

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Issues: (i) Whether pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 is mandatory in suits not contemplating urgent interim relief and whether non-compliance bars institution of the suit; (ii) whether the declaration on the mandatory nature of Section 12A should operate prospectively.

Issue (i): Whether pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 is mandatory in suits not contemplating urgent interim relief and whether non-compliance bars institution of the suit.

Analysis: The provision uses peremptory language and was inserted by the 2018 amendment to further the statutory objective of decongesting commercial courts and promoting speedy commercial dispute resolution. The scheme of the Act, the accompanying Rules, the exclusion of mediation time from limitation, the one-time fee structure, and the statutory status given to settlements all indicate that the legislature intended compulsory pre-institution mediation for suits that do not seek urgent interim relief. The Court rejected the notion that post-institution referral or attempted settlement amounts to substantial compliance, and held that the bar to institution is real and enforceable through Order VII Rule 11(d) of the Code of Civil Procedure, 1908.

Conclusion: Section 12A is mandatory, and a suit instituted in breach of it is liable to rejection of the plaint under Order VII Rule 11.

Issue (ii): Whether the declaration on the mandatory nature of Section 12A should operate prospectively.

Analysis: Although the Court held that the statutory command is mandatory, it recognised the recent vintage of the amendment, the conflicting views in the High Courts, and the practical consequences for pending litigation, limitation, and court fees. To avoid unsettling matters already acted upon, the Court moulded relief by making the declaration effective from a specified future date.

Conclusion: The declaration that Section 12A is mandatory was made prospectively from 20.08.2022.

Final Conclusion: The appeals succeeded in part on the legal issue, the plaints filed without complying with Section 12A were held to be vulnerable to rejection, and the ruling was confined prospectively to protect past transactions and pending consequences.

Ratio Decidendi: In commercial suits not seeking urgent interim relief, pre-institution mediation under Section 12A is a mandatory condition precedent to institution, and breach of that mandate attracts rejection of the plaint under Order VII Rule 11(d), subject to the Court's power to give the ruling prospective effect.

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