Pre-Institution Mediation (Section 12A): Can Your Commercial Suit Be Rejected Without It?

For years, many businesses filed commercial suits directly and treated Section 12A of the Commercial Courts Act, 2015 as a formality. That changed in 2022. In Patil Automation Pvt Ltd v. Rakheja Engineers Pvt Ltd, the Supreme Court held that pre-institution mediation under Section 12A is mandatory, and that a commercial suit filed without it is liable to be rejected. The ruling was made to apply prospectively, from August 2022, but it now governs every business that plans to sue another over a commercial dispute.

What Does Section 12A Require?

Section 12A, inserted in 2018, provides that a suit which does not contemplate any urgent interim relief shall not be instituted unless the plaintiff first exhausts the remedy of pre-institution mediation in the manner prescribed by the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018. The mediation is conducted by the authorities constituted under the Legal Services Authorities Act, such as the District Legal Services Authority.

The process is short and structured:

• The plaintiff applies to the Legal Services Authority, setting out the dispute
• The Authority issues notice to the opposite party and conducts mediation
• The process is to be completed within three months, extendable by two months with consent
• If a settlement is reached, it is recorded in writing and has the same status as an arbitral award on agreed terms
• If there is no settlement or the other side stays away, a report lets the plaintiff sue
• The time spent in mediation is excluded when computing limitation, so the plaintiff does not lose time by attempting it

Which Suits Does It Apply To?

Section 12A applies to commercial suits, meaning suits on commercial disputes of the Specified Value, currently ₹3 lakh, as defined in the Commercial Courts Act. These include disputes arising from mercantile transactions, supply and distribution agreements, joint ventures, shareholder agreements, intellectual property licensing and similar matters. It does not apply to Section 138 cheque bounce complaints, which are criminal proceedings, nor to petitions before the NCLT under the IBC or the Companies Act.

What Is the Urgent Interim Relief Exception?

A plaintiff who genuinely needs urgent interim relief, such as an injunction to prevent a breach or the sale of assets, may file without mediation. Because litigants began adding an interim prayer to a plaint merely to avoid mediation, the Supreme Court in Yamini Manohar v. T.K.D. Krithi (2023) clarified that courts must look at the substance of the suit, its cause of action and the nature of the interim relief sought. A prayer for interim relief does not by itself exempt a suit from Section 12A. If the court concludes that urgency was manufactured, the plaint may be rejected.

A plaintiff relying on the exception should therefore be able to show real urgency: an imminent act, a risk of irreparable harm or dissipation of assets, backed by documents. A plaintiff whose only real claim is for money, where the interim relief is incidental, should assume mediation is required.

What Happens If a Plaintiff Skips It?

A suit filed in breach of Section 12A is liable to be rejected under Order VII Rule 11 of the CPC, on the ground that it is barred by law. Our article on whether a court can reject a plaint under Order VII Rule 11 explains how that application works. A defendant who spots the defect should raise it early, usually through an application for rejection of the plaint.

For the plaintiff, the consequence goes beyond delay. A rejected plaint means starting again, paying fresh costs and, if limitation is close, risking a time-barred claim, although the period spent on a properly filed suit may sometimes be excluded under Section 14 of the Limitation Act. It is far safer to complete mediation before filing.

How Should Businesses Use Pre-Institution Mediation?

Approach mediation seriously rather than as a hurdle. The mediator's report is a pre-condition to suing, but a real settlement can save months. Prepare your documents, quantify your claim, and attend with someone who has authority to settle. If the other side does not attend, you obtain a report that lets you proceed, which also strengthens a claim for costs. Mediation is also a useful way to test the other side's real defence before you commit to litigation.

Mediation sits alongside the other steps in a recovery dispute. A legal notice for recovery of money normally comes first, and for fixed-sum claims the Order 37 summary suit follows. Our Commercial Disputes practice can help you prepare for mediation or decide whether the urgent relief exception genuinely applies; you can also request a consultation.