No shortcut from pre-litigation mediation

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Pre-Litigation Mediation in Commercial Proceedings
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The Supreme Court has rejected the notion of an “absolute and unrestricted right” to bypass pre-litigation mediation in commercial proceedings.

It ruled that a prayer for urgent interim relief should not be a disguise or mask to get around section 12A of the Commercial Courts Act. Camouflage and guise to bypass the statutory mandate of pre-litigation mediation should be checked when deception and falsity is apparent or established.

The court’s judgment came while dismissing an appeal lodged against an order of Delhi High Court. The petitioner – Yamini Manohar, defendant in CS (Comm) No. 205/2022 – had applied to the Supreme Court for urgent relief from the high court process under order VII, rule 11 of the Code of Civil Procedure, 1908.

A couple of significant remarks were made by the division bench comprising Justices Sanjiv Khanna and SVN Bhatti, on the approach commercial courts should take in prayers for urgent interim relief.

The court stated that there was no need for a petitioner to file an application seeking a waiver of pre-litigation mediation. Instead, the court must use the facts and circumstances mentioned in the pleadings of the suit when deciding whether to waive pre-litigation mediation.

Addressing order VII, rule 11 of the code, the court found:

  • That non-granting of interim relief at the ad interim stage, when a plaint is taken up for registration/admission and examination, would not justify dismissal of a commercial suit; sometimes, interim relief is granted post issuance of the notice; and
  • The specific suit could not be dismissed after examination of three principles: prima facie case, irreparable harm and injury, and balance of convenience.

On section 12A:

  • The court ruled that commercial courts need to make comprehensive assessments of the nature, subject matter, cause of action and prayer for interim relief to ensure that applications are genuine and not just a way to escape the pre-litigation mediation condition contemplated under section 12A;
  • It further rejected the notion of an “absolute and unrestricted right” of the plaintiff to paralyse section 12A and asserted that the section empowers the court to make assessments based on a plaintiff’s submissions, documents and the factual matrix of the case; and
  • It clarified that the words “contemplate any urgent interim relief” in section 12A(1), with reference to the suit, should be read as conferring power on the court to be satisfied. The words suggest that the suit must “contemplate”, which means the plaint, documents and facts should show and indicate the need for urgent interim relief.

The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.

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