No room for camouflaged urgent interim relief

Section 12A of the Commercial Courts Act, 2015 (act), provides that no commercial case may be brought until the parties have attempted to resolve their dispute through pre-institution mediation in accordance with its associated rules. The only circumstance in which such mediation may be avoided is where the action contemplates some urgent interim relief. Section 12A of the act was added in the hope that mediation would reduce the workload of the commercial courts, expediting the disposal of cases.

After section 12A of the act was brought into force, the question arose whether pre-institution mediation for commercial cases was mandatory or optional because of a party’s autonomy to mediate. In 2022, the Supreme Court in Patil Automation Private Limited and Ors v Rakheja Engineers Private Limited, held that pre-institution mediation under section 12A of the act was mandatory. However, the court allowed an exception under which commercial actions may be filed without the parties having participated in pre-institution mediation when the plaintiff seeks urgent interim relief.

In its judgment, the court acknowledged that there was scope for parties to file frivolous applications for urgent interim relief specifically to side-step pre-institution mediation. However, the court did not set out a procedure in cases where, after examining the issues, a court found that urgent interim relief was sought only to avoid mandatory mediation. The Supreme Court left it to lawmakers to fill this gap. However, parliament has not amended section 12A, leaving it to the discretion of each court. A court would have to decide either to reject the case completely for non-compliance or to return it to the parties for them to comply with section 12A of the act by submitting to pre-institution mediation.

In the subsequent Supreme Court case of Yamini Manohar v T.K.D. Keerthi, the defendant applied under order VII, rule 11 of the Code of Civil Procedure, 1908, for the case to be rejected. The defendant argued the plaintiff had failed to submit to mandatory mediation under section 12A of the act. The application was dismissed by the district commercial court, a decision upheld by Delhi High Court. The defendant then applied to the Supreme Court. The Supreme Court upheld the dismissal of the defendant’s application by the commercial court as the pleadings in the case satisfied the grounds for contemplating urgent interim relief. The court went on to provide guidance to commercial courts by specifying the factors to be considered in determining good faith contemplation of urgent interim relief.

The court held that an application for urgent interim relief should not be a disguise to avoid pre-institution mediation. A commercial court should examine the nature and subject matter of the case, the cause of action, the documents and facts, and the application itself to determine if the applicant contemplates an urgent interim relief. The court further observed that the mere refusal to grant urgent interim relief does not automatically lead to the rejection of the case. This will only occur if it is apparent there has been falsity and deception in applying for illusionary urgent relief in order to circumvent pre-institution mediation.

A commercial court has no discretion to waive the mandatory requirement of pre-institution mediation. A separate application explicitly seeking exemption from complying with the mandatory mediation requirement is thus not required. The need for urgent interim relief is established through the pleadings and oral submissions.

Yamini Manohar provides much-needed clarity for courts assessing whether an application for urgent interim relief in a commercial case is genuine or merely a smokescreen to bypass mandatory pre-institution mediation. The judgment narrows the opportunity for unscrupulous litigants to manufacture claims for urgent relief solely to proceed to litigation without submitting to mandatory pre-institution mediation.

The Supreme Court has interpreted section 12A of the act in a way that furthers the legislative spirit and intent behind its enactment. The judgment gives commercial courts sufficient powers to prevent attempts by deceitful litigants to circumvent the provisions of section 12A of the act and through clever drafting evade the requirement for pre-institution mediation.

Sonam Gupta is a counsel and Shiva Pande is an associate at Bharucha & Partners