Commercial Courts Should Assess if Urgent Interim Relief Plea is a Disguise to Evade Pre-Litigation Mediation: Supreme Court

Commercial Courts Should Assess if Urgent Interim Relief Plea is a Disguise to Evade Pre-Litigation Mediation: Supreme Court

Upholds the order of the Delhi High Court

The Supreme Court has stated that the plaintiff has no absolute choice to avoid pre-litigation mediation by pleading for urgent interim relief. It reiterated that the mandatory nature of Section 12A of the Commercial Courts Act, 2015 mandated pre-litigation mediation unless the suit contemplated urgent relief.

The bench comprising Justice Sanjiv Khanna and Justice SVN Bhatti stated that the commercial court should examine that the prayer for urgent interim relief was not a "disguise or mask to wriggle out of and get over Section 12A of the CC Act."

Section 12A states - a suit that does not contemplate any urgent interim relief, shall not be instituted without exhausting the remedy of pre-litigation mediation.

In the Patil Automation Private Limited and others vs Rakheja Engineers Private Ltd 2022 case, the apex court had held that Section 12A was mandatory and the suits filed without following that condition were liable to be rejected.

The top court was hearing an appeal against an order of the Delhi High Court, which refused to reject a commercial suit under Order VII Rule 11 of the Code of Civil Procedure for not availing of pre-litigation mediation.

While upholding the order of the high court, the bench made significant remarks regarding the approach that the commercial courts were required to take regarding urgent interim relief.

The judges said that no specific application was needed to waive off the process of pre-litigation mediation. The court could decide based on the pleadings in the suit. The bench noted that unlike Section 80 of the CPC, which specifically mentioned that the leave of the court should be obtained to institute the suit without following the notice requirement, Section 12A did not prescribe such a condition.

While explaining that the suit could not be dismissed solely because interim relief was not ultimately granted, the court remarked, “The facts and circumstances of the case have to be considered holistically from the standpoint of the plaintiff."

It added, "The non-grant of interim relief at the ad-interim stage, when the plaint is taken up for registration/admission and examination, will not justify dismissal of the commercial suit under Order VII, Rule 11 of the Code; at times, interim relief is granted after issuance of notice. Nor can the suit be dismissed, because the interim relief, post the arguments, is denied on merits and on examination of the three principles (i) prima facie case, (ii) irreparable harm and injury (iii) balance of convenience. The fact that the court issued notice and/or granted interim stay may indicate that the court is inclined to entertain the plaint."

Justice Khanna and Justice Bhatti held, "It is difficult to agree with the proposition that the plaintiff has the absolute choice and right to paralyze Section 12A of the CC Act by making a prayer for urgent interim relief. Camouflage and guise to bypass the statutory mandate of pre-litigation mediation should be checked when deception and falsity is apparent or established. The proposition that the commercial courts do have a role, albeit a limited one, should be accepted, otherwise it would be up to the plaintiff alone to decide whether to resort to the procedure.”

The judges stressed, “An ‘absolute and unfettered right’ approach is not justified if the pre-institution mediation is mandatory, as held by this court in the Patil Automation Private Limited (supra). The words ‘contemplate any urgent interim relief, with reference to the suit, should be read as conferring power on the court to be satisfied. These suggest that the suit must ‘contemplate’. It means the plaint, documents, and facts should show and indicate the need for an urgent interim relief. This is the precise and limited exercise that the commercial courts will undertake, the contours of which have been explained. This will be sufficient to keep in check and ensure that the legislative object/intent behind the enactment of Section 12A of the CC Act is not defeated."