Pre-Institution Mediation under Section 12A: A Gatekeeper, Not a Formality

When Parliament inserted Section 12A into the Commercial Courts Act, 2015 in 2018, many practitioners read it as a polite suggestion. A plaintiff with a money claim could file the suit, accept a court referral to mediation later, and treat the requirement as satisfied in substance. That reading has not survived. Through Patil Automation Private Limited v Rakheja Engineers Private Limited (2022) and, more recently, Dhanbad Fuels Private Limited v Union of India (2025), the Supreme Court has made pre-institution mediation a threshold condition for commercial litigation in India.

This paper traces how the law reached this point, what the 2025 judgment adds, and the practical questions that businesses and their counsel now need to answer before a commercial suit is filed.

What the provision requires

Section 12A(1) 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. The procedure sits in the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018. The mediation is ordinarily conducted through the authority constituted under the Legal Services Authorities Act, 1987, and must be completed within three months, extendable by a further two months with the consent of the parties.

Two features make the process more than a box to tick. First, the period spent in mediation is excluded when computing limitation, so a plaintiff is not prejudiced by the delay. Second, a settlement reached in pre-institution mediation has the same status and effect as an arbitral award on agreed terms under Section 30(4) of the Arbitration and Conciliation Act, 1996, which means it is directly enforceable.

From directory to mandatory: Patil Automation

Before 2022, High Courts were divided. Some treated non-compliance as a curable irregularity; others rejected plaints outright. In Patil Automation, decided in August 2022, the Supreme Court resolved the split. It held that the language of Section 12A is mandatory, that the provision serves a public purpose of reducing the burden on commercial courts, and that a suit filed in breach of it must be rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908.

Conscious of the number of suits already pending, the Court made its declaration operative from 20 August 2022. Suits filed before that date were not to be rejected merely for want of pre-institution mediation.

What Dhanbad Fuels adds

Dhanbad Fuels, decided on 15 May 2025, arose from a recovery suit filed by the Union of India without any attempt at pre-institution mediation. The plaintiff argued, among other things, that the infrastructure for mediation was not adequately in place when the suit was filed. The Supreme Court was unpersuaded. It reaffirmed that Section 12A is mandatory and that a suit which does not contemplate urgent interim relief cannot be instituted without exhausting mediation.

The judgment is also useful for what it says about the transition. For suits filed before 20 August 2022 without mediation, the Court indicated that the appropriate course is not rejection but to keep the suit in abeyance and permit the parties to explore mediation. For suits filed after that date, the consequence of non-compliance is rejection of the plaint. The Court also observed that deficiencies in mediation infrastructure do not dilute a statutory mandate.

The real battleground: 'urgent interim relief'

With the mandatory character settled, litigation has moved to the exception. A plaintiff who seeks urgent interim relief is not required to mediate first. The risk is obvious: an interim application can be attached to a suit simply to avoid Section 12A.

The Supreme Court addressed this in Yamini Manohar v T.K.D. Keerthi (2023). It held that the commercial court must examine whether the suit genuinely contemplates urgent interim relief, looking at the matter from the plaintiff's standpoint. The plaintiff does not have an absolute right to bypass mediation by drafting an interim prayer, but equally the court is not to conduct a mini-trial on the merits of the interim application. The question is whether the urgency is real or a device.

In practice, the following factors tend to weigh with courts when the exception is invoked:

• whether there is a real risk of dissipation of assets, destruction of evidence or continuing infringement that cannot wait three to five months;

• the time the plaintiff has already allowed to pass since the cause of action arose, since long delay sits uneasily with a claim of urgency;

• whether the interim relief sought is specific and capable of being granted, or is a generic prayer added for form; and

• in intellectual property cases, whether the infringement is ongoing and causing harm to goodwill that money cannot repair.

Questions that remain open

Some issues continue to generate inconsistent orders. Courts have differed on whether Section 12A applies to counterclaims, on how it interacts with summary suits under Order XXXVII, and on what happens when the defendant fails to appear in mediation. Where the opposite party does not participate, the Rules contemplate a non-starter report, which then permits the suit to be filed. Plaintiffs should keep a clean record of the notice issued and the authority's report, since that document will be examined at the threshold.

Practical guidance

For businesses with receivables, supply disputes or contractual claims, the following approach reduces the risk of a plaint being rejected after months of preparation:

1. Treat mediation as the first step in the litigation calendar, not an afterthought. Build the three-to-five-month window into limitation planning, remembering that the mediation period is excluded.

2. Invoke the urgency exception only where it can be justified on affidavit with specific facts. A weak interim application risks both rejection of the plaint and an adverse view of the plaintiff's credibility.

3. Prepare for the mediation seriously. Settlements have the force of an arbitral award, and a well-documented offer can shape costs and interest later if the matter goes to trial.

4. Preserve the non-starter or failure report and annex it to the plaint. It is the single document most likely to be scrutinised at admission.

Conclusion

Section 12A has become a genuine gatekeeper. The Supreme Court has signalled consistently that commercial courts are not to be the first port of call for disputes that could be resolved by structured negotiation. For claimants, the cost of ignoring the provision is no longer a short adjournment but the loss of the suit itself. The sensible response is to treat pre-institution mediation as part of the litigation strategy, and to use it well.