Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd.
Supreme Court of India · 17 August 2022 · 2 judges
Pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 is mandatory; a suit filed in breach of it must be rejected under Order VII Rule 11 CPC, a declaration made effective from 20.08.2022.
Facts
The respondent filed a commercial summary suit under Order XXXVII CPC before the Additional District Judge, Faridabad, on 12.10.2020 to recover about Rs. 1 crore with interest. The appellant, the defendant, applied under Order VII Rules 10 and 11 CPC for rejection of the plaint because the suit was filed without the pre-institution mediation required by Section 12A of the Commercial Courts Act. The trial court refused, kept the suit in abeyance and sent the parties to the District Legal Services Authority for mediation. The Punjab and Haryana High Court upheld that order in revision. In a connected appeal the Madras High Court had rejected a similar application. Some High Courts had treated Section 12A as mandatory and others had not.
Questions before the Court
- Whether pre-institution mediation under Section 12A of the Commercial Courts Act, 2015, as amended in 2018, is mandatory.
- Whether a plaint in a suit filed without complying with Section 12A must be rejected under Order VII Rule 11 CPC, and whether the court can do so on its own.
- Whether the declaration of law should operate only prospectively.
What the Court held
- Section 12A is mandatory. Its language is imperative, and the object of the Act, to resolve commercial disputes quickly through pre-institution mediation without the court's time, supports that reading.
- Mediation is required only in suits that do not contemplate urgent interim relief; in those suits the Legislature kept immediate access to court open.
- A suit instituted in violation of Section 12A must be rejected under Order VII Rule 11 CPC. The court may exercise this power on its own, after hearing the plaintiff. A defendant's failure to raise the objection does not make Section 12A directory.
- The declaration takes effect from 20.08.2022. Plaints already rejected without further steps within limitation cannot be reopened, a plaintiff who has filed a fresh suit after rejection gets no benefit, and suits filed in breach after the jurisdictional High Court held Section 12A mandatory get no relief.
Why it matters
The judgment settles a conflict among High Courts by declaring Section 12A of the Commercial Courts Act mandatory and linking non-compliance to rejection of the plaint under Order VII Rule 11 CPC. It draws on the analogy of notice under Section 80 CPC, and it uses the power to give a declaration of law prospective effect so that pending suits filed on the earlier understanding are not defeated.
In the Court's words
Copied from the official judgment; each passage links to its page.
“It is in this background that the Court must approach the issue of whether Section 12A has been perceived as being a mandatory provision. We say this for the reason that the decisive element in the search for the answer, in the interpretation of such a Statute, must be to ascertain the intention of the Legislature. The first principle, of course, must be the golden rule of interpretation, which means, the interpretation in conformity with the plain language, which is used. There cannot even be a shadow of a doubt that the language used in Section 12A is plainly imperative in nature.”
“The question as to whether Section 12A is mandatory or not, must be decided with reference to language used, the object of the enactment and a host of other aspects. The fact that if a defendant does not raise the plea about compliance of Section 12A, it may result in a given case of waiver cannot result in Section 12A not being mandatory. If it were so, then in a case where there is no notice under Section 80, a plaint can never be rejected. It is legally untenable and defies logic.”
“We declare that Section 12A of the Act is mandatory and hold that any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11. This power can be exercised even suo moto by the court as explained earlier in the judgment. We, however, make this declaration effective from 20.08.2022 so that concerned stakeholders become sufficiently informed.”
Provisions interpreted
Case and bench
- Parties
- M/s. Patil Automation Private Limited v. Rakheja Engineers Private Limited
- Case
- Civil Appeal No. of 2022 (arising out of SLP (C) No. 14697 of 2021)
- Decided
- 17 August 2022
- Bench
- K.M. Joseph, Hrishikesh Roy
- Opinions
- Unanimous. Judgment delivered by K.M. Joseph J. for the Bench.
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