Calcutta high court: compliance with section 12A of commercial courts act cannot be substituted by mediation conducted in an independent, prior non-commercial suit

Calcutta High Court clarifies that compliance with Section 12A of the Commercial Courts Act cannot be replaced by independent mediation in prior non-commercial suits.

Case Title: Ramji Lal Agarwal v. Sourav Agarwal

The Calcutta High Court has held that once a suit is registered as a commercial suit, the mandatory requirement of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 must be complied with, and that mediation conducted earlier in a separate, non-commercial suit between the same parties cannot be treated as substantial compliance with this requirement.

Justice Aniruddha Roy was dealing with an interlocutory application filed by the plaintiff seeking an injunction to enforce a negative covenant under a family agreement dated June 13, 2017, against the defendant. The suit had been filed before the Commercial Division of the High Court.

The plaintiff had earlier filed a suit on the same cause of action before the Regular Division, which was dismissed on the ground that it was not maintainable there, being commercial in nature. While the parties' appeals against this dismissal were pending, the Division Bench had directed the parties to mediation, which failed. The appeals were subsequently dismissed, and the Supreme Court dismissed the plaintiff's special leave petition against that order. The plaintiff then filed the present suit before the Commercial Division.

The defendant raised the issue of maintainability, contending that the mandatory requirement of pre-institution mediation under Section 12A of the Commercial Courts Act had not been complied with, and that no leave had been obtained for dispensing with this requirement, even though the plaint contained an averment seeking such dispensation.

The plaintiff argued that since mediation had already been availed of and had failed between the same parties on the same cause of action during the pendency of the earlier suit, this amounted to substantial compliance with Section 12A.

The defendant further said that the earlier mediation had been conducted under the 2006 Rules framed under Section 89 of the Code of Civil Procedure, and not under the statutory format prescribed by the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.

The Court held that the provisions of the Commercial Courts Act, including Section 12A, are mandatory, and non-compliance renders a plaint liable to be rejected as barred by law. It found that the mediation earlier undertaken between the parties was in connection with the previous suit and was conducted under Section 89 of the Code of Civil Procedure, and did not satisfy the requirement of Section 12A.

Distinguishing AAONE Developers, the Court observed that in that case there was only one suit which continued after conversion into a commercial suit, whereas in the present case the earlier suit stood dismissed and a fresh, independent commercial suit was subsequently instituted, thereby attracting the rigours of Section 12A afresh.

Holding that no leave had been prayed for or granted for dispensation of the requirement under Section 12A, and that the parties had not availed of mediation in terms of the Act, the Court rejected the plaint filed in the suit. The parties were relegated to mediation before the jurisdictional mediation centre, to be concluded within one month from the first sitting. The Court directed that the court fees paid be returned to the plaintiff's advocate, to be utilised in the event a fresh suit is filed on the same cause of action. The interlocutory application for injunction was also dismissed, without any order as to costs.