VERDICTUM.

IN

2025 INSC 696

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6846 OF 2025

(@SPECIAL LEAVE PETITION (C) NO. 4980 OF 2021)

M/S DHANBAD FUELS PRIVATE LIMITED …Appellant(s)

VERSUS

UNION OF INDIA & ANR. …Respondent(s)

JUDGMENT

Signature Not Verified

Digitally signed by
VISHAL ANAND
Date: 2025.05.15
13:24:05 IST
Reason:
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J. B. PARDIWALA, J.

For the convenience of exposition, this judgment is divided into the

following parts:

INDEX

A. FACTUAL MATRIX ........................................................................ 2

B. SUBMISSIONS ON BEHALF OF THE APPELLANT ............... 9

C. SUBMISSIONS ON BEHALF OF THE UNION OF INDIA..... 13

D. ANALYSIS ...................................................................................... 19

i. Legislative intent behind the enactment of Section 12A of the 2015

Act ................................................................................................. 20

ii. Section 12A of the 2015 Act is mandatory in nature .................... 26

iii. How the expression “urgent interim relief” is to be construed ..... 35

iv. The effect of according prospectivity to the declaration in Patil

Automation (supra) on cases like the one at hand ....................... 39

v. The equitable maxim lex non cogit ad impossibilia ..................... 41

E. CONCLUSION ............................................................................... 49

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1. Leave granted.

2. This appeal arises from the judgment and order passed by the High

Court at Calcutta on its appellate side dated 22.02.2021 in C.O. No.

1678 of 2020 by which the High Court disposed of the revision

application filed by the appellant herein by directing that the suit

instituted by the respondent herein, i.e., Union of India, on

09.08.2019, shall be kept in abeyance for seven months from the date

of the order or until the receipt of the report of the mediator,

whichever is earlier. In other words, the High Court proceeded to pass

an order keeping in mind Section 12A of the Commercial Courts Act,

2015 (for short, “the 2015 Act”), as amended in 2018.

A. FACTUAL MATRIX

3. The facts giving rise to this appeal may be summarised as under:

a. The respondent Union of India instituted Money Suit No. 28 of

2019 on 09.08.2019 in the Commercial Court, Alipore against

the appellant herein for the recovery of a sum of Rs.

8,73,36,976/- (Rupees Eight Crore, Seventy-Three Lakh, Thirty-

Six Thousand, Nine Hundred and Seventy-Six only) towards

differential freight and penalty. Indisputably, no urgent interim

relief was prayed for in the said suit.

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b. No sooner the suit referred to above came to be instituted than

the appellant herein, as defendant, raised a preliminary objection

in its written statement dated 20.12.2019 as regards the

maintainability of the suit without availing the remedy of pre-

institution mediation under Section 12A of the 2015 Act read

with Pre-Institution Mediation and Settlement Rules, 2018 (in

short, “the PIMS Rules”) which came into force with effect

from 03.07.2018.

c. On 30.09.2020, the appellant herein preferred Interim

Application No. 190 of 2020 under Order VII Rule 11(d) of the

Civil Procedure Code, 1908 (for shot, the “CPC”) read with

Section 12A of the 2015 Act seeking rejection of the plaint, inter

alia, on the ground that the Money Suit No. 28 of 2019 suffered

from institutional defects and was violative of the mandatory

provisions of pre-institution mediation.

d. The Order VII Rule 11(d) application, referred to above, came

to be rejected by the Commercial Court vide order dated

21.12.2020. While rejecting the I.A. No. 190 of 2020 the

Commercial Court observed thus:

“13. Since the case has been filed on 09.08.2019 and the
present application has been filed at a belated stage, I find
there is no requirement to reject the suit even for
noncompliance of the mandatory provision of Section 12A

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of the Commercial Courts Act, 2015, otherwise, instead of

aid in justice, the justice will be more delayed.

14. Once the plaint has been accepted by this Court, it

would be presumed that the Court has no reason
whatsoever to reject the plaint and obviously, the
Defendant can raise this issue even at the time of filing
W/S but admittedly, the Defendant no. 1 filed W/S even
without taking the plea as now he has taken and in that
case, it would be presumed that they are not also interested
in the mediation proceedings.

15. This Court has been established on 05.07.2019 and

within a month or more, the instant suit has been filed and
at this stage, there is no proper infrastructure for
conducting pre-litigation mediation and standard
operating procedure has also not been framed by the
Hon'ble High Court at Calcutta.

16. In the above circumstances, the plea as taken by the

Defendant no. 1/Petitioner is liable to be rejected as filed
at a belated stage.

17. It appears from the instant application that the

Defendant no. 1 is interested to proceed with the mediation
proceedings and accordingly, let the dispute be referred to
mediation and in such case also, the interest of the
Defendant no.1/Petitioner will not be prejudiced.

18. Let the dispute be referred for mediation and Mr.

Jayanta Mukherjee, Ld. Member of the Bar is appointed
as the Mediator.

19. Both sides are directed to attend the mediation

proceedings on 04.01.2021 at 2 p.m., and thereafter, the
Ld. Mediator will fix further dates of proceedings and for
doing so, the Ld. Mediator can obtain proposals for
settlement from both sides.

20. The Ld. Mediator is further directed to complete his

proceedings within 11.01.2021 and to submit the report
alongwith the proposal if any, as submitted by both parties

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in a separate sealed envelope for consideration of this

Court while awarding cost under Section 35A of the CPC.

21. Accordingly, the instant I.A. is disposed of as being

rejected on contest.”

e. Thus, the Commercial Court while declining to reject the plaint

directed post-institution mediation by asking the parties to name

and appoint an advocate as a mediator.

f. The appellant herein, being dissatisfied with the order passed by

the Commercial Court rejecting the application filed under

Order VII Rule 11(d) of the CPC, challenged the same before

the High Court by filing a civil revision application.

g. The High Court disposed of the revision application, inter alia,

holding as under:

“15. In this case, the defendant filed the application under

Order VII Rule 11(d) of the Code of Civil Procedure for
rejection of the plaint as being barred by law, the plaintiff
having failed to initiate the process of mediation under
Section 12A of the said Act. However, assuming that the
plaint is rejected on this ground, Order VII rule 13 would
allow the plaintiff to file another suit on the self same
cause of action. Thus, in my opinion, rejecting the plaint
at this stage, would not be in consonance with the
objectives of the said Act and Rules. The plaintiffs may
face a non-starter or a non-settlement and would have to
come back and file a suit once again. This will cause
unnecessary delay and shall not be cost effective even for
the defendant. Thus, considering the ultimate object of the
provision of law, this Court is of the opinion that the suit
which is at its early stage, be kept in abeyance and the
plaintiff be directed to comply with the provisions of

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Section 12A. This order is further passed keeping in mind

the time and the situation when the plaint was filed, that
is, within a month after the commercial division at Alipore
had been made operative. It is also true that until
December, 2020, the SOP and the meditation rules to be
followed by the Legal Services Authority Act, 1987 in West
Bengal, for conducting commercial mediations had not
been notified. The panel of trained mediators for
commercial suit was also prepared and published
thereafter. Thus the plaintiffs had sufficient reasons not to
go for an effective mediation as envisaged under the said
Rules in the absence of proper infrastructure. The
situation would have been otherwise, had there been
proper infrastructure in place.

16. The decision of the Calcutta High Court will not apply
as the decision was on the point of leave to file the suit
without exhausting the mediation process. This Court is
not dispensing with the requirement of Section 12A but
directing the plaintiff to comply with the provision of law
by keeping the suit in abeyance.

17. Mediation in India is still in its nascent stage and

requires more awareness. Prior to the publication of the
panel of trained mediators for settlement of commercial
disputes, there was no complete machinery which could be
availed. Settlement of commercial disputes require special
technical and commercial knowledge.

18. Mandatory training for mediation of commercial

disputes is the minimum requirement for any mediator to
be appointed in terms of the said Rules. Commercial
disputes are very often technical in nature and may involve
knowledge in commercial law and business. If such was
not the case, a separate panel of such mediators would not
have been prepared. The Act and the Rules have been
framed with an object of improving the “ease of doing
business”.

19. Section 12A of the Pre-Institution Mediation, is a mere

tool for reduction of pendency of commercial litigation in
India. However, the purpose of the said Section 12A and
the Rules cannot not be to nonsuit a party but only to

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encourage the party seeking to file a suit to first explore

the possibility of settlement of the dispute through
mediation. Section 12A provides the parties with an
alternative mechanism to resolve their disputes by
negotiation in the presence of a mediator. Such mediation
has been made time bound and the parties also have the
liberty to move the commercial court for adjudication of
the dispute, if a mediation results in a non-starter or the
talks of settlement fail.

20. Thus the plaint should not be rejected at this stage on

the ground of non-compliance with Section 12A of the said
Act when the plaintiff can still be directed to comply with
the provisions of law by keeping the suit in abeyance.

21. The instant case is a suit for recovery of money filed

by the Union of India for an amount over Rs.8 Crores. The
alleged claim is for recovery of public money. The
allegation is illegal claim of concessional rate of freight
under Rate Circular No.24/2008, 30/2008 and 36/2009.
The suit was filed, summons were issued, the written
statement was filed, case management hearing was held.
The defendant did not show any inclination towards
settlement of the dispute by way of mediation. An
application under Order VII Rule 11 (a) of the Code of
Civil Procedure was filed by the defendant for rejection of
the plaint against the defendant No. 2 to 4. Noncompliance
with Section 12A was not raised by the defendant in the
said application. Thereafter, once the earlier application
was rejected, a subsequent application under Order VII
Rule 11(d) for rejection of the plaint on the ground of
noncompliance with Section 12A of the said Act was again
filed. The application was filed on September 30, 2020,
that is, more than a year since the institution of the suit.
Thus, the learned court held that the suit should not fail
for non-compliance of Section 12A of the said Act.
Rejection of the plaint would result in delay in
dispensation of justice, instead of the court acting in aid
of justice. In my opinion, this was a correct approach,
keeping in mind the objects and reasons for establishing
Commercial Courts, that is, quick and easy resolution of
disputes either by settlement or in court. Yet, the obligation
under the law must be complied with. The learned court

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below rightly directed the suit to be kept in abeyance. In

my opinion, the defendants will not suffer any prejudice.
The suit has not progressed beyond filing of the written
statement. Thereafter two consecutive applications were
filed by the defendant for rejection of the plaint. It is also
not the case of the defendant that they are interested in
settlement through mediation.

22. The decisions cited by Mr. Mitra are not applicable in

the facts of this case. The court can make an order
adjusting equities for satisfying the ends of justice as it
may deem fit while interpreting a procedural law even if
the same is couched with a negative covenant.

23. However, the learned court below erred in naming the

mediator himself, instead of directing the plaintiffs to
approach the State Legal Services Authority, West Bengal,
in terms of the 2018 Rules and the SOP notified by the
State of West Bengal in this regard.

24. The order impugned is set aside to the extent of

appointment of Mr. Jayanta Mukharjee learned member of
the bar as a mediator, and the direction upon the parties
to attend the mediation on the date fixed by the learned
court below and also further directing the learned
mediator to complete the proceeding within January 11,
2021 and submit a report before the learned court.

25. Hence, it is ordered that the suit be kept in abeyance

for seven months from date or until receipt of the report of
the learned mediator, whichever is earlier. The plaintiffs
are directed to approach the District Legal Services
Authority, West Bengal in accordance with the Standard
Operating Procedure (SOP) dated December 11, 2020,
mandatorily, within two weeks from date. In case of
default, the learned court below shall be at liberty to pass
such orders in the suit for non-compliance of the order of
court. The Authority shall act in accordance with the said
Rules of 2018 and the SOP. The process is to be completed
within the period as prescribed by the Rule 3(8) of the
Rules of 2018. The Mediator shall file the report in such
Form and manner as prescribed by the Rules, before the
learned court below within the aforesaid period. The

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remuneration/fees etc. of the learned Mediator will be

fixed as per the SOP.

26. Upon receipt of the report from the Mediator, the

learned Commercial court will proceed according to law.
This revisional application is disposed of and there shall
be no order as to costs.”

4. In such circumstances referred to above, the appellant-original

defendant has come up before us with the present appeal.

B. SUBMISSIONS ON BEHALF OF THE APPELLANT

5. Mr. Vikas Singh, the learned Senior Counsel appearing for the

appellant, vehemently submitted that the High Court committed an

egregious error in declining to reject the plaint having regard to the

mandatory provision of Section 12A of the 2015 Act. According to

the learned counsel, the issue is squarely covered by the decision of

this Court in Patil Automation Private Limited and Others v.

Rakheja Engineers Private Limited reported in (2022) 10 SCC 1,

wherein this Court has said in so many words that Section 12A of the

2015 Act is mandatory and any suit instituted violating the mandate

of Section 12A must be visited with rejection of the plaint under Order

VII Rule 11.

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6. The learned counsel laid much emphasis on the observations made by

this Court in Patil Automation (supra) as contained in paragraphs 103

and 114 of the judgment respectively. He would argue that in Patil

Automation (supra) this Court while holding on one hand that it is

crystal clear that the procedure provided under Section 12A of the

2015 Act is mandatory, said on the other hand that in view of the facts

of Patil Automation (supra), where the trial had progressed

substantially, directed the parties to appear before the Secretary

District Legal Services Authority, Faridabad for mediation keeping

the suit alive and in abeyance. Taking a clue from the observations

made by this Court in paragraphs 103 and 114 of Patil Automation

(supra) respectively, the learned counsel submitted that the suit in

question is still at the initial stage and the same has been kept in

abeyance and has not progressed beyond filing of the written

statement. This, according to the learned counsel, would take the suit

in question out of the purview of the category where there has been

substantial progress in the suit. In other words, according to the

learned counsel, since there has been no progress worth the name in

the suit in question, the mandate of Section 12A will apply with all

force and the plaint ought to meet with the fate of rejection.

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7. The learned counsel submitted that this Court in Patil Automation

(supra) applied the principle of prospective overruling more

particularly for the purpose of issuing directions as contained in

paragraph 113 and sub-paragraphs respectively thereof. Relying on

the decision of the Constitution Bench in I.C. Golaknath and others

v. State of Panjab and others reported in AIR 1967 SC 1643, more

particularly the observations made in paragraph 45 therein, the

learned counsel would submit that even while applying the doctrine

of prospective overruling the law laid down could be said to have

been always the same. If a subsequent decision changes the earlier

one, the later decision would not change the law but would only

discover and lay down the correct principle of law. According to the

learned counsel, if the suit is allowed to proceed further the same

would amount to a fresh litigation as it has not progressed beyond the

initial stage and has been under subsisting orders of stay since 2021.

8. In such circumstances referred to above, according to the learned

counsel there remains no material distinction between a fresh suit if

filed today and the present suit sought to be revived from the state of

inception.

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9. The learned counsel laid much stress on his submission that the suit

in question would be governed by the declaration made by this Court

in Patil Automation (supra).

10. The learned counsel further submitted that while applying the

doctrine of prospective overruling, the House of Lords in the case of

Spectrum Plus Ltd., In re: reported in (2005) 3 WLR 58, has held

that prospective overruling takes several different forms. In its

simplest form prospective overruling involves a court giving a ruling

of the character sought by the bank in that case. Overruling of this

simple or “pure” type has the effect that the court’s ruling has an

exclusively prospective effect. The ruling applies only to transactions

or happenings occurring after the date of court’s decision. All

transactions entered into, or events occurring, before that date

continue to be governed by the law as it was conceived to be before

the court gave its ruling.

11. It was also argued that even otherwise since the suit has not

progressed beyond the initial stage the declaration made by this Court

in paragraph 104 of Patil Automation (supra) would apply with all

force. In paragraph 104 the Court observed, “They would have to

bring a fresh suit, no doubt after complying with Section 12A, as

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permitted under Order VII Rule 13. Moreover, the declaration of law

by this Court would relate back to the date of the Amending Act of

2018”. The same would be applicable in the present facts and

circumstances of the case.

12. In the last, the learned counsel submitted that if the suit is withdrawn

today and filed afresh after exploring the avenue of pre-institution

mediation, it would not, in any manner, give rise to the question of

limitation having been exhausted, since the plaintiff is the Central

Government, and the limitation to file the suit by Central Government

is 30 years under Article 112 of the schedule of the Limitation Act,

1963 (for short, “the Limitation Act”).

13. In such circumstances referred to above, the learned counsel prayed

that there being merit in his appeal the same may be allowed and the

plaint be ordered to be rejected.

C. SUBMISSIONS ON BEHALF OF THE UNION OF INDIA

14. Ms. Archana Pathak Dave, the learned Additional Solicitor General,

submitted that no error, not to speak of any error of law, could be said

to have been committed by the High Court in passing the impugned

order.

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15. The learned ASG laid much emphasis on the fact that the suit

instituted by the Union of India for recovery of money from the

appellant herein should not fail in view of the purported non-

compliance with Section 12A of the 2015 Act, more particularly,

when the infrastructural requirement for the mediation process was

not completed and the Standard Operating Procedure (SOP) came to

be framed only on 11.02.2020.

16. The learned ASG submitted that there need not be any debate on the

point that Section 12A of the 2015 Act is mandatory. In other words,

Section 12A stipulates compulsory pre-suit mediation. She would

submit that the issue is no longer res integra in view of the decision

of this Court in Patil Automation (supra). However, according to the

learned ASG the law laid down by this Court in Patil Automation

(supra) should be applied prospectively with effect from 20.08.2022

as made clear in the decision itself.

17. The learned ASG provided us with a table to give a bird’s eye view of

the timelines for insertion of Section 12A of the 2015 Act followed

by creation of the necessary infrastructure for implementation of the

provisions and the filing of the money suit by Union of India.

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18. According to the learned ASG, the table would reveal that after the

establishment of the first Commercial Court in Alipore, the statutory

framework and corresponding rules were progressively implemented

till December 2020. According to her, the money suit instituted in

2019 could not have been referred to pre-suit mediation under Section

12A due to persisting infrastructural vacuum created by lack of

appointment of necessary authorities/mediators and delineation of the

procedural framework for the same. The table provided by the learned

ASG reads thus:

Date Insertion and Money Suit

subsequent
implementation of
S.12A
03.05.2018 S. 12A was introduced
by way of amendment
to the 2015 Act
mandating pre-suit
mediation.
03.07.2018 Central Government
notified the PIMS
Rules. Rule 3 requires a
party to make an
application to the
Authority for initiation
of mediation process.
The Central Govt.
further authorised the
State Authority and
District Authority
constituted under the
Legal Services
Authorities Act, 1987
for the purposes of pre-

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institution mediation
and settlement.
12.09.2018 The Central Govt.
further authorised the
authorities constituted
under the Legal
Services Authorities
Act, 1987 such as the
National and District
Legal Services
Authorities for the
purposes of pre-
institution mediation
and settlement.
09.08.2019 Money Suit No. 28
of 2019 filed before
the Commercial
Court by the
respondents seeking
recovery of a sum of
INR 8,73,36,976
against the
appellant.
20.12.2019 The appellant filed
its written statement
in the suit.
27.01.2020 A panel of trained
mediators for
conducting pre-
litigation mediation in
commercial disputes
was sent to the State
Legal Services
Authority, West Bengal.
30.09.2020 Appellant filed an
application under
Order 7 Rule 11 of
the CPC seeking
rejection of the
plaint after more
than one year of
filing of the suit,
evincing that the

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same was merely an

afterthought with
the purpose of
negating the suit.
14.10.2020 The SOP was prepared
by the State Legal
Services Authority.
11.12.2020 The SOP was approved

19. The learned ASG submitted that although the first commercial court

was established at Alipore on 05.07.2019, yet the institutional

infrastructure for pre-suit mediation was not in place until much later.

This is because the panel of trained mediators was prepared only on

27.01.2020 followed by approval of the SOP on 21.12.2020. As such,

when the Union of India instituted the Money Suit on 09.08.2019, the

requisite infrastructure for conducting pre-suit mediation was not yet

established thereby making compliance with Section 12A impossible.

20. The learned ASG tried to fortify her submission by relying on the

equitable maxim lex non cogit ad impossibilia, i.e., law does not

compel an impossible performance. In this regard, the learned ASG

placed reliance on the decision of this Court in the case of Raj Kumar

Dey v. Tarapada Dey reported in (1987) 4 SCC 398, more

particularly, the observations made in paragraph 6 therein.

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21. The learned ASG submitted that taking advantage of this

administrative vacuum, the appellant should not be allowed to defeat

the money suit under the garb of non-compliance. Section 12A, at its

nascent stage was not a feasible course. If settlement through

mediation is truly the real objective and intention of the petitioner, the

same may be fully achieved by the impugned order.

22. It was further submitted that had Union of India awaited the

establishment of the requisite infrastructure, the same would have

unduly impeded the recovery process in a money suit involving public

funds, thereby defeating the very purpose and legislative intent of the

2015 Act, which aims to ensure expeditious resolution of commercial

disputes.

23. In the last the learned ASG submitted that if the money suit instituted

by the Union of India is dismissed on the ground of Section 12A of

the 2015 Act, the Union of India would still have the opportunity to

file another suit on the same cause of action under Order VII Rule 13

of the CPC and the process would have to start afresh. The court fees

would also have to be deposited for the fresh suit. Such delay and

protraction of the suit proceedings would be contrary to the very

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objective of the 2015 Act and the same may lead the public exchequer

to suffer.

24. In such circumstances referred to above, the learned ASG prayed that

there being no merit in this appeal, the same may be dismissed.

D. ANALYSIS

25. Having heard the learned counsel appearing for the parties and having

gone through the materials on record, two questions fall for our

consideration:

a. Whether the High Court committed any error in passing the

impugned order; and

b. Whether, due to non-compliance with Section 12A of the

Commercial Courts Act, 2015, a suit should be dismissed under

Order VII Rule 11 of the Code of Civil Procedure, 1908, or

whether it should be kept in abeyance, directing the parties to

first explore the possibility of settlement by instituting

mediation?

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i. Legislative intent behind the enactment of Section 12A of the

2015 Act

26. Before adverting to the rival submissions canvassed on either side, we

must look into few relevant provisions of law.

27. Section 12A of the 2015 Act reads as follows:

“12-A. Pre-institution mediation and settlement.—(1)

A suit, which does not contemplate any urgent interim
relief under this Act, shall not be instituted unless the
plaintiff exhausts the remedy of pre-institution
mediation in accordance with such manner and
procedure as may be prescribed by rules made by the
Central Government.

(2) The Central Government may, by notification,

authorise the Authorities constituted under the Legal
Services Authorities Act, 1987 (39 of 1987), for the
purposes of pre-institution mediation.

(3) Notwithstanding anything contained in the Legal

Services Authorities Act, 1987 (39 of 1987), the
Authority authorised by the Central Government under
sub-section (2) shall complete the process of mediation
within a period of three months from the date of
application made by the plaintiff under sub-section (1):

Provided that the period of mediation may be extended

for a further period of two months with the consent of
the parties:

Provided further that, the period during which the

parties remained occupied with the pre-institution
mediation, such period shall not be computed for the
purpose of limitation under the Limitation Act, 1963 (36
of 1963).

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(4) If the parties to the commercial dispute arrive at a

settlement, the same shall be reduced into writing and
shall be signed by the parties to the dispute and the
mediator.

(5) The settlement arrived at under this section shall

have the same status and effect as if it is an arbitral
award on agreed terms under sub-section (4) of Section
30 of the Arbitration and Conciliation Act, 1996 (26 of
1996).”

28. At the time of enactment of the 2015 Act, the monetary limit for a suit

liable to be tried by the Commercial Court was fixed at Rs 1 crore.

29. In the course of three years, noticing certain features, the legislature

decided to amend the 2015 Act. Therefore, in the year 2018, the 2015

Act came to be amended by the Commercial Courts, Commercial

Division and Commercial Appellate Division of High Courts

(Amendment) Act, 2018 (Act 28 of 2018) (hereinafter referred to as

“the Amending Act”).

30. It is apposite that we notice the Statement of Objects and Reasons of

the Amending Act:

“Statement of Objects and Reasons.—The Commercial

Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015 was
enacted for the constitution of Commercial Courts,
Commercial Division and Commercial Appellate
Division in the High Courts for adjudicating

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commercial disputes of specified value and for matters

connected therewith or incidental thereto.

2. The global economic environment has since become

increasingly competitive and to attract business at
international level, India needs to further improve its
ranking in the World Bank “Doing Business Report”
which, inter alia, considers the dispute resolution
environment in the country as one of the parameters for
doing business. Further, the tremendous economic
development has ushered in enormous commercial
activities in the country including foreign direct
investments, public private partnership, etc. which has
prompted initiating legislative measures for speedy
settlement of commercial disputes, widen the scope of
the courts to deal with commercial disputes and
facilitate ease of doing business. Needless to say that
early resolution of commercial disputes of even lesser
value creates a positive image amongst the investors
about the strong and responsive Indian legal system. It
is, therefore, proposed to amend the Commercial
Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015.

3. As Parliament was not in session and immediate

action was required to be taken to make necessary
amendments in the Commercial Courts, Commercial
Division and Commercial Appellate Division of High
Courts Act, 2015, to further improve India's ranking in
the “Doing Business Report”, the President
promulgated the Commercial Courts, Commercial
Division and Commercial Appellate Division of High
Courts (Amendment) Ordinance, 2018 on 3-5-2018.

4. It is proposed to introduce the Commercial Courts,

Commercial Division and Commercial Appellate
Division of High Courts (Amendment) Bill, 2018 to
replace the Commercial Courts, Commercial Division
and Commercial Appellate Division of High Courts
(Amendment) Ordinance, 2018, which inter alia,
provides for the following namely— (i) to reduce the
specified value of commercial disputes from the existing
one crore rupees to three lakh rupees, and to enable the

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parties to approach the lowest level of subordinate

courts for speedy resolution of commercial disputes;

(ii) to enable the State Governments, with respect to the

High Courts having ordinary original civil jurisdiction,
to constitute commercial courts at District Judge level
and to specify such pecuniary value of commercial
disputes which shall not be less than three lakh rupees
and not more than the pecuniary jurisdiction of the
district courts;

(iii) to enable the State Governments, except the

territories over which the High Courts have ordinary
original civil jurisdiction, to designate such number of
Commercial Appellate Courts at district judge level to
exercise the appellate jurisdiction over the commercial
courts below the district judge level;

(iv) to enable the State Governments to specify such

pecuniary value of a commercial dispute which shall not
be less than three lakh rupees or such higher value, for
the whole or part of the State; and

(v) to provide for compulsory mediation before

institution of a suit, where no urgent interim relief is
contemplated and for this purpose, to introduce the pre-
institution mediation and settlement mechanism and to
enable the Central Government to authorise the
authorities constituted under the Legal Services
Authorities Act, 1987 for this purpose.

5. The Bill seeks to achieve the above objectives.”

31. It is, accordingly, by the Amending Act that Section 12A came to be

inserted. We should also look into the PIMS Rules that came to be

published in the Gazette and thereby came into force on 03.7.2018.

Rule 3 reads as follows:

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“3. Initiation of mediation process.—(1) A party to a

commercial dispute may make an application to the
Authority as per Form 1 specified in Schedule I, either
online or by post or by hand, for initiation of mediation
process under the Act along with a fee of one thousand
rupees payable to the Authority either by way of demand
draft or through online;

(2) The Authority shall, having regard to the territorial

and pecuniary jurisdiction and the nature of commercial
dispute, issue a notice, as per Form 2 specified in
Schedule I through a registered or speed post and
electronic means including e-mail and the like to the
opposite party to appear and give consent to participate
in the mediation process on such date not beyond a
period of ten days from the date of issue of the said
notice.

(3) Where no response is received from the opposite

party either by post or by e-mail, the Authority shall
issue a final notice to it in the manner as specified in
sub-rule (2).

(4) Where the notice issued under sub-rule (3) remains

unacknowledged or where the opposite party refuses to
participate in the mediation process, the Authority shall
treat the mediation process to be a non-starter and make
a report as per Form 3 specified in the Schedule I and
endorse the same to the applicant and the opposite
party.

(5) Where the opposite party, after receiving the notice

under sub-rule (2) or (3) seeks further time for his
appearance, the Authority may, if it thinks fit, fix an
alternate date not later than ten days from the date of
receipt of such request from the opposite party.

(6) Where the opposite party fails to appear on the date

fixed under sub-rule (5), the Authority shall treat the
mediation process to be a non-starter and make a report
in this behalf as per Form 3 specified in Schedule I and
endorse the same to the applicant and the opposite
party.

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(7) Where both the parties to the commercial dispute

appear before the Authority and give consent to
participate in the mediation process, the Authority shall
assign the commercial dispute to a mediator and fix a
date for their appearance before the said mediator.

(8) The Authority shall ensure that the mediation

process is completed within a period of three months
from the date of receipt of application for pre-institution
mediation unless the period is extended for further two
months with the consent of the applicant and the
opposite party.”

32. A perusal of Section 12A indicates that the period during which the

parties remain occupied with the pre-institution mediation shall not

be computed for the purpose of limitation under the Limitation Act.

Further, if the parties to the commercial dispute arrive at a settlement,

the same shall be reduced into writing and shall be signed by the

parties to the dispute and the mediator. The settlement arrived shall

have the same status and effect as if it is an arbitral award on agreed

terms under Section 30(4) of the Arbitration and Conciliation Act,

1996. This is another remarkable feature of the mediation regime

ushered in by the Amending Act which, by deeming the mediated

settlement at par with an arbitral award, provides strong legal backing

to the mediation process and ensures that the enforceability of the

same is met with fewer hurdles, thereby increasing the attractiveness

of mediation as an alternative to litigation.

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33. The aim and object of Section 12A is to ensure that before a

commercial dispute is filed before the court, the alternative means of

dissolution are adopted so that only genuine cases come before the

courts. The said procedure has been introduced to decongest the

regular courts.

ii. Section 12A of the 2015 Act is mandatory in nature

34. We shall now look into the decision of this Court in Patil Automation

(supra). In Patil Automation (supra), this Court declared Section 12A

of the 2015 Act to be mandatory in nature. It further held that pre-

litigation mediation is necessary, unless the suit contemplates an

urgent interim relief. The decision obviated the prevailing confusion

as regards the mandatory nature of Section 12A of the 2015 Act as

well as the legal consequences of non-compliance, which was

necessary in light of the divergent views adopted by a number of High

Courts. A few relevant observations from the said decision are

reproduced hereinbelow:

“The regime under Order VII Rule 11CPC

92. Order VII Rule 11 declares that the plaint can

be rejected on 6 grounds. They include failure to
disclose the cause of action, and where the suit appears
from the statement in the plaint to be barred. We are
concerned in these cases with the latter. Order VII Rule
12 provides that when a plaint is rejected, an order to
that effect with reasons must be recorded. Order VII
Rule 13 provides that rejection of the plaint mentioned

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in Order VII Rule 11 does not by itself preclude the

plaintiff from presenting a fresh plaint in respect of the
same cause of action. Order VII deals with various
aspects about what is to be pleaded in a plaint, the
documents that should accompany and other details.
Order IV Rule 1 provides that a suit is instituted by
presentation of the plaint to the court or such officer as
the court appoints. By virtue of Order IV Rule 1(3), a
plaint is to be deemed as duly instituted only when it
complies with the requirements under Order VI and
Order VII. Order V Rule 1 declares that when a suit has
been duly instituted, a summon may be issued to the
defendant to answer the claim on a date specified
therein. There are other details in the order with which
we are not to be detained. We have referred to these rules
to prepare the stage for considering the question as to
whether the power under Order VII Rule 11 is to be
exercised only on an application by the defendant and
the stage at which it can be exercised.

93. In Patasibai v. Ratanlal reported in (1990) 2

SCC 42, one of the specific contentions was that there
was no specific objection for rejecting of the plaint taken
earlier. In the facts of the case, the Court observed as
under :

“13. On the admitted facts appearing from the

record itself, the learned counsel for the
respondent, was unable to show that all or any of
these averments in the plaint disclose a cause of
action giving rise to a triable issue. In fact, Shri
Salve was unable to dispute the inevitable
consequence that the plaint was liable to be
rejected under Order 7 Rule 11 CPC on these
averments. All that Shri Salve contended was that
the court did not in fact reject the plaint under
Order 7 Rule 11CPC and summons having been
issued, the trial must proceed. In our opinion, it
makes no difference that the trial court failed to
perform its duty and proceeded to issue summons
without carefully reading the plaint and the High
Court also overlooked this fatal defect. Since the
plaint suffers from this fatal defect, the mere

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issuance of summons by the trial court does not

require that the trial should proceed even when no
triable issue is shown to arise. Permitting the
continuance of such a suit is tantamount to
licensing frivolous and vexatious litigation. This
cannot be done.”

94. On a consideration of the scheme of Orders IV,

V and VII of the CPC, we arrive at the following
conclusions:

94.1. A suit is commenced by presentation of a

plaint. The date of the presentation in terms of Section
3(2) of the Limitation Act, 1963 is the date of
presentation for the purpose of the said Act. By virtue of
Order 4 Rule 1(3), institution of the plaint, however, is
complete only when the plaint is in conformity with the
requirement of Order 6 and Order 7.

94.2. When the court decides the question as to issue

of summons under Order V Rule 1, what the court must
consider is whether a suit has been duly instituted.

94.3. Order VII Rule 11 does not provide that the

court is to discharge its duty of rejecting the plaint only
on an application. Order VII Rule 11 is, in fact, silent
about any such requirement. Since summon is to be
issued in a duly instituted suit, in a case where the plaint
is barred under Order VII Rule 11(d), the stage begins
at that time when the court can reject the plaint under
Order VII Rule 11. No doubt it would take a clear case
where the court is satisfied. The Court has to hear the
plaintiff before it invokes its power besides giving
reasons under Order VII Rule 12. In a clear case, where
on allegations in the suit, it is found that the suit is
barred by any law, as would be the case, where the
plaintiff in a suit under the Act does not plead
circumstances to take his case out of the requirement of
Section 12A, the plaint should be rejected without
issuing summons. Undoubtedly, on issuing summons it
will be always open to the defendant to make an
application as well under Order VII Rule 11. In other

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words, the power under Order VII Rule 11 is available

to the court to be exercised suo motu. (See in this regard,
the judgment of this Court in Madiraju Venkata
Ramana Raju v. Peddireddigari Ramachandra Reddy,
(2018) 14 SCC 1)”
(Emphasis supplied)

35. The Court summed up its reasoning from paragraph 99 onwards as

follows:

“99.1. The Act did not originally contain Section 12-A.

It is by amendment in the year 2018 that Section 12-A
was inserted. The Statement of Objects and Reasons are
explicit that Section 12-A was contemplated as
compulsory. The object of the Act and the Amending Act
of 2018, unerringly point to at least partly foisting
compulsory mediation on a plaintiff who does not
contemplate urgent interim relief. The provision has
been contemplated only with reference to plaintiffs who
do not contemplate urgent interim relief. The legislature
has taken care to expressly exclude the period
undergone during mediation for reckoning limitation
under the Limitation Act, 1963. The object is clear.

99.2. It is an undeniable reality that courts in India are

reeling under an extraordinary docket explosion.
Mediation, as an alternative dispute mechanism, has
been identified as a workable solution in commercial
matters. In other words, the cases under the Act lend
themselves to be resolved through mediation. Nobody
has an absolute right to file a civil suit. A civil suit can
be barred absolutely or the bar may operate unless
certain conditions are fulfilled. Cases in point, which
amply illustrate this principle, are Section 80 CPC and
Section 69 of the Partnership Act.

99.3. The language used in Section 12-A, which includes

the word “shall”, certainly, goes a long way to assist the
Court to hold that the provision is mandatory. The entire
procedure for carrying out the mediation, has been spelt
out in the Rules. The parties are free to engage counsel

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during mediation. The expenses, as far as the fee

payable to the mediator, is concerned, is limited to a
one-time fee, which appears to be reasonable,
particularly, having regard to the fact that it is to be
shared equally. A trained mediator can work wonders.

99.4. Mediation must be perceived as a new mechanism

of access to justice. We have already highlighted its
benefits. Any reluctance on the part of the Court to give
Section 12-A, a mandatory interpretation, would result
in defeating the object and intention of Parliament. The
fact that the mediation can become a non-starter, cannot
be a reason to hold the provision not mandatory.
Apparently, the value judgment of the lawgiver is to give
the provision, a modicum of voluntariness for the
defendant, whereas, the plaintiff, who approaches the
court, must, necessarily, resort to it. Section 12-A
elevates the settlement under the Act and the Rules to an
award within the meaning of Section 30(4) of the
Arbitration Act, giving it meaningful enforceability. The
period spent in mediation is excluded for the purpose of
limitation. The Act confers power to order costs based
on conduct of the parties.”
(Emphasis supplied)

36. Touching upon the aspect of what the expression “does not

contemplate urgent interim relief” appearing in Section 12A of the

2015 Act entails, the judgment observed that unlike Section 80(2) of

the CPC which allows the filing of a suit after seeking leave of the

court, Section 12A contains no such stipulation. The Court also

observed that whether the absence of such stipulation under Section

12A could be misused by litigants to bypass the mandate of pre-

litigation mediation was an aspect which may be looked into by the

legislature. The relevant observations read as follows:

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“100. In the cases before us, the suits do not

contemplate urgent interim relief. As to what should
happen in suits which do contemplate urgent interim
relief or rather the meaning of the word “contemplate”
or urgent interim relief, we need not dwell upon it. The
other aspect raised about the word “contemplate” is
that there can be attempts to bypass the statutory
mediation under Section 12-A by contending that the
plaintiff is contemplating urgent interim relief, which in
reality, it is found to be without any basis. Section 80(2)
CPC permits the suit to be filed where urgent interim
relief is sought by seeking the leave of the court. The
proviso to Section 80(2) contemplates that the court
shall, if, after hearing the parties, is satisfied that no
urgent or immediate relief need be granted in the suit,
return the plaint for presentation to the court after
compliance. Our attention is drawn to the fact that
Section 12-A does not contemplate such a procedure.
This is a matter which may engage attention of the
lawmaker. Again, we reiterate that these are not issues
which arise for our consideration. In the fact of the
cases admittedly there is no urgent interim relief
contemplated in the plaints in question.”
(Emphasis supplied)

37. The Court ultimately disposed of the matters in the following manner:

“113.1. We declare that Section 12-A of the Act is

mandatory and hold that any suit instituted violating the
mandate of Section 12-A must be visited with rejection
of the plaint under Order 7 Rule 11. This power can be
exercised even suo motu by the court as explained
earlier in the judgment. We, however, make this
declaration effective from 20-8-2022 so that
stakeholders concerned become sufficiently informed.

113.2. Still further, we however direct that in case

plaints have been already rejected and no steps have
been taken within the period of limitation, the matter
cannot be reopened on the basis of this declaration. Still
further, if the order of rejection of the plaint has been

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acted upon by filing a fresh suit, the declaration of

prospective effect will not avail the plaintiff.

113.3. Finally, if the plaint is filed violating Section 12-

A after the jurisdictional High Court has declared
Section 12-A mandatory also, the plaintiff will not be
entitled to the relief.”
(Emphasis supplied)

38. As discussed aforesaid, the observations in paragraph 100 of Patil

Automation (supra) refer to Section 80(2) of the CPC, which permits

a suit, praying urgent interim relief, to be filed by seeking the leave

of the court. The proviso to Section 80(2) of the CPC states that, if,

after hearing the parties, the court is satisfied that no urgent or

immediate relief is required to be granted in the suit, the court may

return the plaint for presentation to it after compliance with

requirements of Section 80(1) of the CPC.

39. The position of law is well settled that a plaint may be rejected under

Order VII Rule 11 of the CPC if any of the conditions specified

therein are fulfilled. The decision in Patil Automation (supra)

recognised this principle and stipulated that beginning 20.08.2022,

any suit instituted under the 2015 Act without complying with Section

12A must meet with the fate of rejection of plaint under Order VII

Rule 11. It is also pertinent to observe that under Order VII Rule 11,

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no time period within which the plaint may be rejected has been

stipulated. The power to reject a plaint, thus, can be exercised at any

stage of the suit. This Court in Madanuri Sri Rama Chandra Murthy

v. Syed Jalal reported in (2017) 13 SCC 174 observed that the power

to reject a plain is exercisable by the court at any stage of the suit. The

relevant observations read as under:

“7. The plaint can be rejected under Order 7 Rule 11 if

conditions enumerated in the said provision are fulfilled.
It is needless to observe that the power under Order 7
Rule 11 CPC can be exercised by the Court at any stage
of the suit. The relevant facts which need to be looked
into for deciding the application are the averments of
the plaint only. If on an entire and meaningful reading
of the plaint, it is found that the suit is manifestly
vexatious and meritless in the sense of not disclosing
any right to sue, the court should exercise power under
Order 7 Rule 11 CPC. Since the power conferred on the
Court to terminate civil action at the threshold is
drastic, the conditions enumerated under Order 7 Rule
11 CPC to the exercise of power of rejection of plaint
have to be strictly adhered to. The averments of the
plaint have to be read as a whole to find out whether the
averments disclose a cause of action or whether the suit
is barred by any law. It is needless to observe that the
question as to whether the suit is barred by any law,
would always depend upon the facts and circumstances
of each case. The averments in the written statement as
well as the contentions of the defendant are wholly
immaterial while considering the prayer of the
defendant for rejection of the plaint. Even when the
allegations made in the plaint are taken to be correct as
a whole on their face value, if they show that the suit is
barred by any law, or do not disclose cause of action,
the application for rejection of plaint can be entertained
and the power under Order 7 Rule 11 CPC can be
exercised. If clever drafting of the plaint has created the

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illusion of a cause of action, the court will nip it in the

bud at the earliest so that bogus litigation will end at the
earlier stage.”
(Emphasis supplied)

40. Similarly, in Popat and Kotecha Property v. State Bank of India

Staff Assn., reported in (2005) 7 SCC 510, this Court observed that

the scheme of Order VII Rule 11 is silent about the stage at which the

power to reject a plaint may be invoked by the court. However, the

use of the word “shall” denotes that the courts are under an obligation

to reject a plaint if the conditions specified therein are satisfied. Thus,

it could be said that under the scheme of Order VII Rule 11, it is not

the stage at which the objection is raised which is relevant, but it is

the merit of the objection raised which has been conferred primacy.

The relevant observations from the said decision read as under:

“23. Rule 11 of Order 7 lays down an independent

remedy made available to the defendant to challenge the
maintainability of the suit itself, irrespective of his right
to contest the same on merits. The law ostensibly does
not contemplate at any stage when the objections can be
raised, and also does not say in express terms about the
filing of a written statement. Instead, the word “shall”
is used clearly implying thereby that it casts a duty on
the court to perform its obligations in rejecting the
plaint when the same is hit by any of the infirmities
provided in the four clauses of Rule 11, even without
intervention of the defendant. In any event, rejection of
the plaint under Rule 11 does not preclude the plaintiffs
from presenting a fresh plaint in terms of Rule 13.”
(Emphasis supplied)

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41. At this juncture, we would like to point out that the Trial Court in the

instant case, while refusing to allow the application of the appellant

under Order VII Rule 11, observed that the application, having been

filed at a belated stage of more than an year after the filing of the

written statement, was liable to be rejected. However, the decision in

Patil Automation (supra) does not leave any scope for a similar

approach to be adopted by courts anymore in cases where Section 12A

has not been duly complied with. The Court in the said decision has

also observed that even if a plea of rejection of plaint is not taken by

the defendant, the courts must suo motu take note of the non-

compliance with Section 12A and reject the plaint, and the stage of

the suit proceedings is not a valid consideration to be looked into

while rejecting a plaint. However, as we shall discuss in more detail

in the subsequent paragraphs, the decision in Patil Automation

(supra) makes the consequence of rejection of plaint for non-

compliance prospectively applicable for suits instituted post

20.08.2022.

iii. How the expression “urgent interim relief” is to be construed

42. Further, it is also pertinent to note that Section 12A of the 2015 Act

does not contemplate leave of the court for filing a suit which

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contemplates an urgent interim relief, as is clear from the language

and words used in the provision. The provision also does not

necessarily require an application seeking exemption if a suit is being

filed without pre-institution mediation. An application seeking waiver

on account of urgent interim relief setting out grounds and reasons

may allay a challenge and assist the court, but in the absence of any

statutory mandate or rules made by the Central Government, an

application per se is not a condition under Section 12A of the 2015

Act. Pleadings on record and oral submissions would be sufficient in

ordinary course.

43. This Court in Yamini Manohar v. T.K.D. Keerthi reported in (2024)

5 SCC 815 while interpreting the import of the expression “a suit

which does not contemplate any urgent interim relief” used in Section

12A of the 2015 Act observed that the word “contemplate” connotes

to deliberate and consider. Further, the legal position that the plaint

can be rejected and not entertained reflects application of mind by the

court as regards the requirement of “urgent interim relief”. The Court

further observed that the prayer of urgent interim relief should not act

as a disguise to get over the bar contemplated under Section 12A.

However, at the same time, the Court observed that the mere non-

grant of the interim relief at the ad-interim stage, when the plaint is

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taken up for admission and examination would not justify the

rejection of the plaint under Order VII Rule 11 of the CPC, as interim

relief is at times also granted after issuance of notice. Further, even if

after the conclusion of arguments on the aspect of interim relief, the

same is denied on merits, that would not by itself justify the rejection

of the plaint under Order VII Rule 11. The relevant observations from

the said decision are reproduced hereinbelow:

“10. We are of the opinion that when a plaint is filed

under the CC Act, with a prayer for an urgent interim
relief, the commercial court should examine the nature
and the subject-matter of the suit, the cause of action,
and the prayer for interim relief. The prayer for urgent
interim relief should not be a disguise or mask to
wriggle out of and get over Section 12-A of the CC Act.
The facts and circumstances of the case have to be
considered holistically from the standpoint of the
plaintiff. 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 7 Rule 11
of the Code; at times, interim relief is granted after
issuance of notice. Nor can the suit be dismissed under
Order 7 Rule 11 of the Code, because the interim relief,
post the arguments, is denied on merits and on
examination of the three principles, namely : (i) prima
facie case, (ii) irreparable harm and injury, and (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.

11. Having stated so, it is difficult to agree with the

proposition that the plaintiff has the absolute choice and
right to paralyse Section 12-A of the CC Act by making
a prayer for urgent interim relief. Camouflage and guise
to bypass the statutory mandate of pre-litigation

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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 under Section 12-A of the CC Act. An
“absolute and unfettered right” approach is not justified
if the pre-institution mediation under Section 12-A of the
CC Act is mandatory, as held by this Court in Patil
Automation [Patil Automation (P) Ltd. v. Rakheja
Engineers (P) Ltd., (2022) 10 SCC 1 : (2023) 1 SCC
(Civ) 545] .

12. The words “contemplate any urgent interim relief”

in Section 12-A(1) of the CC Act, with reference to the
suit, should be read as conferring power on the court to
be satisfied. They suggest that the suit must
“contemplate”, which 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 in the earlier
paragraph(s). This will be sufficient to keep in check and
ensure that the legislative object/intent behind the
enactment of Section 12-A of the CC Act is not
defeated.”
(Emphasis supplied)

44. Thus, it becomes clear from a perusal of the aforesaid decision that

the test under Section 12A is not whether the prayer for the urgent

interim relief actually comes to be allowed or not, but whether on an

examination of the nature and the subject-matter of the suit and the

cause of action, the prayer of urgent interim relief by the plaintiff

could be said to be contemplable when the matter is seen from the

standpoint of the plaintiff. Further, what is also to be kept in mind by

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the courts is that the urgent interim relief must not be merely an

unfounded excuse by the plaintiff to bypass the mandatory

requirement of Section 12A of the 2015 Act.

45. In the case at hand indisputably, no urgent interim relief was prayed

for at the time of the institution of the suit by the Union.

iv. The effect of according prospectivity to the declaration in

Patil Automation (supra) on cases like the one at hand

46. In Patil Automation (supra), this Court held that the language of

Section 12A is plainly imperative in nature, and any commercial suit

instituted without adhering to this provision is liable to be rejected

under Order VII Rule 11 of the CPC. However, recognising that the

Amending Act containing Section 12A is a ‘toddler’, and that the

“law necessarily would have teething problems at the nascent stage”,

this Court declared the aforesaid declaration to operate prospectively,

effective from 20.08.2022, so that the stakeholders may be

sufficiently informed. In the instant case, as the money suit was filed

by the respondents much prior to the decision in Patil Automation

(supra), it is squarely protected by the prospective ruling of this

Court.

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47. This Court had further held that the protective umbrella of prospective

overruling in Patil Automation (supra) would not apply to plaints

which were rejected, and no steps had been taken within the period of

limitation; or such rejection had been acted upon by filing a new suit;

or if the plaint violating Section 12A had been filed after the

jurisdictional High Court has declared the provision to be mandatory.

Indisputably, the Union of India does not fall under any of the other

aforementioned exceptions. Thus, we find it difficult to agree with the

submission canvassed by the appellant that the bar of Section 12A of

the 2015 Act would continue to apply to the money suit filed by the

respondents despite there being a prospective declaration in Patil

Automation (supra).

48. While it is correct that any declaration of the correct position of the

law goes back to the day of the inception of the law itself, as the courts

merely discover the correct position of law by applying settled legal

principles and not legislate a new legal position, it is equally well

recognised that the courts, while declaring an interpretation of the

law, may declare it to be operative only prospectively so as to prevent

chaos which may ensue as a result of the unsettling of the transactions

which may have taken place before such declaration. Taking a clue

from the decisions of this Court on the aspect of prospective

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overruling, it could be said that this Court has been endowed with the

power to mould the relief to do complete justice in a given situation,

and to avoid the possibility of chaos and confusion that may be caused

in the society at large.

v. The equitable maxim lex non cogit ad impossibilia

49. It is settled that law does not compel an impossible performance, and

the same position has been followed by this Court in a catena of

judgments. Espousing the aforesaid maxim in Raj Kumar Dey

(supra) this Court has held as follows:

“6. …. The other maxim is lex non cogit ad impossibilia

(Broom's Legal Maxims — page 162) — The law does
not compel a man to do that which he cannot possibly
perform. The law itself and the administration of it, said
Sir W. Scott, with reference to an alleged infraction of
the revenue laws, must yield to that to which everything
must bend, to necessity; the law, in its most positive and
peremptory injunctions, is understood to disclaim, as it
does in its general aphorisms, all intention of
compelling impossibilities, and the administration of
laws must adopt that general exception in the
consideration of all particular cases.”

50. The aforesaid maxim was recognised and reiterated by this Court in

U.P. SRTC v. Imtiaz Hussain reported in (2006) 1 SCC 380.

51. The materials on record would indicate that after the establishment of

the first Commercial Court at Alipore, the statutory framework and

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corresponding rules were progressively implemented until December

2020. Therefore, during this intervening period, referring the matter

to pre-suit mediation under Section 12A was impossible due to a

persisting vacuum created by lack of appointment of necessary

authorities and delineation of the procedural framework.

52. The learned ASG is right to some extent in her submission that

awaiting the establishment of the requisite infrastructure would

unduly impede the recovery process in a money suit involving public

funds, thereby defeating the very purpose and legislative intent of the

2015 Act, which aims to ensure the expeditious resolution of

commercial disputes.

53. The declaration of the mandatory nature of Section 12A of the 2015

Act was given prospective effect in Patil Automation (supra) keeping

in mind the fact that Section 12A, being in its stages of infancy, had

given rise to conflicting views by different High Courts and

consequently an overall lack of clarity on the nature of the provision.

Thus, the Court was of the view that in the absence of prospective

effect being given to the declaration, all such suits which had been

filed without complying with the provision, owing to the lack of

clarity on the mandatory nature of the provision, would be susceptible

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to being rejected and the court fees submitted at the time of their

institution being written off. The Court further expressed

apprehensions as regards the applicability of Section 14 of the

Limitation Act to fresh suits filed after the rejection of plaint for non-

compliance with Section 12A and thus held that it would be in the

best interest of justice that the declaration of mandatory compliance

with Section 12A be given prospectivity to avoid the aforesaid

complexities from cropping up.

54. While giving prospectivity to its finding on the mandatory nature of

Section 12A and the consequence of rejection of plaint in cases of

non-compliance, the Court also observed that the prospective

declaration would not save the situation in certain categories of cases

which we have discussed in paragraph 47 above. However, it is not

the case of the appellant that the case at hand falls within the ambit of

any of the exceptions laid down in Patil Automation (supra).

55. It is interesting to note that the decision impugned before us was

referred to by this Court in paragraph 54 of Patil Automation (supra)

while it was discussing the divergent views of different High Courts

on the nature of Section 12A of the 2015 Act. Therein, this Court had

observed thus:

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“54. A learned Single Judge of the High Court of

Calcutta, in the decision reported in Dhanbad Fuels Ltd.
v. Union of India and Others, 2021 SCC OnLine SC 429,
took the view that mediation in India is still at a nascent
stage and requires more awareness. There was a need
for mandatory training of commercial disputes. It was
further found that the party cannot be denied the right
to participate in the justice dispensation system. It
wasfurther noticed that there was no obligation on the
part of the defendant to respond to the initiative of the
plaintiff. Rejecting the plaint under Order VII Rule 11(d)
in view of Order VII Rule 13, which enables a fresh Suit
to be filed upon rejection under Order VII Rule 11,
would show that the power under Order VII Rule 11
should not be invoked as it would not be in accordance
with the objectives of the Act and the Rules.”

56. After taking into consideration the view taken by the Calcutta High

Court in the impugned decision as well as the view of several other

High Courts, this Court, in Patil Automation (supra), arrived at the

findings as we have discussed in detail in the preceding paragraphs.

Thus, insofar as the interpretation of the nature of Section 12A of the

2015 Act in the impugned decision is concerned, the same must be

seen in the context of the decision in Patil Automation (supra).

57. However, the pertinent question that falls for us is whether the

approach adopted by the Trial Court and approved by the High Court

in the present case, in keeping the suit in abeyance, and sending the

parties to mediation as per the PIMS Rules and the 2020 SOP, was the

correct approach. In other words, while the decision in Patil

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Automation (supra) is clear that any suit instituted after 20.08.2022

without complying with Section 12A of the 2015 Act must be visited

with the rejection of the plaint under Order VII Rule 11, whether in

suits filed prior to the said date, the courts must keep the suit in

abeyance and refer the parties to mediation, and proceed with it only

after the report of the mediator is received.

58. The answer to the aforesaid question requires us to harmoniously

construe the two observations made by this Court in Patil Automation

(supra). The Court observed in paragraph 104 of the said decision that

the declaration of the law by the Court would relate back to the date

of the Amending Act. However, keeping in mind practical

considerations, the Court in paragraph 113.1 observed that the

consequence of rejection of plaint under Order VII Rule 11 for not

complying with Section 12A of the 2015 Act would only be operative

prospectively with effect from 20.08.2022. Thus, what is clear from a

joint reading of both these observations is that while Section 12A is

held to be mandatory from the date of the inception of the provision

itself, the consequence of rejection for non-compliance is only made

applicable prospectively.

59. Thus, although suits which were instituted before the date of the

decision in Patil Automation (supra) may not be rejected under Order

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VII Rule 11 for not complying with Section 12A of the 2015 Act,

unless they fall within the exceptional categories described in the said

decision itself, yet this would not obviate the requirement of giving

the parties a chance to attempt to resolve the disputes through

mediation as envisaged under Section 12A of the 2015 Act. One of

the ways by which this can be achieved is by keeping the suit in

abeyance and referring the parties to a time-bound mediation and only

proceeding with the suit once the report of the mediator is received.

This approach would ensure that even if not pre-institution, the parties

at the very least get an opportunity to resolve the disputes through

mediation post the institution of the suit. This in no way means that

Section 12A envisages post-institution mediation. Post-institution

mediation, while keeping the suit in abeyance, is only envisaged for

the limited category of cases which are not covered by the prospective

declaration made in Patil Automation (supra) as the rejection of

plaints under Order VII Rule 11 has been done away with in the

interest of justice in such category of cases. This approach also

received the tacit approval of this Court in Patil Automation (supra),

wherein while disapproving the reasoning adopted in the order

impugned therein, the Court refused to interfere with the impugned

order which had referred the parties to mediation while keeping the

suit in abeyance.

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60. However, it is also important to clarify that in cases where a suit

instituted prior to 20.08.2022 has been decided, it would not be of any

avail to the parties to revisit the same on the ground of mandatory

compliance with Section 12A of the 2015 Act. However, wherever

such a suit is pending before the trial court and an objection is raised

by the defendant for non-compliance with Section 12A of the 2015

Act, or any intent to settle the dispute by mediation is exhibited by

the parties, then it would be permissible for the court to keep the suit

in abeyance and refer the parties to time-bound mediation in

accordance with the 2015 Act, the PIMS Rules and the 2020 SOP.

61. Before we part with the matter, we also deem it appropriate to address

one of the main contentions of the appellant that having regard to the

fact that the suit is still at the nascent stage of filing of written

statement and no substantial progress has been made therein, this

Court must reject the plaint and direct the respondents to institute a

fresh suit after complying with the mandatory requirement of Section

12A. However, we do not find any force in the aforesaid submission.

We do not see how directing the respondents to institute a fresh suit

would be of any benefit to the appellant. We have discussed in detail

that this Court in Patil Automation (supra) made its decision

prospectively applicable keeping in mind the predicament of suits like

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the one at hand wherein owing to a lack of clarity in law, Section 12A

of the 2015 could not be complied with in certain cases. Directing the

institution of a fresh suit would only result into the forfeiture of the

court fees deposited by the respondents, which would only be an

unnecessary burden on the public exchequer. The approach adopted

by the Trial Court and the High Court in keeping the suit in abeyance

and directing the parties to approach the competent authority for

mediation commends more to us as it complies with a harmonious

reading of the decision in Patil Automation (supra) and prevents

unnecessary delays and burden on the public exchequer. Further,

substantial progress in the suit was not the only reason why the Court

in Patil Automation (supra) gave prospective effect to its decision.

As we have discussed, factors like forfeiture of court fees, ambiguity

over the applicability of Section 14 of the Limitation Act, unsettling

of settled cases, etc. were a few other reasons which weighed with the

Court in arriving at its decision of according prospectivity to the

judgment. Thus, we find it difficult to accept the argument advanced

by the appellant that the plaint must be rejected for the reason that the

suit has not made substantial progress after its institution.

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E. CONCLUSION

62. In light of the aforesaid discussion, we summarise our findings as

under:

a. The decision of this Court in Patil Automation (supra) lays

down the correct position of law as regards Section 12A of the

2015 Act by holding it to be mandatory in nature.

b. As held in paragraph 104 of the decision in Patil Automation

(supra), the declaration of the mandatory nature of Section 12A

of the 2015 Act relates back to the date of the Amending Act.

c. As held in paragraph 113.1 of the decision in Patil Automation

(supra), any suit which is instituted under the 2015 Act without

complying with Section 12A is liable to be rejected under Order

VII Rule 11. However, this declaration applies prospectively to

suits instituted on or after 20.08.2022.

d. A suit which contemplates an urgent interim relief may be filed

under the 2015 Act without first resorting to mediation as

prescribed under Section 12A of the 2015 Act.

e. Unlike Section 80(2) of the CPC, leave of the court is not

required to be obtained before filing a suit without complying

with Section 12A of the 2015 Act.

f. The test for “urgent interim relief” is if on an examination of the

nature and the subject-matter of the suit and the cause of action,

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the prayer of urgent interim relief by the plaintiff could be said

to be contemplable when the matter is seen from the standpoint

of the plaintiff.

g. Courts must also be wary of the fact that the urgent interim relief

must not be merely an unfounded excuse by the plaintiff to

bypass the mandatory requirement of Section 12A of the 2015

Act.

h. Even if the urgent interim relief ultimately comes to be denied,

the suit of the plaintiff may be proceeded with without

compliance with Section 12A if the test for “urgent interim

relief” is satisfied notwithstanding the actual outcome on merits.

i. Suits instituted without complying with Section 12A of the 2015

Act prior to 20.08.2022 cannot be rejected under Order VII Rule

11 on the ground of non-compliance with Section 12A unless

they fall within the exceptions stipulated in paragraph 113.2 and

113.3 of the decision in Patil Automation (supra).

j. In suits instituted without complying with Section 12A of the

2015 Act prior to 20.08.2022 which are pending adjudication

before the trial court, the court shall keep the suit in abeyance

and refer the parties to time-bound mediation in accordance with

Section 12A of the 2015 Act if an objection is raised by the

defendant by filing an application under Order VII Rule 11, or

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in cases where any of the parties expresses an intent to resolve

the dispute by mediation.

63. Thus, the answer to the question formulated by us whether a suit filed

without complying with Section 12A of the 2015 Act must be

dismissed or be kept in abeyance with a direction to the parties to

explore mediation is as follows:

a. If the suit is instituted on or after the date of the decision in Patil

Automation (supra), i.e., 20.08.2022, without complying with

Section 12A of the 2015 Act, then it must meet with rejection

under Order VII Rule 11, either on an application by the

defendant or suo motu by the court.

b. If the suit was instituted prior to 20.08.2022 without complying

with Section 12A of the 2015 Act, and the same does not fall

within one of the exceptional categories as explained in

paragraph 47 of this judgment, then it would be open to the court

to keep the suit in abeyance and direct the parties to explore the

possibility of mediation in accordance with the 2015 Act, the

PIMS Rules and the 2020 SOP.

64. Having answered the issues as aforesaid, we find it difficult to accept

the contention of the appellant that the Trial Court as well as the High

Court committed an error in refusing to reject the plaint under Order

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VII Rule 11. On the contrary, the approach adopted by the High Court

in the impugned order in keeping the suit in abeyance and referring the

parties to mediation, strikes a perfect balance between the mandatory

nature of Section 12A of the 2015 Act as well as the prospective

applicability of the consequence of non-compliance with Section 12A as

held in Patil Automation (supra).

65. Needless to clarify that the mediation proceedings must be completed

within the time frame stipulated by Section 12A of the 2015 Act and the

PIMS Rules, that is, within a period of three months and extendable by

two more months, if the need so arises.

66. In the result, the present appeal fails and is hereby dismissed.

67. Pending application(s), if any, shall also stand disposed of.

68. We direct the Registry to circulate a copy of this judgment to all High

Courts.

………………………..J.

(J.B. Pardiwala)

New Delhi; ………………………..J.

May 15th, 2025 (R. Mahadevan)

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