# M/s Awasthi Motors, Kanpur Nagar v. Managing Director M/s Energy Electricals Vehicle, New Delhi & Anr

- **Citation:** (2021) 5 ILRA 313
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2021-03-22
- **Case number:** FAFO (D) No. 144 of 2021
- **Bench:** Saumitra Dayal Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-awasthi-motors-kanpur-nagar-v-managing-director-m-s-energy-electricals-46972
- **Pages:** 12

## Headnote

A. Civil Law - Deposit of court fee on the
valuation
of
plaint
to
maintain
an
application u/s 12A - Commercial Courts
Act, 2015: Section 2(1)(i), 2(1)(c), 3, 12A,
16,
21A;
Commercial
Courts
(PreInstitution Mediation and Settlement)
Rules, 2018: Rule 3; Civil Procedure Code,
1908: Section 149, 26, Order IV Rule 1,
Order VI Rule 15-A.

Legislative Intent - Commercial Courts
Act, 2015 - Section 12A - If the context
does not show nor demands otherwise,
the text of a statutory provision couched
in a negative form ordinarily has to be
read in the form of command - By using
prohibitive or negative word, i.e. 'not' in
conjunction with the word 'shall' and by further
qualifying the phrase with the word 'unless'
before the words 'the plaintiff exhausts the
remedy of pre-institution mediation', a clear and
unambiguous intent has been expressed to
make the provision of Section 12A (1)
mandatory. (Para 16)

There are negative or prohibitive words used in
S. 12A(1) of the Act to clearly indicate that preinstitution mediation is mandatory or stands by
way of a pre-condition to the institution of a suit
proceedings involving a 'commercial dispute' of
a 'specified value'. Further, the second proviso
to S. 12A(3), makes it plain that the time
consumed in seeking pre-institution mediation is
to be excluded for the purposes of institution of
the suit. Thus, the pre-institution mediation
must be carried out prior and even independent
to the institution of the suit proceeding that may
eventually to be instituted only in the case of a
failed mediation. This is to ensure amicable final
settlement
between
the
parties
without
litigation-that often involves long delays. (Para
18, 19, 20)

Once the institution of the suit proceeding itself
has been put in abeyance by the legislature,
unless a pre-institution mediation is first carried
out (except where urgent interim relief is
sought), it cannot be contemplated how a
condition inextricably linked to the institution of
the suit, namely payment of court fee on the
314 INDIAN LAW REPORTS ALLAHABAD SERIES
valuation of the plaint, can be enforced at the
stage of pre-institution mediation. (Para 23)

B. The application for pre-institution
mediation is mandatory in nature. That
application must be entertained and dealt
with independent to the institution of the
suit proceedings. In fact, the institution of a
suit would depend directly on the fate of the
pre-institution mediation and not vice-versa. It
cannot be said that an application for preinstitution mediation may be entertained only
after the suit proceeding had been first
instituted. The status of plaint as regular or
defective is irrelevant or extraneous to the
maintainability of the application for initiation of
pre-institution mediation. (Para 24, 28)

Though, by way of a general principle of law,
the suit proceeding may never be instituted
unless the issue of court fees has been
satisfactorily dealt with, yet, in the context of S.
12A of the Act, that principle would stand
excluded and it would never apply to a preinstitution mediation. The two concepts stand in
mutual exclusion to each other. There is no
conflict between the same, either. (Para 29)

Appeal allowed. Impugned order set
aside. Matter remitted. (E-3)

Precedent followed:

## Text

5 All. M/s Awasthi Motors, Kanpur Nagar Vs. Managing Director M/s Energy Electricals
Vehicle, New Delhi & Anr.
313
execution and registration of the sale deed.
Any alienation, assignment, transfer or
encumbrance made by the defendant
pendente lite in favour of any third party,
one, more or successive, shall all be treated
as void and of no consequence. In the event
of default by the defendant, the plaintiff
would be entitled to execution of the sale
deed in terms of this decree through the
process of Court.

37. Second Appeal no.1873 of 1985
stands allowed with costs throughout and
Second Appeal 2315 of 1985 stands
dismissed with costs throughout. Let a
decree be drawn up by the Decree Section
forthwith.

38. Let a copy of this judgment be
communicated to the Trial Court through
the learned District Judge, Aligarh by the
Joint Registrar (Compliance).
----------
(2021)05ILR A313
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 22.03.2021

BEFORE

THE HON'BLE SAUMITRA DAYAL SINGH, J.

FAFO (D) No. 144 of 2021

M/s Awasthi Motors, Kanpur Nagar
 ...Appellant
Versus
Managing Director M/s Energy Electricals
Vehicle, New Delhi & Anr. ...Respondents

Counsel for the Appellant:
Sri Shashank Tripathi

Counsel for the Respondents:
-----
A. Civil Law - Deposit of court fee on the
valuation
of
plaint
to
maintain
an
application u/s 12A - Commercial Courts
Act, 2015: Section 2(1)(i), 2(1)(c), 3, 12A,
16,
21A;
Commercial
Courts
(PreInstitution Mediation and Settlement)
Rules, 2018: Rule 3; Civil Procedure Code,
1908: Section 149, 26, Order IV Rule 1,
Order VI Rule 15-A.

Legislative Intent - Commercial Courts
Act, 2015 - Section 12A - If the context
does not show nor demands otherwise,
the text of a statutory provision couched
in a negative form ordinarily has to be
read in the form of command - By using
prohibitive or negative word, i.e. 'not' in
conjunction with the word 'shall' and by further
qualifying the phrase with the word 'unless'
before the words 'the plaintiff exhausts the
remedy of pre-institution mediation', a clear and
unambiguous intent has been expressed to
make the provision of Section 12A (1)
mandatory. (Para 16)

There are negative or prohibitive words used in
S. 12A(1) of the Act to clearly indicate that preinstitution mediation is mandatory or stands by
way of a pre-condition to the institution of a suit
proceedings involving a 'commercial dispute' of
a 'specified value'. Further, the second proviso
to S. 12A(3), makes it plain that the time
consumed in seeking pre-institution mediation is
to be excluded for the purposes of institution of
the suit. Thus, the pre-institution mediation
must be carried out prior and even independent
to the institution of the suit proceeding that may
eventually to be instituted only in the case of a
failed mediation. This is to ensure amicable final
settlement
between
the
parties
without
litigation-that often involves long delays. (Para
18, 19, 20)

Once the institution of the suit proceeding itself
has been put in abeyance by the legislature,
unless a pre-institution mediation is first carried
out (except where urgent interim relief is
sought), it cannot be contemplated how a
condition inextricably linked to the institution of
the suit, namely payment of court fee on the
314 INDIAN LAW REPORTS ALLAHABAD SERIES
valuation of the plaint, can be enforced at the
stage of pre-institution mediation. (Para 23)

B. The application for pre-institution
mediation is mandatory in nature. That
application must be entertained and dealt
with independent to the institution of the
suit proceedings. In fact, the institution of a
suit would depend directly on the fate of the
pre-institution mediation and not vice-versa. It
cannot be said that an application for preinstitution mediation may be entertained only
after the suit proceeding had been first
instituted. The status of plaint as regular or
defective is irrelevant or extraneous to the
maintainability of the application for initiation of
pre-institution mediation. (Para 24, 28)

Though, by way of a general principle of law,
the suit proceeding may never be instituted
unless the issue of court fees has been
satisfactorily dealt with, yet, in the context of S.
12A of the Act, that principle would stand
excluded and it would never apply to a preinstitution mediation. The two concepts stand in
mutual exclusion to each other. There is no
conflict between the same, either. (Para 29)

Appeal allowed. Impugned order set
aside. Matter remitted. (E-3)

Precedent followed:

1. Goswami Krishna Murari Lal Vs Shiam Sunder,
1984 All LJ 1034 (Para 14)

2. U.O.I. Vs A.K. Pandey, (2009) 10 SCC 552
(Para 16)

3. Govindlal Chhaganlal Patel Vs Agricultural
Produce Market Committee, (1975) 2 SCC 482
(Para 17)

Precedent distinguished:

1.
A.
Nawab
John
&
ors.
Vs.
V.N.
Subramaniyam, (2012) 7 SCC 738 (Para 7)

Present appeal has been filed against
order
dated
04.01.2021,
passed
by
Presiding
Officer,
Commercial
Court,
Jhansi.
(Delivered by Hon'ble Saumitra Dayal
Singh, J.)

1. Certified copy of the formal order
filed today. Taken on record.

2. Defect reported stands cured.
Office to allot regular number to the
appeal.

3. Heard Shri Shashank Tripathi,
learned counsel for the appellant.

4. The appeal has been heard on the
following question of law:-

"Whether deposit of court fee on
the valuation of the plaint is a precondition to maintain an application under
Section 12A of The Commercial Courts Act,
2015 read with Rule 3 of The Commercial
Courts (Pre-Institution Mediation and
Settlement) Rules, 2018?"

5. Present appeal has been filed under
Section 13(1)A of The Commercial Courts
Act, 2015 (hereinafter referred to as the
Act) against the order of the Presiding
Officer,
Commercial
Court,
Jhansi
(hereinafter also referred to as the 'learned
court below'), dated 4.1.2021. By that
order, the learned court below has rejected
the
appellant's
application
-
paper
no.14C/2, praying for issuance of notice to
the respondent for pre-institution mediation
and settlement. Also, order has been passed
rejecting the other application paper no.
15C/2 filed by the appellant praying for
extension of time, to deposit the deficient
court fee on the valuation of the plaint,
pending pre-institution mediation.

6. Briefly, the appellant is a dealer in
electronic vehicles (E-rickshaws and Ecarts) manufactured by the company -
5 All. M/s Awasthi Motors, Kanpur Nagar Vs. Managing Director M/s Energy Electricals
Vehicle, New Delhi & Anr.
315
respondent no.1, of which respondent no.2
is the Managing Director. Bereft of
unrelated details, it may be noticed,
disputes have arisen between the parties
arising from the appointment of the
appellant as a dealer by the respondent
company. The appellant claims to have
transferred Rs. 4,36,000/- to the respondent
through banking channel but corresponding
supply of goods has not been made to the
appellant. In such circumstances, the
appellant presented a plaint before the
learned court below, proposing to institute
a suit against the respondents, seeking
delivery of the goods (in lieu of the money
paid
by
the
appellant)
and
for
compensation. Owing to deficiency of
Court fees, it was registered as Misc. Case
No. 17 of 2020.

7. At the same time, besides the plaint
document, the appellant had moved an
application under Section 12A of the Act
before the learned Presiding Officer,
Commercial Court, Jhansi, seeking preinstitution mediation. That application was
numbered as paper no. 14C/2. It had also
applied for extension of time to deposit the
deficient court fees, as reported on the
plaint in the Misc. Case No. 17 of 2020. It
was numbered as paper no. 15C/2. By the
impugned order, the learned court below
has rejected those applications on the
reasoning that the plaint presented by the
appellant is deficient in court fee. Relying
on General Rule Civil, Section 149 Civil
Procedure Code, 1908 (hereinafter referred
to as the 'Code') and the decision of the
Supreme Court in A. Nawab John & Ors.
Vs. V. N. Subramaniyam, (2012) 7 SCC
738, it has been held by the learned court
below that - "The Court proceedings are
conducted
by
General
Rule
Civil.
Admittedly the applicant appears is more
keen to get the relief, without filing the
basis of suit or filing the Court fee."

8. Relying on Section 12A of the Act
read with The Commercial Courts (PreInstitution
Mediation
and
Settlement)
Rules, 2018 (hereinafter referred to as the
'Rules') it has been submitted, that law
provides for a complete Code for initiation
and conduct of pre-institution mediation-by
way of a mandatory pre-condition to
institute a suit proceeding under the Act.
Inasmuch as the Act read with the Rules
only requires payment of prescribed fees
for conduct of pre-institution mediation, the
learned court below could not have
imposed any further condition on the
petitioner to deposit the entire court fee
payable on the plaint. The court fee may
become due only on the failure of preinstitution mediation. He would further
submit; the language of the aforesaid
provisions is clear. If payment of court fee
is enforced at this stage, the entire purpose
of seeking pre-institution mediation would
fail, resulting in failure of justice.

9. The application filed by the
petitioner has been rejected by the learned
court below by an ex-parte order, without
issuance of any notice to the respondents.
Further, the reason given by the learned
court is - the non-payment of the court fee
on the valuation of the plaint document.
Thus, the dispute and the question arising
from the order passed by the learned court
below is strictly a matter between the court
and the appellant. The opposite party has
no right to be heard at this preliminary
stage of the proceeding. Therefore, no
notice is required to be issued to the
respondents in the present appeal.
316 INDIAN LAW REPORTS ALLAHABAD SERIES

10. Having heard learned counsel for
the appellant and having perused the
record, in the first place, the controversy
revolves around the provisions of Section
12A of the Act and the Rules, in the
context of pre-existing provisions of the
Code and the General Rule Civil, as made
applicable to the proceedings under the
Act. In that regard, it is seen, the provisions
of Section 12A of the Act were introduced
upon amendment made by Act no. 28 of
2018. Thereby, Chapter IIIA was added to
the Act, with retrospective effect from
3.5.2018. Section 12A of the Act reads as
below:

"12A. 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 preinstitution 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).

(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)]".

11. Pursuant to enactment of Section
12A and in exercise of powers conferred
under Section 21A of the Act, the Central
Government has published and enforced
the Rules. Relevant to the issue before this
Court, Rule 3 of the Rules reads as below:-

"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
5 All. M/s Awasthi Motors, Kanpur Nagar Vs. Managing Director M/s Energy Electricals
Vehicle, New Delhi & Anr.
317
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.

(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 preinstitution mediation unless the period is
extended for further two months with the
consent of the applicant and the opposite
party."

12. Then, by virtue of Section 3 of the
Act, at present thirteen 'Commercial Courts'
have been created in the State of Uttar
Pradesh for the purpose of ensuring speedy
disposal of 'commercial disputes' of a
'specified value', not less than three lakh
Rupees. Under Section 2(1)(c) of the Act,
'commercial dispute' has been defined as -
disputes arising out of ordinary transaction
of merchants, bankers, financiers and
traders such as those relating to mercantile
documents, including enforcement and
interpretation of such documents. Then, by
virtue of Section 2(1)(i) of the Act,
'specified value', in relation to valuation of
a suit involving a commercial dispute, has
been defined to mean - the value of the
subject matter in respect of a suit, not less
than three lakh rupees or higher value as
may be notified.

13. As to the applicability of the Code
- to a suit in respect of a 'commercial
dispute' of a 'specified value', Section 16 of
the Act provides that the Code as amended
by the Schedule to the Act, shall apply and
the 'Commercial Court' shall follow the
provisions of the Code as amended by the
Act. By virtue of the Schedule to the Act, a
proviso has been appended to Section 26 of
the Code regarding institution of a suit
318 INDIAN LAW REPORTS ALLAHABAD SERIES
proceeding. Thus, the affidavit required
under section 26(2) of the Code must
conform to the prescription of Order VI,
Rule 15-A, as introduced by the Schedule
to the Act. Yet, in absence of any other
manner being prescribed and by virtue of
section 26(1) read with Order IV, Rule 1(1)
of the Code (as applicable in Uttar Pradesh)
read with section 16 of the Act, a suit
involving
a
'commercial
dispute'
of
'specified value' shall be instituted by the
presentation of a plaint along with true
copy/copies (for service of notice), to the
Court or the appointed officer. Similarly,
under Order IV, Rule 1(2) of the Code (as
applicable in Uttar Pradesh), court fee
chargeable for such service must be paid at
the time of filing the plaint. Then,
following the above, by virtue of Order IV,
Rule (1)3 of the Code read with section 16
of the Act, no suit involving a 'commercial
dispute' of a 'specified value' shall be
deemed to be instituted unless it complies
with the requirements specified in sub-rules
(1) & (2).

14 . As to the meaning to be given to
the word 'instituted' used in sub-section (1)
of Section 12A, in Goswami Krishna
Murari Lal Vs. Shiam Sunder, 1984 All
LJ 1034, in the context of a suit
proceeding, it was held as under:

"...A suit is deemed to be
instituted only when it is registered under
the orders of the Court to which it is
presented..."

15. What follows from the above is -
a suit involving a 'commercial dispute' of a
'specified value' may be treated to have
been instituted upon presentation of a plaint
supported by affidavit on prescribed form,
to the Court or the appointed officer. It
must comply with sub-rules (1) & (2) of the
Rule 1 of Order IV and also the General
Rule Civil. However, even these mandatory
steps of institution of a suit taken either
individually or collectively and also their
consequence
have
been
specifically
suspended, by law, by introduction of
section 12-A to the Act.

16. Then under Section 12A(1) of the
Act, the legislature has chosen to use the
words 'shall not be instituted unless the
plaintiff exhausts the remedy of preinstitution mediation'. Therefore, a question
arises whether the said phrase is mandatory
or directory insofar as it provides for a precondition for institution of a suit involving
a 'commercial dispute' of a 'specified value'.
One may first look at the meaning and
intent of the legislature gathered from the
attending
circumstances.
By
using
prohibitive or negative word, i.e. 'not' in
conjunction with the word 'shall' and by
further qualifying the phrase with the word
'unless' before the words 'the plaintiff
exhausts the remedy of pre-institution
mediation', a clear and unambiguous intent
has been expressed to make the provision
of Section 12A (1) mandatory. The use of
prohibitive or negative words leave no
doubt as to the legislative intent. This
principle had been applied by the Supreme
Court in Union of India Vs. A.K. Pandey,
(2009) 10 SCC 552 while reading Rule 34
of the Army Rules, 1954 to be mandatory.
There, it was observed as under:

"15. The principle seems to be
fairly well settled that prohibitive or
negative words are ordinarily indicative of
mandatory
nature
of
the
provision;
although not conclusive. The Court has to
examine carefully the purpose of such
provision and the consequences that may
follow from non-observance thereof. If the
context does not show nor demands
5 All. M/s Awasthi Motors, Kanpur Nagar Vs. Managing Director M/s Energy Electricals
Vehicle, New Delhi & Anr.
319
otherwise, the text of a statutory provision
couched in a negative form ordinarily has
to be read in the form of command. When
the word "shall" is followed by prohibitive
or negative words, the legislative intention
of
making
the
provision
absolute,
peremptory and imperative becomes loud
and clear and ordinarily has to be inferred
as such...."

17. Then, in Govindlal Chhaganlal
Patel Vs. Agricultural Produce Market
Committee, (1975) 2 SCC 482, the
Supreme Court again had the occasion to
consider when a provision may be read as
mandatory or directory in the context of the
words 'shall' and 'may'. It was observed as
under:

"13.
Crawford
on
Statutory
Construction (Edn. 1940, Article 261, p.
516) sets out the following passage from an
American case approvingly:

"The question as to whether a
statute is mandatory or directory depends
upon the intent of the Legislature and not
upon the language in which the intent is
clothed. The meaning and intention of the
Legislature must govern, and these are to
be
ascertained,
not
only
from
the
phraseology of the provision, but also by
considering its nature, its design, and the
consequences which would follow from
construing it the one way or the other."

Thus, the governing factor is the
meaning and intent of the Legislature,
which should be gathered not merely from
the words used by the Legislature but from
a variety of other circumstances and
considerations. In other words, the use of
the word "shall" or "may" is not conclusive
on the question whether the particular
requirement of law is mandatory or
directory. But the circumstance that the
Legislature has used a language of
compulsive force is always of great
relevance and in the absence of anything
contrary in the context indicating that a
permissive interpretation is permissible, the
statute
ought
to
be
construed
as
peremptory. One of the fundamental rules
of interpretation is that if the words of a
statute
are
themselves
precise
and
unambiguous, no more is necessary than to
expound those words in their natural and
ordinary sense, the words themselves in
such case best declaring the intention of the
legislature. [Shriram v. State of Bombay,
AIR 1961 SC 674 : (1961) 2 SCR 890, 898 :
(1961) 1 Cri LJ 760] Section 6(1) of the Act
provides in terms, plain and precise, that a
notification issued under the section "shall
also" be published in Gujarati in a
newspaper. The word ''also' provides an
important clue to the intention of the
legislature because having provided that
the notification shall be published in the
Official Gazette, Section 6(1) goes on to
say that the notification shall also be
published in Gujarati in a newspaper. The
additional mode of publication prescribed
by law must, in the absence of anything to
the contrary appearing from the context of
the provision or its object, be assumed to
have a meaning and a purpose. In Khub
Chand v. State of Rajasthan [AIR 1967 SC
1074 : (1967) 1 SCR 120, 124-25] it was
observed that:

"The term ''shall' in its ordinary
significance is mandatory and the court
shall ordinarily give that interpretation to
that term unless such an interpretation
leads to some absurd or inconvenient
320 INDIAN LAW REPORTS ALLAHABAD SERIES
consequence or be at variance with the
intent of the Legislature, to be collected
from
other
parts
of
the
Act.
The
construction of the said expression depends
on the provisions of a particular Act, the
setting in which the expression appears, the
object for which the direction is given, the
consequences that would flow from the
infringement of the direction and such
other considerations."

18. In the present case, not only there
are negative or prohibitive words used in
sub-section (1) of Section 12A of the Act to
clearly
indicate
that
pre-institution
mediation is mandatory or stands by way of
a pre-condition to the institution of a suit
proceedings
involving
a
'commercial
dispute' of a 'specified value' but further,
the second proviso to sub-section (3) of
Section 12A further makes it plain that the
time consumed in seeking pre-institution
mediation is to be excluded for the
purposes of institution of the suit. The
legislative intent is thus unambiguous that
the suit proceeding may be instituted only
after the pre-institution mediation has
failed. Thus, the pre-institution mediation
must be carried out prior and even
independent to the institution of the suit
proceeding that may eventually to be
instituted only in the case of a failed
mediation.

19.

Unless
the
pre-institution
mediation
were
to
be
undertaken
independent of the institution of the suit
itself, the second proviso to sub-Section (3)
of Section 12A of the Act would become a
dead letter of law and would remain
completely redundant. If a plaintiff would
have to first institute a suit proceeding and
thereafter seek mediation, there would arise
no occasion when, for the purpose of
computation of the period of limitation, any
time
consumed
in
conducting
such
mediation may ever be required to be
excluded. In all such cases, the suit
proceedings would always necessarily
stand instituted, prior in time.

20. In the present case, there appears
to be a clear purpose on part of the
legislature to provide for pre-institution
mediation,
to
ensure
amicable
final
settlement between the parties without
litigation - that often involves long delays.
The whole purpose of enacting the Act and
the amendment introduced by Act No. 28
of 2018 has been to ensure expeditious
disposal. In that regard, the Objects and
Reasons may be noted below:

"Statements
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 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
5 All. M/s Awasthi Motors, Kanpur Nagar Vs. Managing Director M/s Energy Electricals
Vehicle, New Delhi & Anr.
321
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 3rd
May, 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 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 PreInstitution
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."

21. Thus, after 03.05.2018, no fresh
suit involving a 'commercial dispute' of a
'specified value' shall be instituted, unless
the (proposed) plaintiff first exhausts the
remedy of pre-institution mediation. That is
the exact prescription made by Section 12A
(1) of the Act. The only exception may
322 INDIAN LAW REPORTS ALLAHABAD SERIES
arise if such a suit carries an urgent interim
relief application. In that case the suit
proceeding may be instituted even without
seeking pre-institution mediation.

22. As as result, once it is disclosed
that the proposed plaintiff proposes to
institute a suit proceeding involving a
'commercial dispute' of a 'specified value'
not involving any urgent interim relief, the
Commercial Court, before whom such suit
proceedings is proposed to be instituted
must enforce on such proposed plaintiff the
mandatory pre-condition of pre-institution
mediation, prescribed by the Act. The
legislature has left no discretion with the
Courts, in that regard, by using words -
"shall not" in sub-section (1) of Section
12A of the Act before the words - "be
instituted" and the word "unless" thereafter.

23. Once the institution of the suit
proceeding itself has been put in abeyance
by the legislature, unless a pre-institution
mediation is first carried out (except where
urgent interim relief is sought), it cannot be
contemplated how a condition inextricably
linked to the institution of the suit, namely
payment of court fee on the valuation of the
plaint, can be enforced at the stage of preinstitution mediation. For that reason as
well, the reasoning adopted by the learned
court below cannot be accepted as correct.

24. The application for pre-institution
mediation is mandatory in nature. That
application must be entertained and dealt
with independent to the institution of the
suit proceedings. In fact, the institution of a
suit would depend directly on the fate of
the pre-institution mediation and not viceversa. It cannot be said that an application
for pre-institution mediation may be
entertained only after the suit proceeding
had been first instituted.

25. Also, with respect to any suit
involving 'commercial disputes' of a
'specified value', not involving an urgent
interim
relief
application,
such
an
application must necessarily be filed on
Form 1 appended to Schedule 1 to the
Rules. It shall be entertained subject to it
being complete in all respects. Filing of
plaint with or without defects is not
required or prescribed by the Act read with
the Rules as a pre-condition of maintaining
that application.

26. If the pre-institution mediation is
a non-starter, then a report on Form 3 in
Schedule 1 to the Rules would be
submitted. It would allow for the exclusion
of time - starting from the date an
application for pre-institution mediation is
filed, to the date of receipt of the nonstarter report (by the proposed plaintiff),
towards the computation of limitation to
institute the suit. It is the plain effect of the
second proviso to section 12A (3) of the
Act read with Rule 3(4) of the Rules.

27. In all cases, for the purpose of
pre-institution mediation the proposed
plaintiff must disclose the nature of the
dispute as a commercial dispute of a
specified value and; the territorial and
pecuniary jurisdiction of the Court to
whom the application for pre-institution
mediation is presented on Form 1, besides
the
proforma
requirements
already
prescribed under the Rules.

28. Since, in my opinion, the
institution of the suit proceeding is not a
pre-condition to maintain an application
under Section 12A of the Act read with the
Rules, the reasoning adopted by the learned
court below cannot be accepted as correct.
The application seeking pre-institution
mediation must be dealt with independent
5 All. M/s Awasthi Motors, Kanpur Nagar Vs. Managing Director M/s Energy Electricals
Vehicle, New Delhi & Anr.
323
of the filing/presentation of the plaint and
it's status as regular or defective is
irrelevant
or
extraneous
to
the
maintainability of the application for
initiation of pre-institution mediation.

29. Since the filing of the plaint is
itself found to be, not a pre-condition to
seek
pre-institution
mediation
under
Section 12A of the Act, the ratio of the
decision of the Supreme Court in A.
Nawab John Vs. B.M. Subramaniam
(supra) is wholly distinguishable. That
decision was based on the pre-existing law
under the Code i.e. in the absence of any
requirement for pre-institution mediation.
Though, by way of a general principle of
law, the suit proceeding may never be
instituted unless the issue of court fees has
been satisfactorily dealt with, yet, in the
context of section 12A of the Act, that
principle would stand excluded and it
would never apply to a pre-institution
mediation. The two concepts stand in
mutual exclusion to each other. There is no
conflict between the same, either.

30.

Resultantly,
though
the
application filed by the appellant seeking
pre-institution
mediation
was
wholly
maintainable, by virtue of Rule 3 of the
Rules, the appellant is required to pay preinstitution mediation fee. The appellant
here is willing to deposit that fee, but the
learned court below has erred and not
allowed him to deposit the same.

31. Besides the reasons noted above,
unless such course is adopted, the whole
purpose
of
seeking
pre-institution
mediation in the commercial dispute would
stand risk of failure as besides depositing
the mediation fee at the stage provided
under the Rules, the appellant would be
further burdened to deposit the entire court
fee. Yet, despite depositing the entire court
fee and the mediation fee, the plaintiff
would still have to await failure of the
mediation before his suit proceeding would
commence. This course, if adopted, would
be
self-contradicted
and
unreasonable
besides being clearly not permitted by law
and more time consuming.

32. Consequently, the order dated
4.1.2021 passed by the Presiding Officer,
Commercial Court, Jhansi, is set aside and
the matter remitted to that Court to pass an
appropriate order, as expeditiously as
possible. In doing so, it may remain open to
the learned court below to also examine if
there exists a 'commercial dispute' of a
'specified value' over which it has territorial
and pecuniary jurisdiction. Then, it would
be for the learned court below to pass
appropriate order or issue appropriate
direction requiring the appellant to deposit
the
pre-institution
mediation
fee,
in
accordance with law.

33. Once the pre-institution mediation
fee would have been deposited by the
appellant in terms of the direction issued by
the learned court below, the pre-institution
mediation would be carried out, strictly in
terms of the Rules and the suit, if any, may
be instituted, in accordance with law, if and
when required, thereafter. It is only at that
stage that the second proviso to sub-section
(3) of Section 3 of the Act would come into
play. Also, it is at that stage that the court
fees on the valuation of the plaint may be
charged and paid, in accordance with law.
However, that stage has yet not arrived and
the observations made in this order are only
for the purposes of offering clarity as a
324 INDIAN LAW REPORTS ALLAHABAD SERIES
natural consequence of the reasoning given
above.

34. The question of law (as framed
above) is answered in the negative i.e. in
favour of the appellant.

35. Accordingly, the present appeal is
allowed.
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