# M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS v. RAKHEJA ENGINEERS PRIVATE LIMITED

- **Citation:** [2022] 11 S.C.R. 808
- **Court:** Supreme Court of India
- **Decided:** 2022-08-17
- **Case number:** Civil Appeal No. 5333 of 2022
- **Bench:** K. M. Joseph, Hrishikesh Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-patil-automation-private-limited-and-ors-v-rakheja-engineers-private-limited-35702
- **Pages:** 61

## Headnote

Commercial Courts Act, 2015 - s.12A - Statutory pre-institution
mediation contemplated u/s.12A - Held: Is mandatory - Exhausting
pre-institution mediation by the plaintiff, with all the benefits that
may accrue to the parties and, more importantly, the justice delivery
system as a whole, would make s.12A not a mere procedural
provision - The design and scope of the Act, as amended in 2018,
by which s.12A was inserted, would make it clear that Parliament
intended to give it a mandatory flavour - Any other interpretation
would not only be in the teeth of the express language used but,
more importantly, result in frustration of the object of the Act and
the Rules - Any suit instituted violating the mandate of s.12A must
be visited with rejection of the plaint under Or. VII r. 11 CPC - This
power can be exercised even suo moto by the court - This
declaration effective from 20.08.2022 - Code of Civil Procedure,
1908 - Order VII r.11.
Mediation - Role of the Bar - Held: Mediation offers a
completely new approach to attaining the goal of justice - A winwin situation resulting from assigning a greater role to the parties
themselves, with no doubt, a spirit of accommodation represents a
better and what is more in the era of docket explosion, the only
meaningful choice - The role of the Bar is vital in taking mediation
forward - It is important that the courts also adapt to the changing
times.
Interpretation of Statutes - Golden rule of interpretation -
Held: The decisive element in the search for the answer, in the
interpretation of a Statute, must be to ascertain the intention of the
Legislature - The first principle must be the golden rule of
interpretation, which means, the interpretation in conformity with
the plain language, which is used.
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Mediation - Statutory pre-institution mediation contemplated
u/s.12A of the Commercial Courts Act, 2015 - Held: Is provided
only in suits, which do not contemplate any urgent interim relief -
Therefore, pre-institution mediation has been mandated only in a
class of suits - This is for the reason that in suits which contemplate
urgent interim relief, the Law-giver has carefully vouchsafed
immediate access to justice as contemplated ordinarily through the
courts - The carving out of a class of suits and selecting them for
compulsory mediation, harmonises with the attainment of the object
of the law - Commercial Courts Act, 2015 - s.12A.
Code of Civil Procedure,1908 - Or.VII, r.11- No absolute right
to file civil suit - A civil suit can be barred by a law, either expressly
or by necessary implication - The jurisdiction of a civil court can
be ousted - There is no fundamental right with anyone to contend
that he has a right to file a civil suit, which cannot be taken away -
Presence of Order VII Rule 11(d) which mandates rejection of a
plaint where a suit is barred is a reminder of the principle that there
is no absolute right to file a civil suit.
Code of Civil Procedure,1908 - Order VII, r.11(d) - Stage at
which power to reject plaint can be exercised - Whether the power
under the rule can be exercised only on application filed by
defendant - Held: Or.VII r.11 does not provide that the court is to
discharge its duty of rejecting the plaint only on an application -
Power u/Or. VII r.11 is available to the court to be exercised suo
motu - In a clear case, where on allegations in the suit, it is found
that the suit is barred by any law, the plaint should be rejected
without issuing summons.
Disposing of the appeals, the Court
HELD: 1. Section 12A of the Commercial Courts Act, 2015
cannot be described as a mere procedural law. Exhausting preinstitution mediation by the plaintiff, with all the benefits that may
accrue to the parties and, more importantly, the justice delivery
system as a whole, would make Section 12A not a mere procedural
provision. The design and scope of the Act, as amended in 2018,
by which Section 12A was inserted, would make it clear that
Parliament intended t

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[2022] 11 S.C.R. 808
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS.
v.
RAKHEJA ENGINEERS PRIVATE LIMITED
(Civil Appeal No. 5333 of 2022)
AUGUST 17, 2022
[K. M. JOSEPH AND HRISHIKESH ROY, JJ.]
Commercial Courts Act, 2015 - s.12A - Statutory pre-institution
mediation contemplated u/s.12A - Held: Is mandatory - Exhausting
pre-institution mediation by the plaintiff, with all the benefits that
may accrue to the parties and, more importantly, the justice delivery
system as a whole, would make s.12A not a mere procedural
provision - The design and scope of the Act, as amended in 2018,
by which s.12A was inserted, would make it clear that Parliament
intended to give it a mandatory flavour - Any other interpretation
would not only be in the teeth of the express language used but,
more importantly, result in frustration of the object of the Act and
the Rules - Any suit instituted violating the mandate of s.12A must
be visited with rejection of the plaint under Or. VII r. 11 CPC - This
power can be exercised even suo moto by the court - This
declaration effective from 20.08.2022 - Code of Civil Procedure,
1908 - Order VII r.11.
Mediation - Role of the Bar - Held: Mediation offers a
completely new approach to attaining the goal of justice - A winwin situation resulting from assigning a greater role to the parties
themselves, with no doubt, a spirit of accommodation represents a
better and what is more in the era of docket explosion, the only
meaningful choice - The role of the Bar is vital in taking mediation
forward - It is important that the courts also adapt to the changing
times.
Interpretation of Statutes - Golden rule of interpretation -
Held: The decisive element in the search for the answer, in the
interpretation of a Statute, must be to ascertain the intention of the
Legislature - The first principle must be the golden rule of
interpretation, which means, the interpretation in conformity with
the plain language, which is used.
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Mediation - Statutory pre-institution mediation contemplated
u/s.12A of the Commercial Courts Act, 2015 - Held: Is provided
only in suits, which do not contemplate any urgent interim relief -
Therefore, pre-institution mediation has been mandated only in a
class of suits - This is for the reason that in suits which contemplate
urgent interim relief, the Law-giver has carefully vouchsafed
immediate access to justice as contemplated ordinarily through the
courts - The carving out of a class of suits and selecting them for
compulsory mediation, harmonises with the attainment of the object
of the law - Commercial Courts Act, 2015 - s.12A.
Code of Civil Procedure,1908 - Or.VII, r.11- No absolute right
to file civil suit - A civil suit can be barred by a law, either expressly
or by necessary implication - The jurisdiction of a civil court can
be ousted - There is no fundamental right with anyone to contend
that he has a right to file a civil suit, which cannot be taken away -
Presence of Order VII Rule 11(d) which mandates rejection of a
plaint where a suit is barred is a reminder of the principle that there
is no absolute right to file a civil suit.
Code of Civil Procedure,1908 - Order VII, r.11(d) - Stage at
which power to reject plaint can be exercised - Whether the power
under the rule can be exercised only on application filed by
defendant - Held: Or.VII r.11 does not provide that the court is to
discharge its duty of rejecting the plaint only on an application -
Power u/Or. VII r.11 is available to the court to be exercised suo
motu - In a clear case, where on allegations in the suit, it is found
that the suit is barred by any law, the plaint should be rejected
without issuing summons.
Disposing of the appeals, the Court
HELD: 1. Section 12A of the Commercial Courts Act, 2015
cannot be described as a mere procedural law. Exhausting preinstitution mediation by the plaintiff, with all the benefits that may
accrue to the parties and, more importantly, the justice delivery
system as a whole, would make Section 12A not a mere procedural
provision. The design and scope of the Act, as amended in 2018,
by which Section 12A was inserted, would make it clear that
Parliament intended to give it a mandatory flavour. Any other
interpretation would not only be in the teeth of the express
language used but, more importantly, result in frustration of the
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
RAKHEJA ENGINEERS PRIVATE LIMITED
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object of the Act and the Rules. If the object of the law is defeated
by non-compliance with the provision, then, it would be regarded
as mandatory. The right to institute the Suit in a plaintiff who
does not contemplate urgent interim relief in a commercial matter
under the Act, is clearly conditioned by the fulfilment of certain
conditions as provided in Section 12A. This cannot be likened to
allowing a party to file his written statement. Bearing in mind the
object also, the conclusion is inevitable that the right of suit itself
will fructify only when the conditions in Section 12A are fulfilled.
Treating the provision as procedural, also, the result cannot be
different. Any other view would remove the basis for treating
Section 80(1) of the CPC as mandatory. [Para 43][838-E-H; 839A-B]
2. On a conspectus of the Act, as from its birth till the Lawgiver stepped- in with the amendment in 2018, the Act read with
the Rules represent an economic experiment as much as it deals
more directly with a vital aspect of administration of justice.
Commercial disputes have been clearly identified. The value has
been fixed. Courts, at different stages, have been contemplated.
Timelines are contemplated. The whole object of the law is clear
as day light. Disputes of a commercial hue, must be extinguished
with the highest level of expedition. The dispute resolution would
witness a termination of the lis between the feuding parties. More
importantly, it would prepare the ground for the country becoming
a destination attracting capital by enhancing the ease of doing
business. It does not require much debate to conclude that there
is a direct relationship between ease of doing business and an
early and expeditious termination of disputes, which may arise in
commercial matters. The speed with which the justice delivery
system in any country responds to the problem of docket
explosion, particularly in the realm of commercial disputes can
be regarded as a very safe index of the ease of doing business in
that country. The Act, therefore, is, in the said sense, a unique
experiment to push the pace of disposal of commercial disputes.
It is in this background that the Court must approach the issue
of whether Section 12A has been perceived as being a mandatory
provision. This is for the reason that the decisive element in the
search for the answer, in the interpretation of such a Statute, must
be to ascertain the intention of the Legislature. The first principle,
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of course, must be the golden rule of interpretation, which means,
the interpretation in conformity with the plain language, which is
used. There cannot even be a shadow of a doubt that the language
used in Section 12A is plainly imperative in nature. However,
this Court will not be led by the mere use of the word 'shall'.
Even going by the sublime object of the Act, this Court is fully
reinforced in its' opinion that the pre-institution mediation is
intended to produce results, which has a direct bearing on the
fulfilment of the noble goals of the Law-giver. It is apparent that
the Legislature has manifested a value judgement. [Para 53][847C-H; 848-A-B]
3. Section 9 of the CPC is not the law, which creates a right
to file a civil suit. It would require a law, to invade, absolutely or
conditionally, the vital civil right of a person to take his grievance
to a civil court. A civil suit can be barred by a law, either expressly
or by necessary implication. The jurisdiction of a civil court can
be ousted. In other words, there is no Fundamental Right with
anyone to contend that he has a right to file a civil suit, which
cannot be taken away. It is another matter that the courts will not
lightly infer the ouster of a jurisdiction of a civil court. The very
presence of Order VII Rule 11(d), which mandates rejection of a
plaint, where a suit is barred, is a reminder of the principle that
there is no absolute right to file a civil suit. [Para 55][848-G-H;
849-A]
4. On a consideration of the scheme of the Orders IV, V
and VII of the CPC, the Court arrives at the following conclusions:
(A) A suit is commenced by presentation of a plaint.The
date of the presentation in terms of Section 3(2) of the Limitation
Act is the date of presentation for the purpose of the said Act. By
virtue of Order IV Rule 1 (3), institution of the plaint, however,
is complete only when the plaint is in conformity with the
requirement of Order VI and Order VII.
(B) 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.
(C) Order VII Rule 11 does not provide that the court is to
discharge its duty of rejecting the plaint only on an application.
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
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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 words,
the power under Order VII Rule 11 is available to the court to be
exercised suo motu. [Para 68][858-E-H; 859-A-C]
5. The Act did not originally contain Section 12A. It is by
amendment in the year 2018 that Section 12A was inserted. The
Statement of Objects and Reasons are explicit that Section 12A
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. 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 of the CPC and Section 69 of the Indian Partnership
Act. The language used in Section 12A,which includes the word
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'shall', certainly, go 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 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. Mediation must be perceived as a
new mechanism of access to justice. Any reluctance on the part
of the Court to give Section 12A, a mandatory interpretation,
would result in defeating the object and intention of the
Parliament. The fact that the mediation can become a non-starter,
cannot be a reason to hold the provision not mandatory.
Apparently, the value judgement of the Law-giver 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 12A 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.
[Para 72][861-D-H; 862-A-D]
6. Section 12A of the 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. This power can
be exercised even suo moto by the court as explained earlier in
the judgment. This declaration is made effective from 20.08.2022
so that concerned stakeholders become sufficiently informed.
However, it is directed 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 acted upon by filing a fresh suit, the declaration of prospective
effect will not avail the plaintiff. Finally, if the plaint is filed violating
Section 12A after the jurisdictional High Court has declared
Section 12A mandatory also, the plaintiff will not be entitled to
the relief. [Para 84][868-A-D]
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
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Kailash v. Nanhku and others (2005) 4 SCC 480 :
[2005] 3 SCR 289 - distinguished.
Madiraju Venkata Ramana Raju v. Peddireddigari
Ramachandra Reddy and Others (2018) 14 SCC 1 :
[2018] 9 SCR 164; Sharif-ud-Din v. Abdul Gani Lone
(1980) 1 SCC 403 : [1980] 1 SCR 1177 and Vikram
Bakshi and Others v. Sonia Khosla (Dead) by Legal
Representatives (2014) 15 SCC 80 : [2014] 6 SCR 762
- relied on.
State of U.P. and others v. Babu Ram Upadhya AIR
1961 SC 751 : [1961] 2 SCR 679; Bhikraj Jaipuria v.
Union of India AIR 1962 SC 113 : [1962] 2 SCR 880;
Lachmi Narain and others v. Union of India and others
AIR 1976 SC 714 : [1976] 2 SCR 785; Bihari
Chowdhary & Anr. v. State of Bihar & Ors. (1984) 2
SCC 627 : [1984] 3 SCR 309; Gangappa Gurupadappa
Gugwad, Gulbarga v. Rachawwa, Widow of
LochanappaGugwad and others (1970) 3 SCC 716 :
[1971] 2 SCR 691; Seth LoonkaranSethia and others
v. Ivan E. John and others AIR 1977 SC 336 : [1977] 1
SCR 853; Salem Advocate Bar Association, T.N. v.
Union of India (2005) 6 SCC 344 : [2005] 1 Suppl.
SCR 929; Prem Lala Nahata v. Chandi Prasad Sikaria
(2007) 2 SCC 551 : [2007] 2 SCR 261; State of A.P.
and others v. Pioneer Builders, A.P. (2006) 12 SCC
119 : [2006] 6 Suppl. SCR 571; Afcons Infrastructure
Limited and Another v. Cherian Varkey Construction
Company Private Limited and Others (2010) 8 SCC 24
: [2010] 8 SCR 1053; Raghunath Das v. Union of
India& Another AIR 1969 SC 674 : [1969] 1 SCR 450;
Olympic Cards Limited v. Standard Chartered Bank
(2013) 1 CTC 38; Jarnail Singh and Others v.
LachhmiNarain Gupta and Others 2022 SCC Online
SC 96; L.C. Golak Nath and Others v. State of Punjab
and Another AIR 1967 SC 1643 : [1967] 2 SCR 762;
Taherakhatoon (D) By Lrs. v. Salambin Mohammad
(1999) 2 SCC 635 : [1999] 1 SCR 901; M/s. Somaiya
Organics (India) Ltd. v. State of Uttar Pradesh AIR 2001
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SC 1723 : [2001] 3 SCR 33; P.V. George & Ors. v. State
of Kerala & Ors. AIR 2007 SC 1034 : [2007] 1
SCR 1198; Patasibai and Others v. Ratanlal (1990) 2
SCC 42 : [1990] 1 SCR 172 and Harsh Dhingra v.
State of Haryana and others (2001) 9 SCC 550 : [2001]
3 Suppl. SCR 446 - referred to.
Ganga Taro Vazirani v. Deepak Raheja 2021 SCC
Online Bombay 195; Dhanbad Fuels Ltd. v. Union of
India and Others 2021 SCC Online Calcutta 429; Laxmi
Polyfab Pvt. Ltd. v. Eden Realty Ventures Pvt. Ltd. and
Another AIR 2021 Calcutta 190; Awasthi Motors v.
Managing Director M/s. Energy Electricals Vehicle and
Another AIR 2021 Allahabad 143; Deepak Raheja v.
Ganga Taro Vazirani (2021) SCC OnLine Bom 3124;
Dredging and Desiltation Company Pvt. Ltd. v.
Mackintosh Burn and Northern Consortium and Others
2021 SCC Online Calcutta 1458 and Curewin
Pharmaceuticals Pvt. Ltd. v. Curewin Hylico Pharma
Pvt. Ltd AIR 2021 MP 154 - referred to.
Bhagchand Dagadusa Gujrathi and Ors. v. Secretary
of State for India AIR 1927 PC 176; AL. AR. Vellayan
Chettiar (Decd.) & Others v. Government of the Province
of Madras Through the Collector of Ramnad at Madura
& Another AIR 1947 PC 197 - referred to.
Regina vs. Sekhon (2003) 1 WLR 1655 and National
Westminster Bank Plc. v. Spectrum Plus Ltd. & Ors.
(2005) UK HL 41- referred to.
Case Law Reference
[2018] 9 SCR 164
relied on
Para 19
[1961] 2 SCR 679
referred to
Para 29
[1962] 2 SCR 880
referred to
Para 30
[1976] 2 SCR 785
referred to
Para 31
[1984] 3 SCR 309
referred to
Para 34
[1971] 2 SCR 691
referred to
Para 37
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
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[1977] 1 SCR 853
referred to
Para 39
[1980] 1 SCR 1177
relied on
Para 40
[2005] 3 SCR 289
distinguished
Para 41
[2005] 1 Suppl. SCR 929
referred to
Para 44
[2007] 2 SCR 261
referred to
Para 45
[2006] 6 Suppl. SCR 571
referred to
Para 46
[2010] 8 SCR 1053
referred to
Para 51
[2014] 6 SCR 762
relied on
Para 56
[1969] 1 SCR 450
referred to
Para 64
[1990] 1 SCR 172
referred to
Para 67
[1967] 2 SCR 762
referred to
Para 78
[1999] 1 SCR 901
referred to
Para 79
[2001] 3 SCR 33
referred to
Para 80
[2007] 1 SCR 1198
referred to
Para 81
[2001] 3 Suppl. SCR 446
referred to
Para 82
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5333
of 2022.
From the Judgment and Order dated 09.09.2021 of the High Court
of Punjab and Haryana at Chandigarh in Civil Revision Bearing No.CR1853-2021(O&M).
With
Civil Appeal No. 5334 of 2022.
With
Special Leave Petition (C) Diary No. 29458 of 2021.
Sanjeev Anand, Sr. Adv., Ms. Sonam Anand, Santosh Krishnan,
Ayush Negi, Ms. Vishakha Upadhyaya, Himanshu Tyagi, Chaitanya
Nikte, Varnita Ojha, Arup Banerjee, Advs. for the Appellants.
Saket Sikri, Ms. Ekta Kalra Sikri, Ajaypal Singh Kullar, Vikalp
Mudgal, Hetu Arora Sethi, Ms. Saumya Tondon, Anirudha Bhat, Rahul
Jain, Joy Thattil Ittup, Bijish B. Tom, Bhunu Thilak, Mrs. Prabha Swami,
Nikhil Swami, Ms. Divya Swami, Advs. for the Respondent.
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The Judgment of the Court was delivered by
K. M. JOSEPH, J.
1. Leave granted.
2. The seminal question which arises for consideration is whether
the statutory pre-litigation mediation contemplated under Section 12A of
the Commercial Courts Act, 2015 (hereinafter referred to as 'Act') as
amended by the Amendment Act of 2018 is mandatory and whether the
Courts below have erred in not allowing the applications filed under
Order VII Rule 11 of the Code of Civil Procedure, 1908 (hereinafter
referred to as 'CPC'), to reject the plaints filed by the respondents in
these appeals without complying with the procedure under Section 12A
of the Act.
3. In Civil Appeal arising from SLP (C)No. 14697 of 2021, the
respondent filed a commercial suit under Order XXXVII of the CPC
before the Additional District Judge, District Court, Faridabad, praying
for recovery of Rs. 1,00,40,291/- along with 12 per cent interest on a
certain sum which detail need not detain us. The suit was laid on
12.10.2020.
4. The appellant is the defendant in the said suit. It filed an
application on 05.02.2021 under Order VII Rules 10 and 11 read with
Sections 9 and 20 of the CPC, inter alia contending that the suit was
filed without adhering to Section 12A of the Act. The respondent filed its
reply on 23.03.2021. It contested the matter contending that the suit was
not barred for non-compliance of Section 12A of the Act.
5. A written statement came to be filed on 23.03.2021. On
16.08.2021, the trial Court rejected the contention of the appellant inter
alia holding as follows:
"20. From the bare perusal of Section 12A, it is crystal clear that
the procedure provided is mandatory in nature and if by applying
the said principles, the suit of the plaintiff is rejected, then it would
have a catastrophe effect. The court is of the view that the
legislature has no such intention to frame such stringent provision
the said rules. 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 the genuine cases come
before the Court. Further,it also appears to the court that the said
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
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procedure has been introduced to de-congest the regular courts.
It is pertinent that the Hon'ble Bombay High Court in case Ganga
Tara Vazirani (supra), held that the procedure provided under
Section 12A of the Commercial Courts Act is not a penal enactment
for punishment and there is no embargo in filing the suit without
exhausting the remedy of mediation specially when an attempt is
clear to show that the intention of the applicant has already been
made and failed. The fact is clear that before filing the suit, the
respondent/plaintiff has sent e-mail and legal notice and despite
that the applicant/defendant failed to make the payment of the
dues. Moreover, it is well settled that the procedure and law are
for advancement of justice and not to thwart on technical grounds.
Thus, in the larger interest of justice, the court deems it appropriate
that the civil suit can be kept in abeyance and both the parties are
directed to appear before the Secretary, District Legal Services
Authority, Faridabad on 26.08.2021 for the purpose of mediation
as per the provisions of Section 12A of the Commercial Courts
Act and the Rules framed thereunder. With these directions, the
application is disposed of."
(Emphasis supplied)
6. The appellant filed a Civil Revision Petition. The High Court of
Punjab and Haryana, however, confirmed the finding in paragraph 20
and further held that the Courts are meant to deliver substantial justice.
The rules of procedure are handmaid of justice and are meant to advance
the ends of justice and they are not to be bogged down by the technicalities
of procedure so as to lose sight of its main duty which is to dispense
justice. It was further found that the purpose of referring the dispute to
mediation centre is to explore settlement. If the suit is filed without taking
recourse to the procedure, it is further found, it should not entail rejection
of the plaint. This could not have been the intention of the legislature. It
is further observed that an enactment is to be interpreted in a manner
that it does not result in delivery of 'perverse justice'. It was noted that
the trial Court had directed that the civil suit be kept in abeyance and the
parties were to appear before the Secretary of the District Legal Services
Authority for the purpose of mediation. Reliance was placed on the
judgment of the High Court of Bombay in Ganga Taro Vaziraniv.
Deepak Raheja1.
1 2021 SCC OnLine Bom 195
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7. In the other appeal arising out of SLP (C) No. 5737 of 2022,
the impugned Order has been passed by the High Court of Madras,
rejecting a similar application filed by the appellant-defendant in a
commercial suit instituted without having resorted to pre-litigation
mediation under Section 12A of the Act.
8. There is yet another special leave petition which was filed,viz.,
SLP Diary No. 29458 of 2021. This is filed with an application for
permission to file special leave petition. In this special leave petition, the
order which is impugned is the same order which is impugned in SLP
(C)No. 5737 of 2022.
9. The Special Leave Petition is supported with an application for
permission to file SLP. The applicant is not a party in the suit in question.
However, it is his case that a suit is pending in which similar question
arises. Though, we have not issued notice in the said matter, we allowed
Shri Sharath Chandran, learned Counsel for the petitioner, to address
the Court on what appeared to us to be purely a legal issue, viz., the
effect of non-compliance with Section 12A of the Act. In other words,
we have permitted intervention, though in the application for permission
to file SLP, which application shall stand, accordingly, disposed of. So
also the SLP.
SUBMISSION OF THE APPELLANTS
10. Shri Sanjeev Anand, learned Senior Counsel, appearing for
the appellant in civil appeal arising out of SLP (C)No. 5737 of 2022,
would submit that the Court, in the impugned Order, held,inter alia, as
follows.
"23. The Central Government by notification dated 03.07.2018,
has framed rule and the rule 3(1) and 3(7) of the Commercial
Courts Act, 2015 (Pre-Institution Mediation and Settlement) Rules,
2018, reads as under:
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;
......
......
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]
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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.
24. Though the word 'shall' in Section 12A of the Act, sounds
Prelitigation mediation is mandatory on the part of the plaintiff to
explore Settlement before filing suit under Commercial Court Act,
the Rule framed used the word 'shall' and makes it an optional.
Also even if one party go for pre-litigation mediation the other
party may conveniently abstain from participating in the mediation
and make it a non-starter. Even otherwise, mediator can proceed
only if the both the parties appear and give consent to participate
in the mediation process. Thus, it is very clear that on combined
reading of the Commercial Courts Act and the Rules framed
thereunder, pre-litigation mediation is subject to urgency for any
interim relief and the consent of the sparing parties.
25. In such circumstances, the Harmonious Interpretation takes
us to the irresistible conclusion that Section 12-A of the Commercial
Courts Act, is not a mandatory provision. The right to access
justice which is a Constitutional Right cannot be denied or deprived
for not resorting to mediation. The Court is not substitute to
Alternative Dispute Redressal, it is otherwise. The litigant cannot
be denied the doors of justice for directly approaching the Court
without exploring the possibility of mediation. There can be no
prejudice to the defendant, if the defendant is ready for mediation,
even after Institution of the suit. Also there is no impediment either
for the party or for the Courtto refer the pending matter to be
resolved through mediation or any other Alternative Dispute
Redressal mechanism. This provision is meant for the parties to
work out an amicably settlement without involving in the adversary
system of litigation. The intention of this Section is not to prevent
access to justice or to aid anyone who refuse to subject himself to
the judicial process. The intention is to avoid the procedural rigor
and to arrive an amicable win-win settlement. Any other interpretation
to Section 12-A of the Act contrary to the intention will amount to
miscarriage of Justice. Therefore, this Court holds that there is no
ground to entertain this Application seeking rejection of plaint.
Hence, Application is dismissed with costs of Rs.10,000/-."
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11. He would submit that the High Court has clearly erred in the
view it has taken. He would submit that the Act came into force in the
year 2015. It is by the amendment in the year 2018 that Section 12A
came to be incorporated.
12. He took us through the Statement of Objects and Reasons.
He would commend for the Court's acceptance the view that the
legislation was put in place with a definite object of enhancing the ease
of doing business in India and de-clogging of Commercial Courts which
were assigned with an important task of quickly disposing of commercial
matters and thatmust be uppermost in the mind of the Court.
13. He would submit that if the application under Order VII Rule
11 is allowed and the plaint is rejected for non-compliance with Section
12A, in view of Order VII Rule 13 of the CPC, there is no prejudice
caused as on the same cause of action, the plaintiff can bring a fresh suit
after complying with the mandate of Section 12A of the Act.
14. He would point out that most pertinently the law giver has
used the word 'shall' in Section 12A. The word 'shall' in the context of
the object of the legislation must be construed as mandatory. He would
complain that the High Court has not properly appreciated the meaning
of the words used in the subordinate legislation,viz., Commercial Courts
(Pre-Institution Mediation and Settlement) Rules, 2018(hereinafter
referred to as the "Rules") with regard to the use of the word 'may' in
Rule 3. He would submit that it only refers to the discretion with the
plaintiff in regard to the particular mode to be chosen as contemplated
therein. Bearing in mind the use of mandatory words conveying an
imperative sense in the parent legislation,the High Court erred in finding
that the provision in the parent enactment must be treated as only
directory. He would submit that the sublime object of the legislation is
clearly to de-clog the court particularly having regard to the reduction of
the monetary value from Rs.1 crore to Rs.3 lakhs. In other words, by
virtue of the amendment, the Legislature was conscious of the fact that
there would be a phenomenal increase in the cases which would be
treated as commercial cases. Bearing in mind also, the larger object of
promoting India as a desired destination for economic activity which in
large measure would depend upon the ease of doing business, the purpose
is clear as daylight. The High Court has clearly erred in the matter.
15. Shri Ayush Negi, learned Counsel for the appellant in other
appeal, would also address arguments on similar lines. In his case, he
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]
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would submit that the trial Court has proceeded on the footing that the
commercial suit as such cannot be thrown out for non-compliance of
Section 12A and the trial Court has erroneously considered post institution
mediation as tantamounting to compliance with pre litigation mediation
contemplated under Section 12A.
16. He would submit that the plain language and the object of the
legislation has been overlooked by the Court in the impugned order as is
clear by the observations in the impugned order.
17. Both the counsels for the appellants would draw a parallel
between the language used in Section 80 CPC and the case law generated
by the said provision to contend that Section 12A is mandatory. Equally,
support is sought to be drawn from judgments rendered under Section
69 of the Indian Partnership Act, 1932.
18. Shri Sharath Chandran, learned counsel who appears in SLP
(C)Diary No. 29458 of 2021 would point out that the procedure
contemplated under Section 12A is mandatory.
19. It is the further submission of Shri Sharath Chandran that
decision of the learned Single Judge of the Bombay High Court in Ganga
Taro(supra) has been reversed by the Division Bench in Deepak Raheja
v. Ganga Taro Vazirani2. He has brought to the notice of this Court the
different views expressed by the other High courts. It is his contention
that on a reference to the Statement of Objects and Reasons, the speech
made by the Law Minister and the plain language used coupled with the
intention of theLawgiver makes it clear that Section 12A is mandatory.
He, however, drew a distinction between the presentation of the plaint
and the institution of the suit. He also submits that this Court has taken
notice of pre-litigation mediation in matrimonial disputes and disputes
under Motor Vehicles Act. He would further contend that the Court can
suo motu reject the plaint without any application. He relies on the
judgment of this Court in Madiraju Venkata Ramana Raju v.
Peddireddigari Ramachandra Reddy and Others3. He however,
contends that the embargo against institution of the suit may not
necessarily affect inherent jurisdiction of the Court. He has further
submitted in regard to the interpretation to be placed in cases where
urgent interim relief is contemplated and the appropriate procedure
2 (2021) SCC OnLine Bom 3124
3 (2018) 14 SCC 1
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provided therein. He would in this regard place reliance upon the judgment
in Regina vs. Sekhon4 to contend that if a plea under Section 12A is not
pointed out at an earlier point of time, non-compliance cannot result in
the proceeding becoming a nullity. He would submit that nullifying
proceedings on account of non-compliance at a belated stage would in
effect be throwing the baby out with the bathwater. He would also point
out that the High Court was in error in not finding that mediation is one
of the best forms of conflict resolution. Further, error in understanding
of Rule 3 of the Rules is pointed out.
20. Per contra, Shri Saket Sikri, learned counsel who appears in
civil appeal arising from SLP (C)No. 14697 of 2021, would contend that
Section 12A is actually to be understood as directory. He submits that in
order that the word 'shall' in a statutory provision be considered as
mandatory, one of the cardinal tests employed by the Courts is to ask the
question whether the provision contemplated penal consequences for
disobedience of the provision. He would point out that no penal
consequence is spelt out in Section 12A for instituting a suit without
complying with Section 12A.
21. Next, he would point out that instituting a suit without complying
with the provisions of Section 12A does not affect any legal right of the
defendant. It is only a procedure intended to bring about a settlement
between the parties.
He further contends that the course adopted by the Court in his
case has addressed the concerns of the defendant as well. This is for
the reason that the Court has kept proceedings in the suit in abeyance
and referred the parties for mediation. In this context, he highlights the
fact that the appellant which swears by mediation has made it a nonstarter by not taking part in the mediation procedure.
22. He would submit that having regard to the purport of Section
12A, the interest of justice would be subserved if the procedure which is
adopted by the Court in his case is accepted. In other words, if the Court
after the institution of the suit immediately refers the parties to the
mediation, the appellants may not be justified in insisting on pre institution
mediation. In this regard, he would emphasisethat pre litigation mediation
contemplated in Section 12A does not pertain to inherent jurisdiction of a
Court. While mediation is to be encouraged, the Court may not lose sight
4 (2003) 1 WLR 1655
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]
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of the fact that ahalf-way house between the two extremes has been
attempted by the Court in the case, which suffices, having regard to the
fact also that no penal consequences are provided and no right of the
defendant is imperilled.
23. He next draws our attention to the aspect of court fees. He
would submit that the plaintiff is bound to pay the whole court fee under
the law in question. When the plaint gets rejected under Order VII Rule
11, the plaintiff suffers a loss of the entire court fee. This is one of the
consequences which this Court should not lose sight of, it is contended.
Here again, the procedure which has been adopted in the case is
commended for our acceptance as substantial compliance with Section
12A which at the same time, will not reach such disastrous consequences
for the litigants.
He also touches upon the possible consequence of a plea of
limitation overwhelming a fresh suit of the plaintiff after rejection of the
first suit.
ANALYSIS
24. Section 12A of the Act reads as follows:
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
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
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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)."
25. The Act was enacted in the year 2015. At the time, the monetary
limit for a suit liable to be tried by the Commercial Court was fixed at
Rs.1 crore.
26. In the course of three years, noticing certain features,
Parliament has decided to amend the Act. Therefore, in the year 2018,
the 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").
27. It is apposite that we notice the statement of objects 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
commercial disputes of specified value and for matters connected
therewith or incidental thereto.
2.