In a pivotal ruling, the Supreme Court has drawn a sharp line between procedural formality and practical justice for commercial disputes filed before August 20, 2022. It clarified that suits initiated without pre-institution mediation, as mandated by Section 12A of the Commercial Courts Act, 2015, cannot simply be tossed out under Order VII Rule 11 of the Civil Procedure Code.
The case arose from a money recovery suit filed by the government in 2019 against Dhanbad Fuels Pvt Ltd, seeking ₹8.73 crore. The defendant pushed for outright rejection of the case, citing the absence of mandatory pre-filing mediation. However, both the Commercial Court and the Calcutta High Court refused dismissal, instead placing the suit on hold and steering the parties toward mediation.
This approach now finds robust backing from the Supreme Court. The bench, led by Justices JB Pardiwala and R Mahadevan, underscored a key nuance: while Section 12A’s mediation requirement is indeed mandatory, the harsh consequence of rejecting suits for non-compliance kicks in only from August 20, 2022, the date following the Patil Automation judgment.
Patil Automation had made waves by declaring that suits without prior mediation should be dismissed, but crucially, it applied this prospectively to avoid retroactive chaos. The Supreme Court reaffirmed that rejecting suits filed before that date simply because they skipped mediation would be unfair and impractical—especially when court fees could be lost and no substantial benefit gained.
The judgment also took into account the ground realities of 2019, noting that West Bengal’s mediation framework was not yet operational then. This reinforced the Court’s endorsement of the lower courts’ decision to keep the case in limbo and nudge parties toward mediation instead of outright rejection.
For pending suits initiated before the Patil Automation cutoff, the Court held that they cannot be dismissed solely on mediation grounds, unless falling under narrow exceptions like expired limitation or already rejected plaints with fresh compliant suits filed.
What emerges is a pragmatic middle path—courts may hold suits in abeyance and encourage mediation, but only as a temporary, practical fix rather than a replacement for the pre-institution mediation rule going forward.
In essence, the Supreme Court’s verdict balances strict legal mandates with real-world fairness, protecting litigants caught in the transitional period and setting a clear marker for suits filed after August 2022.
No suits from the pre-mandatory era will be thrown out just for skipping mediation, but going forward, the rule stands firm—with courts empowered to apply mediation rigorously before suits take their first step.