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There have been attempts by the legislation to support mediation and other alternative conflict resolution processes in recent years. In the Commercial Courts Act, 2015 (the "Act"), chapter IIIA was added in 2018, and section 12A (the "12A") mandated pre-institution mediation in cases of commercial suits of a certain value that did not include an application for urgent interim relief. However, it has been disputed whether or not this section is mandatory or merely directory in nature. With the decision in Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd( 2022 SCC OnLine SC 1028), the Supreme Court has finally put this controversy to rest. The Court has held that the requirement of exhausting pre-institution mediation under Section 12-A of the Act is mandatory and that any suit instituted “violating the mandate of Section 12-A must be visited with rejection of the plaint under Order 7 Rule 11”.

Section 12-A of the Act includes the use of “shall”, which made pre-suit institution mediation proceedings necessary only for plaintiffs who don't need prompt interim relief. According to the act, mediation is a time-sensitive procedure that State governments have to manage. Furthermore, the Limitation Act of 1963 specifically states that any time spent in mediation proceedings is not to be considered as part of the statute of limitations.

The only exception of Section 12A is where the party seeks access to urgent interim relief. Nonetheless, there's no clarity about what's meant by "urgent interim relief" as this is left in the hands of the Court to decide. Recently, it has been determined that Section 12-A of the Act is not mandatory in cases requiring urgent interim relief related to intellectual property rights.

Process of Pre-litigation Mediation as per the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018

Mediation Process: 

For those involved in commercial disputes, they need to fill out Form-1 in Schedule-I either online at(https://nalsa.gov.in/lsams/nologin/mediation.action?requestLocale=en),by mail or physically by making an application to the Authority along with a fee of INR 1000/- for initiating the mediation process as payable by demand draft/ online.

After considering the territorial & commercial jurisdiction and the nature of commercial dispute, the Authority will issue a notice in Form-2 in Schedule-I through registered post or speed post and by email to another party. They are required to give their consent for participating in mediation proceedings on a date which is not beyond ten days from issue of notice.

There could be 3 situations which can arise after the notice to the other party:

1. Receiving no response from the Opponents: The court will issue final notice in this situation.
2. In the event that the other party refuses to comply or does not acknowledge the Authority's final notice, then it'll be considered a non-starter, an official report will be made as per Form 3 in Schedule-I. The report will be endorsed with both parties.
3. If the other side requests more time to respond after receiving the notice, the Authority has the power to grant an alternate appearance date not later than 10 days from when the request was received. If the other party does not show up on the date that has been pushed back, then the procedure is seen as a non-starter according to Form 3..

If both parties agree and willingly take part in the mediation, the Authority will assign a mediator and arrange for them to attend a meeting. During this session, all relevant details of the commercial dispute will be discussed

The Authority will make sure to conclude the mediation process within three months from when they get an application for pre-institution mediation. An extension of two more months is possible if both parties agree.

Benefits of Mediation in Commercial Courts Act, 2015