Introduction:

The adjudication of commercial disputes in the civil courts is a tiresome and lengthy procedure. The long-pending commercial litigations in India had mentally harassed and frustrated the litigants by keeping them longing for the court’s award. Hence, to address these issues and provide for speedy and productive remedies in all commercial disputes, i.e. disputes arising out of the commercial relationship between parties such as mercantile documents, export and import of merchandise or services, admiralty, maritime law, aviation, infrastructure, immovable property, franchising, distributions, joint venture, management, shareholders, partnership agreements, intellectual property rights, insurance, etc., the legislature came up with the special law, i.e. The Commercial Courts Act, 2015.

The Act provides for the constitution of the Commercial courts at the district level by the respective State Government after consulting with the concerned High Court. But before initiating proceedings before the Commercial Courts, the Act makes it mandatory for the parties to attempt to resolve their commercial dispute through mediation.   

Mediation in Commercial Disputes:

Unlike any other grievance redressal mechanism, Mediation is considered the most effective and popular among all other known grievance redressal mechanisms in recent times. The method involves voluntarily resolving the disputes amicably and with the assistance of the third party, i.e., the Mediator. To resolve the commercial disputes between the parties, Chapter IIIA was introduced in the Commercial Courts Act,2015, which contains the underlined pre-institution mediation provision under Section 12A of the Act, which makes it mandatory for the plaintiff to exhaust the remedy of pre-institution mediation before the institution of a commercial/civil suit in the commercial court of a specified value. However, in those cases where there is a requirement for urgent interim relief, the application for pre-institution mediation will not lie.

Section 12A of Commercial Courts Act, 2015: A Way Forward

Pre-Institution Mediation under section 12A of the Act gives each party a chance to settle the dispute amicably between themselves with the Mediator’s help before initiating commercial proceedings under the Act. Under Subsection 3 of Section 12, the time period of 3 months is mentioned to complete the whole mediation proceedings with the extension of 2 months with the parties’ consent. A procedure such as this saves time and litigation cost and is to be looked forward to in each commercial suit. The Procedure of Mediation is governed by the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, and the award of such proceedings is binding upon the parties in the same manner as an award passed by the arbitrator under subsection (4) of Section 30 of the Arbitration and Conciliation Act,1996. This leads to the finality of the decision and certainty between the parties about the award.

The Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 ensure that the mediator maintains the confidentiality of the matter. Hence, Rule 12 makes the Mediator responsible for maintaining the trust and confidentiality throughout Mediator. Also, under Rule 9, it is required that the parties, councils, and the mediator maintain the secrecy of the case. No stenographic, audio or visual recording of the mediation is allowed. The only exception is when the other party permits the mediator to share such information. Such essential consideration makes pre-institution mediation a more opted option than others.

A Confused Interpretation:

While interpreting Section 12A of the Act, Clause (1) leaves a little confusion as to whether the party has to mandatory exhaust his remedy of pre-institution mediation before filing the commercial suit before the court?

The interpretation by various High Courts in the context of “mandatorily exhausting the remedy of pre-institution mediation” is widely different from each other. One of the judgments from the division bench of Bombay High Court, in Deepak Raheja v. Ganga Taro Vazirani (2021 SCC OnLine Bom 3124), held that “Section 12A of the Act is mandatory in case of a commercial suit of a specified value, which does not contain any application for urgent interim relief, as such a proceeding cannot be instituted unless pre-institution mediation has been exhausted by the plaintiff. On the contrary, the bench at Madras High Court in Shahi Exports Private Limited v. Goldstar Line Limited & Others (A.No.35 of 2021 in C.S.No.669 of 2019) held that if a person doesn’t resort to mediation, his constitutional right which is right to access the justice cannot be denied in such cases.  In addition, the bench held that alternative dispute redressal is not a substitute for Court, but it is the other way round. Finally, concluding the judgment, the court held that Section 12A of the Commercial Courts Act was not a mandatory provision. It would be considered a denial of justice if the person did not explore the possibility of mediation and directly approach the Court.

Conclusion:

Mediation in commercial disputes, according to the author, is the most effective as it helps in the speedy disposal of the matter. Although, as a matter of fact, mediation to be considered an effective redressal mechanism, need to have proper infrastructure and resources, and proper trained mediators to conduct the proper mediation according to defined rules. Also, the various interpretations of Section 12A of the Act by various High Courts gives the parties the leverage to misuse the area as to no certainty and can easily avoid the rule as laid down by the makers of law. According to the author, it is not a denial of the right to justice if the parties are mandatorily sent to the mediator, since parties can always approach the court in a case such mediation fails.

References:

1.https://blog.ipleaders.in/impact-insertion-section-12a-commercial-courts-act/

2.https://nalsa.gov.in/services/mediation/pre-institutuion-mediation-in-commercial-matters

3.https://www.mondaq.com/india/arbitration-dispute-resolution/1132800/mediation-under-the-commercial-courts-act-2015-the-legislative-intent-and-the-interpretation-conundrum#:~:text=In%202018%2C%20chapter%20IIIA%20was,application%20for%20urgent%20interim%20relief.

4.https://www.thehindubusinessline.com/business-laws/making-mediation-not-mandatory-is-problematic/article33897036.ece

5.https://www.livelaw.in/news-updates/section-12-a-commercial-courts-act-on-pre-institution-mediation-and-settlement-not-a-mandatory-says-madras-high-court-179868