Commercial Dispute Resolution Watch

INTRODUCTION

Since its introduction in 2018, Section 12-A of the Commercial Courts Act, 2015 has required parties to a commercial dispute to first attempt pre-institution mediation before approaching a Commercial Court, unless the suit contemplates urgent interim relief. For several years, however, High Courts across the country remained divided on whether this requirement was truly mandatory or merely directory, leaving litigants uncertain about the fate of suits filed without prior mediation.

That uncertainty was substantially resolved by the Supreme Court's landmark ruling in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022) 10 SCC 1, which declared Section 12-A to be mandatory. The question that has continued to occupy courts since then is how strictly this mandate should be enforced, particularly where mediation infrastructure was inadequate, where suits were filed before the 2022 ruling, or where a plaintiff genuinely required urgent relief. The Supreme Court's decision in M/s Dhanbad Fuels Private Limited v. Union of India & Anr. (Civil Appeal No. 6846 of 2025), delivered on 15 May 2025, offers the most recent and authoritative word on this question.

This newsletter traces the background of Section 12-A, examines the Dhanbad Fuels ruling and the wider body of case law surrounding it, and evaluates the practical benefits and concerns that this line of jurisprudence raises for commercial litigants.

BACKGROUND

Commercial disputes in India are governed by a specialised regime created under the Commercial Courts Act, 2015, which established dedicated Commercial Courts and Commercial Divisions to ensure the speedy adjudication of high-value commercial disputes. Recognising that litigation is often a slow and adversarial route to resolving disputes that could be settled through negotiation, Parliament inserted Section 12-A into the Act with effect from 3 May 2018.

Section 12-A(1) provides that a suit which does not contemplate any urgent interim relief shall not be instituted before a Commercial Court unless the plaintiff has first exhausted the remedy of pre-institution mediation, conducted by authorities constituted under the Legal Services Authorities Act, 1987, in the manner prescribed by Central Government rules. The provision thus creates two categories of commercial suits: those seeking urgent interim relief, which may proceed directly to court, and those that do not, which must first pass through mediation.

In the years following its introduction, High Courts took divergent views on the consequences of skipping this step. Some treated it as a mere procedural formality capable of being cured; others treated non-compliance as fatal to the suit. This inconsistency was resolved in 2022 when the Supreme Court, in Patil Automation, held Section 12-A to be mandatory and directed that suits filed in violation of it be rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908. Even after Patil Automation, questions persisted about suits instituted before that ruling, about what genuinely qualifies as 'urgent interim relief', and about whether infrastructural shortcomings could excuse non-compliance — questions that the Dhanbad Fuels appeal squarely presented to the Court.

Visual: judicial interpretation of Section 12-A.

KEY DEVELOPMENTS

M/s Dhanbad Fuels Pvt. Ltd. v. Union of India & Anr.

The Union of India had instituted Money Suit No. 28 of 2019 before the Commercial Court at Alipore, claiming approximately ₹8.73 crores from Dhanbad Fuels towards differential freight charges and penalties, without seeking any urgent interim relief and without undergoing pre-institution mediation. Dhanbad Fuels objected under Order VII Rule 11(d) of the CPC, read with Section 12-A, contending that the suit was barred for want of mandatory pre-suit mediation.

The Commercial Court declined to reject the plaint, citing the early stage of the litigation, the absence of functioning mediation infrastructure at Alipore in 2019, and the possibility of delay if the plaint were rejected outright; it instead referred the parties to mediation after institution of the suit. The High Court upheld this approach, keeping the suit in abeyance for several months while mediation was attempted, and treated Section 12-A as a procedural safeguard rather than a bar to jurisdiction.

On appeal, the Supreme Court disagreed. It held that Section 12-A is mandatory for every suit that does not seek urgent interim relief, and that non-compliance requires rejection of the plaint under Order VII Rule 11(d) CPC. The Court found the lower courts' reasoning to be contrary to the binding position in Patil Automation, and rejected the argument that the absence of mediation infrastructure in 2019 could excuse compliance, holding that the maxim lex non cogit ad impossibilia (the law does not compel the impossible) did not apply on the facts. The plaint was accordingly ordered to be rejected, with liberty to the Union of India to pursue mediation and refile.

The ruling sits alongside a wider body of case law refining the contours of Section 12-A. In Yamini Manohar v. T.K.D. Keerthi, the Supreme Court held that a Commercial Court must examine the plaint and the relief actually sought to determine whether a suit genuinely contemplates urgent interim relief, rather than accepting a bare assertion of urgency. Building on this, the Supreme Court's decision in Novenco Building and Industry A/S v. Xero Energy Engineering Solutions Pvt. Ltd. (2025 INSC 1256) recognised that ongoing acts of infringement in intellectual property suits inherently carry urgency, exempting such suits from the Section 12-A requirement. Most recently, the Calcutta High Court in Ramji Lal Agarwal v. Sourav Agarwal (2026 SCC OnLine Cal 10218) reaffirmed that mediation conducted in an earlier, independently concluded proceeding cannot substitute for fresh pre-institution mediation once a new commercial suit is filed, underscoring that Section 12-A compliance must be assessed afresh for each suit.

RELEVANT LEGAL FRAMEWORK

"Pre-institution mediation was intended to ease the burden on courts and foster early settlement — an objective that cannot be diluted through procedural leniency."

Statutory Framework

Section 12-A of the Commercial Courts Act, 2015 mandates pre-institution mediation for commercial suits of the specified value that do not contemplate urgent interim relief, with mediation to be conducted by authorities under the Legal Services Authorities Act, 1987, in accordance with the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018. The mediation process is generally to be completed within three months, extendable by a further two months with the consent of the parties, and the period spent in mediation is excluded while computing limitation. A settlement reached through this process carries the same status as an arbitral award under the Arbitration and Conciliation Act, 1996.

Order VII Rule 11(d) of the Code of Civil Procedure, 1908 supplies the procedural consequence for non-compliance: where a plaint discloses that the suit is barred by law — here, by the mandatory bar in Section 12-A — the plaint is liable to be rejected at the threshold, without proceeding to trial.

Judicial Precedents

Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1, remains the foundational authority declaring Section 12-A mandatory with prospective effect from 20 August 2022. Dhanbad Fuels applies and reinforces this position, while clarifying that infrastructural gaps at the relevant time do not excuse non-compliance. Yamini Manohar v. T.K.D. Keerthi requires courts to make a genuine, fact-based assessment of whether urgent interim relief is truly contemplated, guarding against the exemption being used as a device to bypass mediation. Earlier decisions such as Ganga Taro Vazirani v. Deepak Raheja from the Bombay High Court similarly treated the provision as a mandatory condition precedent, strictly construed to aid the speedy disposal of commercial disputes.

Visual: balancing mandatory mediation with genuine urgency.

ANALYSIS

The Dhanbad Fuels ruling consolidates the Supreme Court's firm stance that pre-institution mediation is not a mere formality but a jurisdictional prerequisite for the institution of commercial suits that do not seek urgent interim relief. By refusing to excuse non-compliance on account of infrastructural shortcomings that existed at the time of filing, the Court has signalled that litigants and their counsel bear the primary responsibility for verifying compliance before a suit is filed, rather than relying on courts to relax the requirement after the fact.

At the same time, the Court's approach preserves a workable, dual-track system: suits genuinely requiring urgent interim relief may still proceed directly, provided the pleadings themselves demonstrate that urgency, as clarified in Yamini Manohar and applied favourably to intellectual property claimants in Novenco. This balance seeks to prevent Section 12-A from becoming either an easily circumvented technicality or an inflexible barrier that denies access to justice in genuinely urgent matters.

The Calcutta High Court's 2026 ruling in Ramji Lal Agarwal further tightens this framework by rejecting the argument that mediation undertaken in one proceeding can be carried forward to a subsequent, independent suit. Taken together, this line of authority reflects a judiciary that is increasingly unwilling to accept substantial or partial compliance, insisting instead on strict adherence to the letter of Section 12-A for every commercial suit that lacks a genuine claim to urgent relief.

A note of caution nonetheless persists: the Supreme Court in Dhanbad Fuels was addressing a suit filed in 2019, well before Patil Automation declared the provision mandatory, yet still applied the bar with full rigour on the specific facts before it, rather than treating the earlier filing date as automatically protective. This suggests that litigants cannot assume any residual leniency will be extended merely because a suit predates settled case law, making early and careful compliance advice essential in ongoing and future commercial litigation.

POTENTIAL BENEFITS

"Mediation as a condition precedent promotes discipline in commercial litigation and upholds the legislative intent to streamline dispute resolution."

The reaffirmation of Section 12-A's mandatory character carries several practical advantages. First, it is likely to reduce the burden on already overstretched Commercial Courts by diverting a meaningful proportion of disputes towards settlement before they reach the docket, consistent with the original legislative intent behind the provision.

Second, strict enforcement offers greater predictability to businesses and their counsel: once the requirement is known to be non-negotiable in the absence of genuine urgency, parties can build compliance into their pre-litigation strategy rather than risk a plaint being rejected midway through proceedings, which can prove far costlier in terms of time and expense.

Third, by requiring courts to scrutinise claims of urgency rather than accept them at face value, decisions such as Yamini Manohar guard against the exemption being misused as a routine device to avoid mediation, preserving the integrity of the pre-institution mediation mechanism as a genuine settlement opportunity rather than a box-ticking exercise.

Finally, the consistent line of authority from the Supreme Court down to State High Courts promotes uniformity in how Section 12-A is applied across jurisdictions, reducing the scope for forum-specific inconsistency that had characterised the years immediately following the provision's introduction.

POTENTIAL CONCERNS

Despite its benefits, strict enforcement of Section 12-A raises certain practical concerns. Mediation infrastructure under the Legal Services Authorities remains uneven across States, and litigants in areas with limited mediation capacity may face genuine difficulty in complying within a reasonable time, even where they act in good faith — a concern the Commercial Court and High Court had sought to address in Dhanbad Fuels before being overruled.

There is also a continuing risk of satellite litigation over the threshold question of whether a suit truly contemplates urgent interim relief, as parties may be tempted to frame prayers for interim relief primarily to avoid mediation. This places a considerable burden on Commercial Courts to conduct a searching, fact-specific inquiry at the very outset of proceedings, as contemplated in Yamini Manohar, which can itself consume time and resources.

Government litigants, as seen in Dhanbad Fuels, may face particular difficulty given the layered approvals often required before public authorities can participate meaningfully in mediation or settlement, raising questions about whether institutional readiness within government departments has kept pace with the statutory mandate.

Finally, strict rejection of plaints for non-compliance — even where a settlement through post-institution mediation might otherwise have been achieved, as the Commercial Court had attempted in Dhanbad Fuels — could, in some cases, result in delay and additional cost through refiling, rather than the swifter resolution that Section 12-A was designed to promote, particularly for suits instituted in the years before the requirement was authoritatively settled.

Visual: simplified Section 12-A compliance pathway.

CONCLUSION

"Section 12-A compliance must now be approached as a jurisdictional prerequisite, not a procedural afterthought."

The Supreme Court's decision in Dhanbad Fuels leaves little room for ambiguity: pre-institution mediation under Section 12-A of the Commercial Courts Act, 2015 is a mandatory condition precedent for commercial suits that do not genuinely contemplate urgent interim relief, and non-compliance will result in rejection of the plaint regardless of the stage the litigation has reached or the infrastructural difficulties that may have existed at the time of filing.

Read together with Yamini Manohar, Novenco, and the Calcutta High Court's 2026 ruling in Ramji Lal Agarwal, the current body of law leaves commercial litigants with a clear, if demanding, compliance roadmap: assess urgency honestly at the drafting stage, complete pre-institution mediation wherever urgent relief is not genuinely required, and treat mediation undertaken in one proceeding as confined to that proceeding alone. For litigators and law students alike, Section 12-A now stands as one of the clearest illustrations of how the judiciary can convert a once-uncertain procedural provision into a firm and uniformly enforced jurisdictional bar.

REFERENCES

Primary Sources

1. The Commercial Courts Act, 2015, Section 12-A. Available at: https://www.indiacode.nic.in

2. Code of Civil Procedure, 1908, Order VII Rule 11. Available at: https://www.indiacode.nic.in

3. Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1, Supreme Court of India. Available at: https://main.sci.gov.in

4. M/s Dhanbad Fuels Private Limited v. Union of India & Anr., Civil Appeal No. 6846 of 2025, Supreme Court of India, decided 15 May 2025. Available at: https://main.sci.gov.in

5. Novenco Building and Industry A/S v. Xero Energy Engineering Solutions Pvt. Ltd., 2025 INSC 1256, Supreme Court of India. Available at: https://main.sci.gov.in

6. Ramji Lal Agarwal v. Sourav Agarwal, 2026 SCC OnLine Cal 10218, Calcutta High Court, decided 24 June 2026. Available at: https://www.scconline.com

Secondary Sources

7. King Stubb & Kasiva, "Mandatory Pre-Litigation Mediation Under Section 12A Of Commercial Courts Act Reaffirmed By Supreme Court", 30 May 2025. Available at: https://ksandk.com/newsletter/sc-pre-litigation-mediation-section-12a/

8. Anhad Law, "Revisiting the scope of section 12A, Commercial Courts Act: Supreme Court affirms prospective application while recognising practical constraints", Lexology. Available at: https://www.lexology.com/library/detail.aspx?g=d232dc37-eefa-440e-9934-de9e21ca0160

9. SCC OnLine Blog, "New Suit, New Mediation: Calcutta HC Reaffirms Mandatory Section 12A Compliance Under the Commercial Courts Act", August 2026. Available at: https://www.scconline.com/blog/post/2026/08/01/calcutta-high-court-reaffirms-section-12a-compliance-for-mandatory-pre-institution-mediation/

10. Lexology, "When Urgency Meets Procedure: The Supreme Court's Game-Changing Ruling on Section 12A", October 2025. Available at: https://www.lexology.com/library/detail.aspx?g=8e6c8ff3-4b55-47b8-9e5a-0c23b721dc80

11. Lexology, "Exemption under Section 12A of the Commercial Courts Act - Legal Position vis-à-vis IP suits". Available at: https://www.lexology.com/library/detail.aspx?g=a142104c-d2e3-4c77-9327-8bd264c5018d

Illustrations created for this newsletter to visually explain the legal process.