Date of Filing Determines Compliance with Section 12-A, Not Registration: Bombay High Court Dismisses Attempt to Block Commercial Suit at Threshold

“Where the Suit Is Filed Prior to the Declaration of Section 12-A as Mandatory, It Cannot Be Rejected for Non-Compliance Merely Because It Was Registered Later”, In a compelling ruling on 5th January 2026, the Bombay High Court dismissed an application filed by the State Bank of India seeking rejection of a commercial suit under Order VII Rule 11 of the Civil Procedure Code. The suit, instituted by Asean International Limited and others for recovery of over ₹83 crore and USD 6.3 million, had been challenged on grounds of limitation, lack of cause of action, and non-compliance with Section 12-A of the Commercial Courts Act, 2015. Justice Gauri Godse held that none of the statutory grounds for rejection were met and directed that the suit should proceed to trial.

The ruling settles important procedural controversies in commercial litigation, particularly on the interpretation of when a suit is deemed to be “instituted” under Section 12-A of the Commercial Courts Act. The Court firmly declared that the act of filing the plaint, not its subsequent registration, is what determines whether pre-institution mediation under Section 12-A was mandatory at the time.

“Presentation of the Plaint Is the Institution of the Suit”: Court Clarifies the Trigger for Section 12-A Compliance

At the heart of the dispute was the argument advanced by SBI that the suit, though filed on 31st July 2021, was registered only on 18th December 2021—after the Bombay High Court in Deepak Raheja v. Ganga Taro Vazirani (decided on 1st October 2021) had declared compliance with Section 12-A mandatory. SBI contended that registration, not filing, should be the point of reference for compliance.

Rejecting that contention, the Court observed,

“Institution of a suit under the said Act would mean presentation of the plaint under sub-rule (1) of Rule 1 of Order IV of the CPC. In the context of Section 12-A... it is the filing of a suit and not its registration which is material.”

The Court emphasized that once a suit is filed before the declaration of Section 12-A as mandatory by the jurisdictional High Court, the non-compliance with the mediation requirement cannot be fatal.

The judgment aligned with the Supreme Court’s authoritative pronouncement in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022) 10 SCC 1, where the top court had held that the mandatory nature of Section 12-A applies only prospectively—either from 20th August 2022 or from the date when a High Court specifically declared it so. As the Bombay High Court’s declaration came into effect only on 1st October 2021, the suit in the present case, filed before that, was clearly outside its scope.

The Court further observed,

“The plaint in the present case cannot be rejected on the ground of non-compliance with the mandatory requirement under Section 12-A of the said Act.”

“Cause of Action Is Not Illusory—Whether It Holds on Merits Is for Trial, Not Rejection”: Court Upholds Plaint’s Legal Foundation

SBI had additionally urged rejection of the plaint on the basis that there was no privity of contract between the plaintiffs and the bank, and thus no cause of action. Dismissing this, the Court noted that the plaintiffs had been recognised beneficiaries under the Master Restructuring Agreement and Trust and Retention Account Agreement, and that the bank—being the lead lender and account bank—was obliged to act in accordance with the priority clauses in those documents.

The Court acknowledged that the plaintiffs’ claim was grounded in documentary evidence, including minutes of Joint Lenders Forum (JLF) meetings, representations made by Varun’s director, and the restructuring scheme approved by financial institutions. It held,

“Whether the plaintiffs’ cause of action is sustainable or defective presents a triable issue that warrants trial and cannot be decided at this stage.”

Justice Godse also rejected the argument that the cause of action arose solely from representations by Varun’s ex-director and not SBI, noting that the agreements clearly established the bank’s fiduciary obligations to release funds in a priority order.

“The cause of action is also pleaded against defendant no. 1, as the Lead Bank and the Account Bank responsible for releasing funds to the plaintiffs in accordance with the priority set out in the agreements.”

The Court reiterated that it is not open to reject a plaint merely because the cause of action is disputed. As long as material facts are pleaded and a cause of action is disclosed, the plaint must proceed to trial.

“Limitation Is a Mixed Question of Fact and Law—Not a Ground for Rejection at Threshold”

On the question of limitation, SBI had asserted that the claims arose between 2014 and 2017 and were thus barred by the three-year limitation period under the Limitation Act. The plaintiffs countered that they became aware of the bank’s breach only on 21st May 2019, through a Miscellaneous Application filed before the NCLT by Mauritius Commercial Bank, which revealed the diversion of funds in breach of the restructuring agreements.

Accepting the plaintiffs’ position for the purpose of threshold analysis, the Court ruled,

“The cause of action for filing a suit consists of a bundle of facts, and the factum of the suit being barred by limitation is ordinarily a mixed question of fact and law.”

The Court held that plaintiffs are entitled to lead evidence to support their claim that the cause of action arose within the limitation period. Accordingly, the suit could not be rejected merely on the basis of the date of invoices or contracts.

“Routine Applications Under Order VII Rule 11 Are Abusing Judicial Time”: Court Cautions Against Frivolous Threshold Objections in Commercial Suits

Delivering a strong message, Justice Godse expressed disapproval over the tendency of litigants to delay commercial suits by misusing procedural provisions such as Order VII Rule 11. She observed,

“It is unfortunate that, despite the well-settled legal principles... applications are routinely filed for rejection of the plaint, thereby delaying the decision in suits filed under the said Act.”

The Court reaffirmed that the power to reject a plaint is a drastic measure which must be exercised sparingly and only when the conditions under Order VII Rule 11 are unambiguously met. Attempting to short-circuit the trial process through premature procedural objections, it held, is contrary to the spirit of the Commercial Courts Act, which was enacted to accelerate the disposal of commercial disputes.

Ultimately, the application filed by SBI under Order VII Rule 11 was rejected, and the matter directed to proceed to trial.

This judgment reaffirms that a meaningful reading of the plaint, not a hyper-technical approach, must guide judicial scrutiny at the threshold stage in commercial suits. It sends a clear signal to litigants that procedural tactics cannot substitute substantive defence and that threshold objections must meet the stringent standards of Order VII Rule 11 CPC.

“None of the grounds enumerated under Order VII Rule 11 of the CPC are satisfied in the facts of the present case, for rejection of the plaint at the threshold.”

Justice Godse’s ruling contributes to a growing body of jurisprudence that emphasises substance over form, procedural fairness over litigation strategy, and the Court’s duty to avoid premature termination of suits based on contested or triable issues.

Date of Decision: 5th January 2026