Plaint Cannot Be Rejected For Skipping Pre-Institution Mediation If Urgent Interim Relief Is Contemplated From Plaintiff’s Standpoint: Bombay High Court

"Test under Section 12-A is not whether the prayer for the urgent interim relief actually comes to be allowed or not, but whether on an examination of the nature and the subject-matter of the suit and the cause of action, the prayer of urgent interim relief by the plaintiff could be said to be contemplable when the matter is seen from the standpoint of the plaintiff," Bombay High Court, in a significant ruling dated May 4, 2026, held that a commercial suit cannot be dismissed at the threshold for non-compliance with the mandatory pre-institution mediation requirement under Section 12-A of the Commercial Courts Act, 2015, if the plaintiff genuinely contemplates urgent interim relief.

A single-judge bench of Justice Gauri Godse observed that the determination of "urgency" must be viewed holistically from the standpoint of the plaintiff and should not be based on whether the court ultimately grants the interim prayer.

The Court clarified that while the prayer for urgent interim relief should not be a "disguise or mask" to bypass the statutory mandate of mediation, the court must look beyond procedural formalities when a plaintiff alleges an immediacy of peril or risk of losing rights.

The plaintiffs, part of the Mordani Group, filed a commercial suit for the specific performance of a "Framework Agreement" dated December 20, 2024, which purportedly recorded a composite settlement of various loan facilities availed from IIFL Finance (Defendant Nos. 1 and 2). The plaintiffs alleged that despite the settlement, the defendants initiated precipitative actions under the SARFAESI Act and the Insolvency and Bankruptcy Code. Fearing the loss of secured assets and real estate projects, the plaintiffs filed the suit seeking urgent injunctions without initiating pre-institution mediation. The defendants moved applications under Order VII Rule 11 of the CPC for rejection of the plaint.

The primary question before the court was whether the suit was barred under Section 12-A of the Commercial Courts Act for failing to undergo mandatory mediation. The court was also called upon to determine whether the suit was barred by Section 34 of the SARFAESI Act and whether the plaint disclosed a cause of action against defendants who were not signatories to the Framework Agreement.

Power To Reject Plaint Is A Drastic Measure To Be Exercised Strictly

The Court began by noting that the power to reject a plaint under Order VII Rule 11 of the CPC is a "drastic measure" because it terminates a civil action at the threshold. Relying on the Supreme Court's decision in Dahiben v. Arvindbhai Kalyanji Bhanusali, the bench emphasized that this power must be exercised strictly in accordance with the conditions enumerated in the Code.

The bench observed that the word "shall" in Order VII Rule 11 obliges the court to reject the plaint only when the conditions, such as the suit being barred by law, are strictly satisfied after a "meaningful, not formal" reading of the plaint.

The "Standpoint Of Plaintiff" Test For Urgent Interim Relief

While interpreting Section 12-A of the Commercial Courts Act, the Court relied on the Supreme Court precedents in Yamini Manohar v. T.K.D. Keerthi and Dhanbad Fuels Private Limited v. Union of India. The Court held that Section 12-A does not require the leave of the court or a formal application for waiver of mediation; rather, the court must be satisfied that urgent relief is "contemplated."

The bench noted that the word "contemplate" means to deliberate and consider. It held that the test is not the actual grant or denial of interim relief on merits, but whether the need for such relief was contemplable from the plaintiff's perspective at the time of filing.

"The prayer of urgent interim relief should not act as a disguise to get over the bar contemplated under Section 12-A... however, the mere non-grant of the interim relief at the ad-interim stage would not justify the rejection of the plaint."

Post-Filing Conduct Of Plaintiff Is Not A Decisive Criterion

The defendants argued, relying on Image Developer v. Kamla Landmarc, that the "alacrity" or lack thereof with which a plaintiff pursues interim relief after filing is a material factor. However, Justice Godse clarified that the post-filing stages of a suit—often delayed by court pendency or registry procedures—are irrelevant for the purposes of Order VII Rule 11(d).

The Court held that once a suit is filed with an urgency plea, the court’s examination is limited to whether the plaint and documents indicate a real need for intervention. Procedural rules and court delays cannot be used to penalize a plaintiff who reasonably apprehended a threat to their assets at the time of institution.

SARFAESI Bar Not Applicable To Specific Performance Of Settlements

Regarding the objection under Section 34 of the SARFAESI Act, the Court held that the Debt Recovery Tribunal (DRT) is not empowered to determine substantive prayers for the specific performance of a Framework Agreement or a profit-sharing agreement.

The bench observed that the bar under Section 34 only applies to matters that the DRT is specifically authorized to determine under the Act. Since the plaintiffs were seeking the enforcement of a settlement agreement rather than merely challenging a SARFAESI measure, the civil court’s jurisdiction remained intact.

"The substantive prayers in the present suit seeking relief of specific performance... cannot be dealt with and decided under the SARFAESI Act."

Cause Of Action Against Non-Signatories Who Acted Upon Agreements

The defendants argued that since some of them were not signatories to the Framework Agreement, the plaint should be rejected against them for lack of privity. The Court rejected this, noting that the plaint contained specific averments that these defendants had acted upon the agreement and availed themselves of its benefits.

The Court held that when a plaint discloses that parties have acted upon a settlement to bring about an overall resolution of loan facilities, the merits of such a cause of action can only be determined at the stage of trial, not at the threshold of Order VII Rule 11.

The High Court concluded that since the plaintiffs had expressed a genuine apprehension of dispossession and precipitative action by the financial institutions, urgent interim relief was "contemplated." Consequently, the exemption from pre-institution mediation was valid. Finding no other legal bar or lack of cause of action, the Court dismissed the defendants' applications.

Date of Decision: 04 May 2026