“Pre-Litigation Mediation Isn’t a Straightjacket,” Rules Calcutta High Court

In a significant ruling, the Calcutta High Court has overturned the dismissal of a commercial suit under Section 12A of the Commercial Courts Act, 2015, which mandates pre-institution mediation unless the suit “contemplates” urgent interim relief. The bench, comprising Justices I. P. Mukerji and Biswaroop Chowdhury, emphasized that the trial court erred in rejecting the plaint without adequately considering the plaintiff’s assertion that urgent relief was necessary.

Shristi Infrastructure Development Corporation Limited filed a commercial suit against Sarga Hotel Private Limited, seeking interim relief under Order 39 Rules 1 and 2 of the Civil Procedure Code. The plaintiff did not undergo pre-litigation mediation, arguing that the urgency of the interim relief justified bypassing this requirement. The trial court, however, dismissed the suit on the grounds of non-compliance with Section 12A, leading to an appeal.

The Importance of Urgent Interim Relief: The High Court highlighted that Section 12A of the Commercial Courts Act requires pre-litigation mediation unless the suit “contemplates” urgent interim relief. Justice Mukerji pointed out that the trial court should have evaluated whether the plaintiff genuinely needed urgent relief, as indicated by the circumstances at the time of filing the suit. The bench observed that the term “contemplate” does not necessitate immediate action but acknowledges the possibility that such relief may become necessary during the litigation process.

Judgment in Patil Automation Pvt. Ltd.: The court relied heavily on the Supreme Court’s ruling in Patil Automation Pvt. Ltd. Vs. Rakheja Engineers Pvt. Ltd., which held that Section 12A is both procedural and substantive, making pre-litigation mediation mandatory unless urgent interim relief is contemplated. The High Court criticized the trial court for not aligning with this precedent, which allows a plaintiff to bypass mediation if a potential need for interim relief is convincingly argued.

Justice Mukerji further elaborated that once a suit is filed, it can be dismissed only after a thorough judicial examination. He emphasized that pre-litigation mediation aims to reduce court caseloads but should not impede access to justice where urgent relief is necessary. The judgment underscored that courts must balance the mandatory nature of mediation with the practical realities faced by plaintiffs.

The Calcutta High Court’s ruling underscores the importance of judicial discretion in the application of Section 12A. By allowing the appeal, the court reaffirmed that plaintiffs should not be unfairly penalized for bypassing pre-litigation mediation when there is a credible need for urgent interim relief. This decision is expected to influence future cases involving Section 12A, providing clearer guidelines on when pre-institution mediation can be legitimately skipped.

Date of Decision: 23^rd August, 2024.

Shristi Infrastructure Development Corporation Limited vs. Sarga Hotel Private Limited & Anr.