Case title: 

Indian Oil Corporation Ltd v. Commercial Court -II, & Anr.

Date of Order: 

12th May 2023

Bench: 

Hon’ble Mr. Justice Manish Mathur

Parties: 

Petitioner(s): 

Indian Oil Corporation Ltd. Mumbai Having Divisional Office, Lko.

Through  G.M. Engineering Department.

Respondent(s): Commercial Court-II, Lko.  & Anr.

SUBJECT:

The Allahabad High Court (hereinafter referred to as ‘the High Court’ or ‘the Court’) upheld the ruling of the Lucknow Commercial Court which rejected the petitioner’s plea to proceed with a commercial lawsuit without undergoing pre-institution mediation as mandated by the section 12(A) of the Commercial Courts Act, 2015. The Allahabad High Court has affirmed the decision of the lower court.

IMPORTANT PROVISIONS:

The Constitution of India, 1950:

• Article 227

The Commercial Courts Act, 2015 (the Act):

• Section 12(A)
• Section 12(A)(1)

The Code of Civil Procedure:

• Section 80(1)

OVERVIEW:

• The petitioner had entered into a contract with respondent no. 2 for the supply, transportation, installation, and commission of new unipols.
• Respondent No. 2 failed to meet the terms of the contract.
• A show cause notice was issued and the contract was terminated.
• The petitioner filed a lawsuit challenging the termination (Civil suit no. 274 of 2022) arguing that there was no urgency in the case, thereby making the waiver of the mediation requirement unnecessary.
• The Commercial Court passed an order rejecting the petitioner’s objections to the initial lawsuit
• Section 12(A) mandates that a lawsuit is not allowed without attempting mediation first.
• The petitioner has filed a writ petition challenging the order.

ISSUES RAISED:

• Whether the contemplation of urgent interim relief as envisaged under Section 12A of the Commercial Courts Act 2015 requires consideration by the Court only as per averments made in the plaint/Temporary injunction application or other incidental aspects as well?

ARGUMENTS ADVANCED BY THE PETITIONER:

• Section 12(A) of the Act is mandatory.
• The absence of any pressing need in the initial case implies that there is no requirement to forgo the mediation obligation under section 12(A) of the Act.
• The petitioner cited the cases of M/S Patil Automation Pvt Ltd & Ors v. Rakheja Engineers Pvt Ltd. and M/S Microlabs Ltd v. Mr. A. Santosh, to support their argument.

ARGUMENTS ADVANCED BY THE RESPONDENT

• Respondent No. 2 contested that although the contract was terminated, clause 6.13(b) regarding price adjustments for delays was invoked.
• The petitioner is still contemplating additional measures, including potential forfeiture of security deposits and the initiation of penal actions against the respondents.  
• The temporary injunction suit was filed only after the petitioner took actions against them.
• The case of Chandra Kishor Chaurasiya v. R A Perfumery Works Pvt Ltd supports their arguments.

JUDGEMENT ANALYSIS:

• Termination of the contract order was issued on 31^st October 2022. The subsequent lawsuit of temporary injunction was filed on 8^th December 2022.
• The Commercial Court rejected the petitioner’s objections regarding the non-maintainability of the pre-institution mediation, stating that the plaintiff sought interim relief.
• Emphasis was given to the determination of whether a suit involves urgent interim relief based on the plaintiff’s pleadings and the relief sought, the words ‘contemplate any urgent interim relief’ are used to qualify the category of suits.
• The suit, therefore, as determined solely by the frame of the plaintiff’s pleadings and relief sought, involves urgent interim relief, and thus is barred under section 12A of the Act of 2015.
• The time of filing the lawsuit- whether it is after a significant delay or not – is not a decisive criterion for determining the urgency of interim relief.
• The determination of urgent interim relief is not solely the plaintiff’s responsibility, the court must assess this factor based on the relief sought in the lawsuit or the application for temporary injunction.
• In the instant case, the lawsuit does not contemplate urgent interim relief and upheld the order of the commercial court.

CONCLUSION:

The High Court of Allahabad dismissed the petitioner’s claim that the delay of two months in filing a lawsuit challenging a contract termination indicated a lack of urgency justifying the bypassing of pre-institution mediation. The Court observed that urgency is not present if the termination order is not being enforced. The writ petition under Article 227 of the Constitution was rejected with each party instructed to bear their own costs.