Bench:
Honourable Justice Sanjiv Khanna and Honourable Justice SVN Bhatti
Parties:
Petitioner – Yamini Manohar
Respondent – Keerthi
OVERVIEW
- The Supreme Court has affirmed the mandatory nature of pre-litigation mediation under Section 12A of the CC Act in commercial suits.
- While the denial of interim relief at preliminary or post-argument stages does not warrant suit dismissal, commercial courts must scrutinize urgent interim relief requests to prevent circumvention of Section 12A.
- The plaintiff's absolute discretion over mediation is untenable, and courts have a limited role in ensuring Section 12A's effectiveness.
- The phrase "contemplate urgent interim relief" implies that suits must demonstrate a genuine need for such relief. This approach safeguards the legislative intent behind Section 12A.
FACTS
- In this particular instance, the Supreme Court was deliberating an appeal against a decision made by the Delhi High Court, which had declined to dismiss a commercial lawsuit under Order VII Rule 11 of the Code of Civil Procedure due to the non-utilization of pre-litigation mediation. The High Court refrained from dismissing the lawsuit since it sought urgent interim relief.
- Upholding the High Court's ruling, a panel comprising Justices Sanjiv Khanna and SVN Bhatti offered insightful observations regarding the approach that Commercial Courts should adopt when considering requests for urgent interim relief.
ANALYSIS
- In the landmark case of M/s Patil Automation Private Limited and others versus Rakheja Engineers Private Ltd 2022 LiveLaw (SC) 678, the Supreme Court decisively established the mandatory nature of Section 12A, emphasizing that commercial suits filed without adhering to this prerequisite are liable to be dismissed.
- The Court clarified that the denial of interim relief at the preliminary stage, when the plaint is being considered for registration, admission, and examination, does not warrant the dismissal of the commercial suit under Order VII, Rule 11 of the Code of Civil Procedure. It is noteworthy that interim relief is sometimes granted even after the issuance of a notice to the opposing party.
- Furthermore, the Court asserted that the denial of interim relief, subsequent to the presentation of arguments and the examination of the three crucial principles – prima facie case, irreparable harm and injury, and balance of convenience – does not justify the dismissal of the suit under Order VII, Rule 11 of the Code. The mere fact that the court issued a notice and/or granted an interim stay may suggest an inclination towards entertaining the plaint.
- When a commercial suit is filed under the CC Act along with a request for urgent interim relief, the commercial court has the responsibility of meticulously examining the suit's nature, subject matter, cause of action, and the specific request for interim relief. The mere inclusion of a request for urgent interim relief should not be used as a subterfuge or camouflage to circumvent the mandatory provisions of Section 12A of the CC Act. The specific circumstances and facts of each case must be holistically considered from the plaintiff's perspective.
- The notion that the plaintiff possesses the absolute right and discretion to render Section 12A of the CC Act inoperative by simply requesting urgent interim relief is difficult to reconcile with the statutory mandate of pre-litigation mediation. When deception or falsehood is evident or established, measures should be taken to prevent the use of camouflage or guise to bypass the mandatory requirement for pre-litigation mediation.
- The proposition that commercial courts have a role to play, albeit a limited one, should be acknowledged; otherwise, the decision of whether or not to adhere to the procedures outlined in Section 12A of the CC Act would rest solely with the plaintiff. Considering this Court's ruling in Patil Automation Private Limited (supra), which upheld the mandatory nature of pre-institution mediation under Section 12A of the CC Act, an approach that grants "absolute and unfettered right" to the plaintiff is unjustified.
- The phrase "contemplate any urgent interim relief" in Section 12A(1) of the CC Act, in the context of the suit, should be interpreted as conferring upon the court the authority to determine whether the plaintiff's request for urgent interim relief is valid. This implies that the suit must "contemplate," meaning that the plaint, documents, and facts must demonstrate and substantiate the need for urgent interim relief. This is the precise and narrowly defined task that commercial courts will undertake, the parameters of which have been outlined in the preceding paragraphs. This approach will be sufficient to safeguard and uphold the legislative intent underlying the enactment of Section 12A of the CC Act.
