Pre-Litigation Mediation Under The Commercial Courts Act – Mandatory?
Muneeb Rashid Malik
5 Dec 2022 10:15 AM IST
Various forms of Negotiation have existed before history started to record it for posterity. In ancient times, people adapted the negotiation methodology to settle their disputes amicably. According to the Black's Law Dictionary,[1] Negotiation is a consensual bargaining process in which the parties attempt to reach an agreement on a disputed or potentially disputed matter. It involves communication in the form a dialogue between the parties to reach a mutually acceptable solution. It is a non-binding process initiated by the parties themselves, who have some shared and opposite interests, without interference of any third party.[2] A person having good negotiation skills can prove handy in resolving many types of disputes.
Mediation, an improvised form of negotiation, is voluntary, party-centred and structured negotiation wherein a third party, which is neutral, by making use of the negotiation methodology, assists the disputing parties to reach a mutually acceptable solution. In mediation, the parties retain the right to decide for themselves, whether to settle a dispute or not. Even though the mediator facilitates their communications and negotiations, the parties always retain control over the outcome of the dispute.[3] The main objective of mediation is to ensure betterment of the society by bringing an end to disputes in a manner which is effective, convenient, and less expensive.
Recently, in Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited,[4] a seminal question which arose for consideration before the
Supreme Court of India was whether the statutory pre-litigation mediation as contemplated under Section 12A of the Commercial Courts Act, 2015 (hereinafter referred to as 'Act') is mandatory or not.
Before analysing the judgment of the Supreme Court pronounced in Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited, it will be apposite to understand Section 12A of the Act. Section 12A of the Act talks about Pre-Institution Mediation and Settlement and states that a suit, which does not contemplate any urgent interim relief, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with the manner as may be prescribed by the rules made by the Central Government. Further, the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 (hereinafter referred to as 'Rules') have also been framed by the Central Government which aid in understanding and applying the relevant provisions of the Act. effectively. The State Authority and District Authority constituted under the Legal Services Authorities Act, 1987 (hereinafter referred to as 'the Authority'), have been authorised for the purposes of pre-institution mediation and settlement under Section 12A of the Commercial Courts Act, 2015. The Authority has to complete the process of mediation within a period of three months from the date of application made by the plaintiff and the period of mediation can be extended for a further period of two months with the consent of the parties.
It will also be apt to understand Rule 3 of the Rules which talks about initiation of mediation process and states that a party to a commercial dispute may make an application to the Authority, for initiation of mediation process. Thereafter, the Authority must issue a notice to the opposite party to appear and give consent to participate in the mediation process. Where no response is received from the opposite party, the Authority has to issue a final notice to it. When the final notice also remains unacknowledged or where the opposite party refuses to participate, the authority shall treat the mediation process to be a non-starter. Where the opposite party, seeks further time to appear, the Authority may fix an alternate date not later than ten days from the date of receipt of such request from the opposite party and where the opposite party fails to appear on the date fixed, the Authority has to treat the mediation process to be a non-starter.
In this context, the Supreme Court while hearing the case of Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited, held that statutory pre-litigation mediation contemplated under Section 12A of the Commercial Courts Act, 2015 is mandatory.
The Bench further held that the Act did not originally contain Section 12A and it was by an amendment in the year 2018 that Section 12A was inserted. The Bench focussed on the Statement of Objects and Reasons of the Amending Act and observed that they are explicit and that Section 12A was contemplated as compulsory. Furthermore, it was held that the object of the Act and the Amending Act of 2018, unerringly point to, at least, partly foisting compulsory mediation on a plaintiff who does not contemplate urgent interim relief and the provision has been contemplated only with reference to plaintiffs who do not contemplate urgent interim relief. In fact, the legislature has expressly excluded the period undergone during mediation for reckoning limitation under the Limitation Act, 1963. It is also important to note that the language used in Section 12A, includes the word 'shall', which assists the Court to hold that the provision is mandatory and the entire procedure for carrying out the mediation, has been spelt out in the Rules. It was further held that any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 which can be exercised even suo moto by the court.
The judgment pronounced by the Supreme Court in Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited, is a step in the right direction as pre-litigation mediation contemplated under Section 12A of the Commercial Courts Act, 2015 has been held to be mandatory. The judgment perceives mediation as an effective mechanism of access to justice. If the Supreme Court had showed any reluctance to give Section 12A, a mandatory interpretation, that would have resulted in defeating the object and intention of the legislature. It cannot be denied that our courts are reeling under a huge docket explosion, hence, mediation, has to be considered a viable solution for matters which can be resolved amicably.
However, mediation can only bloom in the country when we have the required infrastructural facilities and services of skilled mediators. It is necessary that a mediator must always uphold the integrity and fairness of the mediation process and he must ensure that the parties involved in mediation have a good understanding of all the aspects of the process. He/she must maintain the reasonable expectations of the parties as to confidentiality and be faithful to the relationship of trust imposed in his/her office. An area of concern is the limited number of mediators in the country. Therefore, there is a pressing need to have a dedicated Bar for mediation which will surely help in increasing the presence of mediation in the country. Training programmes must be regularly organized for mediators for discussing the principles of mediation, prejudices, biases, perceptions, stereotypes, ethics, role of the mediators in resolving disputes, scope of mediation post COVID-19, and the concepts of conflict, negotiation, communication, etc., so that mediation flourishes in our country tellingly.
Author: Muneeb Rashid Malik is an Advocate and Associate at Luthra and Luthra Law Offices India. Views are personal.
