M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. versus RAKHEJA ENGINEERS PRIVATE LIMITED

[2022] 11 S.C.R.

AM/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS.

RAKHEJA ENGINEERS PRIVATE LIMITED

(Civil Appeal No. 5333 of 2022)

BAUGUST 17, 2022

[K. M. JOSEPH AND HRISHIKESH ROY, JJ.]

Commercial Courts Act, 2015 – s.12A – Statutory pre-institutionmediation contemplated u/s.12A – Held: Is mandatory – Exhaustingpre-institution mediation by the plaintiff, with all the benefits thatCmay accrue to the parties and, more importantly, the justice deliverysystem as whole, would make s.12A not mere proceduralprovision – The design and scope of the Act, as amended in 2018,by which s.12A was inserted, would make it clear that Parliamentintended to give it mandatory flavour – Any other interpretationDwould not only be in the teeth of the express language used but,more importantly, result in frustration of the object of the Act andthe Rules – Any suit instituted violating the mandate of s.12A mustbe visited with rejection of the plaint under Or. VII r. 11 CPC – Thispower can be exercised even suo moto by the court – Thisdeclaration effective from 20.08.2022 – Code of Civil Procedure,E1908 – Order VII r.11.

Mediation – Role of the Bar – Held: Mediation offers acompletely new approach to attaining the goal of justice – win-win situation resulting from assigning greater role to the partiesthemselves, with no doubt, spirit of accommodation represents aFbetter and what is more in the era of docket explosion, the onlymeaningful choice – The role of the Bar is vital in taking mediationforward – It is important that the courts also adapt to the changingtimes.

Interpretation of Statutes – Golden rule of interpretation –GHeld: The decisive element in the search for the answer, in theinterpretation of Statute, must be to ascertain the intention of theLegislature – The first principle must be the golden rule ofinterpretation, which means, the interpretation in conformity withthe plain language, which is used.

Mediation – Statutory pre-institution mediation contemplatedu/s.12A of the Commercial Courts Act, 2015 – Held: Is providedonly in suits, which do not contemplate any urgent interim relief –Therefore, pre-institution mediation has been mandated only in aclass of suits – This is for the reason that in suits which contemplateurgent interim relief, the Law-giver has carefully vouchsafedimmediate access to justice as contemplated ordinarily through thecourts – The carving out of class of suits and selecting them forcompulsory mediation, harmonises with the attainment of the objectof the law – Commercial Courts Act, 2015 – s.12A.

Code of Civil Procedure,1908 – Or.VII, r.11– No absolute rightto file civil suit – civil suit can be barred by law, either expresslyor by necessary implication – The jurisdiction of civil court canbe ousted – There is no fundamental right with anyone to contendthat he has right to file civil suit, which cannot be taken away –Presence of Order VII Rule 11(d) which mandates rejection of aplaint where suit is barred is reminder of the principle that thereis no absolute right to file civil suit.

Code of Civil Procedure,1908 – Order VII, r.11(d) – Stage atwhich power to reject plaint can be exercised – Whether the powerunder the rule can be exercised only on application filed bydefendant – Held: Or.VII r.11 does not provide that the court is todischarge its duty of rejecting the plaint only on an application –Power u/Or. VII r.11 is available to the court to be exercised suomotu – In clear case, where on allegations in the suit, it is foundthat the suit is barred by any law, the plaint should be rejectedwithout issuing summons.

Disposing of the appeals, the Court

HELD: 1. Section 12A of the Commercial Courts Act, 2015cannot be described as mere procedural law. Exhausting pre-institution mediation by the plaintiff, with all the benefits that mayaccrue to the parties and, more importantly, the justice deliverysystem as whole, would make Section 12A not mere proceduralprovision. The design and scope of the Act, as amended in 2018,by which Section 12A was inserted, would make it clear thatParliament intended to give it mandatory flavour. Any otherinterpretation would not only be in the teeth of the expresslanguage used but, more importantly, result in frustration of the

Aobject of the Act and the Rules. If the object of the law is defeatedby non-compliance with the provision, then, it would be regardedas mandatory. The right to institute the Suit in plaintiff whodoes not contemplate urgent interim relief in commercial matterunder the Act, is clearly conditioned by the fulfilment of certainconditions as provided in Section 12A. This cannot be likened toBallowing party to file his written statement. Bearing in mind theobject also, the conclusion is inevitable that the right of suit itselfwill fructify only when the conditions in Section 12A are fulfilled.Treating the provision as procedural, also, the result cannot bedifferent. Any other view would remove the basis for treatingCSection 80(1) of the CPC as mandatory. [Para 43][838-E-H; 839-A-B]

2. On conspectus of the Act, as from its birth till the Law-giver stepped- in with the amendment in 2018, the Act read withthe Rules represent an economic experiment as much as it dealsDmore directly with vital aspect of administration of justice.Commercial disputes have been clearly identified. The value hasbeen fixed. Courts, at different stages, have been contemplated.Timelines are contemplated. The whole object of the law is clearas day light. Disputes of commercial hue, must be extinguishedwith the highest level of expedition. The dispute resolution wouldEwitness termination of the lis between the feuding parties. Moreimportantly, it would prepare the ground for the country becominga destination attracting capital by enhancing the ease of doingbusiness. It does not require much debate to conclude that thereis direct relationship between ease of doing business and an

Fearly and expeditious termination of disputes, which may arise incommercial matters. The speed with which the justice deliverysystem in any country responds to the problem of docketexplosion, particularly in the realm of commercial disputes canbe regarded as very safe index of the ease of doing business in

that country. The Act, therefore, is, in the said sense, uniqueGexperiment to push the pace of disposal of commercial disputes.It is in this background that the Court must approach the issueof whether Section 12A has been perceived as being mandatoryprovision. This is for the reason that the decisive element in thesearch for the answer, in the interpretation of such Statute, mustHbe to ascertain the intention of the Legislature. The first principle,

of course, must be the golden rule of interpretation, which means,the interpretation in conformity with the plain language, which isused. There cannot even be shadow of doubt that the languageused in Section 12A is plainly imperative in nature. However,this Court will not be led by the mere use of the word ‘shall’.Even going by the sublime object of the Act, this Court is fullyreinforced in its’ opinion that the pre-institution mediation isintended to produce results, which has direct bearing on thefulfilment of the noble goals of the Law-giver. It is apparent thatthe Legislature has manifested value judgement. [Para 53][847-C-H; 848-A-B]3. Section 9 of the CPC is not the law, which creates rightto file civil suit. It would require law, to invade, absolutely orconditionally, the vital civil right of person to take his grievanceto civil court. civil suit can be barred by law, either expresslyor by necessary implication. The jurisdiction of civil court canbe ousted. In other words, there is no Fundamental Right withanyone to contend that he has right to file civil suit, whichcannot be taken away. It is another matter that the courts will notlightly infer the ouster of jurisdiction of civil court. The verypresence of Order VII Rule 11(d), which mandates rejection of aplaint, where suit is barred, is reminder of the principle thatthere is no absolute right to file civil suit. [Para 55][848-G-H;849-A]

4. On consideration of the scheme of the Orders IV, Vand VII of the CPC, the Court arrives at the following conclusions:

(A) suit is commenced by presentation of plaint.Thedate of the presentation in terms of Section 3(2) of the LimitationAct is the date of presentation for the purpose of the said Act. Byvirtue of Order IV Rule 1 (3), institution of the plaint, however,is complete only when the plaint is in conformity with therequirement of Order VI and Order VII.

(B) When the court decides the question as to issue ofsummons under Order V Rule 1, what the court must consider iswhether suit has been duly instituted.

(C) Order VII Rule 11 does not provide that the court is todischarge its duty of rejecting the plaint only on an application.

AOrder VII Rule 11 is, in fact, silent about any such requirement.Since summon is to be issued in duly instituted suit, in casewhere the plaint is barred under Order VII Rule 11(d), the stagebegins at that time when the court can reject the plaint underOrder VII Rule 11. No doubt it would take clear case where thecourt is satisfied. The Court has to hear the plaintiff before itBinvokes its power besides giving reasons under Order VII Rule12. In clear case, where on allegations in the suit, it is foundthat the suit is barred by any law, as would be the case, where theplaintiff in suit under the Act does not plead circumstances totake his case out of the requirement of Section 12A, the plaintCshould be rejected without issuing summons. Undoubtedly, onissuing summons it will be always open to the defendant to makean application as well under Order VII Rule 11. In other words,the power under Order VII Rule 11 is available to the court to be

exercised suo motu. [Para 68][858-E-H; 859-A-C]

D5. The Act did not originally contain Section 12A. It is byamendment in the year 2018 that Section 12A was inserted. TheStatement of Objects and Reasons are explicit that Section 12Awas contemplated as compulsory. The object of the Act and theAmending Act of 2018, unerringly point to at least partly foistingEcompulsory mediation on plaintiff who does not contemplateurgent interim relief. The provision has been contemplated onlywith reference to plaintiffs who do not contemplate urgent interimrelief. The Legislature has taken care to expressly exclude theperiod undergone during mediation for reckoning limitation underthe Limitation Act, 1963. The object is clear. It is an undeniableFreality that Courts in India are reeling under an extraordinarydocket explosion. Mediation, as an Alternative DisputeMechanism, has been identified as workable solution incommercial matters. In other words, the cases under the Actlend themselves to be resolved through mediation. Nobody hasGan absolute right to file civil suit. civil suit can be barredabsolutely or the bar may operate unless certain conditions arefulfilled. Cases in point, which amply illustrate this principle, areSection 80 of the CPC and Section 69 of the Indian PartnershipAct. The language used in Section 12A,which includes the word

‘shall’, certainly, go long way to assist the Court to hold thatthe provision is mandatory. The entire procedure for carryingout the mediation, has been spelt out in the Rules. The partiesare free to engage Counsel during mediation. The expenses, asfar as the fee payable to the Mediator, is concerned, is limited toa one-time fee, which appears to be reasonable, particularly,having regard to the fact that it is to be shared equally. trainedMediator can work wonders. Mediation must be perceived as anew mechanism of access to justice. Any reluctance on the partof the Court to give Section 12A, mandatory interpretation,would result in defeating the object and intention of theParliament. The fact that the mediation can become non-starter,cannot be reason to hold the provision not mandatory.Apparently, the value judgement of the Law-giver is to give theprovision, modicum of voluntariness for the defendant, whereas,the plaintiff, who approaches the Court, must, necessarily, resortto it. Section 12A elevates the settlement under the Act and theRules to an award within the meaning of Section 30(4) of theArbitration Act, giving it meaningful enforceability. The periodspent in mediation is excluded for the purpose of limitation. TheAct confers power to order costs based on conduct of the parties.[Para 72][861-D-H; 862-A-D]

6. Section 12A of the Act is mandatory and any suit institutedviolating the mandate of Section 12A must be visited withrejection of the plaint under Order VII Rule 11. This power canbe exercised even suo moto by the court as explained earlier inthe judgment. This declaration is made effective from 20.08.2022so that concerned stakeholders become sufficiently informed.However, it is directed that in case plaints have been alreadyrejected and no steps have been taken within the period oflimitation, the matter cannot be reopened on the basis of thisdeclaration. Still further, if the order of rejection of the plaint hasbeen acted upon by filing fresh suit, the declaration of prospectiveeffect will not avail the plaintiff. Finally, if the plaint is filed violatingSection 12A after the jurisdictional High Court has declaredSection 12A mandatory also, the plaintiff will not be entitled tothe relief. [Para 84][868-A-D]

ABC

Kailash v. Nanhku and others (2005) 4 SCC 480 :[2005] 3 SCR 289 – distinguished.

Madiraju Venkata Ramana Raju v. PeddireddigariRamachandra Reddy and Others (2018) 14 SCC 1 :[2018] 9 SCR 164; Sharif-ud-Din v. Abdul Gani Lone(1980) 1 SCC 403 : [1980] 1 SCR 1177 and VikramBakshi and Others v. Sonia Khosla (Dead) by LegalRepresentatives (2014) 15 SCC 80 : [2014] 6 SCR 762– relied on.

State of U.P. and others v. Babu Ram Upadhya AIR1961 SC 751 : [1961] 2 SCR 679; Bhikraj Jaipuria v.Union of India AIR 1962 SC 113 : [1962] 2 SCR 880;Lachmi Narain and others v. Union of India and othersAIR 1976 SC 714 : [1976] 2 SCR 785; BihariChowdhary & Anr. v. State of Bihar & Ors. (1984) 2SCC 627 : [1984] 3 SCR 309; Gangappa GurupadappaGugwad, Gulbarga v. Rachawwa, Widow ofLochanappaGugwad and others (1970) 3 SCC 716 :[1971] 2 SCR 691; Seth LoonkaranSethia and othersv. Ivan E. John and others AIR 1977 SC 336 : [1977] 1SCR 853; Salem Advocate Bar Association, T.N. v.Union of India (2005) 6 SCC 344 : [2005] 1 Suppl.SCR 929; Prem Lala Nahata v. Chandi Prasad Sikaria(2007) 2 SCC 551 : [2007] 2 SCR 261; State of A.P.and others v. Pioneer Builders, A.P. (2006) 12 SCC119 : [2006] 6 Suppl. SCR 571; Afcons InfrastructureLimited and Another v. Cherian Varkey ConstructionCompany Private Limited and Others (2010) 8 SCC 24: [2010] 8 SCR 1053; Raghunath Das v. Union ofIndia& Another AIR 1969 SC 674 : [1969] 1 SCR 450;Olympic Cards Limited v. Standard Chartered Bank(2013) 1 CTC 38; Jarnail Singh and Others v.LachhmiNarain Gupta and Others 2022 SCC OnlineSC 96; L.C. Golak Nath and Others v. State of Punjaband Another AIR 1967 SC 1643 : [1967] 2 SCR 762;Taherakhatoon (D) By Lrs. v. Salambin Mohammad(1999) 2 SCC 635 : [1999] 1 SCR 901; M/s. SomaiyaOrganics (India) Ltd. v. State of Uttar Pradesh AIR 2001

M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v.RAKHEJA ENGINEERS PRIVATE LIMITED

SC 1723 : [2001] 3 SCR 33; P.V. George & Ors. v. Stateof Kerala & Ors. AIR 2007 SC 1034 : [2007] 1SCR 1198; Patasibai and Others v. Ratanlal (1990) 2SCC 42 : [1990] 1 SCR 172 and Harsh Dhingra v.State of Haryana and others (2001) 9 SCC 550 : [2001]3 Suppl. SCR 446 – referred to.

Ganga Taro Vazirani v. Deepak Raheja 2021 SCCOnline Bombay 195; Dhanbad Fuels Ltd. v. Union ofIndia and Others 2021 SCC Online Calcutta 429; LaxmiPolyfab Pvt. Ltd. v. Eden Realty Ventures Pvt. Ltd. andAnother AIR 2021 Calcutta 190; Awasthi Motors v.Managing Director M/s. Energy Electricals Vehicle andAnother AIR 2021 Allahabad 143; Deepak Raheja v.Ganga Taro Vazirani (2021) SCC OnLine Bom 3124;Dredging and Desiltation Company Pvt. Ltd. v.Mackintosh Burn and Northern Consortium and Others2021 SCC Online Calcutta 1458 and CurewinPharmaceuticals Pvt. Ltd. v. Curewin Hylico PharmaPvt. Ltd AIR 2021 MP 154 – referred to.

Bhagchand Dagadusa Gujrathi and Ors. v. Secretaryof State for India AIR 1927 PC 176; AL. AR. VellayanChettiar (Decd.) & Others v. Government of the Provinceof Madras Through the Collector of Ramnad at Madura& Another AIR 1947 PC 197 – referred to.

Regina vs. Sekhon (2003) 1 WLR 1655 and NationalWestminster Bank Plc. v. Spectrum Plus Ltd. & Ors.(2005) UK HL 41– referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5333of 2022.E

From the Judgment and Order dated 09.09.2021 of the High Courtof Punjab and Haryana at Chandigarh in Civil Revision Bearing No.CR-1853-2021(O&M).

WithFCivil Appeal No. 5334 of 2022.

With

Special Leave Petition (C) Diary No. 29458 of 2021.

Sanjeev Anand, Sr. Adv., Ms. Sonam Anand, Santosh Krishnan,GAyush Negi, Ms. Vishakha Upadhyaya, Himanshu Tyagi, ChaitanyaNikte, Varnita Ojha, Arup Banerjee, Advs. for the Appellants.

Saket Sikri, Ms. Ekta Kalra Sikri, Ajaypal Singh Kullar, VikalpMudgal, Hetu Arora Sethi, Ms. Saumya Tondon, Anirudha Bhat, RahulJain, Joy Thattil Ittup, Bijish B. Tom, Bhunu Thilak, Mrs. Prabha Swami,HNikhil Swami, Ms. Divya Swami, Advs. for the Respondent.

The Judgment of the Court was delivered by

K. M. JOSEPH, J.

1. Leave granted.

2. The seminal question which arises for consideration is whetherthe statutory pre-litigation mediation contemplated under Section 12A ofthe Commercial Courts Act, 2015 (hereinafter referred to as ‘Act’) asamended by the Amendment Act of 2018 is mandatory and whether theCourts below have erred in not allowing the applications filed underOrder VII Rule 11 of the Code of Civil Procedure, 1908 (hereinafterreferred to as ‘CPC’), to reject the plaints filed by the respondents inthese appeals without complying with the procedure under Section 12Aof the Act.

3. In Civil Appeal arising from SLP (C)No. 14697 of 2021, therespondent filed commercial suit under Order XXXVII of the CPCbefore the Additional District Judge, District Court, Faridabad, prayingfor recovery of Rs. 1,00,40,291/- along with 12 per cent interest on acertain sum which detail need not detain us. The suit was laid on12.10.2020.

4. The appellant is the defendant in the said suit. It filed anapplication on 05.02.2021 under Order VII Rules 10 and 11 read withSections 9 and 20 of the CPC, inter alia contending that the suit wasfiled without adhering to Section 12A of the Act. The respondent filed itsreply on 23.03.2021. It contested the matter contending that the suit wasnot barred for non-compliance of Section 12A of the Act.

5. written statement came to be filed on 23.03.2021. On16.08.2021, the trial Court rejected the contention of the appellant interalia holding as follows:

“20. From the bare perusal of Section 12A, it is crystal clear thatthe procedure provided is mandatory in nature and if by applyingthe said principles, the suit of the plaintiff is rejected, then it wouldhave catastrophe effect. The court is of the view that thelegislature has no such intention to frame such stringent provisionthe said rules. The aim and object of Section 12A is to ensure thatbefore commercial dispute is filed before the court, the alternativemeans of dissolution are adopted so that the genuine cases comebefore the Court. Further,it also appears to the court that the said

Aprocedure has been introduced to de-congest the regular courts.It is pertinent that the Hon’ble Bombay High Court in case GangaTara Vazirani (supra), held that the procedure provided underSection 12A of the Commercial Courts Act is not penal enactmentfor punishment and there is no embargo in filing the suit withoutexhausting the remedy of mediation specially when an attempt isBclear to show that the intention of the applicant has already beenmade and failed.The fact is clear that before filing the suit, therespondent/plaintiff has sent e-mail and legal notice and despitethat the applicant/defendant failed to make the payment of thedues. Moreover, it is well settled that the procedure and law areCfor advancement of justice and not to thwart on technical grounds.Thus, in the larger interest of justice, the court deems it appropriatethat the civil suit can be kept in abeyance and both the parties aredirected to appear before the Secretary, District Legal ServicesAuthority, Faridabadon 26.08.2021 for the purpose of mediationas per the provisions of Section 12A of the Commercial CourtsDAct and the Rules framed thereunder. With these directions, theapplication is disposed of.”

(Emphasis supplied)

6. The appellant filed Civil Revision Petition. The High Court ofPunjab and Haryana, however, confirmed the finding in paragraph 20Eand further held that the Courts are meant to deliver substantial justice.The rules of procedure are handmaid of justice and are meant to advancethe ends of justice and they are not to be bogged down by the technicalitiesof procedure so as to lose sight of its main duty which is to dispensejustice. It was further found that the purpose of referring the dispute toFmediation centre is to explore settlement. If the suit is filed without takingrecourse to the procedure, it is further found, it should not entail rejectionof the plaint. This could not have been the intention of the legislature. Itis further observed that an enactment is to be interpreted in mannerthat it does not result in delivery of ‘perverse justice’. It was noted that

the trial Court had directed that the civil suit be kept in abeyance and theGparties were to appear before the Secretary of the District Legal ServicesAuthority for the purpose of mediation. Reliance was placed on thejudgment of the High Court of Bombay in Ganga Taro Vaziraniv.1Deepak Raheja.

H1 2021 SCC OnLine Bom 195

7. In the other appeal arising out of SLP (C) No. 5737 of 2022,the impugned Order has been passed by the High Court of Madras,rejecting similar application filed by the appellant-defendant in acommercial suit instituted without having resorted to pre-litigationmediation under Section 12A of the Act.

8. There is yet another special leave petition which was filed,viz.,SLP Diary No. 29458 of 2021. This is filed with an application forpermission to file special leave petition. In this special leave petition, theorder which is impugned is the same order which is impugned in SLP(C)No. 5737 of 2022.

9. The Special Leave Petition is supported with an application forpermission to file SLP. The applicant is not party in the suit in question.However, it is his case that suit is pending in which similar questionarises. Though, we have not issued notice in the said matter, we allowedShri Sharath Chandran, learned Counsel for the petitioner, to addressthe Court on what appeared to us to be purely legal issue, viz., theeffect of non-compliance with Section 12A of the Act. In other words,we have permitted intervention, though in the application for permissionto file SLP, which application shall stand, accordingly, disposed of. Soalso the SLP.

SUBMISSION OF THE APPELLANTS

10. Shri Sanjeev Anand, learned Senior Counsel, appearing forthe appellant in civil appeal arising out of SLP (C)No. 5737 of 2022,would submit that the Court, in the impugned Order, held,inter alia, asfollows.

“23. The Central Government by notification dated 03.07.2018,has framed rule and the rule 3(1) and 3(7) of the CommercialCourts Act, 2015 (Pre-Institution Mediation and Settlement) Rules,2018, reads as under:

3.Initiation of mediation process. –

(1) party to commercial dispute may make an application tothe Authority as per Form-1 specified in Schedule-I, either onlineor by post or by hand, for initiation of mediation process underthe Act along with fee of one thousand rupees payable to theAuthority either by way of demand draft or through online;

(7) Where both the parties to the commercial dispute appearbefore the Authority and give consent to participate in themediation process, the Authority shall assign the commercialdispute to Mediator and fix date for their appearance beforethe said Mediator.

24. Though the word ‘shall’ in Section 12A of the Act, soundsPrelitigation mediation is mandatory on the part of the plaintiff toexplore Settlement before filing suit under Commercial Court Act,the Rule framed used the word ‘shall’ and makes it an optional.Also even if one party go for pre-litigation mediation the otherparty may conveniently abstain from participating in the mediationand make it non-starter. Even otherwise, mediator can proceedonly if the both the parties appear and give consent to participatein the mediation process. Thus, it is very clear that on combinedreading of the Commercial Courts Act and the Rules framedthereunder, pre-litigation mediation is subject to urgency for anyinterim relief and the consent of the sparing parties.

25. In such circumstances, the Harmonious Interpretation takesus to the irresistible conclusion that Section 12-A of the CommercialCourts Act, is not mandatory provision. The right to accessjustice which is Constitutional Right cannot be denied or deprivedfor not resorting to mediation. The Court is not substitute toEAlternative Dispute Redressal, it is otherwise. The litigant cannotbe denied the doors of justice for directly approaching the Courtwithout exploring the possibility of mediation. There can be noprejudice to the defendant, if the defendant is ready for mediation,even after Institution of the suit. Also there is no impediment eitherFfor the party or for the Courtto refer the pending matter to beresolved through mediation or any other Alternative DisputeRedressal mechanism. This provision is meant for the parties towork out an amicably settlement without involving in the adversarysystem of litigation. The intention of this Section is not to preventaccess to justice or to aid anyone who refuse to subject himself toGthe judicial process. The intention is to avoid the procedural rigorand to arrive an amicable win-win settlement. Any other interpretationto Section 12-A of the Act contrary to the intention will amount tomiscarriage of Justice. Therefore, this Court holds that there is noground to entertain this Application seeking rejection of plaint.

Hence, Application is dismissed with costs of Rs.10,000/-.”

11. He would submit that the High Court has clearly erred in theview it has taken. He would submit that the Act came into force in theyear 2015. It is by the amendment in the year 2018 that Section 12Acame to be incorporated.

12. He took us through the Statement of Objects and Reasons.He would commend for the Court’s acceptance the view that thelegislation was put in place with definite object of enhancing the easeof doing business in India and de-clogging of Commercial Courts whichwere assigned with an important task of quickly disposing of commercialmatters and thatmust be uppermost in the mind of the Court.

13. He would submit that if the application under Order VII Rule11 is allowed and the plaint is rejected for non-compliance with Section12A, in view of Order VII Rule 13 of the CPC, there is no prejudicecaused as on the same cause of action, the plaintiff can bring fresh suitafter complying with the mandate of Section 12A of the Act.

14. He would point out that most pertinently the law giver hasused the word ‘shall’ in Section 12A. The word ‘shall’ in the context ofthe object of the legislation must be construed as mandatory. He wouldcomplain that the High Court has not properly appreciated the meaningof the words used in the subordinate legislation,viz., Commercial Courts(Pre-Institution Mediation and Settlement) Rules, 2018(hereinafterreferred to as the “Rules”) with regard to the use of the word ‘may’ inRule 3. He would submit that it only refers to the discretion with theplaintiff in regard to the particular mode to be chosen as contemplatedtherein. Bearing in mind the use of mandatory words conveying animperative sense in the parent legislation,the High Court erred in findingthat the provision in the parent enactment must be treated as onlydirectory. He would submit that the sublime object of the legislation isclearly to de-clog the court particularly having regard to the reduction ofthe monetary value from Rs.1 crore to Rs.3 lakhs. In other words, byvirtue of the amendment, the Legislature was conscious of the fact thatthere would be phenomenal increase in the cases which would betreated as commercial cases. Bearing in mind also, the larger object ofpromoting India as desired destination for economic activity which inlarge measure would depend upon the ease of doing business, the purposeis clear as daylight. The High Court has clearly erred in the matter.

15. Shri Ayush Negi, learned Counsel for the appellant in otherappeal, would also address arguments on similar lines. In his case, he

DEF

Awould submit that the trial Court has proceeded on the footing that thecommercial suit as such cannot be thrown out for non-compliance ofSection 12A and the trial Court has erroneously considered post institutionmediation as tantamounting to compliance with pre litigation mediationcontemplated under Section 12A.B16. He would submit that the plain language and the object of thelegislation has been overlooked by the Court in the impugned order as isclear by the observations in the impugned order.

17. Both the counsels for the appellants would draw parallelbetween the language used in Section 80 CPC and the case law generatedCby the said provision to contend that Section 12A is mandatory. Equally,support is sought to be drawn from judgments rendered under Section69 of the Indian Partnership Act, 1932.

18. Shri Sharath Chandran, learned counsel who appears in SLP(C)Diary No. 29458 of 2021 would point out that the procedureDcontemplated under Section 12A is mandatory.

19. It is the further submission of Shri Sharath Chandran thatdecision of the learned Single Judge of the Bombay High Court inGangaTaro(supra) has been reversed by the Division Bench inDeepak Raheja2v. Ganga Taro Vazirani. He has brought to the notice of this Court theEdifferent views expressed by the other High courts. It is his contentionthat on reference to the Statement of Objects and Reasons, the speechmade by the Law Minister and the plain language used coupled with theintention of theLawgiver makes it clear that Section 12A is mandatory.He, however, drew distinction between the presentation of the plaintand the institution of the suit. He also submits that this Court has takenFnotice of pre-litigation mediation in matrimonial disputes and disputesunder Motor Vehicles Act. He would further contend that the Court cansuo motu reject the plaint without any application. He relies on thejudgment of this Court in Madiraju Venkata Ramana Raju v.Peddireddigari Ramachandra Reddy and Others3. He however,Gcontends that the embargo against institution of the suit may notnecessarily affect inherent jurisdiction of the Court. He has furthersubmitted in regard to the interpretation to be placed in cases whereurgent interim relief is contemplated and the appropriate procedure

2 (2021) SCC OnLine Bom 3124H3 (2018) 14 SCC 1

provided therein. He would in this regard place reliance upon the judgmentinRegina vs. Sekhon4 to contend that if plea under Section 12A is notpointed out at an earlier point of time, non-compliance cannot result inthe proceeding becoming nullity. He would submit that nullifyingproceedings on account of non-compliance at belated stage would ineffect be throwing the baby out with the bathwater. He would also pointout that the High Court was in error in not finding that mediation is oneof the best forms of conflict resolution. Further, error in understandingof Rule 3 of the Rules is pointed out.

20. Per contra, Shri Saket Sikri, learned counsel who appears incivil appeal arising from SLP (C)No. 14697 of 2021, would contend thatSection 12A is actually to be understood as directory. He submits that inorder that the word ‘shall’ in statutory provision be considered asmandatory, one of the cardinal tests employed by the Courts is to ask thequestion whether the provision contemplated penal consequences fordisobedience of the provision. He would point out that no penalconsequence is spelt out in Section 12A for instituting suit withoutcomplying with Section 12A.

21. Next, he would point out that instituting suit without complyingwith the provisions of Section 12A does not affect any legal right of thedefendant. It is only procedure intended to bring about settlementbetween the parties.

He further contends that the course adopted by the Court in hiscase has addressed the concerns of the defendant as well. This is forthe reason that the Court has kept proceedings in the suit in abeyanceand referred the parties for mediation. In this context, he highlights thefact that the appellant which swears by mediation has made it non-starter by not taking part in the mediation procedure.

22. He would submit that having regard to the purport of Section12A, the interest of justice would be subserved if the procedure which isadopted by the Court in his case is accepted. In other words, if the Courtafter the institution of the suit immediately refers the parties to themediation, the appellants may not be justified in insisting on pre institutionmediation. In this regard, he would emphasisethat pre litigation mediationcontemplated in Section 12A does not pertain to inherent jurisdiction of aCourt. While mediation is to be encouraged, the Court may not lose sight

4 (2003) 1 WLR 1655

Aof the fact that ahalf-way house between the two extremes has beenattempted by the Court in the case, which suffices, having regard to thefact also that no penal consequences are provided and no right of thedefendant is imperilled.

23. He next draws our attention to the aspect of court fees. HeBwould submit that the plaintiff is bound to pay the whole court fee underthe law in question. When the plaint gets rejected under Order VII Rule11, the plaintiff suffers loss of the entire court fee. This is one of theconsequences which this Court should not lose sight of, it is contended.

Here again, the procedure which has been adopted in the case isCcommended for our acceptance as substantial compliance with Section12A which at the same time, will not reach such disastrous consequencesfor the litigants.

He also touches upon the possible consequence of plea oflimitation overwhelming fresh suit of the plaintiff after rejection of thefirst suit.D

ANALYSIS

24. Section 12A of the Act reads as follows:

12A. Pre-Institution Mediation and Settlement— (1) suit, whichdoes not contemplate any urgent interim relief under this Act,Eshall not be instituted unless the plaintiff exhausts the remedy ofpre-institution mediation in accordance with such manner andprocedure as may be prescribed by rules made by the CentralGovernment.

(2) The Central Government may, by notification, authorise theFAuthorities constituted under the Legal Services Authorities Act,1987 (39 of 1987), for the purposes of pre-institution mediation.

(3) Notwithstanding anything contained in the Legal ServicesAuthorities Act, 1987 (39 of 1987), the Authority authorised bythe Central Government under sub-section (2) shall complete theGprocess of mediation within period of three months from thedate of application made by the plaintiff under sub-section (1):

Provided that the period of mediation may be extended fora further period of two months with the consent of the parties:

Provided further that, the period during which the partiesHremained occupied with the pre-institution mediation, such period

shall not be computed for the purpose of limitation under theLimitation Act, 1963 (36 of 1963).

(4) If the parties to the commercial dispute arrive at settlement,the same shall be reduced into writing and shall be signed by theparties to the dispute and the mediator.

(5) The settlement arrived at under this section shall have thesame status and effect as if it is an arbitral award on agreedterms under sub-section (4) of section 30 of the Arbitration andConciliation Act, 1996 (26 of 1996).”

25. The Act was enacted in the year 2015. At the time, the monetarylimit for suit liable to be tried by the Commercial Court was fixed atRs.1 crore.

26. In the course of three years, noticing certain features,Parliament has decided to amend the Act. Therefore, in the year 2018,the Act came to be amended by the Commercial Courts, CommercialDivision and Commercial Appellate Division of High Courts (Amendment)Act, 2018 (Act 28 of 2018)(hereinafter referred to as the “AmendingAct”).

27. It is apposite that we notice the statement of objects of theAmending Act:

“STATEMENT OF OBJECTS AND REASONS

The Commercial Courts, Commercial Division and CommercialAppellate Division of High Courts Act, 2015 was enacted for theconstitution of Commercial Courts, Commercial Division andCommercial Appellate Division in the High Courts for adjudicatingcommercial disputes of specified value and for matters connectedtherewith or incidental thereto.

2. The global economic environment has since become increasinglycompetitive and to attract business at international level, Indianeeds to further improve its ranking in the World Bank ‘DoingBusiness Report’ which, inter alia, considers the dispute resolutionenvironment in the country as one of the parameters for doingbusiness. Further, the tremendous economic development hasushered in enormous commercial activities in the country includingforeign direct investments, public private partnership, etc., whichhas prompted initiating legislative measures for speedy settlement

Aof commercial disputes, widen the scope of the courts to dealwith commercial disputes and facilitate ease of doing business.Needless to say that early resolution of commercial disputes ofeven lesser value creates positive image amongst the investorsabout the strong and responsive Indian legal system. It is, therefore,proposed to amend the Commercial Courts, Commercial DivisionBand Commercial Appellate Division of High Courts Act, 2015.

3. As Parliament was not in session and immediate action wasrequired to be taken to make necessary amendments in theCommercial Courts, Commercial Division and CommercialAppellate Division of High Courts Act, 2015, to further improveCIndia’s ranking in the ‘Doing Business Report’, the Presidentpromulgated the Commercial Courts, Commercial Division andCommercial Appellate Division of High Courts (Amendment)Ordinance, 2018 on 3rd May, 2018.

4. It is proposed to introduce the Commercial Courts, CommercialDDivision and Commercial Appellate Division of High Courts(Amendment) Bill, 2018 to replace the Commercial Courts,Commercial Division and Commercial Appellate Division of HighCourts (Amendment) Ordinance, 2018, which inter alia, providesfor the following namely:—

E(i)to reduce the specified value of commercial disputes fromthe existing one crore rupees to three lakh rupees, and toenable the parties to approach the lowest level of subordinatecourts for speedy resolution of commercial disputes;

(ii)to enable the State Governments, with respect to the HighCourts having ordinary original civil jurisdiction, to constitutecommercial courts at District Judge level and to specifysuch pecuniary value of commercial disputes which shallnot be less than three lakh rupees and not more than thepecuniary jurisdiction of the district courts;

G(iii)to enable the State Governments, except the territoriesover which the High Courts have ordinary original civiljurisdiction, to designate such number of CommercialAppellate Courts at district judge level to exercise theappellate jurisdiction over the commercial courts belowthe district judge level;H

(iv)to enable the State Governments to specify such pecuniaryvalue of commercial dispute which shall not be less thanthree lakh rupees or such higher value, for the whole orpart of the State; and

(v)to provide for compulsory mediation before institution of asuit, where no urgent interim relief is contemplated and forthis purpose, to introduce the Pre-Institution Mediation andSettlement Mechanism and to enable the CentralGovernment to authorise the authorities constituted underthe Legal Services Authorities Act, 1987 for this purpose.

5. The Bill seeks to achieve the above objectives.”

28. It is, accordingly, by the Amending Act that Section 12A cameto be inserted. We may notice the Rules which came to be published inthe Gazette and thereby came into force on 03.07.2018. Rule 3 reads asfollows:

“3. Initiation of mediation process. –

(1) party to commercial dispute may make an application tothe Authority as per Form-1 specified in Schedule-I, either onlineor by post or by hand, for initiation of mediation process under theAct along with fee of one thousand rupees payable to theAuthority either by way of demand draft or through online;

(2) The Authority shall, having regard to the territorial andpecuniary jurisdiction and the nature of commercial dispute, issuea notice, as per Form-2 specified in Schedule-I through registeredor speed post and electronic means including e-mail and the liketo the opposite party to appear and give consent to participate inthe mediation process on such date not beyond period of tendays from the date of issue of the said notice.

(3) Where no response is received from the opposite party eitherby post or by e-mail, the Authority shall issue final notice to it inthe manner as specified in sub-rule (2).

(4) Where the notice issued under sub-rule (3) remainsunacknowledged or where the opposite party refuses to participatein the mediation process, the Authority shall treat the mediationprocess to be non-starter and make report as per Form 3specified in the Schedule-I and endorse the same to the applicantand the opposite party.

A(5) Where the opposite party, after receiving the notice undersub-rule (2) or (3) seeks further time for his appearance, theAuthority may, if it thinks fit, fix an alternate date not later thanten days from the date of receipt of such request from the oppositeparty.

B(6) Where the opposite party fails to appear on the date fixedunder sub-rule (5), the Authority shall treat the mediation processto be non-starter and make report in this behalf as per Form 3specified in Schedule-I and endorse the same to the applicant andthe opposite party.

C(7) Where both the parties to the commercial dispute appear beforethe Authority and give consent to participate in the mediationprocess, the Authority shall assign the commercial dispute to aMediator and fix date for their appearance before the saidMediator.

D(8) The Authority shall ensure that the mediation process iscompleted within period of three months from the date of receiptof application for pre-institution mediation unless the period isextended for further two months with the consent of the applicantand the opposite party.”

We shall advert to the effect of this Rule and also advert to theEother rules later on.

DOWN THE MEMORY LANE

29. Bench of five learned Judges in the Judgment reportedin State of U.P. and others v. Babu Ram Upadhya5, considered theFquestion as to whether paragraph-486 of the Police Regulations framedunder Section 7 of the Police Act, was mandatory or not. In substance,the said paragraph purported to taboo the magisterial inquiry under theCode of Criminal Procedure, 1973, when the offence alleged against thePolice Officer was only one under Section 7 of the Police Act. In theopinion written for the majority, Justice K. Subba Rao proceeded toGsum-up the relevant Rules relating to interpretation, when the Statuteuses the word ‘shall’:

“29. The relevant rules of interpretation may be briefly stated thus:When statute uses the word “shall”, prima facie, it is mandatory,

H5 AIR 1961 SC 751

but the Court may ascertain the real intention of the legislature bycarefully attending to the whole scope of the statute. Forascertaining the real intention of the Legislature the Court mayconsider, inter alia, the nature and the design of the statute, andthe consequences which would follow from construing it the oneway or the other, the impact of other provisions whereby thenecessity of complying with the provisions in question is avoided,the circumstance, namely, that the statute provides for acontingency of the non-compliance with the provisions, the factthat the non-compliance with the provisions is or is not visited bysome penalty, the serious or trivial consequences that flowtherefrom, and, above all, whether the object of the legislation willbe defeated or furthered.

30. In Bhikraj Jaipuria v. Union of India6, Bench of fivelearned Judges dealt with the question arising out of Section 175(3) ofthe Government of India Act, 1935. The Court, inter alia, had to dealwith the question, whether enactment should be considered directory orobligatory:

“17. The question still remains whether the purchase ordersexecuted by the Divisional Superintendent but which were notexpressed to be made by the Governor-General and were notexecuted on behalf of the Governor-General, were binding on theGovernment of India. Section 175(3) plainly requires that contractson behalf of the Government of India shall be executed in theform prescribed thereby; the section however does not set outthe consequences of non-compliance. Where statute requiresthat thing shall be done in the prescribed manner or form butdoes not set out the consequences of non-compliance, the questionwhether the provision was mandatory or directory has to beadjudged in the light of the intention of the legislature as disclosedby the object, purpose and scope of the statute. If the statute ismandatory, the thing done not in the manner or form prescribedcan have no effect or validity : if it is directory, penalty may beincurred for non-compliance, but the act or thing done is regardedas good. As observed in Maxwell on Interpretation of Statutes,10th Edn., p. 376:

ABC

A“It has been said that no rule can be laid down for determiningwhether the command is to be considered as mere directionor instruction involving no invalidating consequence in itsdisregard, or as imperative, with an implied nullification fordisobedience, beyond the fundamental one that it depends onthe scope and object of the enactment. It may perhaps be foundBgenerally correct to say that nullification is the natural and usualconsequence of disobedience, but the question is in the maingoverned by considerations of convenience and justice, andwhen that result would involve general inconvenience orinjustice to innocent persons, or advantage to those guilty ofCthe neglect, without promoting the real aim and object of theenactment, such an intention is not to be attributed to thelegislature. The whole scope and purpose of the statute underconsideration must be regarded.”

Lord Campbell in Liverpool Borough Bank v. Turner [(1861) 30DLJ Ch 379] observed:

“No universal rule can be laid down as to whether mandatoryenactments shall be considered directory only or obligatorywith an implied nullification for disobedience. It is the duty ofcourts of justice to try to get at the real intention of the legislatureEby carefully attending to the whole scope of the statute to beconstrued.”

31. In Lachmi Narain and others v. Union of India and others7,this Court, inter alia, held as follows:

“66. Section 6(2), as it stood immediately before the impugnedFnotification, requires the State Government to give by notificationin the Official Gazette “not less than 3 months’ notice” of its intentionto add to or omit from or otherwise amend the Second Schedule.The primary key to the problem whether statutory provision ismandatory or directory, is the intention of the law-maker asGexpressed in the law, itself. The reason behind the provision maybe further aid to the ascertainment of that intention. If thelegislative intent is expressed clearly and strongly in imperativewords, such as the use of “must” instead of “shall”, that will itselfbe sufficient to hold the provision to be mandatory, and it will not

be necessary to pursue the enquiry further. If the provision iscouched in prohibitive or negative language, it can rarely bedirectory, the use of peremptory language in negative form isper se indicative of the intent that the provision is to be mandatory.(Crawford, The Construction of Statutes, pp. 523-24). Here thelanguage of sub-section (2) of Section 6 is emphatically prohibitive,it commands the Government in unambiguous negative terms thatthe period of the requisite notice must not be less than threemonths.”

distinction was, thus, perceived between the words ‘must’ and‘shall’.

32. Learned Counsel for the appellants sought to draw supportfrom the Judgments rendered under Section 80 of the Code of CivilProcedure, 1908 (for short, ‘the CPC’). After the amendment effectedby Act 104 of 1976, Section 80 reads as follows:

“(1) Save as otherwise provided in sub-section (2), no suits shallbe instituted against the Government (including the Governmentof the State of Jammu and Kashmir) or against public officer inrespect of any act purporting to be done by such public officer inhis official capacity, until the expiration of two months next afternotice in writing has been delivered to, or left at the office of

(a) in the case of suit against the Central Government, exceptwhere it relates to railway Secretary to that Government;

(b) in the case of suit against the Central Government whereit relates to railway, the General Manager of that railway;

bb) in the case of suit against the Government of the State ofJammu and Kashmir, the Chief Secretary to that Governmentor any other officer authorized by that Government in thisbehalf;

(c) in the case of suit against any other State Government, aSecretary to that Government or the Collector of the district;

and, in the case of public officer, delivered to him or left athis office, stating the cause of action, the name, descriptionand place of residence of the plaintiff and the relief which heclaims; and the plaint shall contain statement that such noticehas been so delivered or left.

A(2) suit to obtain an urgent or immediate relief against theGovernment (including the Government of the State of Jammuand Kashmir) or any public officer in respect of any act purportingto be done by such public officer in his official capacity, may beinstituted, with the leave of the Court, without serving any noticeas required by sub-section (I); but the Court shall not grant reliefBin the suit, whether interim or otherwise, except after giving to theGovernment or public officer, as the case may be , reasonableopportunity of showing cause in respect of the relief prayed for inthe suit:

Provided that the Court shall, if it is satisfied, after hearing theCparties, that no urgent or immediate relief need be granted in thesuit, return the plaint for presentation to it after complying withthe requirements of sub-section (1).

(3) No suit instituted against the Government or against publicofficer in respect of any act purporting to be done by such publicDofficer in his official capacity shall be dismissed merely by reasonof any error or defect in the notice referred to in sub-section (I),if in such notice

(a) the name, description and the residence of the plaintiff hadbeen so given as to enable the appropriate authority or theEpublic officer to identify the person serving the notice and suchnotice had been delivered or left at the office of the appropriateauthority specified in sub-section (1), and

(b) the cause of action and the relief claimed by the plaintiffhad been substantially indicated.”F

33. In fact, Sub-sections (2) and (3) of Section 80 came to beinserted by virtue of the amendment. In Section 80(1), in view of theinsertion of Sub-Section (2), the opening words “save as otherwiseprovided in sub-Section (2)” came to be inserted. There were otherchanges which were brought about in Section 80 as it stood, as can beGdiscerned from Section 80(1) as substituted. The judgment of the PrivyCouncil, in the decision reported in Bhagchand Dagadusa Gujrathiand Ors. v. Secretary of State for India8, set at rest the controversyabout the mandatory nature of the requirement of previous notice to

H8 AIR 1927 PC 176

be given to comply with Section 80. We need only notice what this Courtheld in the Judgment in State of Madras v. C.P. Agencies and others9:

“1. … The very language of Section 80 makes it clear,— and ithas been so held by the Judicial Committee in BhagchandDagdusav. Secy. of State, 54 Ind App 338:(AIR 1927 PC 176) whichdecision has been adopted by the same tribunal in many latercases—that Section 80 is express, explicit and mandatory andadmits of no implications or exceptions. …”

34. In Bihari Chowdhary&Anr. v. State of Bihar&Ors.10, whileon the effect of Section 80 of the CPC, this Court laid down as follows:

“3. …..

The effect of the section is clearly to impose bar against theinstitution of suit against the Government or public officer inrespect of any act purported to be done by him in his officialcapacity until the expiration of two months after notice in writinghas been delivered to or left at the office of the Secretary toGovernment or Collector of the concerned district and in the caseof public officer delivered to him or left at his office, stating theparticulars enumerated in the last part of sub-section (1) of thesection. When we examine the scheme of the section it becomesobvious that the section has been enacted as measure of publicpolicy with the object of ensuring that before suit is institutedagainst the Government or public officer, the Government orthe officer concerned is afforded an opportunity to scrutinise theclaim in respect of which the suit is proposed to be filed and if itbe found to be just claim, to take immediate action and therebyavoid unnecessary litigation and save public time and money bysettling the claim without driving the person, who has issued thenotice, to institute the suit involving considerable expenditure anddelay. The Government, unlike private parties, is expected toconsider the matter covered by the notice in most objectivemanner, after obtaining such legal advice as they may think fit,and take decision in public interest within the period of twomonths allowed by the section as to whether the claim is just andreasonable and the contemplated suit should, therefore, be avoidedby speedy negotiations and settlement or whether the claim should

9 AIR 1960 SC 1309

10 (1984) 2 SCC 627

DEFG

Abe resisted by fighting out the suit if and when it is instituted.There is clearly public purpose underlying the mandatory provisioncontained in the section insisting on the issuance of notice settingout the particulars of the proposed suit and giving two months’time to Government or public officer before suit can be institutedagainst them. The object of the section is the advancement ofBjustice and the securing of public good by avoidance ofunnecessary litigation.”

35. We may also notice, what this Court had said in BihariChowdhary (supra) about the course of action to be taken, if Suit isfiled without serving notice:

“6. It must now be regarded as settled law that suit againstthe Government or public officer, to which the requirement of aprior notice under Section 80 CPC is attracted, cannot be validlyinstituted until the expiration of the period of two months nextafter the notice in writing has been delivered to the authoritiesDconcerned in the manner prescribed for in the section and if filedbefore the expiry of the said period, the suit has to be dismissedas not maintainable.”

36. We must finally also, for reasons, which will be clear, refer tothe view expressed by this Court in the following paragraph:

“7. On behalf of the appellants, strong reliance was placed onthe decision of learned Single Judge of the High Court of Keralain Nani Amma Nannini Amma v. State of Kerala [AIR 1963 Ker114 : 1962 Ker LJ 1267]. Therein the learned Judge has expressedthe view that Section 80 is not provision of public policy andFthere is nothing in the section expressly affecting the jurisdictionof the Court to try suit instituted before the expiry of the periodprescribed therein. The reasons stated by the learned Judge injustification of his taking the said view despite the clearpronouncement of the Judicial Committee of the Privy Councilin Bhagchand case [AIR 1927 PC 176 : 54 IA 338, 357] do notGappeal to us as correct or sound.In the light of the conclusionexpressed by us in the foregoing paragraphs about the true scopeand effect of Section 80 CPC, the aforecited decision of the learnedSingle Judge of the Kerala High Court cannot be accepted aslaying down good law.”

(Emphasis supplied)

37. In this context, we may refer to the Judgment of this Court inGangappa Gurupadappa Gugwad, Gulbarga v. Rachawwa, Widowof Lochanappa Gugwad and others11:

“10. No doubt it would be open to court not to decide all theissues which may arise on the pleadings before it if it finds thatthe plaint on the face of it is barred by any law. If for instance theplaintiff’s cause of action is against Government and the plaintdoes not show that notice under Section 80 of the Code of CivilProcedure claiming relief was served in terms of the said section,it would be the duty of the court to reject the plaint recording anorder to that effect with reasons for the order. …”

(Emphasis supplied)

38. Section 69 of the Indian Partnership Act, 1932, in sub-Section(1) and (2), read as follows:

“69. Effect of non-registration.—

(1) No suit to enforce right arising from contract or conferredby this Act shall be instituted in any court by or on behalf of anyperson suing as partner in firm against the firm or any personalleged to be or to have been partner in the firm unless the firmis registered and the person suing is or has been shown in theRegister of Firms as partner in the firm.

(2) No suit to enforce right arising from contract shall beinstituted in any Court by or on behalf of firm against any thirdparty unless the firm is registered and the persons suing are orhave been shown in the Register of Firms as partners in the firm.

39. In the decision reported inSeth Loonkaran Sethia and others

v. Ivan E. John and others12, this Court held:

“21. bare glance at the section is enough to show that it ismandatory in character and its effect is to render suit by aplaintiff in respect of right vested in him or acquired by himunder contract which he entered into as partner of anunregistered firm, whether existing or dissolved, void. In otherwords, partner of an erstwhile unregistered partnership firm

12 AIR 1977 SC 336

cannot bring suit to enforce right arising out of contractfalling within the ambit of Section 69 of the Partnership Act. …”

40. In Sharif-ud-Din v. Abdul Gani Lone13, relied upon by ShriSaket Sikri, the matter arose under the Jammu and KashmirRepresentation of Peoples Act, 1957, the question arose whether theBprovision providing that copies of the election petition are to be attestedby the petitioner as true copies under his own signature, was mandatory.We may notice the following paragraph:

“9. The difference between mandatory rule and directory ruleis that while the former must be strictly observed, in the case ofCthe latter substantial compliance may be sufficient to achieve theobject regarding which the rule is enacted. Certain broadpropositions which can be deduced from several decisions of courtsregarding the rules of construction that should be followed indetermining whether provision of law is directory or mandatorymay be summarised thus: The fact that the statute uses the wordD“shall” while laying down duty is not conclusive on the questionwhether it is mandatory or directory provision. In order to findout the true character of the legislation, the court has to ascertainthe object which the provision of law in question has to subserveand its design and the context in which it is enacted. If the objectEof law is to be defeated by non-compliance with it, it has to beregarded as mandatory. But when provision of law relates tothe performance of any public duty and the invalidation of any actdone in disregard of that provision causes serious prejudice tothose for whose benefit it is enacted and at the same time whohave no control over the performance of the duty, such provisionFshould be treated as directory one. Where, however, provisionof law prescribes that certain act has to be done in particularmanner by person in order to acquire right and it is coupledwith another provision which confers an immunity on another whensuch act is not done in that manner, the former has to be regardedGas mandatory one. procedural rule ordinarily should not beconstrued as mandatory if the defect in the act done in pursuanceof it can be cured by permitting appropriate rectification to becarried out at subsequent stage unless by according suchpermission to rectify the error later on, another rule would be

contravened. Whenever statute prescribes that particular actis to be done in particular manner and also lays down that failureto comply with the said requirement leads to specificconsequence, it would be difficult to hold that the requirement isnot mandatory and the specified consequence should not follow.”

41. InKailash v. Nanhku and others14, relied upon by Shri SaketSikri, this Court was dealing with an election matter and one of thequestions was whether the time limit of ninety days, as prescribed by theproviso to Order VIII Rule I of the CPC, is mandatory or not. The saidprovision dealt with the power of the Court to extend time for filing thewritten statement. The proviso fixes period of ninety days from thedate of service of summons as the maximum period for filing the writtenstatement. This Court took the view that the provision is to be construedas directory and not mandatory.

42. In this context, we may notice paragraphs- 28 and 30 ofKailash(supra):

“28. All the rules of procedure are the handmaid of justice.The language employed by the draftsman of processual law maybe liberal or stringent, but the fact remains that the object ofprescribing procedure is to advance the cause of justice. In anadversarial system, no party should ordinarily be denied theopportunity of participating in the process of justice dispensation.Unless compelled by express and specific language of the statute,the provisions of CPC or any other procedural enactment oughtnot to be construed in manner which would leave the courthelpless to meet extraordinary situations in the ends of justice.The observations made by Krishna Iyer, J. in Sushil KumarSen v. State of Bihar [(1975) 1 SCC 774] are pertinent: (SCC p.777, paras 5-6)

“The mortality of justice at the hands of law troubles ajudge’s conscience and points an angry interrogation at thelaw reformer.

The processual law so dominates in certain systems as tooverpower substantive rights and substantial justice. Thehumanist rule that procedure should be the handmaid, not themistress, of legal justice compels consideration of vesting

EFG

838SUPREME COURT REPORTS

residuary power in judges to act ex debito justitiae where thetragic sequel otherwise would be wholly inequitable. … Justiceis the goal of jurisprudence — processual, as much assubstantive.”

xxx

30. It is also to be noted that though the power of the court underthe proviso appended to Rule 1 Order 8 is circumscribed by thewords “shall not be later than ninety days” but the consequencesflowing from non-extension of time are not specifically providedfor though they may be read in by necessary implication. MerelyCbecause provision of law is couched in negative languageimplying mandatory character, the same is not without exceptions.The courts, when called upon to interpret the nature of the provision,may, keeping in view the entire context in which the provisioncame to be enacted, hold the same to be directory though wordedin the negative form.”

43. As far as the views expressed in Kailash(supra), that is acase which dealt with purely procedural provision and the Court foundthat the power of the Court to allow filing of written statement beyondthe time, is not taken away. The absence of penal consequences wasinvoked. The most important aspect is that the provisois in the domainEof the procedural law. In contrast, Section 12A cannot be described as amere procedural law. Exhausting pre-institution mediation by the plaintiff,with all the benefits that may accrue to the parties and, more importantly,the justice delivery system as whole, would make Section 12A not amere procedural provision. The design and scope of the Act, as amendedFin 2018, by which Section 12A was inserted, would make it clear thatParliament intended to give it mandatory flavour. Any otherinterpretation would not only be in the teeth of the express languageused but, more importantly, result in frustration of the object of the Act-and the Rules. In this connection, in the Judgement reported in Sharifud-Din(supra), it has been held that, if the object of the law is defeatedGby non-compliance with the provision, then, it would be regarded asmandatory. The right to institute the Suit in plaintiff who does notcontemplate urgent interim relief in commercial matter under the Act,is clearly conditioned by the fulfilment of certain conditions as providedin Section 12A. This cannot be likened to allowing party to file hisHwritten statement. Bearing in mind the object also, the conclusion is

inevitable that the right of suit itself will fructify only when the conditionsin Section 12A are fulfilled. Treating the provision as procedural, also,the result cannot be different. Any other view would remove the basisfor treating Section 80(1) of the CPC as mandatory.

44. In Salem Advocate Bar Association, T.N. v. Union of India15,this Court, while dealing with the question, whether Section 89 of theCPC was mandatory or not, held as follows:

“55. As can be seen from Section 89, its first part uses the word“shall” when it stipulates that the “court shall formulate terms ofsettlement”. The use of the word “may” in later part of Section89 only relates to the aspect of reformulating the terms of apossible settlement. The intention of the legislature behind enactingSection 89 is that where it appears to the court that there existsan element of settlement which may be acceptable to the parties,they, at the instance of the court, shall be made to apply their mindso as to opt for one or the other of the four ADR methodsmentioned in the section and if the parties do not agree, the courtshall refer them to one or the other of the said modes. Section 89uses both the words “shall” and “may” whereas Order 10 Rule 1-A uses the word “shall” but on harmonious reading of theseprovisions it becomes clear that the use of the word “may” inSection 89 only governs the aspect of reformulation of the termsof possible settlement and its reference to one of ADR methods.There is no conflict. It is evident that what is referred to one ofthe ADR modes is the dispute which is summarised in the termsof settlement formulated or reformulated in terms of Section 89.”

45. Lastly, we may notice that in Prem Lala Nahata v. ChandiPrasad Sikaria16, Justice P.K. Balasubramanyan, speaking on behalfof Justice S.B. Sinha, also held as follows:

“16. Order 7 Rule 11(d) speaks of the suit being “barred by anylaw”. According to Black’s Law Dictionary, bar means, pleaarresting law suit or legal claim. It means as verb, to preventby legal objection. According to Ramanatha Aiyar’s Law Lexicon,“bar” is that which obstructs entry or egress; to exclude fromconsideration. It is therefore necessary to see whether suit bad

15 (2005) 6 SCC 344

16 (2007) 2 SCC 551

BCD

Afor misjoinder of parties or of causes of action is excluded fromconsideration or is barred entry for adjudication. As pointed outalready, on the scheme of the Code, there is no such prohibition ora prevention at the entry of suit defective for misjoinder of partiesor of causes of action. The court is still competent to try anddecide the suit, though the court may also be competent to tell theBplaintiffs either to elect to proceed at the instance of one of theplaintiffs or to proceed with one of the causes of action. On thescheme of the Code of Civil Procedure, it cannot therefore beheld that suit barred for misjoinder of parties or of causes ofaction is barred by law, here the Code. This may be contrastedCwith the failure to comply with Section 80 of the Code. In casenot covered by sub-section (2) of Section 80, it is provided in sub-section (1) of Section 80 that “no suit shall be instituted”. This istherefore bar to the institution of the suit and that is why courtshave taken the view that in case where notice under Section 80of the Code is mandatory, if the averments in the plaint indicateDthe absence of notice, the plaint is liable to be rejected. For, inthat case, the entertaining of the suit would be barred by Section80 of the Code. The same would be the position when suit hit bySection 86 of the Code is filed without pleading the obtaining ofconsent of the Central Government if the suit is not for rent fromEa tenant…..”

(Emphasis supplied)

VIEWS OF HIGH COURTS: DISCORDANT NOTES?

46. In Ganga Taro Vazirani v. Deepak Raheja17, the learnedSingle Judge of the High Court of Bombay, took the view that SectionF12A is procedural provision. The learned Single Judge found furtherthat when urgent relief is applied for, the procedure under Section 12Aneed not be undergone. It was further observed that it was not, as if, theCourt lacks inherent jurisdiction to entertain Suit without complyingwith Section 12A. Still further, he refers to Section 80 of the CPC. HeGrefers to AL. AR. Vellayan Chettiar(Decd.) & Others v. Governmentof the Province of Madras Through the Collector of Ramnad atMadura & Another18, for the proposition that Notice thereunder is givenfor the protection of the Authority concerned and he can lawfully waive

17 2021 SCC Online Bombay 195H18 AIR 1947 PC 197

his right to the Notice. Reliance was also placed on the Judgement in Stateof A.P. and others v. Pioneer Builders, A.P.19, wherein this Courtdeclined to interfere with the finding that having participated in theproceeding without raising objection about the maintainability of the Suit,there would be waiver. Learned Single Judge also took the view thateven under Section 12A of the Act, in given set of facts, the defendantcould be held to have waived his right to set up Section 12A. It is furtherfound that, if there is substantial compliance, the plaintiff cannot be non-suited, i.e., if an attempt has been made for settling the dispute, whichhas failed and, therefore, the plaintiff is constrained to approach theCourt. It is this Judgment, which has been relied upon in both theimpugned Judgments.

47. However, as pointed out by Shri Sharath Chandran, DivisionBench of the High Court of Bombay, in an appeal, has found that theSingle Judge, has erred in his view that Section 12A is not mandatory.The Division Bench proclaimed that Section 12A of the Act is mandatory.It was further observed that considering the object and purpose of Section12A, being rooted in public interest, there is no question of it being waived.When it came to the Order to be passed in the appeal, we notice that theplaintiff contended that the suit was allowed to be filed by the Registrybecause of confusion in the Registry in the initial period, when theAmending Act came into force. There was oversight. The Division Benchstayed the Suit and the impugned Order for three months and referredthe parties for mediation. learned Single Judge of the High Court ofCalcutta, in the decision reported in Dhanbad Fuels Ltd. v. Union ofIndia and Others20, took the view that mediation in India is still at anascent stage and requires more awareness. There was need formandatory training of commercial disputes. It was further found that theparty cannot be denied the right to participate in the justice dispensationsystem. It was further noticed that there was no obligation on the part ofthe defendant to respond to the initiative of the plaintiff. Rejecting theplaint under Order VII Rule 11(d) in view of Order VII Rule 13, whichenables fresh Suit to be filed upon rejection under Order VII Rule 11,would show that the power under Order VII Rule 11 should not beinvoked as it would not be in accordance with the objectives of the Actand the Rules.

19 (2006) 12 SCC 119

20 2021 SCC Online Calcutta 429

A48. Another learned Single Judge of the High Court of Calcutta,in judgment reported in Dredging and Desiltation Company Pvt.Ltd. v. Mackintosh Burn and Northern Consortium and Others21,took the view that there is distinction between filing of Suit andinstitution of Suit under the CPC. It was further found that the barunder Section 12A is absolute w.e.f. 12.12.2020, being the dateBimmediately subsequent to the date after the standard operating procedurefor undertaking pre-litigation procedure under Section 12A was made.This is after finding that the standard operating procedure had beenmade and Rules were published on 11.12.2020. The very same learnedSingle Judge (Debangsu Basak, J.) in the judgment reported in LaxmiCPolyfab Pvt. Ltd. v. Eden Realty Ventures Pvt. Ltd. and Another22,elaborately considered the question as to whether Section 12A ismandatory. He went on to hold that Section 12A was mandatory. TheDivision Bench of the High Court of Madhya Pradesh, in Curewin23Pharmaceuticals Pvt. Ltd. v. Curewin Hylico Pharma Pvt. Ltd,followed the judgment of the learned Single Judge of High Court ofDBombay, which we have noticed inGanga Taro(supra), and after findingthat Suit, which does not contemplate an urgent interim relief, cannotbe instituted unless pre-litigation mediation isexhausted. learned SingleJudge of the Allahabad High Court in the decision reported in AwasthiMotors v. Managing Director M/s. Energy Electricals Vehicle andEAnother24, found that there is clear purpose provided for pre-institutionmediation. He referred to the Statement of Objects and Reasons. Heconcluded that the provision is mandatory.

SURVEY OF THE ACT AND THE RULES

49. Section 2(c) defines ‘commercial dispute’ as encompassingFvarious specified transactions, which are 21 in number. There is aresiduary provision, which brings up the rear and is contained in Section2(c)(xxii). The said provision empowers the Central Government to notifyother commercial disputes as commercial dispute. The explanationamplifies/clarifies the scope of commercial dispute. Section 2(i) defines

the words ‘specified value’ as follows:G

“2(i) “Specified Value”, in relation to commercial dispute, shallmean the value of the subject-matter in respect of suit as

21 2021 SCC Online Calcutta 145822 AIR 2021 Calcutta 19023 AIR 2021 MP 154H24 AIR 2021 Allahabad 143

determined in accordance with section 12 which shall not be lessthan three lakh rupees or such higher value, as may be notified bythe Central Government.”

[The amount was 1 crore when the Act was enacted in 2015 andit was reduced by the Amendment in 2018.]

50. Under Chapter II, the Law-giver has contemplated,Commercial Courts at the District Level, Commercial Appellate Courtat the District Judge Level, Commercial Division in the High Court forall High Courts having Ordinary Original Civil Jurisdiction (See Section4) and Commercial Appellate Division in the High Court. Section 8bars revision application or petition against an interlocutory order. Section12 deals with the determination of the Specified Value. Section 14contemplates that the Commercial Appellate Court and the CommercialAppellate Division shall endeavour to dispose of appeals before them,within six months from the date of filing of such appeals. Under Section15(2), all suits and applications, including under the Arbitration andConciliation Act, relating to commercial dispute of specified value,pending in any Civil Court, is to be transferred to the Commercial Court,where such Court has been constituted. Under Section 16, the provisionsof the CPC, in respect of its application to any suit in respect of acommercial dispute of specified value, is to stand amended as providedin the Schedule. Section 19 provides that the State shall provide thenecessary infrastructure to facilitate working of the Commercial Courtor Commercial Division of High Court. Schedule relatable to Section16, which provides for the amended version of the CPC, inter alia, providesfor substituted version of Section 35 of the CPC dealing with costs. Itprovides that the Court has the discretion in the matter of quantum ofcosts.

Section 35 of the CPC in the Schedule, inter alia, contemplatesthat in making an Order for payment of costs, the Court shall have regardto the conduct of the parties and whether any reasonable offer to settle,is made by party and unreasonably refused by the other party. Sections35(3) and 35(4) read as follows:

“35(3) In making an order for the payment of costs, the Courtshall have regard to the following circumstances, including—

(a) the conduct of the parties;

(b) whether party has succeeded on part of its case, even if thatparty has not been wholly successful;

A(c) whether the party had made frivolous counterclaim leadingto delay in the disposal of the case;

(d) whether any reasonable offer to settle is made by party andunreasonably refused by the other party; and

(e) whether the party had made frivolous claim and instituted aBvexatious proceeding wasting the time of the Court.”

“35(4) The orders which the Court may make under this provisioninclude an order that party must pay-

(a) proportion of another party’s costs;

C(b) stated amount in respect of another party’s costs;

(c) costs from or until certain date;

(d) costs incurred before proceedings have begun;

(e) costs relating to particular steps taken in the proceedings;

D(f) costs relating to distinct part of the proceedings; and

(g) interest on costs from or until certain date.”

[Emphasis supplied]

51. Since, Section 12A also contemplated the making of Rules togive effect to the scheme of pre-litigation mediation.The Rules wereEpromptly made and published on 03.07.2018. Rule 3 elaborately providesfor the manner in which the mediation process is initiated. It contemplatesthat party, to commercial dispute, may make an application to theAuthority. This Rule speaks about party. Section 12A declares that theplaintiff must exhaust the remedy of pre-litigation mediation. What,Fapparently is required is that the Suit cannot be filed except after theremedy of pre-litigation mediation, contemplated under the Act and theRules, is attempted and exhausted. What Rule 3(1) provides is the formin which the application is to be made, viz., Form-I, as specified inSchedule-I. The making of the Form can be by online transmission or bypost or by hand. The view expressed by the High Court of Madras thatGthe use of the word ‘may’, detracts from the mandatory flavour of Section12A is clearly untenable. Section 12A is part of the parent enactment.Rule 3, being subordinate legislation, must be interpreted harmoniously,in the first place, with the parent enactment. That apart, on properunderstanding of Rule 3, there is really no conflict between Section 12AHand Rule 3. Rule 3 only gives discretion to the applicant, in regard to

the mode of making the application. So understood, we are of the clearview that, if Section 12A is otherwise mandatory, Rule 3(1) can only beunderstood as providing three different modes for making the application,contemplated in Section 12A(1).As to whether the application must bemade, must depend upon, among other things, upon the peremptory natureof the language employed in section 12A(1). Rule 3 further contemplatesthat the Authority, which again, has been clearly defined as the Authoritynotified by the Central Government under Section 12A(2), has to issue anotice to the opposite party to appear and to give his consent to participatewithin the time as provided in Rule 3(2). Should there be no response, afinal notice is to be given again in the manner articulated in Rule 3(2).Should there be again no response by the notice remainingunacknowledged or upon there being refusal to participate, the mediationprocess becomes what is described, non-starter. The Authority thenmakes report in Form-III, which is called Non-Starter Report. Thecopy of the Report is served on the applicant and the respondent. Thereis provision for accommodating the request of the opposite partyappearing and seeking time, subject to the date being not later than tendays from the date of request of the parties. If, in such case, there isfailure to appear by the opposite party, again non-starter report inForm-III has to be made. If, on the other hand, where both parties appear,gives consent, the Authority is to assign the matter to Mediator andalso to assign date. The period of mediation being three months andthe possibility of an extension by two months, with the consent of bothsides, is the subject matter of Rule 3. The role of the Mediator is carvedout in Rule 5 to be one to facilitate the voluntary resolution of the disputeand assist the parties in reaching settlement. Rule 6 provides for authoritywith the party to either appear personally or through his duly authorisedrepresentative or counsel. The significance of being represented bycounsel in pre-litigation mediation, cannot but be underlined. Apart fromthe fact that the Legislature must be treated as aware, that, both, publicinterest, as also the interest of the parties, lies in an expeditious disposalof, what is described as, commercial litigation, with sublime goal offostering the highest economic interests of the nation,allowing the Counselto appear before the Mediator is intended to facilitate in arriving at asettlement, which is legally valid and otherwise just. We have noticedthat settlement arrived at in pre-litigation mediation under Section 12A,is to be treated as an award under Section 30(4) of the Arbitration andConciliation Act. Section 30(4) of the Arbitration and Conciliation Act,1996, reads as follows:

ABCD

EFGH

846SUPREME COURT REPORTS

A“30(4) An arbitral award on agreed terms shall have the samestatus and effect as any other arbitral award on the substance ofthe dispute.”

mediation settlement arrived at under Section 89 of the CPCmust be scrutinised by the court and only on its imprimaturbeing given it

Bis effective [see paragraph 40 of Afcons Infrastructure Limited andAnother v. Cherian Varkey Construction Company Private Limitedand Others25]. Since settlement under Section 12A of the Act isaccorded the status of an award under the Arbitration & ConciliationAct, it unerringly points to the object of the legislature to make pre-litigation mediation compulsory. We again underscore the vital role, theClawyers engaged can and must discharge in arriving at just and validsettlement translating into an effective award and therefore, decree.52. Rule 7 deals with the procedure to be adopted by the Mediator.Rule 9 enshrines the principle of confidentiality of mediation. TheMediator, the parties, their authorised representatives or Counsel are toDmaintain confidentiality about the mediation. Rule 9 further declares thatthe Mediator is not to allow stenographic or audio or video recording ofthe mediation sittings. Rule 11 provides for the mediation fee. There is tobe one-time mediation fee, which is to be shared equally, as per the quantumof claim as specified in Schedule II. We may set out Schedule II.

E“SCHEDULE-II

Mediation Fee

[See rule 11]

53. Timelines are contemplated, both in the matter of pleadingsand also other steps to be taken. They are geared to ensure an expeditiousculmination of the proceedings. Originally, the specified value within themeaning of Section 2(i) was fixed as ‘which shall not be less than onecrore rupees’. Within three years of the birth of the Act, Parliamentfound that it was necessary to reduce the specified value from the sumof Rs.1 crore to Rs.3 lakhs, which is what is reflected in the presentavatar of the definition of the word ‘specified value’. It is simultaneouslywith the reduction of the specified value and by the same amendmentthat Section 12A came to be inserted. We have already noticed theStatement of Objects and Reasons, which led to the amendment. On aconspectus of the Act, as from its birth till the Law-giver stepped-in withthe amendment in 2018, the Act read with the Rules represent aneconomic experiment as much as it deals more directly with vital aspectof administration of justice. Commercial disputes have been clearlyidentified. The value has been fixed. Courts, at different stages, havebeen contemplated. Timelines are contemplated. The whole object ofthe law is clear as day light. Disputes of commercial hue, must beextinguished with the highest level of expedition. The dispute resolutionwould witness termination of the lis between the feuding parties. Buteven, more importantly, it would prepare the ground for the countrybecoming destination attracting capital by enhancing the ease of doingbusiness. It does not require much debate to conclude that there is adirect relationship between ease of doing business and an early andexpeditious termination of disputes, which may arise in commercialmatters. The speed with which the justice delivery system in any countryresponds to the problem of docket explosion, particularly in the realm ofcommercial disputes can be regarded as very safe index of the ease ofdoing business in that country. The Act, therefore, is, in the said sense, aunique experiment to push the pace of disposal of commercial disputes.It is in this background that the Court must approach the issue of whetherSection 12A has been perceived as being mandatory provision. Wesay this for the reason that the decisive element in the search for theanswer, in the interpretation of such Statute, must be to ascertain theintention of the Legislature. The first principle, of course, must be thegolden rule of interpretation, which means, the interpretation in conformitywith the plain language, which is used. There cannot even be shadowof doubt that the language used in Section 12A is plainly imperative innature. However, we will not be led by the mere use of the word ‘shall’.

AEven going by the sublime object of the Act, as we have unravelled, weare fully reinforced in our opinion that the pre-institution mediation isintended to produce results, which has direct bearing on the fulfilmentof the noble goals of the Law-giver. It is apparent that the Legislaturehas manifested value judgement. We are not called upon to decide theconstitutionality of the provision. Parliament is presumed to be aware ofBthe felt necessities of the times. It best knows the manner in which theproblems on the ground are redressed. Section 89 of the CPC, doescontemplate mediation ordered by Court. However, it must be noticedthat Section 12A contemplates mediation without any involvement ofthe Court as it is done prior to the institution of the suit.C

54. The potential of Section 89 of the CPC for resolving disputeshas remained largely untapped on account of the fact that mediation hasbecome the product of volition of the parties. Courts, no doubt, havebegun to respond positively.However, there was pressing need todecongest the trial courts, in commercial matters in particular, as theyDbear the brunt of docket explosion. It is noteworthy that Section 12Aprovides for bypass and fast-track route without for moment takingthe precious time of court. At this juncture, it must be immediatelynoticed that the Law-giver has, in Section 12A, provided for pre-institutionmediation only in suits, which do not contemplate any urgent interimrelief. Therefore, pre-institution mediation has been mandated only in aEclass of suits. We say this for the reason that in suits which contemplateurgent interim relief, the Law-giver has carefully vouch-safed immediateaccess to justice as contemplated ordinarily through the courts. Thecarving out of class of suits and selecting them for compulsorymediation, harmonises with the attainment of the object of the law. TheFload on the Judges is lightened. They can concentrate on matters whereurgent interim relief is contemplated and, on other matters, which alreadycrowd their dockets.

55. Section 9 of the CPC is not the law, which creates right tofile civil suit. It would, undoubtedly, require law, however, to invade,absolutely or conditionally, the vital civil right of person to take hisGgrievance to civil court. civil suit can be barred by law, eitherexpressly or by necessary implication. The jurisdiction of civil courtcan be ousted. In other words, there is no Fundamental Right with anyoneto contend that he has right to file civil suit, which cannot be takenaway. It is another matter that the courts will not lightly infer the ousterHof jurisdiction of civil court. The very presence of Order VII Rule

11(d), which mandates rejection of plaint, where suit is barred, is areminder of the principle that there is no absolute right to file civil suit.

56. Under Section 12A, all that is provided is, cooling periodwherein the parties are to be referred for mediation at the hands ofskilled Mediators. While on mediation, we may notice the following viewsexpressed by this Court in the judgment reported inVikram Bakshi andOthers v. Sonia Khosla (Dead) by Legal Representatives26:

“16. According to us it would have been more appropriate forthe parties to at least agree to resort to mediation as providedunder Section 89 CPC and make an endeavour to find amicablesolution of the dispute, agreeable to both the parties. One of theaims of mediation is to find an early resolution of the dispute. Thesooner the dispute is resolved the better for all the partiesconcerned, in particular, and the society, in general. For parties,dispute not only strains the relationship but also destroys it. And,so far as society is concerned it affects its peace. So what isrequired is resolution of dispute at the earliest possible opportunityand via such mechanism where the relationship betweenindividual goes on in healthy manner. Warren Burger, once said:“The obligation of the legal profession is … to serve ashealers of human conflict … we should provide mechanismsthat can produce an acceptable result in shortest possible time,with the least possible expense and with minimum of stresson the participants. That is what justice is all about.”

MEDIATION is one such mechanism which has been statutorilybrought into place in our justice system. It is one of the methodsof alternative dispute resolution and resolves the dispute in waythat is private, fast and economical. It is process in which aneutral intervenor assists two or more negotiating parties to identifymatters of concern, develop better understanding of theirsituation, and based upon that improved understanding, developmutually acceptable proposals to resolve those concerns. It-embraces the philosophy of democratic decisionmaking[Alfin,et al., Mediation Theory & Practice (2nd Edn., 2006) LexisNexis].

xxxxxx

A19. This Bench is of firm opinion that mediation is newdimension of access to justice. As it is one of the best forms, if notthe best, of conflict resolution.The concept of Justice in mediationis advanced in the oeuvres of Professors Stulberg, Love, Hyman,and Menkel-Meadow (Self-Determination Theorists). Theirdefinition of justice is drawn primarily from the exercise of partyBself-determination. They are hopeful about the magic that canoccur when people open up honestly and empathetically abouttheir needs and fears in uninhibited private discussion. And, asthinkers, these jurists are optimistic that the magnanimity of thehuman spirit can conquer structural imbalances and resourceCconstraints.

xxxxxx

19.3. Professor Carrie Menkel-Meadow presents related pointof view in making the case that settlement has political andethical economy of its own and writes:

“Justice, it is often claimed, emerges only when lawyersand their clients argue over its meaning, and, in turn, someauthoritative figure or body pronounces on its meaning, suchas in the canonical cases of the late twentieth century …For many years now, I have suggested that there are othercomponents to the achievement of justice. Most notably, Irefer to the process by which we seek justice (partyparticipation and empowerment, consensus rather thancompromise or command) and the particular types ofoutcomes that might help to achieve it (not binary win-losesolutions, but creative, pie-expanding or even sharedsolutions).”

[Emphasis supplied]

57. On the one hand, the staunchest criticism against mediationhas been that it is opposed to the fundamental principle of access toGjustice. It is in keeping with the traditional notions of the right of personto have dispute adjudicated by an impartial and trained Judge. On theother hand, as noticed by this Court inVikram Bakshi(supra), mediationoffers completely new approach to attaining the goal of justice. win-win situation resulting from assigning greater role to the partiesthemselves, with no doubt, spirit of accommodation represents betterH

and what is more in the era of docket explosion, the only meaningfulchoice. The realisation has been growing over period of time, thatformal court rooms, long drawn-out proceedings, procedural wrangles,mounting and crippling costs, delay, which never wanes but only increaseswith the day that at least, in certain categories of cases, mediation canbe the way out. It, undoubtedly, requires complete change in themindset. The change in approach, undoubtedly, can be achieved only ifthe litigants become aware of its benefits in comparison with the greatdisadvantage in waiting in the serpentine queue for the day of reckoningto arrive in court of law. The role of the Bar is vital in taking mediationforward. With increase in population and skewed Judge-populationratio and huge spiralling of litigation in the courts, it is logical, just andimperative, to attempt and persevere in out of the box thinking.We canno longer afford to remain in the past. clean break with the past isurgently needed. What was mere writing on the wall as early as in thelast decades of the previous century has become the harsh reality. It isimportant that the courts also adapt to the changing times. At least whenthe Parliament has decided to move ahead, it becomes the court’s dutynot to greet it with undue scepticism. It becomes necessary to fulfil theintention of the Parliament by realising the true role of judiciary.

58. perusal of the Act and the Rules reveal the existence of acomplete Code. Mediation contemplated under Section 12A and the Rules,may not succeed in every case. To begin with, the figures may not bereassuring but even if success does not elude the Mediator, in few ofthe cases, good part of the object of the Legislature, would standachieved. Such is the condition of the docket explosion perceivedparticularly in commercial disputes. It is not difficult to appreciate theconcern of the people through their elected representatives. Particularlywith the lowering of the monetary limit from rupees one crores to rupeesthree lakhs, there would be stupendous load on the courts to achievethe timeline and dispose of commercial matters by the conventional modeof adjudication, even with the amended provisions of the CPC asapplicable under Section 16 of the Act.

59. We are not impressed by the argument of Shri Saket Sikri thatSection 12A does not provide for any penalty and, therefore, the provisionis not mandatory. No doubt, he does admit that it is only one of theaspects to be considered whether the word ‘shall’ is to be treated asmandatory. If the argument of learned Counsel is accepted, neither

ASection 80 of the CPC nor Section 69 of the Partnership Act, which donot provide for any penalty for suit brought in contravention of theirterms, would be mandatory. However, it is settled law that plaintinstituted transgressing the mandate of Section 80, that is, when there isno notice at all and no urgent relief is contemplated and leave sought, theplaint would have to be rejected, as the suit would not be maintainable.BThe position is equally the same in regard to absence of registrationcontemplated under Section 69 of the Indian Partnership Act. Therefore,the principle canvassed by the learned Counsel would not apply.

60. Equally, we are unimpressed by the contention of the learnedCounsel Shri Saket Sikri that contravention of mandate of Section 12ACdoes not affect any legal right of the defendant and therefore, the suitfiled without resorting to compulsory mediation must be countenanced.It may be true that it may be relevant input to inquire as to whether, notfollowing mandate of statute, will violate the right of another person.

61. We may proceed on the basis that if the suit is brought withoutDcomplying with Section 12A, where no urgent interim relief is sought,may not in one sense, affect the legal right of the defendant. But thisargument overlooks the larger picture which is the real object of the law.This object is not to be viewed narrowly with reference to the impact onthe parties alone. This is apart from also remembering that if the partiesEwere to exhaust mediation under Section 12A, the opposite side may be,if mediation is successful, saved from the ordeal of proceeding in court,which, undoubtedly, would entail costs, whereas, the mediation costs, aswe have noticed, is minimal, and what is more, one-time affair, and stillfurther, to be shared equally between the parties. Each time the plaintiffis compelled to go in for mediation under Section 12A there is ray ofFhope that the matter may get settled. The chief advantage and highlightof mediation is that it is win-win for all sides, if the mediation issuccessful. Therefore, it cannot, in one sense, be argued that no legalright of the defendant is infracted.Further, on the same logic, Section80(1) of the CPC and Section 69 of the Indian Partnership Act wouldGnot be mandatory. This is however not the case.

62. One of the arguments of Shri Saket Sikri is that, if plaint isrejected under Order VII Rule 11, the plaintiff would be saddled withthe deprivation of the court fee paid. He would contend that this aspectmay be considered, when the Court decides the question as to whetherHthe provision is mandatory or not. Whenever plaint is rejected on the

ground that the suit is barred under any law, this consequence is inevitable.[We may only, in this context, observe, that under Section 4A of theKerala Court Fee and Suit Valuation Act, 1959, the plaintiff needs to payonly one-tenth of the total court fee at the time of institution of the suit.The balance is to be paid not later than fifteen days from the date offraming of issues, inter alia. Section 4A further provides that if the partiesfurther settle the dispute within the period specified or extended by theCourt for payment of the balance court fee, the plaintiff shall not becalled upon to pay the balance court fee.] If plaint is rejected forfailure to give notice, as contemplated in Section 80 of the CPC, thecourt fee paid, may be lost. Equally, for violation of Section 69 of theIndian Partnership Act, if the plaint is rejected, the plaintiff loses thecourt fee. While it may appear to be hard on the plaintiff, the effect ofthe provision contained in Order VII Rule 11, cannot be diluted. Therefore,we are not impressed by the argument, subject to what we will hold lateron.63. One of the aspects which weighed with the learned singlejudge of the Bombay High Court inGanga Taro(supra) is that in casewhere the suit is instituted under Section 80 of the CPC without issuingany notice, if the defendant does not take up the plea of violation ofSection 80, there can be waiver. Thus, even if Section 12A in givencase, where the defendant does not set up the case there can be waiverand therefore, Section 12A is not mandatory. No doubt, the DivisionBench of the Bombay High Court while reversing the learned singlejudge proceeded to hold that there cannot be waiver as Section 12A isbased on public interest. The approach of the learned Single Judge doesnot commend itself to us. The question as to whether Section 12A ismandatory or not, must be decided with reference to language used, theobject of the enactment and host of other aspects. The fact that if adefendant does not raise the plea about compliance of Section 12A, itmay result in given case of waiver cannot result in Section 12A notbeing mandatory. If it were so, then in case where there is no noticeunder Section 80, plaint can never be rejected. It is legally untenableand defies logic. Another argument raised by Shri Saket Sikri, learnedcounsel is that by the impugned order, the High Court has affirmed thetrial Court order that the suit be kept in suspended animation and referredthe parties for mediation. According to him, it is substantial complianceof Section 12A of the Act. It is eminently just.He also points out theconduct of the appellant in not even cooperating in the mediation process.

ABC

AWe are unable to accept this argument. We will refer to Section 80 ofthe CPC to assist us in justifying our conclusion. Under Section 80 (1) ofthe CPC, suit not covered by Section 80(2), which is filed in defianceof the former provision, that is without serving any notice, is notmaintainable. The suit would be barred and liable to be rejected underOrder VII Rule 11. The only exception is what is provided in Section 80B(2).It contemplates suit to obtain an urgent or interim relief. Such suitmay be instituted with the leave of the court without serving any noticeas required under Section 80 (1). In case where plaintiff does notseek urgent interim relief under Section 80(2), the suit would fall withinthe four walls of Section 80(1). Section 80(1) is mandatory. In regard toCsuch suit, there is no question of substantial compliance. The suit mustculminate in rejection of the plaint on invoking power under Order VIIRule 11. We may immediately draw parallel between Section 80(1) ofthe CPC and 12A of the Act. In Section 12A also, the bar of institutionof the suit is applicable only in case in which plaintiff does notcontemplate urgent interim relief. The situation is akin to what isDcontemplated in Section 80(1) of the CPC. In other words, the suit underthe Act which does not contemplate urgent interim relief is like suitcovered by Section 80(1) of the CPC which does not project the needfor any urgent or interim relief. In regard to suit covered under Section12A of the Act, namely, in suit where interim relief is not contemplated,Ethere can be no substantial compliance by way of post institution referenceto mediation. The argument of the plaintiff overlooks the object apartfrom the language used besides the design and scheme of the law. Itwill, if accepted, lead to courts also spending their invaluable time onsuch matters which follow from adjournments, objections and hearings.There is no need to adopt such course.F

64. Take case where notice is given under Section 80(1). Acontention is taken that the notice is not effective as it does not complywith what is required in Section 80(1). In such case, it may be adifferent matter that the Court may take liberal view as to whether

there is compliance. In fact, Section 80(3) makes this position clear.GEven before Section 80 was substituted by Act 104 of 1976 by which80(3) was inserted, in Raghunath Das v. Union of India& Another27while dealing with case where notice was given, this Court inter aliaheld as follows:

“8. The object of the notice contemplated by that section is togive to the concerned Governments and public officers opportunityto reconsider the legal position and to make amends or settle theclaim, if so advised, without litigation. The legislative intentionbehind that section in our opinion is that public money and timeshould not be wasted on unnecessary litigation and the Governmentand the public officers should be given reasonable opportunityto examinethe claim made against them lest they should be drawninto avoidable litigations. The purpose of law is advancement ofjustice. The provisions in Section 80 of the CPC are not intendedto be used as boobytraps against ignorant and illiterate persons.In this case we are concerned with narrow question. Has theperson mentioned in the notice as plaintiff brought the present suitor is he someone else? This question has to be decided by readingthe notice as whole in reasonable manner.

9. In Dhian Singh Sobha Singh v. Union of India [(1958) SCR781, 795] this Court observed that while the terms of Section 80of the CPC must be strictly complied with that does not mean thatthe terms of thesection should be construed in pedantic manneror in manner completely divorced from common sense. Therelevant passage from that judgment is set out below:

“We are constrained to observe that the approach of the HighCourt to this question was not well founded. The Privy Councilno doubt laid down in Bhagchand Dagadua v. Secretary ofState that theterms of section should be strictly complied with.That does not however mean that the terms of the notice shouldbescrutinised in pedantic manner or in manner completelydivorced from commonsense. As was stated by Pollock C.B.in Jones v. Nicholls, “we must import little common senseinto notices of this kind”. Beaumont, C.J. also observedin Chandu Lal Vadilal v. Government of Bombay ”Onemustconstrue Section 80 with some regard to common senseand to the object with which it appears to have been passed.”

65. The period of mediation is three months. If parties warm-upto the prospect of settlement through mediation, on their consent, it canbe extended for another two months. Thus, for payment of one-timefee, in the case, which is successfully mediated by skilled Mediatorand with the assistance of Counsel, the very dispute gets settled. The

Apressure on the courts is taken off to the extent that the parties, withoutreference of the court, are compelled to undergo mediation.

66. Section 12A of the Act provides for mediation. This is aprovision, which was inserted as per the Amending Act (Act 28 of 2018)enacted in the year 2018 and it came into force w.e.f. 03.05.2018. ByBthe said amendment, in fact, Chapter IIIA was inserted and Section 12Ais the sole Section in the said Chapter. plain reading of Section 12Amakes the following position clear:

The Law-giver has declared that if Suit under the Act doesnot ‘contemplate’ any urgent interim relief, then, it cannot beinstituted unless the plaintiff seeks pre-litigation mediation. Thepre-institution mediation is to be done in the manner, procedure,which is to be prescribed by the Central Government. The pre-litigation mediation is to be completed within period of threemonths from the date of the application made by the plaintiff underSub-Section (1) [See Section 12A sub-Section (3)]. The period ofthree months can, however, be extended for period of two monthsprovided there is consent to the same by the parties [See the firstproviso to Section 12A sub-Section (3)]. By the second proviso,the Legislature has taken care to provide that the period, duringwhich the parties remained occupied with the pre-litigationmediation, is not to be reckoned for the purpose of computing theperiod of limitation under the Limitation Act, 1963. As to whatwould happen, if the parties arrive at the settlement, is providedfor in Section 12A sub-Section (4). The settlement is to be reducedinto writing and signed by the parties to the dispute and theMediator. The effectiveness of settlement arrived at in the courseof the pre-institution mediation contemplated in Section 12A, hasbeen dealt with in Section 12A sub-Section (5). Parliament hasaccorded the settlement, the same status and effect as if it is anArbitral Award, on agreed terms under sub-Section (4) of Section30 of the Arbitration and Conciliation Act, 1996. Spread over fivesub-Sections, this standalone Section in Chapter IIIA, no doubt,supported by the Rules, in our view, substantially manifests adefinite scheme to effectively deal with the perceived urgentproblem of acute clogging of the justice delivery system, whichhad to be de-congested. Section 12A cannot be perceived as merelyintended to reach quicker justice, and what is more, on terms,

which are mutually acceptable to the parties concerned. Even,more importantly, it was to produce vital and significant effecton the very interest of the nation. We have perused the Statementof Objects and Reasons. To attract foreign capital by enhancingits rather low standard in the ease of doing business, it was and isstill necessary to showcase an efficient and quick justice deliverysystem in commercial matters. In fact, India, which was rankedat 142 out of 189 countries, in the Ease of Doing Business Index,in 2015, climbed-up to only 130 in the year 2016. By 2020, Indiastood at the 63[rd] position.

THE REGIME UNDER ORDER VII RULE 11 OF THE

CPC

67. Order VII Rule 11 declares that the plaint can be rejectedon 6grounds. They include failure to disclose the cause of action, and wherethe suit appears from the statement in the plaint to be barred. We areconcerned in these cases with the latter. Order VII Rule 12 providesthat when plaint is rejected, an order to that effect with reasonsmustbe recorded. Order VII Rule 13 provides that rejection of the plaintmentioned in Order VII Rule 11 does not by itself preclude the plaintifffrom presenting fresh plaint in respect of the same cause of action.Order VII deals with various aspects about what is to be pleaded in aplaint, the documents that should accompany and other details. OrderIVRule 1 provides that suit is instituted by presentation of the plaint tothe court or such officer as the court appoints. By virtue of Order IVRule1(3), plaint is to be deemed as duly instituted only when it complieswith the requirementsunder Order VIand OrderVII. Order V Rule 1declares that when suit has been duly instituted, summon may beissued to the defendant to answer the claim on date specified therein.There are other details in the Order with which we are not to be detained.We have referred to these rules to prepare the stage for considering thequestion as to whether the power under Order VII Rule 11 is to beexercised only on an application by the defendant and the stage at whichit can be exercised. In Patasibai and Others v. Ratanlal28, one of thespecific contentions was that there was no specific objection for rejectingof the plaint taken earlier. In the facts of the case, the Court observed asunder:

28 (1990) 2 SCC 42

A“13. On the admitted facts appearing from the record itself, learnedcounsel for the respondent, was unable to show that all or any ofthese averments in the plaint disclose cause of action giving riseto triable issue. In fact, Shri Salve was unable to dispute theinevitable consequence that the plaint was liable to be rejectedunder Order VII Rule 11, CPC on these averments. All that ShriBSalve contended was that the court did not in fact reject the plaintunder Order VII Rule 11, CPC and summons having been issued,the trial must proceed. In our opinion, it makes no difference thatthe trial court failed to perform its duty and proceeded to issuesummons without carefully reading the plaint and the High CourtCalso overlooked this fatal defect. Since the plaint suffers from thisfatal defect, the mere issuance of summons by the trial courtdoes not require that the trial should proceed even when no triableissue is shown to arise. Permitting the continuance of such suitis tantamount to licensing frivolous and vexatious litigation. Thiscannot be done.”D

(Emphasis supplied)

68. On consideration of the scheme of the Orders IV, V andVII of the CPC, we arrive at the following conclusions:

(A)A suit is commenced by presentation of plaint. ThedateEof the presentation in terms of Section 3(2) of the LimitationAct is the date of presentation for the purpose of the saidAct. By virtue of Order IV Rule 1(3), institution of the plaint,however, is complete only when the plaint is inconformitywith the requirement of Order VI and Order VII.

F(B)When the court decides the question as to issue of summonsunder Order V Rule 1, what the court must consider iswhether suit has been duly instituted.

(C)Order VII Rule 11 does not provide that the court is todischarge its duty of rejecting the plaint only on anGapplication. Order VII Rule 11 is, in fact, silent about anysuch requirement. Since summon is to be issued in dulyinstituted suit, in case where the plaint is barred underOrder VII Rule 11(d), the stage begins at that time whenthe court can reject the plaint under Order VII Rule 11. Nodoubt it would take clear case where the court is satisfied.H

The Court has to hear the plaintiff before it invokes its powerbesides giving reasons under Order VII Rule 12. In clearcase, where on allegations in the suit, it is found that thesuit is barred by any law, as would be the case, where theplaintiff in suit under the Act does not plead circumstancesto take hiscaseout of the requirement of Section 12A,theplaint should be rejected without issuing summons.Undoubtedly, on issuing summons it will be always open tothe defendant to make an application as well under OrderVII Rule 11. In other words, the power under Order VIIRule 11 is available to the court to be exercised suomotu.(See in this regard, the judgement of this Court inMadiraju Venkata Ramana Raju (supra).

PRESENTATION OF PLAINT AND INSTITUTION OFSUIT

69. Another area of debate has been about the distinction betweenthe presentation of plaint and institution of suit. Section 3(2) of theLimitation Act, 1963, provides that for the purpose of the Limitation Act,a suit is instituted in the ordinary case, when the plaint is presented to theproper Officer. In the case of pauper, the suit is instituted when hisapplication to leave to sue as pauper is made. Order IV Rule 1 of theCPC reads as follows:

“Order IV Rule 1. Suit to be commenced by plaint.—(1) Everysuit shall be instituted by presenting plaint in duplicate to theCourt or such officer as it appoints in this behalf.

(2) Every plaint shall comply with the rules contained in OrdersVI and VII, so far as they are applicable.

(3) The plaint shall not be deemed to be duly instituted unless itcomplies with the requirements specified in sub-rules (1) and (2).”

70. Sub-Rule (3) of Order IV Rule 1 was inserted by Act 46 of1999 w.e.f. 01.07.2002. Shri Sharath Chandran has drawn ourattention to the Judgment of the High Court of Madras reportedin Olympic Cards Limited v. Standard Chartered Bank29. Inthe said case, the question, which arose was, whether there wasan abandonment or withdrawal of suit within the meaning of Order

XXIII Rule 1 of the CPC, which would operate as bar to file afresh suit. In this context, we notice the following discussion:

“16. Rule (1) of Order 4 of C.P.C. provided for institution of Suits.Rules 3 & 4 of Order 4 contains the statutory prescription that thePlaint must comply with the essential requirements of valid Plaintand then only the process of filing would culminate in the registrationof Suit. Rule 21 of Civil Rules of Practice contains the basicdifference between presentation and institution. There is no disputethat the date of filing the Plaint would be counted for the purposeof limitation. However, that does not mean that the Suit was validlyinstituted by filing the Plaint. The Plaint, which does not complywith the Rules contained in Orders 4 & 7, is not valid Plaint.The Court will initially give Diary Number indicating thepresentation of Suit. In case the Plaint is returned, it would remainas “returned Plaint” and not “returned Suit”. The act ofnumbering the Plaint and inclusion in the Register of Suits alonewould constitute the institution of Suit. The stages prior to theregistration of Suit are all preliminary in nature. The return ofPlaint before registration is for the purpose of complying withcertain defects pointed out by the Court. The further procedureafter admitting of the Plaint is indicated in Rule 9 of Order 7. Thisprovision shows that the Court would issue summons to the partiesafter admitting the Plaint and registering the Suit. Thereafter onlythe Defendants are coming on record, exception being theirappearance by lodging caveat. Even after admitting the Plaint,the Court can return the Plaint on the ground of jurisdiction underRule 10 of Order 7 of C.P.C. The fact that the Plaintiff/Petitionerserved the Defendant/respondent the copies of Plaint/Petitionsbefore filing the Suit/Petition would not amount to institution ofSuit/filing Petition. It is only when the Court admits the Plaint,register it and enter it in the Suit register, it can be said that theSuit is validly instituted.

17. It is, therefore, clear that any abandonment before theregistration of Suit would not constitute withdrawal orabandonment of Suit within the meaning of Order 23, Rule 1,C.P.C., so as to operate as legal bar for subsequent Suit of thevery same nature. It is only the withdrawal or abandonment duringthe currency of Legal proceedings would preclude the Plaintiff

to file fresh Suit at later point of time on the basis of the verysame cause of action.”

71. The contention appears to be that it may be fair view to takethat there is no institution of the suit within the meaning of Section 12A,until the Court admits the plaint and registers it in the suit register. Inother words, presentation of the plaint may not amount to institution ofthe suit for the purpose of Order IV Rule 1 of the CPC and Section 12Aof the Act. If this view is adopted, it is pointed out that before the plaintis registered after presentation and there is non-compliance with Section12A, the plaintiffs can, then and there, be told off the gates to first complywith the mandate of Section 12A. This process would not involve theCourts actually spending time on such matters. In the facts, this questiondoes not arise and, it may not be necessary to explore this matter further.

72. We may sum-up our reasoning as follows:

The Act did not originally contain Section 12A. It is byamendment in the year 2018 that Section 12A was inserted. TheStatement of Objects and Reasons are explicit that Section 12Awas contemplated as compulsory. The object of the Act and theAmending Act of 2018, unerringly point to at least partly foistingcompulsory mediation on plaintiff who does not contemplateurgent interim relief. The provision has been contemplated onlywith reference to plaintiffs who do not contemplate urgent interimrelief. The Legislature has taken care to expressly exclude theperiod undergone during mediation for reckoning limitation underthe Limitation Act, 1963. The object is clear. It is an undeniablereality that Courts in India are reeling under an extraordinarydocket explosion. Mediation, as an Alternative Dispute Mechanism,has been identified as workable solution in commercial matters.In other words, the cases under the Act lend themselves to beresolved through mediation. Nobody has an absolute right to file acivil suit. civil suit can be barred absolutely or the bar mayoperate unless certain conditions are fulfilled. Cases in point, whichamply illustrate this principle, are Section 80 of the CPC andSection 69 of the Indian Partnership Act. The language used inSection 12A, which includes the word ‘shall’, certainly, go longway to assist the Court to hold that the provision is mandatory.The entire procedure for carrying out the mediation, has beenspelt out in the Rules. The parties are free to engage Counsel

DEFGH

Aduring mediation. The expenses, as far as the fee payable to theMediator, is concerned, is limited to one-time fee, which appearsto be reasonable, particularly, having regard to the fact that it is tobe shared equally. trained Mediator can work wonders.Mediation must be perceived as new mechanism of access tojustice. We have already highlighted its benefits. Any reluctanceBon the part of the Court to give Section 12A, mandatoryinterpretation, would result in defeating the object and intention ofthe Parliament. The fact that the mediation can become non-starter, cannot be reason to hold the provision not mandatory.Apparently, the value judgement of the Law-giver is to give theCprovision, modicum of voluntariness for the defendant, whereas,the plaintiff, who approaches the Court, must, necessarily, resortto it. Section 12A elevates the settlement under the Act and theRules to an award within the meaning of Section 30(4) of theArbitration Act, giving it meaningful enforceability. The periodspent in mediation is excluded for the purpose of limitation. TheDAct confers power to order costs based on conduct of the parties.

73. In the cases before us, the suits do not contemplate urgentinterim relief. As to what should happen in suits which do contemplateurgent interim relief or rather the meaning of the word ‘contemplate’ orurgent interim relief, we need not dwell upon it. The other aspect raisedEabout the word ‘contemplate’ is that there can be attempts to bypass thestatutory mediation under Section 12A by contending that the plaintiff iscontemplating urgent interim relief, which in reality, it is found to bewithout any basis. Section 80(2) of the CPC permits the suit to be filedwhere urgent interim relief is sought by seeking the leave of the court.FThe proviso to Section 80 (2) contemplates that the court shall, if, afterhearing the parties, is satisfied that no urgent or immediate relief needbe granted in the suit, return the plaint for presentation to the court aftercompliance. Our attention is drawn to the fact that Section 12A does notcontemplate such procedure. This is matter which may engageattention of the lawmaker. Again, we reiterate that these are not issuesGwhich arise for our consideration. In the fact of the cases admittedlythere is no urgent interim relief contemplated in the plaints in question.

SOME CONCERNS

74. Mediation can become potent alternate dispute resolutionHdevice. There are, however, few indispensable requirements. The first

requirement is the existence of adequate infrastructural facilities and,what is more important, availability of trained and skilled Mediators. Therole of the Mediator, as per Rule (5) of the Rules, is to facilitate thevoluntary resolution of commercial dispute and assist the parties in thisregard. How can Mediator, who is not properly trained, fulfil hisresponsibility under Rule (5)? Another area of concern is the availabilityin the number of Mediators in the country, particularly, in the light oflowering of the monetary valuation from Rs. 1 crore to Rs. 3 lakhs. It isall well to pass law with sublime objects as in this case. However, thegoal will not be realised unless the State Governmentsand all otherrelevant Authorities bestow their attention in the matter of providingadequate facilities. Knowledge of the laws, which are the subject matterof the suits under the Act, is indispensable for Mediator to effectivelydischarge his duties. His role is supreme and it is largely shaped by hisown knowledge of the law that governs commercial cases. There mustbe training by Experts, including at the State Judicial Academies. Thismust be undertaken on regular and urgent basis, particularly keeping inmind when there is dearth of trained mediators. There is need tohave dedicated bar for mediation. The effective participation of thebar which must be adequately remunerated for its service will assist inmediation evolving. The concerned High Court may also undertake periodicexercise to establish panel of trained mediators in District and Talukalevels as per need.

75. In Civil Appeal arising out of SLP(C) No. 14697 of 2021, it isbrought to our notice that after the filing of the Special Leave Petition,suit was proceeded with under Order XXXVII of the CPC, Shri AyushNegi, would contend that the respondent\plaintiff has pressed the summaryjudgment and, in case, this Court does not grant relief to the appellant,safeguard may be incorporated allowing the appellants written statementto be treated as leave to defend.

THE RELIEF

76. On the findings we have entered, the impugned orders mustbe set aside and the applications under Order VII Rule 11 allowed. Thiswould mean that the plaints must be rejected. Necessarily, this wouldinvolve the loss of the court fee paid by the plaintiffs in these cases.They would have to bring fresh suit, no doubt after complying withSection 12A, as permitted under Order VII Rule 13. Moreover, thedeclaration of law by this Court would relate back to the date of theAmending Act of 2018.

ABCD

A77. There is plea by Shri Saket Sikri, that if this Courtholds thatSection 12A is mandatory it may be donewith only prospective effect.He drew support of the judgment of this Court in, Jarnail Singh and30Others v. LachhmiNarain Gupta and Others.

“35. While interpreting the scope of Article 142 of the Constitution,Bthis Court held that the law declared by the Supreme Court is thelaw of the land and in so declaring, the operation of the law canbe restricted to the future, thereby saving past transactions.

36. The power of this Court under Article 142 of the Constitutionis constituent power transcendental to statutory prohibitionC[(1997) 5 SCC 201].In Orissa Cement Ltd. v. State of Orissa[(1991) Suppl.1 SCC 430], this Court observed that relief can begranted, moulded or restricted in manner most appropriate tothe situation before it in such way as to advance the interests ofjustice. The doctrine of prospective overruling is in essence arecognition of the principle that the Court moulds the reliefs claimedDto meet the justice of the case, as has been held in SomaiyaOrganics (India) Ltd. v. State of U.P.[(2001 5 SCC 519]. It wasfurther clarified that while in Golak Nath (supra), ‘prospectiveoverruling’ implied an earlier judicial decision on the same issuewhich was otherwise final, this Court had used the power evenEwhen deciding on an issue for the first time. There is no need torefer to other judgments of this Court which have approved andapplied the principle of prospective overruling or prospectiveoperation of judgments. There cannot be any manner of doubtthat this Court can apply its decision prospectively, i.e., from thedate of its judgment to save past transactions.”F

78. The Doctrine of prospective overruling began its innings withthe decision of this Court in L.C. Golak Nath and Others v. State ofPunjab and Another31. This Court in the said case relied upon Articles32, 141 and 142 of the Constitution and extended this doctrine whichwas in vogue in the United States. The principle involves giving effect toGthe law laid down by this Court, from prospective date, ordinarily thedate of the judgment. There is no dispute that while initially the doctrinewas confined to matters arising under the Constitution, later on it hasbeen applied to other areas of law as well.

30 2022 SCC Online SC 96H31 AIR 1967 SC 1643

79. In Taherakhatoon (D) By Lrs. v. Salambin Mohammad32,this Court while dealing with its powers or rather limitation on its powereven after grant of special leave under Article 136 held as follows:

“20. In view of the above decisions, even though we are nowdealing with the appeal after grant of special leave, we are notbound to go into merits and even if we do so and declare the lawor point out the error — still we may not interfere if the justice ofthe case on facts does not require interference or if we feel thatthe relief could be moulded in different fashion.…”

80. In M/s. Somaiya Organics (India) Ltd. v. State of UttarPradesh33, the Court went on to hold as follows in regard to the doctrineof prospective overruling.

“25.The words “prospective overruling” implies an earlier judicialdecision on the same issue which was otherwise final. That ishow it was understood in Golak Nath [AIR 1967 SC 1643: (1967)2 SCR 762]. However, this Court has used the power even whendeciding on an issue for the first time. Thus, in India CementLtd. v. State of T.N. [(1990) 1 SCC 12] when this Court held thatthe cess sought to be levied under Section 115 of the MadrasPanchayats Act, 1958 as amended by Madras Act 18 of 1964,was unconstitutional, not only did it restrain the State of TamilNadu from enforcing the same any further, it also directed thatthe State would not be liable for any refund of cess already paidor collected.28. In the ultimate analysis, prospective overruling, despite theterminology, is only recognition of the principle that the courtmoulds the reliefs claimed to meet the justice of the case — justicenot in its logical but in its equitable sense. As far as this country isconcerned, the power has been expressly conferred by Article142 of the Constitution which allows this Court to “pass suchdecree or make such order as is necessary for doing completejustice in any cause or matter pending before it”. In exercise ofthis power, this Court has often denied the relief claimed despiteholding in the claimants’ favour in order to do ‘complete justice’.”

33 AIR 2001 SC 1723

A81. We may next notice the judgment of this Court in,P.V. George& Ors. v. State of Kerala & Ors.[34] In the said case, the doctrine wassought to be invoked in service matter. The Full Bench of the HighCourt overruled Division Bench which had declared ruleunconstitutional. On the strength of the Full Bench decision the employeeswere sought to be reverted. This Court adverted to the decision of theBHouse of Lords reported inNational Westminster Bank Plc. v. SpectrumPlus Ltd. & Ors.35wherein theCourt held:

“9. Prospective overruling takes several different forms. In itssimplest form prospective overruling involves court giving rulingof the character sought by the bank in the present case. OverrulingCof this simple or ‘pure’ type has the effect that the court rulinghas an exclusively prospective effect. The ruling applies only totransactions or happenings occurring after the date of the courtdecision. All transactions entered into, or events occurring, beforethat date continue to be governed by the law as it was conceivedDto be before the court gave its ruling.

10. Other forms of prospective overruling are more limited and‘selective’ in their departure from the normal effect of courtdecisions. The ruling in its operation may be prospective and,additionally, retrospective in its effect as between the parties toEthe case in which the ruling is given. Or the ruling may beprospective and, additionally, retrospective as between the partiesin the case in which the ruling was given and also as between theparties in any other cases already pending before the courts. Thereare other variations on the same theme.”

(Emphasis supplied)

82. This is not case where this Court is overruling its previousdecision, which was the case in the decision reported in 2005 8 SCC618. This is also not case where this Court is pronouncing law underwhich various transactions have been affected void. It may be true thatGthe doctrine of prospective overruling may not be confined to either ofthe above circumstances as such and its ambit is co-extensive with theequity of situationwhereunder on the law being pronounced it is likelyto intrude into or reopen settled transactions. This is not matter where

34 AIR 2007 SC 1034H35 (2005) UK HL 41

the court is overruling decision of the High Court which has held thefield for long period. See in this regard, Harsh Dhingra v. State ofHaryana and others36. In the said judgment this Court held as follows:

“7.Prospective declaration of law is device innovated by thisCourt to avoid reopening of settled issues and to prevent multiplicityof proceedings. It is also device adopted to avoid uncertaintyand avoidable litigation. By the very object of prospectivedeclaration of law it is deemed that all actions taken contrary tothe declaration of law, prior to the date of the declaration arevalidated. This is done in larger public interest. Therefore, thesubordinate forums which are bound to apply law declared by thisCourt are also duty-bound to apply such dictum to cases whichwould arise in future. Since it is indisputable that court canoverrule decision there is no valid reason why it should not berestricted to the future and not to the past. Prospective overrulingis not only part of constitutional policy but also an extendedfacet of stare decisis and not judicial legislation. These principlesare enunciated by this Court in Baburam v. C.C. Jacob [(1999)3 SCC 362: 1999 SCC (L&S) 682: 1999 SCC (Cri) 433] and AshokKumar Gupta v. State of U.P. [(1997) 5 SCC 201: 1997 SCC(L&S) 1299]”

83. The statute which has generated the controversy is theAmending Act of year 2018. We have noticed that there is undoubtedlya certain amount of cleavage of opinion among the High Courts. Theother feature which is to be noticed is that, this is case where the lawin question, the Amending Act containing certain Section 12A is toddler.The law necessarily would have teething problems at the nascent stage.The specified value has been lowered drastically from Rs.1 crore toRs.3 lakhs. The imperative need to comply with the mandate of Section12A which we have unravelled if it has not been shared by the parties onthe advice they received or on the view prevailing in the High Courtswould necessarily mean that unless we hold that the law, we declare isprospective such suits must perish. The court fee paid would have to bewritten off. In fresh suit which would be otherwise barred by limitation,shelter can be taken only under Section 14 of the Limitation Act. Theavailability of the power under Section 14 itself may have to be decidedby the court.

A84. Having regard to all these circumstances, we would disposeof the matters in the following manner. We declare that Section 12A ofthe Act is mandatory and hold that any suit instituted violating the mandateof Section 12A must be visited with rejection of the plaint under OrderVII Rule 11. This power can be exercised even suo moto by the courtas explained earlier in the judgment. We, however, make this declarationBeffective from 20.08.2022 so that concerned stakeholders becomesufficiently informed. Still further, we however direct that in case plaintshave been already rejected and no steps have been taken within theperiod of limitation, the matter cannot be reopened on the basis of thisdeclaration. Still further, if the order of rejection of the plaint has beenCacted upon by filing fresh suit, the declaration of prospective effectwill not avail the plaintiff. Finally, if the plaint is filed violating Section12A after the jurisdictional High Court has declared Section 12Amandatory also, the plaintiff will not be entitled to the relief.85. In Civil Appeal arising out of SLP (C) No. 14697 of 2021Dtaking note of the fact that it is case where the appellant would havesucceeded and the plaint rejected, it is also necessary to order thefollowing. The written statement filed by the appellant shall be treatedas the application for leave to defend filed within time within the meaningof Order XXXVII and the matter considered on the said basis. Whilewe disapprove of the reasoning in the impugned orders we decline toEotherwise interfere with the orders and the two appeals shall standdisposed of accordingly. In Civil Appeal arising out of SLP (C)No.5737of 2022, we set aside the order directing payment of costs of Rs.10,000/-.The petition for permission to file SLP in SLP (C) Diary No. 29458 of2021 and the said SLP shall stand disposed of as already indicated in theFjudgment.

Bibhuti Bhushan Bose(Assisted by : Neha Sharma, LCRA)

Appeals disposed of.