The Supreme Court upheld the mandatory nature of Section 12A of the Commercial Courts Act, 2015, requiring pre-institution mediation for commercial suits unless urgent interim relief is sought. However, it clarified that non-compliance before August 20, 2022 (the date of its earlier ruling in Patil Automation) does not warrant plaint rejection—instead, courts may refer parties to mediation while keeping suits in abeyance. The judgment harmonizes procedural rigor with practical enforcement, ensuring mediation’s role in reducing litigation backlog without unduly penalizing past filings.
Facts Of The Case:
The case arose from a money suit filed by the Union of India against M/s Dhanbad Fuels Pvt. Ltd. in the Commercial Court, Alipore, seeking recovery of ₹8.73 crores as differential freight and penalty. The suit was filed on August 9, 2019, without seeking urgent interim relief or prior mediation under Section 12A of the Commercial Courts Act, 2015. The defendant raised a preliminary objection, arguing that the suit was not maintainable due to non-compliance with mandatory pre-institution mediation. The Commercial Court rejected the defendant’s application under Order VII Rule 11 CPC, holding that the plea was belated and that proper mediation infrastructure was lacking at the time of filing. Instead, it directed post-institution mediation.
On appeal, the Calcutta High Court upheld the decision but modified the mediation process, ordering the suit to be kept in abeyance for seven months while referring the parties to the District Legal Services Authority for mediation. The defendant then approached the Supreme Court, contending that the plaint should have been rejected outright for violating Section 12A. The Supreme Court dismissed the appeal, ruling that while pre-litigation mediation is mandatory, suits filed before its August 2022 clarification in Patil Automation need not be rejected—instead, courts may defer proceedings for mediation to avoid injustice.
Procedural History:
The procedural history of this case traces a structured judicial journey through multiple courts. The dispute originated when the Union of India filed Money Suit No. 28 of 2019 before the Commercial Court at Alipore on 9th August 2019, seeking recovery of ₹8.73 crores from M/s Dhanbad Fuels Pvt. Ltd. without prior mediation under Section 12A of the Commercial Courts Act, 2015. The defendant raised this jurisdictional defect through a written statement on 20th December 2019 and subsequently filed an application under Order VII Rule 11(d) CPC on 30th September 2020, seeking plaint rejection. The Commercial Court rejected this application on 21st December 2020, noting the belated challenge and infrastructural unpreparedness for mediation when the suit was filed, while paradoxically ordering post-institution mediation.
The defendant’s Civil Revision Application (C.O. No. 1678 of 2020) before the Calcutta High Court resulted in a modified order dated 22nd February 2021, which kept the suit in abeyance for mediation through proper channels under the PIMS Rules. The matter then reached the Supreme Court via SLP(C) No. 4980/2021, where it was converted to Civil Appeal No. 6846/2025. The apex court’s judgment dated 15th May 2025 finally settled the controversy by upholding the High Court’s pragmatic approach – recognizing Section 12A’s mandatory character prospectively from its Patil Automation (2022) clarification, while validating the course adopted for pre-clarification filings through abeyance and mediation instead of outright rejection. This layered adjudication reflects the judiciary’s balanced evolution in implementing the mediation mandate.
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Court Observation:
The Supreme Court made several crucial observations while deciding this case. First, it reaffirmed that Section 12A of the Commercial Courts Act is mandatory, requiring parties to exhaust pre-institution mediation before filing commercial suits, unless urgent interim relief is sought. The Court noted this provision aims to reduce case backlog and promote alternative dispute resolution.
Significantly, the Bench observed that while the mandatory nature of Section 12A relates back to the 2018 amendment, the consequence of plaint rejection for non-compliance would only apply prospectively from August 20, 2022 (the date of its Patil Automation judgment). This created a balanced approach – recognizing the legislative intent while preventing injustice to parties who filed suits during the initial implementation phase when mediation infrastructure was still developing.
The Court emphasized that post-institution mediation could be ordered for suits filed before the 2022 clarification, keeping the proceedings in abeyance during mediation. It distinguished this from pre-institution mediation, noting such flexibility was necessary during the “teething problems” of the new system. The judgment also clarified that urgent interim relief must be genuine and not just a tactic to bypass mediation, though courts should examine this holistically from the plaintiff’s perspective.
Finally, the Bench highlighted the equitable principle of lex non cogit ad impossibilia (law does not demand the impossible), recognizing the practical challenges in immediately implementing the mediation requirement nationwide. These observations collectively shaped a pragmatic interpretation that respects both the statute’s mandatory character and ground realities of legal reform implementation.
Final Decision & Judgement:
The Supreme Court dismissed the appeal and upheld the Calcutta High Court’s decision in its final judgment. The Bench ruled that while Section 12A of the Commercial Courts Act is indeed mandatory, the remedy of plaint rejection for non-compliance would only apply prospectively to suits filed after August 20, 2022 (the date of its earlier Patil Automation judgment). For cases like the present one, filed before this cutoff date, the Court approved keeping the suit in abeyance while directing the parties to undergo mediation – a pragmatic solution that balanced statutory compliance with practical considerations.
The judgment clarified that genuine attempts at mediation must be made, either pre-institution (for new cases) or through court-ordered mediation (for pending cases filed before 2022). It emphasized that this approach respected the legislative intent behind Section 12A while avoiding injustice to parties who acted in good faith during the initial implementation phase of the mediation framework. The Court also directed its registry to circulate the judgment to all High Courts, ensuring uniform implementation of this nuanced interpretation across India’s commercial courts. This decision thus established an important precedent for transitional cases under the evolving commercial dispute resolution framework.
Case Details:
Case Title: M/s Dhanbad Fuels Private Limited vs. Union of India & Anr. Citation:(2025)INSC 696 Civil Appeal No.:Civil Appeal No. 6846 of 2025 Date of Judgment: 15th May 2025 Bench: Justice J.B. Pardiwala & Justice R. Mahadevan
Download The Judgement Here