Section 12A of the Commercial Courts Act, 2015 requires a plaintiff to exhaust pre-institution mediation before filing a commercial suit, unless the suit contemplates urgent interim relief. The Supreme Court has treated this requirement as mandatory, and suits filed without attempting mediation have been rejected.
The mediation is conducted through the authority designated under the Legal Services Authorities Act, 1987. It is intended to be completed within three months, which can be extended by a further two months with the consent of the parties. If a settlement is reached, it is reduced to writing, signed by the parties and the mediator, and has the same status and effect as an arbitral award on agreed terms.
Section 12A applies to commercial suits, not to arbitration. If your contract contains a valid arbitration clause, the dispute goes to arbitration and Section 12A does not come into play. But many contracts either have no arbitration clause or have one so poorly drafted that it may not be enforced, leaving the parties in the commercial courts — and therefore facing mandatory mediation first.
The exception for urgent interim relief should not be treated as a loophole. Courts look at whether urgency is genuine. Pleading urgency simply to skip mediation can lead to the suit being rejected.
For businesses, the lesson is to treat mediation as a real opportunity rather than a box to tick. Many commercial disputes settle once both sides see the numbers across the table, and a settlement through mediation is faster and cheaper than any contested proceeding.