|
Powered by AltAlpha AI
|
Jayanti Dhingra is a third-year law student at O.P. Jindal Global University, Sonipat.
Section 12A was incorporated through the 2018 Amendment of the Commercial Courts Act, 2015 (CCA) making it mandatory to have pre-institution mediation before filing a commercial suit. The Section was incorporated to reduce the burden of cases in courts and encourage parties to take arbitration as an alternative to court systems.
Recently the Calcutta High Court in the case of Proactive Ship Management Pvt. Ltd. v. Owners and Parties interested in the Vessel Green Ocean read the literal words of Section 12A of the Act to conclude that the plaintiff must exhaust the remedy of pre-institution mediation except in the case of urgent interim relief or where the court dispenses with the mandate. Urgent interim relief should be determined “at the time of institution of suit” and so, the same cannot be sought post the institution of the suit. The phrase “which does not contemplate any urgent interim relief” written under Section 12A(1) demonstrates that the necessity behind giving an urgent interim relief is an exception. The literal interpretation of the Section would show the mandatory character of Section 12A by use of the word ‘shall’. This article tries to delineate what is the existing jurisprudence on mandatory pre-institution mediation and what should be the way forward for the same.
Setting the era for Mandatory Pre-Institution Mediation
Before the introduction of Section 12A, Courts had been trying to adopt an arbitration-pro approach. In 1909, Section 89 of The Code of Civil Procedure, 1908 was amended to allow litigants for an alternate remedy to avail before filing the suit. The phrase “where it appears to the court that there exist elements of a settlement” in Section 89 left it to the discretion of the parties to avail this provision. However, with the incorporation of Section 12A, it is considered mandatory to undertake mediation.
The case of Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd.(Patil Automation case) tried to resolve the conundrum of whether a pre-institution mediation is compulsory or optional. The Court looked at the overall objective and upheld the intention of the Legislature behind incorporating such provision. It held Section 12A to be mandatory because if the provision is held to be directory, then it would be a ‘blatant defeat’ of the objective of Section 12A. Now that the Court held it to be mandatory, it is also important to look at the exceptions that can be carved out of it – namely “urgent interim relief”.
The Courts in the Patil Automation case, however, did not dwell upon what comes within the ambit of “urgent interim relief”. In case of K. Varathan Vs. Mr. Prakash Babu Nakundhi Reddy, the Madras High Court clarified what does the expression “contemplation of urgent interim relief” mean. They tried to find out the meaning of these 4 terms separately – ‘contemplate’, ‘urgent’, ‘interim’ and ‘relief’ – because these have not been defined under the General Clauses Act, 1897. The Court laid importance on these criteria – whether the matter is backed by application of mind, whether irreversible damage would be caused if Section 12A is not bypassed, whether the urgency is determined by the plaintiff’s own wrongdoing, if yes, then the plaintiff cannot take advantage of his own wrong, or whether the injury is imminent. But this case has also left a legal lacuna as it did not concede the wide discretion that the Commercial Division has.
In Yamini Manohar vs T K D Keerthi, the Court observed that no one has the “right to paralyze Section 12A”. It further held that “Camouflage and guise to bypass the statutory mandate of pre-litigation mediation should be checked when deception and falsity is apparent or established.” The word ‘contemplation’ means that the Court should be satisfied that an urgent interim relief is required, and everything that is submitted to the Court, ranging from facts to the arguments submitted by the parties, should point towards it. Therefore, the ultimate authority still vests upon the Courts to avoid any “artificial device” in the disguise of ‘urgent interim relief’ that the party might employ to bypass mediation.
Through these judgements, a higher benchmark has been set for resolving commercial disputes, but the Courts in such cases did not address the potential ramifications that it can cause to the disputing parties.
The Way Forward and Conclusion
In this backdrop, the constitutional and fundamental rights should not be forgotten; the mediation process is just a part of it, a subset of the broader range of rights which the alternative mechanisms of mediation cannot replace. There are certain ways where the Courts can adopt a more liberal approach towards commercial disputes. One is applying the doctrine of substantial compliance, rather than enforcing strict and absolute compliance, and the other is deviating from the literal interpretation of Section 12A and adopting a golden interpretation of the Section.
The doctrine of substantial compliance
Doctrine of substantial compliance has been propagated in the Bombay High Court decision of Ganga Taro Vazirani vs Deepak Raheja. It allowed substantial compliance of Section 12(A)(1) and not complete compliance. This has provided litigants some relief in contrast to the gruelling task of proving ‘urgent interim relief’. The court in this case said that “when parties have tried to resolve their disputes unsuccessfully, it would be futile to still drive the parties to pre-institution mediation.” Therefore, to prove that the provision has been substantially complied with, one has to prove that an unsuccessful attempt has already been made by the parties before approaching the court of law. A genuine attempt made by the parties is sufficient to fulfil Section 12A.
However, certain loopholes might creep in. The parties are supposed to resort to Legal Services Authorities for an attempt to mediate. But due to the digital era, Online Dispute Resolution (ODR) is also gaining prominence as an effective and a quick way to resolving disputes. The Arbitration and Conciliation (Amendment) Act, 2015 gave due recognition to electronic means of arbitration. ODR provides for an easy alternative to mediate instead of overburdening the courts, and secondly it provides the parties an option to appoint the mediators of their choice. In such cases, question arises on when the Courts can declare that a genuine attempt has been made to mediate as per Section 12A. One would have to prove that a bona fide attempt has been made to reconcile with the help of a skilled and an impartial mediator. It should not be equated with an informal exchange between the parties. Therefore, one of the major disadvantages is where to draw a line between substantial and a tenuous form of compliance.
Therefore, though the stance taken by the Courts in this case can be problematic, the author believes that the Courts’ approach is right as it is inclining more towards the interest of the parties rather than imposing a higher benchmark of absolute compliance of Section 12A.
The Golden interpretation rule
As has been already discussed, the literal interpretation of the Section as being mandatory because of the use of the word “shall” can be disadvantageous to the disputing parties. Applying the golden rule of interpretation can help the Courts to go beyond the mere face value of the Section to look at the broader purpose of the Section. Courts are trying to encourage pre-litigation mediation in the country. This is also evident from Section 5 of the Mediation Act, 2023. Section 5 provides that the suits of all civil and criminal nature should be preceded by a mediation, and it also accepts the jurisdiction of Section 12A of CCA. Therefore, to further the intentions of the legislature, it is important to place it as a subset of the constitutional and fundamental rights of citizens.
In conclusion, the interests of the parties are of utmost concern and the Courts should ensure that access to justice is not hurdled by such provisions. The author believes that substantially fulfilling the requirements of Section 12A should be the benchmark that the courts should set, keeping in mind the intent behind Section 12A. Moreover, it should not be a contest between interim relief and mediation as two polar opposites; rather the two must work together to give justice effectively. The essence of mediation is mutual attempt to resolve the conflict. Therefore, the fundamental tenet of mediation is consent, and not compulsion.
