S.12A | Commercial Court Need Not Order Mediation If Civil Court Had Referred Parties To Mediation Before Returning Suit: Karnataka High Court

The Karnataka High Court has reiterated that Commercial Court need not refer parties to pre-institution mediation under Section 12A Commercial Courts Act, where suit was earlier presented before the competent civil Court which had initiated efforts for mediation but subsequently the plaint was returned on grounds of lack of civil court's jurisdiction.

For context, Section 12A mandates pre-institution mediation and settlement between parties before a suit can be instituted. It reads that a suit which does not contemplate, any urgent interim relief, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation and settlement. 

Referring to decisions of the Supreme Court and Delhi High Court Justice M Nagaprasanna said:

"When Commercial O.S. is for the first time instituted before the Court, Section 12A becomes mandatory. Without the pre institution mediation and settlement, the suit in commercial O.S. cannot be entertained. The concerned Court should suo-motu reject the plaint and send the parties to mediation or keep the plaint in abeyance and send the parties to mediation.”

“In the event suit is presented before the competent civil Court and the competent civil Court has initiated efforts for mediation and those have failed, after such failure, realising the fact that the plaint ought to be presented before the commercial Court, the rigour of Section 12A need not all over again be followed by the commercial Court before entertaining the plaint, as there would have been substantial compliance of Section 12A, which mandates efforts to be made to resolve the dispute by way of settlement," it added. 

Background

The plaintiff Jayashri R Kamath had instituted a suit seeking delivery of vacant possession of the suit schedule property and clearance of arrears of rent. In the suit, for about 6 months, the matter was adjourned for settlement between the parties. Later an application came to be filed for return of the plaint on the ground that the issue in the lis has to be adjudicated before the Commercial Court under the Commercial Courts Act, 2015.

The application was allowed and the plaint was returned to be presented before the Commercial Court. It then becomes a commercial original suit following which the petitioner P Vasudeva Kamath who is the defendant in the suit, filed an application under Order VII Rule 11 of the CPC seeking rejection of the plaint on the score it is barred by law, as the mandate of the Commercial Courts Act insofar as it concerns Section 12A is not followed. The same came to be rejected against which Kamath moved the high court. 

The petitioner argued that the mandate of law is that pre-institution mediation and settlement as per Section 12A is mandatory. It is immaterial if settlement talks were on before the plaint was presented before the Commercial Court. Unless Section 12A is preceded before entertainment of the suit, the commercial O.S. is not maintainable.

The respondents argued that all nuances of pre-institution mediation and settlement had already taken place before the concerned Court when it was at the stage of original suit and to send it back again for nothing would become a travesty.

Findings

Referring to Section 12A the court said, “The soul of the provision is to avoid multiplicity of litigation. If parties could not settle prior to institution of the suit, an opportunity to arrive at such a settlement must be afforded.”

Further the court referred to the order sheet maintained before the civil court and said “From January to April 2024 the matter was adjourned on several occasions for the purpose of talks of settlement and recording of settlement. In June 2024 the parties submitted failure of talks of settlement. Then the Court posted the matter for plaintiff's evidence. At that point in time, an application is preferred for return of plaint to be presented before the Commercial Court.”

It emphasized that “The parties are the same, but the Court is different. Talks of settlement had gone on for four months and it had failed. The defendants who are sought to be evicted from the premises are now wanting to buy time by resorting to these methods, notwithstanding failure of settlement.”

The court held “No fault can be found with the order that is passed by the concerned Court rejecting the application filed by the defendants/petitioners under Order VII Rule 11 of the CPC. There is no travesty found in the order for this Court to entertain the petition under Article 227 of the Constitution of India.”

The court dismissed the plea. 

Appearance: Senior Counsel Vigneshwar S. Shastri a/w Advocate Dinesh Kumar Rao K for for Petitioner

Senior Counsel Dhananjay V. Joshi a/w Advocate Ajay Prabhu M for Respondent.

Citation No: 2025 LiveLaw (Kar) 216

Case Title: P Vasudeva Kamath & ANR AND Jayashri R Kamath

Case No: WRIT PETITION No.9697 OF 2025

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