A defendant who refuses court-directed pre-institution mediation cannot seek rejection of the plaint for Section 12A non-compliance.

The plaintiff sued to recover amounts allegedly due for IT hardware and software supplied to the defendants, claiming ₹2,29,30,180, including contractual interest.

It sought exemption from pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 (“CC Act”), but the Single Judge instead referred the parties to mediation.

The defendants did not participate, and a Non-Starter Report was issued.

The defendants’ application under Order VII Rule 11 CPC, seeking rejection of the plaint for non-compliance with Section 12A and lack of pecuniary jurisdiction, was dismissed.

The defendants appealed under Section 13(1A) of the CC Act.

1. Whether the plaint was liable to be rejected under Order VII Rule 11 CPC for failure to comply with Section 12A, notwithstanding the court-directed mediation and the defendants’ non-participation.

2. Whether the suit fell below the Commercial Court’s pecuniary jurisdiction because the defendants disputed the amount claimed and asserted a lower outstanding balance.

3. Whether an appeal lay from the dismissal of the Order VII Rule 11 application.

Section 12A of the CC Act makes pre-institution mediation mandatory for suits that do not contemplate urgent interim relief; under Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. and M/s Dhanbad Fuels Pvt. Ltd. v. Union of India, post-20 August 2022 suits instituted without compliance are liable to rejection under Order VII Rule 11 CPC.

The court also applied the principle that a defendant cannot take advantage of its own refusal to participate in a mediation opportunity afforded by the court.

For an Order VII Rule 11 application, the court considers the plaint and its supporting documents, not the defendant’s defence; pecuniary jurisdiction is determined by the valuation pleaded in the plaint.

Under Section 12(1)(a) of the CC Act, a money claim is valued inclusive of interest computed up to the date of filing.

The proviso to Section 13(1A) limits appeals from orders of a Commercial Division to specified orders, including those enumerated in Order XLIII CPC and Section 37 of the Arbitration and Conciliation Act, 1996.

Although the court acknowledged that Section 12A is mandatory, it held that the plaintiff had not simply bypassed mediation: the Single Judge referred the parties to pre-institution mediation, the defendants declined to participate, and they had also stated that they were unwilling to mediate in the earlier appeal.

In those circumstances, allowing the defendants to seek rejection for non-compliance would let them benefit from their own refusal; rejection would also serve no useful purpose because the plaintiff could immediately refile after the failed mediation.

The defendants’ claimed balance of ₹1,21,96,712 was a matter of defence and could not displace the plaint’s pleaded valuation at this stage.

The pleaded claim of ₹2,29,30,180, including contractual interest, exceeded the applicable threshold, leaving entitlement to the claimed principal and interest for trial.

The court observed that the appeal’s maintainability was seriously doubtful, but proceeded to consider and reject the merits.

It rejected both objections, dismissed the appeal and pending applications, and clarified that it had expressed no opinion on the merits of the suit.