Mandatory Pre-Institution Mediation under Section 12A Applies Prospectively from August 20, 2022

The Petitioner originally instituted a money suit (No. 03 of 2016) against the Respondents in August 2016

After a judgment in 2018 and subsequent appeals, a Division Bench of the High Court of Sikkim transferred the matter to the Commercial Court in November 2021 to be tried under the Commercial Courts Act, 2015

On 08.07.2025, the Commercial Court at Namchi disposed of the suit, holding that the Petitioner failed to comply with the mandatory pre-institution mediation required under Section 12A of the Act

The Petitioner challenged this order via Article 227 of the Constitution, arguing that since the suit was instituted in 2016—prior to the 2018 amendment introducing Section 12A—the mandate could not be applied retrospectively

1. Whether the mandatory pre-institution mediation under Section 12A of the Commercial Courts Act, 2015, applies to a suit originally instituted in 2016, prior to the provision's enactment and the Supreme Court's declaration of its mandatory nature

2. Whether the Commercial Court was correct in rejecting the suit for non-compliance with Section 12A given the timeline of the litigation

Section 12A of the Commercial Courts Act, 2015, which mandates pre-institution mediation unless urgent interim relief is sought

M/s Patil Automation Private Limited & Ors. v. Rakheja Engineers Private Limited (2022), which declared Section 12A mandatory but effective prospectively from 20.08.2022

M/s Dhanbad Fuels Private Limited v. Union of India (2025), which clarified that suits filed prior to 20.08.2022 without complying with Section 12A are protected from dismissal and may instead be kept in abeyance for mediation

The Court reasoned that while Section 12A is imperative, its mandatory application is governed by the timeline set by the Supreme Court

It observed that the Petitioner’s money suit was originally filed on 18.08.2016, long before the 2018 amendment and the 20.08.2022 cutoff date for prospective application

Consequently, the Commercial Court erred in applying the "mandatory" rule retrospectively to dismiss a suit that was already pending in various forms prior to the relevant legal deadline

The Court noted that for such transitional cases, the appropriate procedure is to seek mediation while the suit is in abeyance rather than disposing of the case entirely

It held that the mandatory bar of Section 12A does not apply to the Petitioner’s suit as it was instituted well before 20.08.2022

The Court restored Commercial Suit Case No. 01 of 2021 to the files of the Commercial Court for disposal as per law but granted the Commercial Court the liberty to keep the suit in abeyance to direct the parties toward post-institution mediation in accordance with the 2020 Standard Operating Procedure