“Prospective Enforcement” of Mandatory Pre-Institution Mediation under Section 12A: A Comprehensive Commentary on M/S Dhanbad Fuels Private Limited v. Union of India (2025 INSC 696)

1. Introduction

The Supreme Court’s decision in M/S Dhanbad Fuels Private Limited v. Union of India & Anr. delivers the first authoritative exposition after Patil Automation v. Rakheja Engineers on how courts should treat commercial suits filed before 20 August 2022 without complying with the mandatory pre-institution mediation requirement in Section 12A of the Commercial Courts Act, 2015 (CCA).

The litigation arose out of a money suit (Rs 8.73 crores) filed on 09 Aug 2019 by the Union of India (Railways) to recover differential freight and penalty from Dhanbad Fuels. The defendant objected, contending that the suit was barred by Section 12A because no pre-institution mediation (PIM) had been attempted. Both the Commercial Court and the Calcutta High Court refused to reject the plaint; instead they kept the suit in abeyance and directed parties to mediation. The defendant appealed to the Supreme Court.

The judgment—authored by Pardiwala J.—upholds the High Court’s approach, crystallises the inter-play between Section 12A, Order VII Rule 11 CPC, and the doctrine of prospective over-ruling, and sets out an operational roadmap for commercial courts country-wide.

2. Summary of the Judgment

• Mandatory nature reaffirmed: Section 12A is mandatory; ordinarily, a plaint filed in breach must be rejected under Order VII r 11.
• Prospective cut-off respected: Following Patil Automation, rejection is compulsory only for suits instituted on or after 20 Aug 2022.
• Approach for pre-cut-off suits: For suits filed earlier, courts cannot reject the plaint merely because PIM was not attempted; instead they should (i) keep the suit in abeyance and (ii) refer parties to a time-bound mediation under the PIMS Rules, 2018 and applicable SOPs.
• No “urgent-interim” plea: The Union had not sought any urgent interim relief; hence Section 12A squarely applied.
• Infrastructure vacuum recognised: At the time of filing (2019) West Bengal lacked trained mediators/SOP; applying the maxim lex non cogit ad impossibilia, the Court held that Union could not have complied then.
• Defendant’s application belated: Order VII Rule 11 can be invoked at any stage, but in the present context the defendant’s plea did not override the prospective shield created by Patil Automation.
• Outcome: Appeal dismissed; mediation to proceed within the statutory 3 + 2 months; suit to revive thereafter if necessary.

3. Analysis

3.1 Precedents Cited and their Influence

1. Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd., (2022) 10 SCC 1 – Found Section 12A mandatory; ordered rejection under O-VII r 11; but prospectively effective from 20-08-2022. The present Bench adopts Patil’s ratio in toto, treating it as the governing framework.
2. Yamini Manohar v. T.K.D. Keerthi, (2024) 5 SCC 815 – Interprets the phrase “does not contemplate any urgent interim relief”; provides the test for bona fide urgency. Used here to emphasise that Union’s plaint lacked such urgency.
3. Raj Kumar Dey v. Tarapada Dey, (1987) 4 SCC 398 and U.P. SRTC v. Imtiaz Hussain, (2006) 1 SCC 380 – Authorities for the maxim lex non cogit ad impossibilia; used to excuse non-compliance where mediation infrastructure was absent.
4. Popat and Kotecha Property v. SBI Staff Assn., (2005) 7 SCC 510 and Madanuri Sri Rama Chandra Murthy v. Syed Jalal, (2017) 13 SCC 174 – Clarify that Order VII r 11 can be applied suo motu at any stage; cited to show power existed but discretion differs post-Patil.

3.2 Court’s Legal Reasoning

1. Statutory Interpretation – Language of Section 12A (“shall not be instituted… unless”) is unambiguously imperative. – However, Patil’s prospective overruling acts as a temporal filter: only post-20.08.2022 filings attract rejection.
2. Doctrine of Prospective Over-ruling – Rooted in Golak Nath (1967); refined in Keshavananda Bharati and later cases. – Court affirms that while Patil “discovered” the true law, justice demanded protecting suits filed under earlier uncertainty.
3. Balancing Equities & Access to Justice – Rejection would force the Union to pay fresh court-fees and restart litigation despite a 30-year limitation. This would burden the public exchequer and stultify “ease of doing business”—the very objective of CCA.
4. Infrastructure Reality – Detailed timeline shows State of West Bengal notified mediator panel/SOP only in Dec 2020—long after the suit. Hence compliance was factually impossible (maxim applied).
5. Operational Directive – Sets out a refined two-limb test for courts: • When was the suit instituted? • Does it seek urgent interim relief? Depending on answers, the court must either reject, or hold in abeyance and compel mediation.

3.3 Impact of the Decision

• Template for pending suits: Thousands of commercial suits filed between 03 Jul 2018 and 19 Aug 2022 now have a clear procedural path—courts need not dismiss them; they must pause and refer.
• Uniformity across jurisdictions: Conflicting High Court views (Calcutta, Madras, Delhi, Bombay, etc.) now stand harmonised.
• Strengthens Mediation Culture: Even where statutory default occurred, parties are still nudged towards settlement, furthering the CCA’s objective and complementing the upcoming Mediation Act, 2023.
• Administrative Implications: • State Legal Services Authorities must maintain functional mediation panels. • Commercial Courts must develop internal SOPs to “keep suits in abeyance” seamlessly. • Lawyers must advise clients early about Section 12A to avoid dismissal post-cut-off.
• Strategic Litigation Behaviour: Defendants can no longer delay raising Section 12A objections in legacy suits hoping for outright dismissal; best they can achieve is a mediation referral.

4. Complex Concepts Simplified

Section 12A CCA

Introduced in 2018; bars filing of a commercial suit (above ₹3 lakh) unless the plaintiff first tries compulsory pre-institution mediation (PIM), unless the suit seeks “urgent interim relief”.

Order VII Rule 11 CPC

Empowers courts to reject a plaint at any stage on specified grounds; clause (d) covers suits “barred by any law”. After Patil Automation, non-compliance with Section 12A is one such bar.

Prospective Over-ruling

A judicial device allowing a new declaration of law to apply only to future causes or acts, protecting past transactions from disruption—used sparingly to avoid chaos.

Urgent Interim Relief Test

From Yamini Manohar: court must see, from plaintiff’s standpoint, whether immediate protection is genuinely needed; absence of such plea triggers Section 12A.

lex non cogit ad impossibilia

“The law compels not the impossible.” If compliance was impossible (e.g., no mediator panel existed), courts will not penalise the party.

5. Conclusion

The Supreme Court has now provided a definitive algorithm for commercial courts faced with Section 12A objections:

1. Identify the date of institution. • Post-20 Aug 2022 → non-compliance = reject plaint. • Pre-20 Aug 2022 → see next steps.
2. Check for urgent interim relief. • If genuinely contemplated → suit may proceed. • If not → keep suit in abeyance; refer to mediation (time-bound).
3. Upon mediation failure → resume trial; limitation stands protected; prior court-fees preserved.

By endorsing the High Court’s pragmatic approach, the Court advances three simultaneous goals: fidelity to legislative mandate, judicial economy, and promotion of consensual dispute resolution. Importantly, it prevents a wholesale procedural massacre of legacy disputes while still vindicating the centrality of pre-institution mediation in India’s commercial justice architecture.

— Prepared by “Lex-Analytica”
(Comprehensive Legal Commentary Series)