1. Introduction

The landmark judgment in M/S Patil Automation Private Limited v. Rakheja Engineers Private Limited (2022 INSC 839) delivered by the Supreme Court of India on August 17, 2022, addresses a pivotal question in the realm of commercial litigation: the mandatory nature of pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015, as amended in 2018. The case primarily revolves around whether courts below erred in not mandating pre-litigation mediation before rejecting plaints in commercial disputes.

2. Summary of the Judgment

The Supreme Court, led by Justice K.M. Joseph, granted leave and delved into the core issue of the mandatory procedural requirements stipulated by Section 12A of the Commercial Courts Act. The appellant, M/S Patil Automation Pvt. Ltd., contested the injunction against filing a suit without undergoing pre-litigation mediation. The Supreme Court upheld the lower judiciary's stance that compliance with Section 12A is mandatory. Consequently, the Supreme Court set aside the impugned orders and affirmed that suits not adhering to the pre-litigation mediation mandate must be rejected under Order VII Rule 11 of the Civil Procedure Code, 1908 (CPC).

3. Analysis

3.1 Precedents Cited

The judgment references several pivotal cases to substantiate the mandatory nature of Section 12A:

• Ganga Tara Vazirani v. Deepak Raheja (2021 SCC OnLine Bom 195): Initially interpreted Section 12A as directory, allowing plaints to proceed without mandatory mediation.
• State of U.P. v. Babu Ram Upadhya AIR 1961 SC 751: Established that the word "shall" in statutes is prima facie mandatory unless context dictates otherwise.
• Bihari Chowdhary v. State of Bihar (1984) 2 SCC 627: Affirmed the mandatory character of similar procedural requirements under Section 80 of the CPC.
• Salem Advocate Bar Association v. Union of India (2005) 6 SCC 344: Reinforced the mandatory interpretation of procedural provisions aimed at fostering justice.
• Prem Lala Nahata v. Chandi Prasad Sikaria (2007) 2 SCC 551: Highlighted the distinction between mandatory and directory provisions, emphasizing the intent behind legislative language.

These precedents collectively underscore a judicial consensus that when statutes employ imperative language like "shall," especially in procedural contexts aimed at decongesting courts and expediting justice, such provisions are to be construed as mandatory.

3.2 Legal Reasoning

The Supreme Court's reasoning is anchored in multiple facets:

• Statutory Interpretation: The use of "shall" in Section 12A is imperative, aligning with the Act's objective to streamline commercial disputes.
• Legislative Intent: The amendment in 2018, reducing the monetary threshold and introducing mandatory mediation, reflects Parliament's intent to enhance the ease of doing business and alleviate court backlog.
• Comparison with Existing Laws: Analogies with Section 80 of the CPC and Section 69 of the Partnership Act, both treated as mandatory, reinforce the interpretation of Section 12A.
• Policy Considerations: Mandatory mediation serves public interest by promoting dispute resolution outside courts, thereby conserving judicial resources.
• Impact of Non-Compliance: Allowing suits without mediation undermines the Act's objectives, leading to potential docket congestion and delayed justice.

The Court meticulously dismantled the arguments posited by the appellant, particularly the notion that the absence of penal consequences rendered Section 12A directory. By juxtaposing Section 12A with precedential cases where similar procedural mandates were deemed mandatory, the Court solidified its stance.

3.3 Impact

The judgment has profound implications for future commercial litigations:

• Strict Adherence Required: Plaintiffs must now compulsorily engage in pre-litigation mediation before initiating suits that do not seek urgent interim relief.
• Judicial Efficiency: Courts will experience reduced docket burdens, allowing for swifter adjudication of essential cases.
• Enforcement of Mediation Agreements: Settlements achieved through mediation under Section 12A will carry the same weight as arbitral awards, enhancing their enforceability.
• Legal Strategy Shift: Legal practitioners will need to prioritize mediation strategies to align with statutory mandates, potentially reshaping litigation approaches.
• Policy Reinforcement: Upholding the mandatory nature of Section 12A supports legislative efforts to promote alternative dispute resolution mechanisms, aligning with global best practices.

4. Complex Concepts Simplified

4.1 Section 12A of the Commercial Courts Act, 2015

Section 12A mandates that before initiating a commercial lawsuit (for disputes not seeking urgent interim relief), the plaintiff must first engage in pre-litigation mediation. This process involves applying for mediation through a prescribed authority, participating in mediation sessions, and attempting to reach a settlement. If mediation fails or is deemed a non-starter, the suit can proceed.

4.2 Order VII Rule 11 of the Civil Procedure Code, 1908

This rule empowers courts to reject a plaint (the formal written complaint) on specific grounds, such as lack of cause of action or if the suit appears barred by any law. In the context of this judgment, non-compliance with Section 12A provided a legal basis for such rejection.

4.3 Mediation as an Alternative Dispute Resolution (ADR) Mechanism

Mediation is a facilitated negotiation process where an impartial mediator assists disputing parties in reaching a mutually agreeable solution. Unlike arbitration or litigation, mediation is non-binding unless parties formalize their agreement. Under Section 12A, successful mediation results in a settlement that holds the same legal standing as an arbitral award.

5. Conclusion

The Supreme Court's affirmation of the mandatory nature of Section 12A of the Commercial Courts Act, 2015, marks a significant stride towards enhancing the efficiency of India's judicial system in handling commercial disputes. By enforcing pre-litigation mediation, the judiciary not only aligns with legislative intent aimed at decongesting courts but also fosters a culture of amicable dispute resolution. This judgment underscores the judiciary's role in facilitating legislative objectives, ensuring that procedural mandates serve the broader purpose of delivering swift and equitable justice. Legal practitioners, businesses, and stakeholders must now rigorously incorporate mediation into their dispute resolution strategies to comply with statutory requirements and contribute to a more streamlined justice delivery mechanism.