Pre-Institution Mediation in Commercial Suits Under Section 12A

Is pre-institution mediation compulsory before a commercial suit?

Yes, for any commercial suit that does not contemplate urgent interim relief. Section 12A(1) says such a suit 'shall not be instituted' unless the plaintiff exhausts pre-institution mediation in the manner prescribed by the rules. For four years after the provision came in, in 2018, courts were divided on whether this was a real bar or a direction that could be cured later. The Supreme Court settled it in Patil Automation v Rakheja Engineers (2022): the requirement is mandatory, and a suit filed in breach of it must be rejected under Order 7 rule 11 of the CPC, which the court can do on its own.

To avoid unsettling thousands of pending cases, the court made its ruling effective from 20 August 2022. Suits filed before that date were not to be rejected on this ground. In Dhanbad Fuels v Union of India (2025), the Supreme Court confirmed that approach and directed that an older suit be kept in abeyance while the parties tried mediation within a fixed time, rather than being thrown out.

The reason behind the rule is practical. Commercial courts are meant to decide business disputes quickly, and a large share of those disputes are about money that both sides know is owed in some amount. A structured conversation before a mediator, at little cost and within a fixed time, settles some of them and narrows others. Whatever you think of the policy, the rule is now firmly in place, and a plaint filed without it is a plaint at risk.

Which suits need section 12A mediation?

A suit needs pre-institution mediation if it is a commercial dispute, of the specified value, and does not seek urgent interim relief. 'Commercial dispute' is defined widely in section 2(1)(c) of the Act: ordinary transactions of merchants, bankers and traders, export and import, supply of goods and services, distribution and franchising, agency, partnership and shareholder agreements, technology and software contracts, construction and infrastructure contracts, intellectual property, insurance, and agreements relating to immovable property used exclusively in trade or commerce, among others. The specified value is ₹3 lakh or more.

That covers most suits a business files against another business. It includes summary suits under Order 37 for unpaid invoices and loans, which are often filed on the assumption that a summary procedure is exempt. It is not. A commercial summary suit that seeks no urgent interim relief needs pre-institution mediation like any other. Our post on summary suits under Order 37 explains that procedure.

Section 12A applies to suits. It does not apply to execution petitions, to applications under the Arbitration Act such as section 9, 11 or 34 petitions, or to proceedings before tribunals such as the NCLT, DRT or a consumer commission. Disputes below ₹3 lakh, or that are not commercial, such as a family property partition or a tenancy of a residential flat, go to the ordinary civil courts without this step, though the court may still refer the parties to mediation later under section 89 of the CPC.

Does your case need pre-institution mediation?

General guidance. The plaint, the prayers and the facts decide each case.

What counts as "urgent interim relief" under section 12A?

The exception applies when the suit genuinely contemplates urgent interim relief, such as an injunction to stop continuing infringement, to prevent the sale of disputed goods, or to protect a property or fund from being dissipated. The plaintiff files the suit along with an application for interim relief, and the court looks at whether that relief is a real need or a device to skip mediation.

In Yamini Manohar v T.K.D. Keerthi (2023), the Supreme Court said the commercial court should examine the nature and subject matter of the suit, the cause of action and the prayer for interim relief, and should be satisfied that the plea for urgent relief is not a disguise or camouflage to avoid section 12A. The test is from the plaintiff's standpoint and does not require the plaintiff to show that he will win the interim application. But a plaint that adds an injunction prayer to a plain money claim, with nothing to suggest any urgency, will not pass.

Delay matters. A plaintiff who knew of the problem for a year and did nothing will struggle to argue urgency on the day of filing. In intellectual property suits, the Delhi High Court has generally accepted that continuing infringement can justify urgent relief even if it has gone on for some time, because each sale is a fresh injury. In money suits, urgency usually means a real threat that the defendant will dispose of assets, which the plaint must explain with facts, not adjectives.

If the court finds that urgent relief was not genuinely contemplated, the plaint is liable to be rejected. It is not enough for the court to refuse the interim application; the question is whether the suit should have been filed at all without mediation. Draft with that in mind: if the urgency is real, put the facts showing it at the start of the plaint and in a separate application, supported by documents.

How to apply for pre-institution mediation in Delhi NCR

The procedure is laid down in the Commercial Courts (Pre-Institution Mediation and Settlement) Rules 2018. The details of filing differ a little between authorities, so check the current practice with the legal services authority where you will apply.

1. Identify the right authority

   Apply to the legal services authority with jurisdiction where the suit would be filed. For district-level commercial suits in Delhi, that is the District Legal Services Authority of the relevant district; in Noida and Ghaziabad, the DLSA at the Gautam Buddh Nagar or Ghaziabad district court. For suits to be filed on the original side of the Delhi High Court, check with the High Court's legal services set-up.

2. File the application

   The application is made in the prescribed form, giving the parties, their addresses and contact details, a short statement of the dispute and the amount claimed. It can be filed in person and, in many districts, online or by email. A modest fee fixed by the rules, scaled to the claim value, is payable; check the current schedule with the authority.

3. Notice to the other side

   The authority sends notice to the opposite party asking it to appear and give consent to mediation within the time fixed in the rules. If it does not respond, a final notice is sent. Give accurate addresses and email IDs, because a mediation that fails for want of service wastes weeks.

4. Non-starter or appointment of mediator

   If the opposite party does not appear after the final notice, or refuses to mediate, the authority treats the mediation as a non-starter and issues a report. If it appears and agrees, a mediator is assigned and a date fixed at the mediation centre.

5. Mediation sessions

   The mediator meets both sides together and separately, usually over a few sessions. Bring someone with authority to settle, the account statements and the key documents. Sessions are confidential.

6. Settlement or failure report

   If the parties settle, the terms are written down and signed by the parties and the mediator. If they do not, the mediator reports that the mediation failed. Either way, you get a document that closes the process.

7. File the suit with the report

   If there is no settlement, file the commercial suit and annex the non-starter or failure report to the plaint, stating in the plaint that section 12A has been complied with. Watch the limitation date, which resumes once the mediation ends.

What to prepare for the application and the mediation

What happens if the other side does not turn up?

The mediation ends as a non-starter, and you can file the suit. Section 12A requires the plaintiff to exhaust the remedy, not to make the defendant participate. If the opposite party ignores the notice and the final notice, the authority records that and issues a report, which is your proof of compliance. Many defendants, particularly those who do not dispute the debt but cannot or will not pay, simply do not appear.

That can feel like wasted time, but it is not entirely wasted. The non-starter report shows the court that the defendant refused a free and quick chance to resolve the matter, which can count when costs are decided at the end. And in a fair number of cases, the notice from a legal services authority prompts a call from the other side that a lawyer's notice did not.

The rules do not allow the authority to compel attendance or to decide the dispute. If you need a decision on the merits from a body that can rule without the other side's consent, that is the court, after the report, or arbitration if your contract provides for it.

How long does section 12A mediation take, and does limitation stop?

Section 12A(3) gives three months from the date of the application to complete the mediation, extendable by two months with the consent of the parties. In practice, a non-starter is often recorded within four to eight weeks, depending on how quickly notice is served. Where both sides participate, the full three months, and sometimes the extension, can be used.

The period during which the parties are occupied with pre-institution mediation is not counted for limitation. That protects a plaintiff whose limitation date falls during the mediation. But the exclusion covers only the mediation period itself. The time before you applied, and the time after the report, still count. If your three years for a money claim end in a fortnight, apply for mediation now and file the suit promptly after the report; do not sit on the report.

Our post on limitation periods for civil suits explains how the three-year period for money claims is computed, including how acknowledgments of debt and part payments extend it.

The provisions in one place

What happens if a suit was filed without mediation?

If the suit was filed on or after 20 August 2022, without pre-institution mediation and without a genuine need for urgent interim relief, the plaint is liable to be rejected, on the defendant's application or by the court on its own. The defendant should raise the point at the first opportunity, usually by an application under Order 7 rule 11 filed alongside the written statement, not in place of it.

For the plaintiff, rejection is not the end of the claim, because a fresh suit can be filed after mediation. The danger is limitation. If the cause of action arose close to three years before the rejection, the fresh suit may be time-barred, and the time spent in the defective suit is not automatically excluded. Plaintiffs facing this sometimes try to argue that the suit did seek urgent relief; if the record does not support that, the safer course is to start mediation immediately, before the court decides the application, so that a fresh suit can be filed quickly if needed.

For suits filed before 20 August 2022, the plaint should not be rejected on this ground. The Supreme Court's approach in 2025 suggests that a court may instead pause the suit and send the parties to mediation for a limited time.

Is a settlement in pre-institution mediation binding?

Yes. Under section 12A(5), a settlement reached in pre-institution mediation has the same status and effect as an arbitral award on agreed terms under section 30(4) of the Arbitration and Conciliation Act. That means it can be enforced as a decree under section 36 of that Act, through an execution petition, if the other side does not perform. Our post on enforcing an arbitral award as a decree explains how execution works.

Because the settlement will be enforced on its own words, draft it with care. State the exact amount, the dates and mode of each payment, interest on delay, what happens on default (usually that the whole balance or the original claim becomes payable at once), who bears costs, and that the settlement covers all claims arising out of the specified transactions, if that is what you intend. Avoid vague terms such as 'payment as per convenience' or 'subject to reconciliation'.

Do not sign a settlement that depends on something outside it, such as a separate oral understanding about future orders. If it matters, put it in the document. A party who signs a settlement and later finds it does not reflect the deal has very limited room to challenge it.

How to prepare for the mediation session

Treat it as a negotiation with a structured setting, not a formality. The mediator has no power to decide, but a good mediator tests both sides' positions in private sessions and helps them see the risks of litigation. Arrive with a clear account of what is owed and why, and a realistic view of how long a suit will take and what it will cost, including the time of your own staff.

Bring a decision-maker. Mediations fail surprisingly often because the person in the room cannot agree to anything beyond the opening figure. If you are a company, send someone with written authority to settle within a range. If the other side sends someone without authority, ask the mediator to record that and fix another date with the right person.

When Advocate Sadhna Singh prepares clients for these sessions, she asks them to settle three numbers in advance: the full claim, the figure they would accept today, and the figure below which a suit is clearly better. Having these in mind keeps the client from being drawn into a figure they regret, or from walking away from a settlement that was better than what a court would give.

Common mistakes with section 12A

• Adding a token injunction prayer. A money suit with an injunction application that has no real basis invites rejection of the whole plaint. If urgency is real, prove it with facts; if not, mediate first.
• Wrong party name or address. A notice sent to a company's old address, or naming a proprietor instead of the firm, can stall the process and leave you without a clean report.
• Applying to the wrong authority. Apply where the suit would actually be filed, so that the report matches the court.
• Sitting on the report. Limitation runs again once mediation ends. File the suit promptly.
• Sending someone without authority. A settlement cannot be signed by a person who has no power to bind the company, and the mediation may fail for that reason alone.
• A loosely drafted settlement. Without a default clause and clear dates, enforcing the settlement as an award becomes harder than it should be.
• Treating section 12A as covering arbitration. If the contract has an arbitration clause, the dispute goes to arbitration, and a suit may be referred there on the defendant's application under section 8 of the Arbitration Act.

Should a defendant take part in pre-institution mediation?

Usually yes, at least once. Appearing in mediation is not an admission of liability, and what is said there is confidential. It costs little and gives the defendant an early look at how the claimant sees the case, the documents it relies on and the figure it might accept. If the claim is partly justified, a settlement at this stage avoids a suit in which the defendant will face a tight timetable, including the 120-day limit for the written statement and the risk of summary judgment.

If the claim is baseless, attending and explaining why can still be useful, and a defendant that refused mediation should not be surprised if the court takes that into account on costs later. The exception is where a defendant has a separate proceeding it wants to protect, such as an arbitration it has already started; there, take advice on whether attending could create confusion about the forum.

A defendant who receives a section 12A notice should also check its own position on limitation and counter-claims, and gather its documents, because if mediation fails, the suit and its deadlines can follow within weeks.

How does section 12A fit with the Mediation Act 2023?

The Mediation Act 2023 is a general law on mediation, with provisions on mediated settlement agreements, mediation service providers and the Mediation Council of India. It also provides for amendments to section 12A to align pre-institution mediation with the new Act. Its provisions are being brought into force in parts, so before relying on any change to how section 12A mediation is conducted, check whether the relevant part has been notified. Until then, mediation under section 12A continues through the legal services authorities under the 2018 rules.

Our post on what the Mediation Act 2023 changes covers the new Act in more detail, and our page on alternate dispute resolution explains how mediation, conciliation, arbitration and Lok Adalat compare.

Before you apply for pre-institution mediation

• Confirm the dispute is commercial and the specified value is ₹3 lakh or more
• Check the contract for an arbitration clause
• Decide honestly whether urgent interim relief is needed, and if so, gather the facts that prove it
• Work out the limitation date and how much time is left
• Confirm the correct legal name, status and addresses of the other side
• Identify the court where the suit would be filed and the authority for that court
• Prepare the account statement and key documents
• Decide who will attend and what authority they will carry

What to do this week

If you are about to sue, check the limitation date first, then decide whether your case genuinely needs urgent interim relief. If it does not, file the mediation application with the right authority this week, with accurate details of the other side. If you have received a section 12A notice, gather your documents and decide who will attend.

When Advocate B.K. Singh is asked whether a commercial claim can skip mediation, he looks first at what the client actually needs the court to do in the next month. If the honest answer is 'nothing until judgment', the case goes to mediation. If you want an advocate to check whether your suit needs section 12A mediation and to prepare the application, the team at B.K. Singh & Associates can look at the papers through our online enquiry. Our page on civil law practice covers recovery and other suits more generally, and our post on unpaid invoice recovery options compares the routes open to a business that has not been paid.