Table of Contents
Delhi HC Mandates Pre-Institution Mediation for Counter-Claims in Commercial Suits
The Delhi High Court in the case reported in Harbans Lal v. Mukandi Lal recently opined that pre-institution mediation particularly under Section 12A of the Commercial Courts Act, 2015 is compulsory even in the cases where counter-claims exist in commercial cases. [CA: 2019 (LLM) The case involves Aditya Birla Fashion And Retail Limited v. Mrs Saroj Tandon].
Section 12A provides that, any suit that does not require an application for adjournment for interim orders, ought not be initiated without first undergoing pre-institution mediation.
The learned judge of the apex court Justice Manoj Jain opined that a counter-claim like any other commercial suit has to traverse all the legal formalities prescribed by law. The Court held,
The Act for establishment of Commercial Courts, 2015 and Civil Procedure Code does not permit any such different treatment for any such counter-claim… The rules of the game have to remain the same and similar throughout the trial process until the case gets finally disposed off and yes, for counter-claim as well.
Justice Manoj Jain
Justice Manoj Jain
The respondent in this case is the owner of a shop while the petitioner is the lessee of the same. Due to the effects of COVID-19 the petitioner has had to close the shop and stop the lease. But unfortunately the respondent has not refunded any security amount deposited by the petitioner.
In accordance with the requirement of the commercial cases, the petitioner initially formulated an application under Section 12A, which is the remedy of the dispute resolution through the process of mediation before filing the suit before the Saket district court. The respondent failed to attend the hearing of the case. In turn, the petitioner brought a recovery suit before the Delhi High Court.
In the High Court, the respondent appeared and he filed cross claims in the same suit without any appearance to pre-institution mediation. Also the petitioner prayed that the counter-claim be dismissed and the trial court affirmed the same. Dissatisfied with the above said decisions, the petitioner submitted a writ petition in Delhi High court.
The controversy that arose for determination by the High Court was whether Section 12A is directory or mandatory where counter claims are made in a commercial dispute that does not seek any ex parte order.
The High Court dismissed some assertion of the trial court that while that process was requisite in order to start a suit, it was not required for a counter-claim. It also stated that the artefact and counter-reality’s opposite party is endowed with an absolute legal right to mediate before the counter-claim is instituted.
Thus, it would not mean and indicate that because such option was exercised/ tried to be exercised at the initial level and has failed or resulted in a ‘non-starter’ position, any counter-claimant can directly file a commercial suit without ANY kind of relief.
Besides, the Court noted that in any commercial dispute, counter-claims have to be compulsory in terms of the rules and procedures pertaining to commercial suits. According to the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 the Court stated,
“… Such was the scheme of the Rules and the intention of the Legislature had never been to eliminate the rule on pre-institution mediation and settlement for any party and where there is a commercial dispute.”
Thus, the respondent’s counsel suggested that where the both parties have already mediated the matter at the stage of the institution of the originally filed suit and such process has been unsuccessful, the the same parties cannot be ordered to go through the entire process of mediation all over again.
The Court also pointed out that during the first stage of mediation this was forwarded twice to the counter-claimant to participate but this chosen not to do so. The same was labelled as dodging the obligatory requirement in availing for his own suit any such remedy, under the excuse that such has been exhausted according to the Court. It thus held,
“Therefore above said discussion, it becomes quite evident that the pre-institution mediation is must for every suit involving a commercial suit and no dichotomy can be made when the cross suit/counter claim also involves a commercial dispute & is not intended to seek any urgent relief.”
For the appellants, the advocates Varun Sharma, Akhil B Kukreja and Sanchita Chamoli were present.
The respondents were represented by advocates Aastha Dhawan, Shalini Bhardwaj and Aditya Sharma.
