Section 12A of the Commercial Courts Act mandates pre-institution mediation, but if both parties refuse to participate, the suit may proceed without being barred by law.

JUDGMENT

1. The instant appeal arises out of Order dated 07.04.2021, passed by the learned District Judge, Commercial Court-II, Shahdara, Karkardooma Courts, Delhi, in CS (COMM) 82/2019.

2. CS (COMM) 82/2019 was filed by the Appellant herein/Plaintiff for recovery of Rs.27,33,433/- from the Respondent herein/Defendant. Learned District Judge, Commercial Court-II, Shahdara, Karkardooma Courts, Delhi, vide Order impugned herein dismissed the Suit by allowing the application filed by the Respondent herein/Defendant under Order VII Rule 11(d) of the CPC on the ground of Section 12A of the Commercial Courts Act, 2015 (hereinafter referred to as 'the Act'), which mandates Pre-Institution Mediation.

3. The facts leading up to the filing of this Appeal are as under:

a) The Appellant herein runs a business of sale and purchase of fabric in the name and style of M/s Kapil Creations. It is stated that the Respondents herein had purchased fabric from the Appellant herein on credit basis and defaulted in the payment of Rs.17,98,319/-.

b) The Appellant herein, before instituting a Suit, approached the Secretary, Delhi Legal Services Authority (DLSA) for initiation of Pre-Institution Mediation proceedings for recovery of Rs.17,98,319/- with interest @ 24% per annum, by filing an application under Schedule I, Form 1 as specified under Rule 3(1) of the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 (hereinafter referred to as 'the Rules') which had been framed under the Act.

c) Material on record discloses that DLSA gave a Non-starter Report for the Mediation.

d) Since the mediation was a Non-starter, the Appellant herein filed a Suit, being CS (COMM) 82/2019, for recovery of Rs.27,33,433/- before District Judge, Commercial Court-II, Shahdara, Karkardooma Courts, Delhi. Summons was ordered to be served on the Respondent/Defendant. A written statement was filed by the Respondent herein/Defendant and the Appellant herein/Plaintiff filed a replication.

e) Arguments were advanced. According to the learned District Judge, the Suit was filed without complying with Section 12A of the Act. The learned District Judge, Commercial Court-II, Shahdara, Karkardooma Courts, Delhi, after perusing the material on record came to the conclusion that the Plaintiff/Appellant herein had filed an application to the DLSA for initiation of Pre-Institution Mediation proceedings only as a formality in order to file a Civil Suit and had no real intention to proceed with the mediation process. The learned District Judge, Commercial Court-II, Shahdara, Karkardooma Courts, Delhi, dismissed the Suit by observing that Section 12A of the Act is mandatory in nature, and since the Plaintiff/Appellant herein has not acted in good faith and refused to participate in the Pre-Institution Mediation process and, therefore, the Plaintiff/Appellant herein is barred by law.

f) It is this Order which is the subject matter of the instant appeal.

4. For a better appreciation of the facts and the law on the subject, it is necessary to extract the relevant provisions of the Commercial Courts Act, 2015 and the Commercial Courts (Pre-Institution mediation and Settlement) Rules, 2018. Section 12A of the Act reads as under:

"Section 12A.

Pre-Institution Mediation and Settlement.

12A. Pre-Institution Mediation and Settlement.--(1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the