Delhi High Court Rejects Suit for Bypassing Mandatory Mediation, Citing 'Illusory' Urgency

New Delhi: The Delhi High Court, in a significant ruling, has rejected a commercial suit for specific performance, holding that a litigant cannot bypass the mandatory requirement of pre-institution mediation under the guise of "contrived" or "illusory" urgency. Justice Purushaindra Kumar Kaurav emphasized that the exception for urgent interim relief under Section 12A of the Commercial Courts Act, 2015, must be substantiated by genuine, imminent harm and cannot be used as a procedural ruse to escape statutory compliance.

The Court dismissed the suit filed by Myna Homes Private Limited against Preeti Bansal and others, ruling that it was premature and not maintainable due to the failure to exhaust the remedy of mediation.

Background of the Dispute

The case stems from a collaboration agreement signed on June 3, 2015, between Myna Homes Private Limited (Plaintiff) and Preeti Bansal (Defendant No. 1) for the redevelopment of a property in Green Park, New Delhi. The plaintiff agreed to demolish the existing structure and construct a multi-storied building, with the Ground and First floors being allocated to them.

However, the project was embroiled in disputes. The plaintiff alleged that the defendants committed fraud by not disclosing that the property was mortgaged to Union Bank of India. Subsequently, the bank initiated recovery proceedings under the SARFAESI Act, and criminal complaints were filed. The plaintiff's legal battles before the Debt Recovery Tribunal (DRT) and Debt Recovery Appellate Tribunal (DRAT) were unsuccessful.

The plaintiff filed the current suit in 2025, seeking specific performance of the 2015 agreement. They claimed an urgent need for an injunction after discovering a public notice indicating that the defendants were attempting to sell the property to third parties. An application was filed seeking exemption from pre-institution mediation, arguing that any delay would lead to the property being sold, rendering the suit futile.

Arguments from Both Sides

Plaintiff's Contentions: - Mr. Ankur Mahindroo, representing Myna Homes, argued that the cause of action arose recently in May 2025 upon discovering the defendants' intent to sell the property. - He asserted that a sale deed had already been executed behind their back, creating an urgent situation that warranted an immediate injunction and justified bypassing mediation. - Citing Supreme Court judgments in Patil Automation and Yamini Manohar , counsel argued that a suit is maintainable without mediation where urgent relief is genuinely sought.

Defendants' Contentions: - Senior Advocate Mr. Siddharth Yadav, appearing for the defendants, countered that the urgency was self-created and unsustainable. - He argued that the plaintiff had failed to demonstrate readiness and willingness to perform its contractual obligations for nearly a decade (2015-2025). - Mr. Yadav highlighted that the plaintiff was aware of third-party interests and encumbrances as early as 2016 and had already exhausted remedies before the DRT, DRAT, and even the Supreme Court. The current suit, he claimed, was a belated attempt to re-agitate failed issues. - He contended that the claim of urgency was an "illusory" excuse to circumvent the mandatory provision of Section 12A of the Commercial Courts Act.

Court's Legal Analysis and Ruling

Justice Kaurav conducted a thorough analysis of Section 12A of the Commercial Courts Act, referencing a series of Supreme Court and High Court judgments that have established its mandatory nature. The Court reiterated that the phrase "contemplates any urgent interim relief" grants the court the power to scrutinize the plaint to determine if the urgency is genuine or merely a "camouflage" to bypass mediation.

The judgment emphasized key legal principles:

- Mandatory Nature of Mediation: Citing Patil Automation , the Court noted that Section 12A is a mandatory provision, and any suit instituted in violation of it must be rejected.

- Judicial Scrutiny of Urgency: The Court has a "limited but essential gatekeeping role" to examine if the plea of urgency is bona fide. A bald assertion is insufficient.

- Contemplation of Urgency: The test is not whether interim relief is ultimately granted, but whether the pleadings and facts, from the plaintiff's standpoint, genuinely indicate an immediate need for court intervention.

Applying these principles, the Court made the following observations:

"The chronology of events indicates a belated invocation of this Court's jurisdiction, falling short of demonstrating the kind of imminent or irreparable harm that would justify urgent interim intervention... the present exemption application appears to be an afterthought, stemming not from any emergent situation, but from the Plaintiff's longstanding dissatisfaction with the course of events that transpired nearly a decade ago."

The Court found that the plaintiff was aware of third-party rights being created long before filing the suit. The fact that the cause of action originated in 2015 and the suit was filed in 2025 weakened the claim of urgency.

Final Decision and Implications

The Court dismissed the plaintiff's application for exemption from pre-institution mediation, finding that the threshold of urgency had not been met. Consequently, the entire suit, along with pending applications, was rejected as premature and not maintainable.

The Court clarified that its findings were limited to the issue of maintainability under Section 12A and did not reflect on the merits of the plaintiff's claim for specific performance or damages. The plaintiff was granted liberty to institute a fresh suit in accordance with the law, which includes complying with the pre-institution mediation procedure. This judgment serves as a stern reminder to litigants that the mandatory mediation process in commercial disputes cannot be casually circumvented by making unsubstantiated claims of urgency.