The Commercial Courts Act (hereinafter referred to as “the Act”) was enacted in 2015 to establish a definite procedural framework for dealing with commercial disputes. Commercial disputes include any dispute arising out of trade relationship between parties such as mercantile documents, partnership agreements, franchising, distributions, joint venture, intellectual property rights, etc., its interpretation and enforcement. Thus, Commercial Courts are made to resolve business issues such as fraud, breach of contract, unfair trade practices etc. This act was enacted to reduce the burden on the Courts by streamlining the work based on its nature. These courts deal with cases involving only a “commercial dispute” of a specified value. Therefore, the main objective of the Act is to enable a speedy redressal of commercial disputes in India.

In 2018, the act was amended to incorporate various changes for the smooth functioning of commercial courts with minimum pending cases. One major amendment was the insertion of Section 12A. with the aim and objective to ensure that before a commercial dispute is filed before the court, an alternative means of dispute resolution is adopted so that only matter which needs the court’s urgent attention, are adjudicated by the court. The legislative intent was to place more reliance on alternative methods of dispute resolution in commercial disputes as well for speedy redressal.

Section 12-A reads as under:

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 Central Government.

(2) The Central Government may, by notification, authorise the authorities constituted under the Legal Services Authorities Act, 19879, for the purposes of pre-institution mediation.

(3) Notwithstanding anything contained in the Legal Services Authorities Act, 1987 (39 of 1987), the Authority authorised by the Central Government under sub-section (2) shall complete the process of mediation within a period of three months from the date of application made by the plaintiff under sub-section (1):

Provided that the period of mediation may be extended for a further period of two months with the consent of the parties:

Provided further that, the period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963 (36 of 1963).

(4) If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator.

(5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996 (26 of 1996).

This provision, by introducing the word “shall”, made the pre-suit institution mediation proceeding mandatory only with reference to plaintiffs who do not contemplate urgent interim relief. As per the Act, mediation under Section 12-A is a time-bound process to be conducted by the respective State Legal Services Authorities (Authority), constituted under the Legal Services Authorities Act, 1987. The period for conducting such mediation has also been expressly excluded by the Legislature under the Limitation Act, 1963.

After Section 12-A was introduced, a difference of opinion arose among the courts with regard to the nature of the section being mandatory or merely directory. The courts had to consider whether plaints instituted without recourse to mandatory pre-institution mediation ought to be rejected upon an application being filed under Order 7 Rule 11 of the Code of Civil Procedure, 1908 (CPC).

In the case of Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited, 2022 (SCC Online SC 1028), the Supreme Court put this controversy to rest. The Court has held that the requirement of exhausting pre-institution mediation under Section 12-A of the Act is mandatory and that any suit instituted “violating the mandate of Section 12-A must be visited with the rejection of the plaint under Order 7 Rule 11”.

Application of Section 12-A to Intellectual Property Cases

However, recently, it has been seen that Section 12-A of the Act is not mandatory in cases involving intellectual property rights where urgent interim relief is sought.

The bench comprising of Justice Pratibha M Singh in the Hon’ble High Court of Delhi, in its judgement dated August 29, 2022, passed in the suit bearing CS (COMM) 582 of 2022 and titled Bolt Technology OU v. Ujoy Technology Private Limited & Anr., observed that “As per the experience seen in intellectual property cases, the relief of interim injunction, including at the ex-parte stage and ad-interim stage, is extremely important. Such matters do not merely involve the interest of the Plaintiff and the Defendants, which are the contesting parties before the Court, but also involve the interest of the customers/consumers of the products and services in question.”

Accordingly, the Court held that in an intellectual property case, where the matter affects not only the disputants but also the consumers and the plaintiff has already exhausted all possible recourses to amicably resolve the matter, then the plaintiff’s application seeking exemption from instituting pre-litigation mediation proceedings in accordance with section 12-A of the Act can be allowed. Thus, it can be said that in intellectual property cases, such reliefs are granted by Courts not merely for the protection of statutory and common law rights but keeping in mind the larger public interest and to avoid deception, confusion, unfair and fraudulent practices in the marketplace.

Another judgement dated August 31, 2022, along the same lines was passed by Hon’ble Justice Jyoti Singh, in a suit bearing CS (COMM) 601 of 2022, titled Retail Royalty Company v. Nirbhay Marg News Broadcast, where infringement of the plaintiff’s trademark was done by the defendants. In this case as well, the defendant was non-responsive to the plaintiff’s amicable approaches and efforts and thus the Plaintiff filed the suit along with an application under Order 39 Rule 1 and 2 of CPC seeking relief of interim injunction. The Hon’ble High Court of Delhi was pleased to grant ex-parte injunction after referring to the Judgment pronounced in the afore-mentioned Bolt Technology matter.

Developing on a similar law point, in the case of Chandra Kishore Chaurasia v. RA Perfumery Works Private Ltd, (Del) 1016, the division bench consisting of Justice Vibhu Bakhru and Justice Amit Mahajan, via judgment dated October 27, 2022, observed that – the question as to whether a suit involves any urgent interim relief is to be determined solely on the basis of nature of pleadings and relief as sought by the plaintiff. It was further observed that if a plaintiff seeks any urgent interim relief, the suit cannot be dismissed on the ground that such a plaintiff has not exhausted the pre-institution remedy of mediation as contemplated under Section 12-A of the Act. Only in cases where urgent interim relief is not sought, such remedy of pre-institution mediation is made mandatory by the courts.

Even though pre-litigation mediation has been made mandatory by the Court, recent trend states that it can be avoided in cases involving intellectual property rights where urgent interim relief is sought. Since urgent interim relief has not been defined under the Act, any such urgency of relief will be adjudged against the larger public/ consumer interest.

Moreover, it is only mandatory for the party instituting the suit to institute the mediation by approaching the Authority while the defendant may altogether abstain from responding to the mediation request. In such a case, the Authority shall treat the process to be a non-starter and the plaintiff can move to the court of law and institute a commercial suit. Thus, it is now treated as a mere obligation that the party treats as merely a technical step to overcoming in order to institute the suit and sometimes a mere dilatory tactic used by defendants.

This article has been authored by Sampada Kapoor, Selvam & Selvam. Sampada graduated from law school at Panjab University and pursued her Post Graduate Diploma in Intellectual Property from National Law School. Being a first-generation lawyer, her quest to expand her expertise in the area of Intellectual Property Rights lead her to secure a Master’s in Intellectual Property Rights from Amity University.