Firms must try mediation before coming to court, says Supreme Court

The development assumes significance as in cases of disputes companies are required to do the same under Section 12A of the Commercial Courts Act 2015.

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The apex court is hearing a petition filed by advocate and former BJP spokesperson Ashwini Upadhyay seeking a ban on the practice by political parties to announce freebies ahead of polls to woo voters.

The Supreme Court on Wednesday made it mandatory for companies to go for mediation before moving the courts. The development assumes significance as in cases of disputes companies are required to do the same under Section 12A of the Commercial Courts Act 2015. However, they rarely do so and directly approach courts. The apex court’s ruling made it clear that from August 20 onwards if companies do not follow the mediation route and come directly to the courts, the matter will be rejected.

The statutory pre-litigation mediation contemplated under Section 12A of the Commercial Courts Act, 2015 as amended by the Amendment Act of 2018 is mandatory and the courts can reject the plaints if the procedure as contemplated by the provision is not complied with, a Bench comprising Justices KM Joseph and Hrishikesh Roy held.

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According to the judges, mediation can become a potent alternate dispute resolution device. The chief advantage and highlight of mediation is that if successful, it is a win-win for all sides, the judgment said. However, it said that there are a few indispensable requirements like existence of adequate infrastructural facilities and availability of trained and skilled mediators.

“We declare that Section 12A of the Act is mandatory and hold that any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11. We, however, make this declaration effective from August 20, 2022 so that concerned stakeholders become sufficiently informed. … Finally, if the plaint is filed violating Section 12A after the jurisdictional High Court has declared Section 12A mandatory also, the plaintiff will not be entitled to the relief,” the apex court said.

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“If the parties were to exhaust mediation under Section 12A, the opposite side may be, if mediation is successful, saved from the ordeal of a proceeding in court, which, undoubtedly, would entail costs, whereas, the mediation costs is minimal, and what is more, a one-time affair, and still further, to be shared equally between the parties. Each time the plaintiff is compelled to go in for mediation under Section 12A, there is a ray of hope that the matter may get settled,” it stated.

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