M/S. PATIL AUTOMATION PRIVATE LIMITED VERSUS RAKHEJA ENGINEERS PRIVATE LIMITED

M/S. PATIL AUTOMATION PRIVATE LIMITED VERSUS RAKHEJA ENGINEERS PRIVATE LIMITED

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2022
(Arising out of SLP (C)No. 14697 of 2021)
M/S. PATIL AUTOMATION
PRIVATE LIMITED AND ORS. … APPELLANT(S)
VERSUS
RAKHEJA ENGINEERS PRIVATE
LIMITED … RESPONDENT(s)
WITH
CIVIL APPEAL NO. OF 2022
(Arising out of SLP (C)No. 5737 of 2022)
ALONG WITH
SPECIAL LEAVE PETITION (C) Diary No.29458 of 2021
J U D G M E N T
K. M. JOSEPH, J.
1. Leave granted.
2. The seminal question which arises for consideration is
whether the statutory pre-litigation mediation contemplated
under Section 12A of the Commercial Courts Act, 2015
2
(hereinafter referred to as ‘Act’) as amended by the
Amendment Act of 2018 is mandatory and whether the Courts
below have erred in not allowing the applications filed
under Order VII Rule 11 of the Code of Civil Procedure,
1908 (hereinafter referred to as ‘CPC’), to reject the
plaints filed by the respondents in these appeals without
complying with the procedure under Section 12A of the Act.
3. In Civil Appeal arising from SLP (C) No. 14697 of 2021,
the respondent filed a commercial suit under Order XXXVII
of the CPC before the Additional District Judge, District
Court, Faridabad, praying for recovery of Rs. 1,00,40,291/-
along with 12 per cent interest on a certain sum which
detail need not detain us. The suit was laid on 12.10.2020.
4. The appellant is the defendant in the said suit. It
filed an application on 05.02.2021 under Order VII Rules
10 and 11 read with Sections 9 and 20 of the CPC, inter
alia contending that the suit was filed without adhering
to Section 12A of the Act. The respondent filed its reply
on 23.03.2021. It contested the matter contending that the
suit was not barred for non-compliance of Section 12A of
the Act.
3
5. A written statement came to be filed on 23.03.2021. On
16.08.2021, the trial Court rejected the contention of the
appellant inter alia holding as follows:
“20. From the bare perusal of Section 12A,
it is crystal clear that the procedure
provided is mandatory in nature and if by
applying the said principles, the suit of
the plaintiff is rejected, then it would
have a catastrophe effect. The court is of
the view that the legislature has no such
intention to frame such stringent provision
the said rules. The aim and object of
Section 12A is to ensure that before a
commercial dispute is filed before the
court, the alternative means of dissolution
are adopted so that the genuine cases come
before the Court. Further, it also appears
to the court that the said procedure has
been introduced to de-congest the regular
courts. It is pertinent that the Hon’ble
Bombay High Court in case Ganga Tara
Vazirani (supra), held that the procedure
provided under Section 12A of the Commercial
Courts Act is not a penal enactment for
punishment and there is no embargo in filing
the suit without exhausting the remedy of
mediation specially when an attempt is clear
to show that the intention of the applicant
has already been made and failed. The fact
is clear that before filing the suit, the
respondent/plaintiff has sent e-mail and
legal notice and despite that the
applicant/defendant failed to make the
payment of the dues. Moreover, it is well
settled that the procedure and law are for
advancement of justice and not to thwart on
technical grounds. Thus, in the larger
interest of justice, the court deems it
appropriate that the civil suit can be kept
in abeyance and both the parties are
4
directed to appear before the Secretary,
District Legal Services Authority,
Faridabad on 26.08.2021 for the purpose of
mediation as per the provisions of Section
12A of the Commercial Courts Act and the
Rules framed thereunder. With these
directions, the application is disposed of.”
(Emphasis supplied)
6. The appellant filed a Civil Revision Petition. The High
Court of Punjab and Haryana, however, confirmed the finding
in paragraph 20 and further held that the Courts are meant
to deliver substantial justice. The rules of procedure are
handmaid of justice and are meant to advance the ends of
justice and they are not to be bogged down by the
technicalities of procedure so as to lose sight of its main
duty which is to dispense justice. It was further found
that the purpose of referring the dispute to mediation
centre is to explore settlement. If the suit is filed
without taking recourse to the procedure, it is further
found, it should not entail rejection of the plaint. This
could not have been the intention of the legislature. It
is further observed that an enactment is to be interpreted
in a manner that it does not result in delivery of ‘perverse
justice’. It was noted that the trial Court had directed
5
that the civil suit be kept in abeyance and the parties
were to appear before the Secretary of the District Legal
Services Authority for the purpose of mediation. Reliance
was placed on the judgment of the High Court of Bombay in
Ganga Taro Vazirani v. Deepak Raheja1.
7. In the other appeal arising out of SLP (C) No. 5737 of
2022, the impugned Order has been passed by the High Court
of Madras, rejecting a similar application filed by the
appellant-defendant in a commercial suit instituted without
having resorted to pre-litigation mediation under Section
12A of the Act.
8. There is yet another special leave petition which was
filed, viz., SLP Diary No. 29458 of 2021. This is filed
with an application for permission to file special leave
petition. In this special leave petition, the order which
is impugned is the same order which is impugned in SLP
(C)No. 5737 of 2022.
9. The Special Leave Petition is supported with an
application for permission to file SLP. The applicant is
not a party in the suit in question. However, it is his
1 2021 SCC OnLine Bom 195
6
case that a suit is pending in which similar question
arises. Though, we have not issued notice in the said
matter, we allowed Shri Sharath Chandran, learned Counsel
for the petitioner, to address the Court on what appeared
to us to be purely a legal issue, viz., the effect of noncompliance with Section 12A of the Act. In other words, we
have permitted intervention, though in the application for
permission to file SLP, which application shall stand,
accordingly, disposed of. So also the SLP.
SUBMISSION OF THE APPELLANTS
10. Shri Sanjeev Anand, learned Senior Counsel, appearing
for the appellant in civil appeal arising out of SLP (C)No.
5737 of 2022, would submit that the Court, in the impugned
Order, held, inter alia, as follows.
“23.The Central Government by notification
dated 03.07.2018, has framed rule and the
rule 3(1) and 3(7) of the Commercial Courts
Act, 2015 (Pre-Institution Mediation and
Settlement) Rules, 2018, reads as under:
3. Initiation of mediation
process. –
(1) A party to a commercial dispute
may make an application to the
Authority as per Form-1 specified
in Schedule-I, either online or by
post or by hand, for initiation of
7
mediation process under the Act
along with a fee of one thousand
rupees payable to the Authority
either by way of demand draft or
through online;
……
……
(7) Where both the parties to the
commercial dispute appear before
the Authority and give consent to
participate in the mediation
process, the Authority shall assign
the commercial dispute to a
Mediator and fix a date for their
appearance before the said
Mediator.
24. Though the word ‘shall’ in Section 12A
of the Act, sounds Prelitigation mediation
is mandatory on the part of the plaintiff
to explore Settlement before filing suit
under Commercial Court Act, the Rule framed
used the word ‘shall’ and makes it an
optional. Also even if one party go for
pre-litigation mediation the other party may
conveniently abstain from participating in
the mediation and make it a non-starter.
Even otherwise, mediator can proceed only
if the both the parties appear and give
consent to participate in the mediation
process. Thus, it is very clear that on
combined reading of the Commercial Courts
Act and the Rules framed thereunder, prelitigation mediation is subject to urgency
for any interim relief and the consent of
the sparing parties.
25. In such circumstances, the Harmonious
Interpretation takes us to the irresistible
conclusion that Section 12-A of the
Commercial Courts Act, is not a mandatory
8
provision. The right to access justice which
is a Constitutional Right cannot be denied
or deprived for not resorting to mediation.
The Court is not substitute to Alternative
Dispute Redressal, it is otherwise. The
litigant cannot be denied the doors of
justice for directly approaching the Court
without exploring the possibility of
mediation. There can be no prejudice to the
defendant, if the defendant is ready for
mediation, even after Institution of the
suit. Also there is no impediment either for
the party or for the Court to refer the
pending matter to be resolved through
mediation or any other Alternative Dispute
Redressal mechanism. This provision is meant
for the parties to work out an amicably
settlement without involving in the
adversary system of litigation. The
intention of this Section is not to prevent
access to justice or to aid anyone who
refuse to subject himself to the judicial
process. The intention is to avoid the
procedural rigor and to arrive an amicable
win-win settlement. Any other
interpretation to Section 12-A of the Act
contrary to the intention will amount to
miscarriage of Justice. Therefore, this
Court holds that there is no ground to
entertain this Application seeking
rejection of plaint.
Hence, Application is dismissed with costs
of Rs.10,000/-.”
11. He would submit that the High Court has clearly erred
in the view it has taken. He would submit that the Act
came into force in the year 2015. It is by the amendment
in the year 2018 that Section 12A came to be incorporated.
9
12. He took us through the Statement of Objects and
Reasons. He would commend for the Court’s acceptance the
view that the legislation was put in place with a definite
object of enhancing the ease of doing business in India and
de-clogging of Commercial Courts which were assigned with
an important task of quickly disposing of commercial
matters and that must be uppermost in the mind of the Court.
13. He would submit that if the application under Order VII
Rule 11 is allowed and the plaint is rejected for noncompliance with Section 12A, in view of Order VII Rule 13
of the CPC, there is no prejudice caused as on the same
cause of action, the plaintiff can bring a fresh suit after
complying with the mandate of Section 12A of the Act.
14. He would point out that most pertinently the law giver
has used the word ‘shall’ in Section 12A. The word ‘shall’
in the context of the object of the legislation must be
construed as mandatory. He would complain that the High
Court has not properly appreciated the meaning of the words
used in the subordinate legislation, viz., Commercial
Courts (Pre-Institution Mediation and Settlement) Rules,
2018 (hereinafter referred to as the “Rules”) with regard
to the use of the word ‘may’ in Rule 3. He would submit
10
that it only refers to the discretion with the plaintiff
in regard to the particular mode to be chosen as
contemplated therein. Bearing in mind the use of mandatory
words conveying an imperative sense in the parent
legislation, the High Court erred in finding that the
provision in the parent enactment must be treated as only
directory. He would submit that the sublime object of the
legislation is clearly to de-clog the court particularly
having regard to the reduction of the monetary value from
Rs.1 crore to Rs.3 lakhs. In other words, by virtue of the
amendment, the Legislature was conscious of the fact that
there would be a phenomenal increase in the cases which
would be treated as commercial cases. Bearing in mind
also, the larger object of promoting India as a desired
destination for economic activity which in large measure
would depend upon the ease of doing business, the purpose
is clear as daylight. The High Court has clearly erred in
the matter.
15. Shri Ayush Negi, learned Counsel for the appellant in
other appeal, would also address arguments on similar
lines. In his case, he would submit that the trial Court
has proceeded on the footing that the commercial suit as
11
such cannot be thrown out for non-compliance of Section 12A
and the trial Court has erroneously considered post
institution mediation as tantamounting to compliance with
pre litigation mediation contemplated under Section 12A.
16. He would submit that the plain language and the object
of the legislation has been overlooked by the Court in the
impugned order as is clear by the observations in the
impugned order.
17. Both the counsels for the appellants would draw a
parallel between the language used in Section 80 CPC and
the case law generated by the said provision to contend
that Section 12A is mandatory. Equally, support is sought
to be drawn from judgments rendered under Section 69 of the
Indian Partnership Act, 1932.
18. Shri Sharath Chandran, learned counsel who appears in
SLP (C) Diary No. 29458 of 2021 would point out that the
procedure contemplated under Section 12A is mandatory.
19. It is the further submission of Shri Sharath Chandran
that decision of the learned Single Judge of the Bombay
High Court in Ganga Taro(supra) has been reversed by the
12
Division Bench in Deepak Raheja v. Ganga Taro Vazirani2.
He has brought to the notice of this Court the different
views expressed by the other High courts. It is his
contention that on a reference to the Statement of Objects
and Reasons, the speech made by the Law Minister and the
plain language used coupled with the intention of the
Lawgiver makes it clear that Section 12A is mandatory. He,
however, drew a distinction between the presentation of the
plaint and the institution of the suit. He also submits
that this Court has taken notice of pre-litigation
mediation in matrimonial disputes and disputes under Motor
Vehicles Act. He would further contend that the Court can
suo motu reject the plaint without any application. He
relies on the judgment of this Court in Madiraju Venkata
Ramana Raju v. Peddireddigari Ramachandra Reddy and
Others3. He however, contends that the embargo against
institution of the suit may not necessarily affect inherent
jurisdiction of the Court. He has further submitted in
regard to the interpretation to be placed in cases where
urgent interim relief is contemplated and the appropriate
2 (2021) SCC OnLine Bom 3124
3 (2018) 14 SCC 1
13
procedure provided therein. He would in this regard place
reliance upon the judgment in Regina vs. Sekhon4 to contend
that if a plea under Section 12A is not pointed out at an
earlier point of time, non-compliance cannot result in the
proceeding becoming a nullity. He would submit that
nullifying proceedings on account of non-compliance at a
belated stage would in effect be throwing the baby out with
the bathwater. He would also point out that the High Court
was in error in not finding that mediation is one of the
best forms of conflict resolution. Further, error in
understanding of Rule 3 of the Rules is pointed out.
20. Per contra, Shri Saket Sikri, learned counsel who
appears in civil appeal arising from SLP (C)No. 14697 of
2021, would contend that Section 12A is actually to be
understood as directory. He submits that in order that the
word ‘shall’ in a statutory provision be considered as
mandatory, one of the cardinal tests employed by the Courts
is to ask the question whether the provision contemplated
penal consequences for disobedience of the provision. He
would point out that no penal consequence is spelt out in
4 (2003) 1 WLR 1655
14
Section 12A for instituting a suit without complying with
Section 12A.
21. Next, he would point out that instituting a suit
without complying with the provisions of Section 12A does
not affect any legal right of the defendant. It is only a
procedure intended to bring about a settlement between the
parties.
He further contends that the course adopted by the
Court in his case has addressed the concerns of the
defendant as well. This is for the reason that the Court
has kept proceedings in the suit in abeyance and referred
the parties for mediation. In this context, he highlights
the fact that the appellant which swears by mediation has
made it a non-starter by not taking part in the mediation
procedure.
22. He would submit that having regard to the purport of
Section 12A, the interest of justice would be subserved if
the procedure which is adopted by the Court in his case is
accepted. In other words, if the Court after the institution
of the suit immediately refers the parties to the mediation,
the appellants may not be justified in insisting on pre
institution mediation. In this regard, he would emphasise
15
that pre litigation mediation contemplated in Section 12A
does not pertain to inherent jurisdiction of a Court. While
mediation is to be encouraged, the Court may not lose sight
of the fact that a half-way house between the two extremes
has been attempted by the Court in the case, which suffices,
having regard to the fact also that no penal consequences
are provided and no right of the defendant is imperilled.
23. He next draws our attention to the aspect of court
fees. He would submit that the plaintiff is bound to pay
the whole court fee under the law in question. When the
plaint gets rejected under Order VII Rule 11, the plaintiff
suffers a loss of the entire court fee. This is one of the
consequences which this Court should not lose sight of, it
is contended.
Here again, the procedure which has been adopted in the
case is commended for our acceptance as substantial
compliance with Section 12A which at the same time, will
not reach such disastrous consequences for the litigants.
He also touches upon the possible consequence of a plea
of limitation overwhelming a fresh suit of the plaintiff
after rejection of the first suit.

16
ANALYSIS
24. Section 12A of the Act reads as follows:
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 preinstitution 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, 1987 (39 of 1987), 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
17
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).”
25. The Act was enacted in the year 2015. At the time, the
monetary limit for a suit liable to be tried by the
Commercial Court was fixed at Rs.1 crore.
26. In the course of three years, noticing certain
features, Parliament has decided to amend the Act.
Therefore, in the year 2018, the Act came to be amended by
the Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts (Amendment) Act, 2018
(Act 28 of 2018) (hereinafter referred to as the “Amending
Act”).
27. It is apposite that we notice the statement of objects
of the Amending Act:
“STATEMENT OF OBJECTS AND REASONS
The Commercial Courts, Commercial Division
and Commercial Appellate Division of High
Courts Act, 2015 was enacted for the
constitution of Commercial Courts,
Commercial Division and Commercial
Appellate Division in the High Courts for
adjudicating commercial disputes of
18
specified value and for matters connected
therewith or incidental thereto.
2. The global economic environment has since
become increasingly competitive and to
attract business at international level,
India needs to further improve its ranking
in the World Bank 'Doing Business Report'
which, inter alia, considers the dispute
resolution environment in the country as one
of the parameters for doing business.
Further, the tremendous economic
development has ushered in enormous
commercial activities in the country
including foreign direct investments,
public private partnership, etc., which has
prompted initiating legislative measures
for speedy settlement of commercial
disputes, widen the scope of the courts to
deal with commercial disputes and facilitate
ease of doing business. Needless to say that
early resolution of commercial disputes of
even lesser value creates a positive image
amongst the investors about the strong and
responsive Indian legal system. It is,
therefore, proposed to amend the Commercial
Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015.
3. As Parliament was not in session and
immediate action was required to be taken to
make necessary amendments in the Commercial
Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015,
to further improve India's ranking in the
'Doing Business Report', the President
promulgated the Commercial Courts,
Commercial Division and Commercial
Appellate Division of High Courts
(Amendment) Ordinance, 2018 on 3rd May,
2018.
4. It is proposed to introduce the
Commercial Courts, Commercial Division and
19
Commercial Appellate Division of High Courts
(Amendment) Bill, 2018 to replace the
Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts
(Amendment) Ordinance, 2018, which inter
alia, provides for the following namely:—
(i) to reduce the specified value of
commercial disputes from the existing
one crore rupees to three lakh rupees,
and to enable the parties to approach
the lowest level of subordinate
courts for speedy resolution of
commercial disputes;
(ii) to enable the State Governments, with
respect to the High Courts having
ordinary original civil jurisdiction,
to constitute commercial courts at
District Judge level and to specify
such pecuniary value of commercial
disputes which shall not be less than
three lakh rupees and not more than
the pecuniary jurisdiction of the
district courts;
(iii) to enable the State Governments,
except the territories over which the
High Courts have ordinary original
civil jurisdiction, to designate such
number of Commercial Appellate Courts
at district judge level to exercise
the appellate jurisdiction over the
commercial courts below the district
judge level;
(iv) to enable the State Governments to
specify such pecuniary value of a
commercial dispute which shall not be
less than three lakh rupees or such
higher value, for the whole or part
of the State; and
(v) to provide for compulsory mediation
before institution of a suit, where
no urgent interim relief is
contemplated and for this purpose, to
introduce the Pre-Institution
20
Mediation and Settlement Mechanism
and to enable the Central Government
to authorise the authorities
constituted under the Legal Services
Authorities Act, 1987 for this
purpose.
5. The Bill seeks to achieve the above
objectives.”
28. It is, accordingly, by the Amending Act that Section
12A came to be inserted. We may notice the Rules which
came to be published in the Gazette and thereby came into
force on 03.07.2018. Rule 3 reads as follows:
“3. Initiation of mediation process. –
(1) A party to a commercial dispute may make
an application to the Authority as per Form1 specified in Schedule-I, either online or
by post or by hand, for initiation of
mediation process under the Act along with
a fee of one thousand rupees payable to the
Authority either by way of demand draft or
through online;
(2) The Authority shall, having regard to
the territorial and pecuniary jurisdiction
and the nature of commercial dispute, issue
a notice, as per Form-2 specified in
Schedule-I through a registered or speed
post and electronic means including e-mail
and the like to the opposite party to appear
and give consent to participate in the
mediation process on such date not beyond a
period of ten days from the date of issue of
the said notice.
21
(3) Where no response is received from the
opposite party either by post or by e-mail,
the Authority shall issue a final notice to
it in the manner as specified in sub-rule
(2).
(4) Where the notice issued under sub-rule
(3) remains unacknowledged or where the
opposite party refuses to participate in the
mediation process, the Authority shall treat
the mediation process to be a non-starter
and make a report as per Form 3 specified in
the Schedule-I and endorse the same to the
applicant and the opposite party.
(5) Where the opposite party, after
receiving the notice under sub-rule (2) or
(3) seeks further time for his appearance,
the Authority may, if it thinks fit, fix an
alternate date not later than ten days from
the date of receipt of such request from the
opposite party.
(6) Where the opposite party fails to appear
on the date fixed under sub-rule (5), the
Authority shall treat the mediation process
to be a non-starter and make a report in
this behalf as per Form 3 specified in
Schedule-I and endorse the same to the
applicant and the opposite party.
(7) Where both the parties to the commercial
dispute appear before the Authority and give
consent to participate in the mediation
process, the Authority shall assign the
commercial dispute to a Mediator and fix a
date for their appearance before the said
Mediator.
(8) The Authority shall ensure that the
mediation process is completed within a
period of three months from the date of
receipt of application for pre-institution
mediation unless the period is extended for
22
further two months with the consent of the
applicant and the opposite party.”
We shall advert to the effect of this Rule and also
advert to the other rules later on.
DOWN THE MEMORY LANE
29. A Bench of five learned Judges in the Judgment reported
in State of U.P. and others v. Babu Ram Upadhya5,
considered the question as to whether paragraph-486 of the
Police Regulations framed under Section 7 of the Police
Act, was mandatory or not. In substance, the said paragraph
purported to taboo the magisterial inquiry under the Code
of Criminal Procedure, 1973, when the offence alleged
against the Police Officer was only one under Section 7 of
the Police Act. In the opinion written for the majority,
Justice K. Subba Rao proceeded to sum-up the relevant Rules
relating to interpretation, when the Statute uses the word
‘shall’:
“29. The relevant rules of interpretation
may be briefly stated thus: When a statute
uses the word “shall”, prima facie, it is
mandatory, but the Court may ascertain the
5 AIR 1961 SC 751
23
real intention of the legislature by
carefully attending to the whole scope of
the statute. For ascertaining the real
intention of the Legislature the Court may
consider, inter alia, the nature and the
design of the statute, and the consequences
which would follow from construing it the
one way or the other, the impact of other
provisions whereby the necessity of
complying with the provisions in question
is avoided, the circumstance, namely, that
the statute provides for a contingency of
the non-compliance with the provisions, the
fact that the non-compliance with the
provisions is or is not visited by some
penalty, the serious or trivial consequences
that flow therefrom, and, above all, whether
the object of the legislation will be
defeated or furthered.
30. In Bhikraj Jaipuria v. Union of India6, a Bench of five
learned Judges dealt with the question arising out of
Section 175(3) of the Government of India Act, 1935. The
Court, inter alia, had to deal with the question, whether
enactment should be considered directory or obligatory:
“17. The question still remains whether
the purchase orders executed by the
Divisional Superintendent but which were not
expressed to be made by the Governor-General
and were not executed on behalf of the
Governor-General, were binding on the
Government of India. Section 175(3) plainly
requires that contracts on behalf of the
Government of India shall be executed in the
form prescribed thereby; the section however
does not set out the consequences of non6 AIR 1962 SC 113
24
compliance. Where a statute requires that a
thing shall be done in the prescribed manner
or form but does not set out the
consequences of non-compliance, the
question whether the provision was mandatory
or directory has to be adjudged in the light
of the intention of the legislature as
disclosed by the object, purpose and scope
of the statute. If the statute is mandatory,
the thing done not in the manner or form
prescribed can have no effect or validity :
if it is directory, penalty may be incurred
for non-compliance, but the act or thing
done is regarded as good. As observed
in Maxwell on Interpretation of Statutes,
10th Edn., p. 376:
“It has been said that no rule can
be laid down for determining whether
the command is to be considered as
a mere direction or instruction
involving no invalidating
consequence in its disregard, or as
imperative, with an implied
nullification for disobedience,
beyond the fundamental one that it
depends on the scope and object of
the enactment. It may perhaps be
found generally correct to say that
nullification is the natural and
usual consequence of disobedience,
but the question is in the main
governed by considerations of
convenience and justice, and when
that result would involve general
inconvenience or injustice to
innocent persons, or advantage to
those guilty of the neglect, without
promoting the real aim and object
of the enactment, such an intention
is not to be attributed to the
legislature. The whole scope and
purpose of the statute under
consideration must be regarded.”
25
Lord Campbell in Liverpool Borough
Bank v. Turner [(1861) 30 LJ Ch 379]
observed:
“No universal rule can be laid
down as to whether mandatory
enactments shall be considered
directory only or obligatory with
an implied nullification for
disobedience. It is the duty of
courts of justice to try to get at
the real intention of the
legislature by carefully attending
to the whole scope of the statute
to be construed.”
31. In Lachmi Narain and others v. Union of India and
others7, this Court, inter alia, held as follows:
“66. Section 6(2), as it stood
immediately before the impugned
notification, requires the State Government
to give by notification in the Official
Gazette “not less than 3 months' notice” of
its intention to add to or omit from or
otherwise amend the Second Schedule. The
primary key to the problem whether a
statutory provision is mandatory or
directory, is the intention of the law-maker
as expressed in the law, itself. The reason
behind the provision may be a further aid
to the ascertainment of that intention. If
the legislative intent is expressed clearly
and strongly in imperative words, such as
the use of “must” instead of “shall”, that
will itself be sufficient to hold the
provision to be mandatory, and it will not
be necessary to pursue the enquiry further.
If the provision is couched in prohibitive
or negative language, it can rarely be
directory, the use of peremptory language
7 AIR 1976 SC 714
26
in a negative form is per se indicative of
the intent that the provision is to be
mandatory. (Crawford, The Construction of
Statutes, pp. 523-24). Here the language of
sub-section (2) of Section 6 is emphatically
prohibitive, it commands the Government in
unambiguous negative terms that the period
of the requisite notice must not be less
than three months.”
A distinction was, thus, perceived between the words
‘must’ and ‘shall’.
32. Learned Counsel for the appellants sought to draw
support from the Judgments rendered under Section 80 of the
Code of Civil Procedure, 1908 (for short, ‘the CPC’). After
the amendment effected by Act 104 of 1976, Section 80 reads
as follows:
“(1) Save as otherwise provided in subsection (2), no suits shall be instituted
against the Government (including the
Government of the State of Jammu and
Kashmir) or against a public officer in
respect of any act purporting to be done by
such public officer in his official
capacity, until the expiration of two months
next after notice in writing has
been delivered to, or left at the office of
(a) in the case of a suit against
the Central Government, except
where it relates to a railway a
Secretary to that Government;
(b) in the case of a suit against
27
the Central Government where it
relates to railway, the General
Manager of that railway;
bb) in the case of a suit against
the Government of the State of
Jammu and Kashmir, the Chief
Secretary to that Government or
any other officer authorized by
that Government in this behalf;
(c) in the case of a suit
against any other State
Government, a Secretary to that
Government or the Collector of the
district;
and, in the case of a public
officer, delivered to him or left
at his office, stating the cause
of action, the name, description
and place of residence of the
plaintiff and the relief which he
claims; and the plaint shall
contain a statement that such
notice has been so delivered or
left.
(2) A suit to obtain an urgent or immediate
relief against the Government (including the
Government of the State of Jammu and
Kashmir) or any public officer in respect
of any act purporting to be done by such
public officer in his official capacity, may
be instituted, with the leave of the Court,
without serving any notice as required by
sub-section (I); but the Court shall not
grant relief in the suit, whether interim
or otherwise, except after giving to the
Government or public officer, as the case
may be , a reasonable opportunity of showing
cause in respect of the relief prayed for
28
in the suit:
Provided that the Court shall, if it is
satisfied, after hearing the parties, that
no urgent or immediate relief need be
granted in the suit, return the plaint for
presentation to it after complying with the
requirements of sub-section (1).
(3) No suit instituted against the
Government or against a public officer in
respect of any act purporting to be done by
such public officer in his official capacity
shall be dismissed merely by reason of any
error or defect in the notice referred to
in sub-section (I), if in such notice
(a) the name, description and the
residence of the plaintiff had
been so given as to enable the
appropriate authority or the
public officer to identify the
person serving the notice and such
notice had been delivered or left
at the office of the appropriate
authority specified in subsection (1), and
(b) the cause of action and the
relief claimed by the plaintiff
had been substantially
indicated.”
33. In fact, Sub-sections (2) and (3) of Section 80 came
to be inserted by virtue of the amendment. In Section 80(1),
in view of the insertion of Sub-Section (2), the opening
29
words “save as otherwise provided in sub-Section (2)” came
to be inserted. There were other changes which were brought
about in Section 80 as it stood, as can be discerned from
Section 80(1) as substituted. The judgment of the Privy
Council, in the decision reported in Bhagchand Dagadusa
Gujrathi and Ors. v. Secretary of State for India8, set at
rest the controversy about the mandatory nature of the
requirement of a previous notice to be given to comply with
Section 80. We need only notice what this Court held in the
Judgment in State of Madras v. C.P. Agencies and others9:
“1. … The very language of Section 80 makes
it clear,-- and it has been so held by the
Judicial Committee in Bhagchand Dagdusa v.
Secy. of State, 54 Ind App 338:(AIR 1927 PC
176) which decision has been adopted by the
same tribunal in many later cases--that
Section 80 is express, explicit and
mandatory and admits of no implications or
exceptions. …”
34. In Bihari Chowdhary & Anr. v. State of Bihar & Ors.10,
while on the effect of Section 80 of the CPC, this Court
laid down as follows:
8 AIR 1927 PC 176
9 AIR 1960 SC 1309
10 (1984) 2 SCC 627
30
“3. …..
The effect of the section is clearly to
impose a bar against the institution of a
suit against the Government or a public
officer in respect of any act purported to
be done by him in his official capacity
until the expiration of two months after
notice in writing has been delivered to or
left at the office of the Secretary to
Government or Collector of the concerned
district and in the case of a public officer
delivered to him or left at his office,
stating the particulars enumerated in the
last part of sub-section (1) of the section.
When we examine the scheme of the section
it becomes obvious that the section has been
enacted as a measure of public policy with
the object of ensuring that before a suit
is instituted against the Government or a
public officer, the Government or the
officer concerned is afforded an opportunity
to scrutinise the claim in respect of which
the suit is proposed to be filed and if it
be found to be a just claim, to take
immediate action and thereby avoid
unnecessary litigation and save public time
and money by settling the claim without
driving the person, who has issued the
notice, to institute the suit involving
considerable expenditure and delay. The
Government, unlike private parties, is
expected to consider the matter covered by
the notice in a most objective manner, after
obtaining such legal advice as they may
think fit, and take a decision in public
interest within the period of two months
allowed by the section as to whether the
claim is just and reasonable and the
contemplated suit should, therefore, be
avoided by speedy negotiations and
settlement or whether the claim should be
resisted by fighting out the suit if and
when it is instituted. There is clearly a
31
public purpose underlying the mandatory
provision contained in the section insisting
on the issuance of a notice setting out the
particulars of the proposed suit and giving
two months' time to Government or a public
officer before a suit can be instituted
against them. The object of the section is
the advancement of justice and the securing
of public good by avoidance of unnecessary
litigation.”
35. We may also notice, what this Court had said in Bihari
Chowdhary(supra) about the course of action to be taken,
if a Suit is filed without serving a notice:
“6. It must now be regarded as settled law
that a suit against the Government or a
public officer, to which the requirement of
a prior notice under Section 80 CPC is
attracted, cannot be validly instituted
until the expiration of the period of two
months next after the notice in writing has
been delivered to the authorities concerned
in the manner prescribed for in the section
and if filed before the expiry of the said
period, the suit has to be dismissed as not
maintainable.”
36. We must finally also, for reasons, which will be clear,
refer to the view expressed by this Court in the following
paragraph:
“7. On behalf of the appellants, strong
reliance was placed on the decision of a
learned Single Judge of the High Court of
Kerala in Nani Amma Nannini Amma v. State of
Kerala [AIR 1963 Ker 114 : 1962 Ker LJ
32
1267]. Therein the learned Judge has
expressed the view that Section 80 is not a
provision of public policy and there is
nothing in the section expressly affecting
the jurisdiction of the Court to try a suit
instituted before the expiry of the period
prescribed therein. The reasons stated by
the learned Judge in justification of his
taking the said view despite the clear
pronouncement of the Judicial Committee of
the Privy Council in Bhagchand case [AIR
1927 PC 176 : 54 IA 338, 357] do not appeal
to us as correct or sound. In the light of
the conclusion expressed by us in the
foregoing paragraphs about the true scope
and effect of Section 80 CPC, the aforecited
decision of the learned Single Judge of the
Kerala High Court cannot be accepted as
laying down good law.”
(Emphasis supplied)
37. In this context, we may refer to the Judgment of this
Court in Gangappa Gurupadappa Gugwad, Gulbarga v. Rachawwa,
Widow of Lochanappa Gugwad and others11:
“10. No doubt it would be open to a court
not to decide all the issues which may arise
on the pleadings before it if it finds that
the plaint on the face of it is barred by
any law. If for instance the plaintiff's
cause of action is against a Government and
the plaint does not show that notice under
Section 80 of the Code of Civil Procedure
claiming relief was served in terms of the
said section, it would be the duty of the
court to reject the plaint recording an
order to that effect with reasons for the
order. …”
(Emphasis supplied)
11 (1970) 3 SCC 716
33
38. Section 69 of the Indian Partnership Act, 1932, in subSection (1) and (2), read as follows:
“69. Effect of non-registration.—
(1) No suit to enforce a right arising from
a contract or conferred by this Act shall
be instituted in any court by or on behalf
of any person suing as a partner in a firm
against the firm or any person alleged to
be or to have been a partner in the firm
unless the firm is registered and the person
suing is or has been shown in the Register
of Firms as a partner in the firm.
(2) No suit to enforce a right arising from
a contract shall be instituted in any Court
by or on behalf of a firm against any third
party unless the firm is registered and the
persons suing are or have been shown in the
Register of Firms as partners in the firm.
39. In the decision reported in Seth Loonkaran Sethia and
others v. Ivan E. John and others12, this Court held:
“21. A bare glance at the section is
enough to show that it is mandatory in
character and its effect is to render a suit
by a plaintiff in respect of a right vested
in him or acquired by him under a contract
which he entered into as a partner of an
unregistered firm, whether existing or
dissolved, void. In other words, a partner
of an erstwhile unregistered partnership
firm cannot bring a suit to enforce a right
arising out of a contract falling within the
ambit of Section 69 of the Partnership Act.
…”
12 AIR 1977 SC 336
34
40. In Sharif-ud-Din v. Abdul Gani Lone13, relied upon by
Shri Saket Sikri, the matter arose under the Jammu and
Kashmir Representation of Peoples Act, 1957, the question
arose whether the provision providing that copies of the
election petition are to be attested by the petitioner as
true copies under his own signature, was mandatory. We may
notice the following paragraph:
“9. The difference between a mandatory rule
and a directory rule is that while the
former must be strictly observed, in the
case of the latter substantial compliance
may be sufficient to achieve the object
regarding which the rule is enacted. Certain
broad propositions which can be deduced from
several decisions of courts regarding the
rules of construction that should be
followed in determining whether a provision
of law is directory or mandatory may be
summarised thus: The fact that the statute
uses the word “shall” while laying down a
duty is not conclusive on the question
whether it is a mandatory or directory
provision. In order to find out the true
character of the legislation, the court has
to ascertain the object which the provision
of law in question has to subserve and its
design and the context in which it is
enacted. If the object of a law is to be
defeated by non-compliance with it, it has
to be regarded as mandatory. But when a
provision of law relates to the performance
of any public duty and the invalidation of
any act done in disregard of that provision
13 (1980) 1 SCC 403
35
causes serious prejudice to those for whose
benefit it is enacted and at the same time
who have no control over the performance of
the duty, such provision should be treated
as a directory one. Where, however, a
provision of law prescribes that a certain
act has to be done in a particular manner
by a person in order to acquire a right and
it is coupled with another provision which
confers an immunity on another when such act
is not done in that manner, the former has
to be regarded as a mandatory one. A
procedural rule ordinarily should not be
construed as mandatory if the defect in the
act done in pursuance of it can be cured by
permitting appropriate rectification to be
carried out at a subsequent stage unless by
according such permission to rectify the
error later on, another rule would be
contravened. Whenever a statute prescribes
that a particular act is to be done in a
particular manner and also lays down that
failure to comply with the said requirement
leads to a specific consequence, it would
be difficult to hold that the requirement
is not mandatory and the specified
consequence should not follow.”
41. In Kailash v. Nanhku and others14, relied upon by Shri
Saket Sikri, this Court was dealing with an election matter
and one of the questions was whether the time limit of
ninety days, as prescribed by the proviso to Order VIII
Rule I of the CPC, is mandatory or not. The said provision
dealt with the power of the Court to extend time for filing
14 (2005) 4 SCC 480
36
the written statement. The proviso fixes a period of ninety
days from the date of service of summons as the maximum
period for filing the written statement. This Court took
the view that the provision is to be construed as directory
and not mandatory.
42. In this context, we may notice paragraphs- 28 and 30
of Kailash (supra):
“28. All the rules of procedure are the
handmaid of justice. The language employed
by the draftsman of processual law may be
liberal or stringent, but the fact remains
that the object of prescribing procedure is
to advance the cause of justice. In an
adversarial system, no party should
ordinarily be denied the opportunity of
participating in the process of justice
dispensation. Unless compelled by express
and specific language of the statute, the
provisions of CPC or any other procedural
enactment ought not to be construed in a
manner which would leave the court helpless
to meet extraordinary situations in the ends
of justice. The observations made by Krishna
Iyer, J. in Sushil Kumar Sen v. State of
Bihar [(1975) 1 SCC 774] are pertinent: (SCC
p. 777, paras 5-6)
“The mortality of justice at the
hands of law troubles a judge's
conscience and points an angry
interrogation at the law reformer.
The processual law so dominates in
certain systems as to overpower
substantive rights and substantial
justice. The humanist rule that
procedure should be the handmaid,
not the mistress, of legal justice
37
compels consideration of vesting a
residuary power in judges to act ex
debito justitiae where the tragic
sequel otherwise would be wholly
inequitable. … Justice is the goal
of jurisprudence — processual, as
much as substantive.”
xxx xxx xxx
30. It is also to be noted that though the
power of the court under the proviso
appended to Rule 1 Order 8 is circumscribed
by the words “shall not be later than ninety
days” but the consequences flowing from nonextension of time are not specifically
provided for though they may be read in by
necessary implication. Merely because a
provision of law is couched in a negative
language implying mandatory character, the
same is not without exceptions. The courts,
when called upon to interpret the nature of
the provision, may, keeping in view the
entire context in which the provision came
to be enacted, hold the same to be directory
though worded in the negative form.”
43. As far as the views expressed in Kailash (supra), that
is a case which dealt with a purely procedural
provision and the Court found that the power of the Court
to allow filing of a written statement beyond the time, is
not taken away. The absence of penal consequences was
invoked. The most important aspect is that the proviso is
in the domain of the procedural law. In contrast, Section
38
12A cannot be described as a mere procedural law. Exhausting
pre-institution mediation by the plaintiff, with all the
benefits that may accrue to the parties and, more
importantly, the justice delivery system as a whole, would
make Section 12A not a mere procedural provision. The design
and scope of the Act, as amended in 2018, by which Section
12A was inserted, would make it clear that Parliament
intended to give it a mandatory flavour. Any other
interpretation would not only be in the teeth of the express
language used but, more importantly, result in frustration
of the object of the Act and the Rules. In this connection,
in the Judgement reported in Sharif-ud-Din (supra), it has
been held that, if the object of the law is defeated by
non-compliance with the provision, then, it would be
regarded as mandatory. The right to institute the Suit in
a plaintiff who does not contemplate urgent interim relief
in a commercial matter under the Act, is clearly conditioned
by the fulfilment of certain conditions as provided in
Section 12A. This cannot be likened to allowing a party to
file his written statement. Bearing in mind the object also,
the conclusion is inevitable that the right of suit itself
will fructify only when the conditions in Section 12A are
39
fulfilled. Treating the provision as procedural, also, the
result cannot be different. Any other view would remove the
basis for treating Section 80(1) of the CPC as mandatory.
44. In Salem Advocate Bar Association, T.N. v. Union of
India15, this Court, while dealing with the question,
whether Section 89 of the CPC was mandatory or not, held
as follows:
“55. As can be seen from Section 89, its
first part uses the word “shall” when it
stipulates that the “court shall formulate
terms of settlement”. The use of the word
“may” in later part of Section 89 only
relates to the aspect of reformulating the
terms of a possible settlement. The
intention of the legislature behind enacting
Section 89 is that where it appears to the
court that there exists an element of a
settlement which may be acceptable to the
parties, they, at the instance of the court,
shall be made to apply their mind so as to
opt for one or the other of the four ADR
methods mentioned in the section and if the
parties do not agree, the court shall refer
them to one or the other of the said modes.
Section 89 uses both the words “shall” and
“may” whereas Order 10 Rule 1-A uses the
word “shall” but on harmonious reading of
these provisions it becomes clear that the
use of the word “may” in Section 89 only
governs the aspect of reformulation of the
terms of a possible settlement and its
reference to one of ADR methods. There is no
15 (2005) 6 SCC 344
40
conflict. It is evident that what is
referred to one of the ADR modes is the
dispute which is summarised in the terms of
settlement formulated or reformulated in
terms of Section 89.”
45. Lastly, we may notice that in Prem Lala Nahata v. Chandi
Prasad Sikaria16, Justice P.K. Balasubramanyan, speaking on
behalf of Justice S.B. Sinha, also held as follows:
“16. Order 7 Rule 11(d) speaks of the suit
being “barred by any law”. According
to Black's Law Dictionary, bar means, a plea
arresting a law suit or legal claim. It
means as a verb, to prevent by legal
objection. According to Ramanatha
Aiyar's Law Lexicon, “bar” is that which
obstructs entry or egress; to exclude from
consideration. It is therefore necessary to
see whether a suit bad for misjoinder of
parties or of causes of action is excluded
from consideration or is barred entry for
adjudication. As pointed out already, on the
scheme of the Code, there is no such
prohibition or a prevention at the entry of
a suit defective for misjoinder of parties
or of causes of action. The court is still
competent to try and decide the suit, though
the court may also be competent to tell the
plaintiffs either to elect to proceed at the
instance of one of the plaintiffs or to
proceed with one of the causes of action.
On the scheme of the Code of Civil
Procedure, it cannot therefore be held that
a suit barred for misjoinder of parties or
of causes of action is barred by a law, here
the Code. This may be contrasted with the
failure to comply with Section 80 of the
16 (2007) 2 SCC 551
41
Code. In a case not covered by sub-section
(2) of Section 80, it is provided in subsection (1) of Section 80 that “no suit
shall be instituted”. This is therefore a
bar to the institution of the suit and that
is why courts have taken the view that in a
case where notice under Section 80 of the
Code is mandatory, if the averments in the
plaint indicate the absence of a notice, the
plaint is liable to be rejected. For, in
that case, the entertaining of the suit
would be barred by Section 80 of the Code.
The same would be the position when a suit
hit by Section 86 of the Code is filed
without pleading the obtaining of consent
of the Central Government if the suit is not
for rent from a tenant…..”
(Emphasis supplied)
VIEWS OF HIGH COURTS: DISCORDANT NOTES?
46. In Ganga Taro Vazirani v. Deepak Raheja17, the learned
Single Judge of the High Court of Bombay, took the view
that Section 12A is a procedural provision. The learned
Single Judge found further that when urgent relief is
applied for, the procedure under Section 12A need not be
undergone. It was further observed that it was not, as if,
the Court lacks inherent jurisdiction to entertain a Suit
without complying with Section 12A. Still further, he
refers to Section 80 of the CPC. He refers to AL. AR.
17 2021 SCC Online Bombay 195
42
Vellayan Chettiar (Decd.) & Others v. Government of the
Province of Madras Through the Collector of Ramnad at Madura
& Another18, for the proposition that Notice thereunder is
given for the protection of the Authority concerned and he
can lawfully waive his right to the Notice. Reliance was
also placed on the Judgement in State of A.P. and others
v. Pioneer Builders, A.P.19, wherein this Court declined to
interfere with the finding that having participated in the
proceeding without raising objection about the
maintainability of the Suit, there would be waiver. Learned
Single Judge also took the view that even under Section 12A
of the Act, in a given set of facts, the defendant could
be held to have waived his right to set up Section 12A. It
is further found that, if there is substantial compliance,
the plaintiff cannot be non-suited, i.e., if an attempt has
been made for settling the dispute, which has failed and,
therefore, the plaintiff is constrained to approach the
Court. It is this Judgment, which has been relied upon in
both the impugned Judgments.
18 AIR 1947 PC 197
19 (2006) 12 SCC 119
43
47. However, as pointed out by Shri Sharath Chandran, a
Division Bench of the High Court of Bombay, in an appeal,
has found that the Single Judge, has erred in his view that
Section 12A is not mandatory. The Division Bench proclaimed
that Section 12A of the Act is mandatory. It was further
observed that considering the object and purpose of Section
12A, being rooted in public interest, there is no question
of it being waived. When it came to the Order to be passed
in the appeal, we notice that the plaintiff contended that
the suit was allowed to be filed by the Registry because
of a confusion in the Registry in the initial period, when
the Amending Act came into force. There was oversight. The
Division Bench stayed the Suit and the impugned Order for
three months and referred the parties for mediation. A
learned Single Judge of the High Court of Calcutta, in the
decision reported in Dhanbad Fuels Ltd. v. Union of India
and Others20, took the view that mediation in India is still
at a nascent stage and requires more awareness. There was
a need for mandatory training of commercial disputes. It
was further found that the party cannot be denied the right
to participate in the justice dispensation system. It was
20 2021 SCC Online Calcutta 429
44
further noticed that there was no obligation on the part
of the defendant to respond to the initiative of the
plaintiff. Rejecting the plaint under Order VII Rule 11(d)
in view of Order VII Rule 13, which enables a fresh Suit
to be filed upon rejection under Order VII Rule 11, would
show that the power under Order VII Rule 11 should not be
invoked as it would not be in accordance with the objectives
of the Act and the Rules.
48. Another learned Single Judge of the High Court of
Calcutta, in a judgment reported in Dredging and
Desiltation Company Pvt. Ltd. v. Mackintosh Burn and
Northern Consortium and Others21, took the view that there
is a distinction between filing of a Suit and institution
of a Suit under the CPC. It was further found that the bar
under Section 12A is absolute w.e.f. 12.12.2020, being the
date immediately subsequent to the date after the standard
operating procedure for undertaking pre-litigation
procedure under Section 12A was made. This is after finding
that the standard operating procedure had been made and
Rules were published on 11.12.2020. The very same learned
21 2021 SCC Online Calcutta 1458
45
Single Judge (Debangsu Basak, J.) in the judgment reported
in Laxmi Polyfab Pvt. Ltd. v. Eden Realty Ventures Pvt.
Ltd. and Another22, elaborately considered the question as
to whether Section 12A is mandatory. He went on to hold
that Section 12A was mandatory. The Division Bench of the
High Court of Madhya Pradesh, in Curewin Pharmaceuticals
Pvt. Ltd. v. Curewin Hylico Pharma Pvt. Ltd23, followed the
judgment of the learned Single Judge of High Court of
Bombay, which we have noticed in Ganga Taro (supra), and
after finding that a Suit, which does not contemplate an
urgent interim relief, cannot be instituted unless prelitigation mediation is exhausted. A learned Single Judge
of the Allahabad High Court in the decision reported in
Awasthi Motors v. Managing Director M/s. Energy Electricals
Vehicle and Another24, found that there is a clear purpose
provided for pre-institution mediation. He referred to the
Statement of Objects and Reasons. He concluded that the
provision is mandatory.
22 AIR 2021 Calcutta 190
23 AIR 2021 MP 154
24 AIR 2021 Allahabad 143
46
A SURVEY OF THE ACT AND THE RULES
49. Section 2(c) defines ‘commercial dispute’ as
encompassing various specified transactions, which are 21
in number. There is a residuary provision, which brings
up the rear and is contained in Section 2(c)(xxii). The
said provision empowers the Central Government to notify
other commercial disputes as a commercial dispute. The
explanation amplifies/clarifies the scope of commercial
dispute. Section 2(i) defines the words ‘specified value’
as follows:
“2(i) “Specified Value”, in relation to a
commercial dispute, shall mean the value of
the subject-matter in respect of a suit as
determined in accordance with section 12
which shall not be less than three lakh
rupees or such higher value, as may be
notified by the Central Government.”
[The amount was 1 crore when the Act was enacted in
2015 and it was reduced by the Amendment in 2018.]
50. Under Chapter II, the Law-giver has contemplated,
Commercial Courts at the District Level, a Commercial
Appellate Court at the District Judge Level, a Commercial
Division in the High Court for all High Courts having
47
Ordinary Original Civil Jurisdiction (See Section 4) and a
Commercial Appellate Division in the High Court. Section 8
bars revision application or petition against an
interlocutory order. Section 12 deals with the
determination of the Specified Value. Section 14
contemplates that the Commercial Appellate Court and the
Commercial Appellate Division shall endeavour to dispose
of appeals before them, within six months from the date of
filing of such appeals. Under Section 15(2), all suits and
applications, including under the Arbitration and
Conciliation Act, relating to a commercial dispute of a
specified value, pending in any Civil Court, is to be
transferred to the Commercial Court, where such Court has
been constituted. Under Section 16, the provisions of the
CPC, in respect of its application to any suit in respect
of a commercial dispute of a specified value, is to stand
amended as provided in the Schedule. Section 19 provides
that the State shall provide the necessary infrastructure
to facilitate working of the Commercial Court or Commercial
Division of a High Court. A Schedule relatable to Section
16, which provides for the amended version of the CPC,
inter alia, provides for a substituted version of Section
48
35 of the CPC dealing with costs. It provides that the
Court has the discretion in the matter of quantum of costs.
Section 35 of the CPC in the Schedule, inter alia,
contemplates that in making an Order for payment of costs,
the Court shall have regard to the conduct of the parties
and whether any reasonable offer to settle, is made by a
party and unreasonably refused by the other party. Sections
35(3) and 35(4) read as follows:
“35(3) In making an order for the payment
of costs, the Court shall have regard to the
following circumstances, including—
(a) the conduct of the parties;
(b) whether a party has succeeded on part
of its case, even if that party has not been
wholly successful;
(c) whether the party had made a frivolous
counterclaim leading to delay in the
disposal of the case;
(d) whether any reasonable offer to settle
is made by a party and unreasonably refused
by the other party; and
(e) whether the party had made a frivolous
claim and instituted a vexatious proceeding
wasting the time of the Court.”
49
“35(4) The orders which the Court may make
under this provision include an order that a
party must pay-
(a) a proportion of another party’s costs;
(b) a stated amount in respect of another
party’s costs;
(c) costs from or until a certain date;
(d) costs incurred before proceedings have
begun;
(e) costs relating to particular steps taken
in the proceedings;
(f) costs relating to a distinct part of the
proceedings; and
(g) interest on costs from or until a certain
date.”
[Emphasis supplied]
51. Since, Section 12A also contemplated the making of
Rules to give effect to the scheme of pre-litigation
mediation. The Rules were promptly made and published on
03.07.2018. Rule 3 elaborately provides for the manner in
which the mediation process is initiated. It contemplates
that a party, to a commercial dispute, may make an
application to the Authority. This Rule speaks about a
party. Section 12A declares that the plaintiff must exhaust
the remedy of pre-litigation mediation. What, apparently
is required is that the Suit cannot be filed except after
50
the remedy of pre-litigation mediation, contemplated under
the Act and the Rules, is attempted and exhausted. What
Rule 3(1) provides is the form in which the application is
to be made, viz., Form-I, as specified in Schedule-I. The
making of the Form can be by online transmission or by post
or by hand. The view expressed by the High Court of Madras
that the use of the word ‘may’, detracts from the mandatory
flavour of Section 12A is clearly untenable. Section 12A
is part of the parent enactment. Rule 3, being a subordinate
legislation, must be interpreted harmoniously, in the first
place, with the parent enactment. That apart, on a proper
understanding of Rule 3, there is really no conflict between
Section 12A and Rule 3. Rule 3 only gives a discretion to
the applicant, in regard to the mode of making the
application. So understood, we are of the clear view that,
if Section 12A is otherwise mandatory, Rule 3(1) can only
be understood as providing three different modes for making
the application, contemplated in Section 12A(1). As to
whether the application must be made, must depend upon,
among other things, upon the peremptory nature of the
language employed in section 12A(1). Rule 3 further
contemplates that the Authority, which again, has been
51
clearly defined as the Authority notified by the Central
Government under Section 12A(2), has to issue a notice to
the opposite party to appear and to give his consent to
participate within the time as provided in Rule 3(2). Should
there be no response, a final notice is to be given again
in the manner articulated in Rule 3(2). Should there be
again no response by the notice remaining unacknowledged
or upon there being refusal to participate, the mediation
process becomes what is described, a non-starter. The
Authority then makes a report in Form-III, which is called
a Non-Starter Report. The copy of the Report is served on
the applicant and the respondent. There is a provision for
accommodating the request of the opposite party appearing
and seeking time, subject to the date being not later than
ten days from the date of request of the parties. If, in
such a case, there is failure to appear by the opposite
party, again a non-starter report in Form-III has to be
made. If, on the other hand, where both parties appear,
gives consent, the Authority is to assign the matter to a
Mediator and also to assign a date. The period of mediation
being three months and the possibility of an extension by
two months, with the consent of both sides, is the subject
52
matter of Rule 3. The role of the Mediator is carved out
in Rule 5 to be one to facilitate the voluntary resolution
of the dispute and assist the parties in reaching a
settlement. Rule 6 provides for authority with the party
to either appear personally or through his duly authorised
representative or counsel. The significance of being
represented by counsel in pre-litigation mediation, cannot
but be underlined. Apart from the fact that the Legislature
must be treated as aware, that, both, public interest, as
also the interest of the parties, lies in an expeditious
disposal of, what is described as, commercial litigation,
with a sublime goal of fostering the highest economic
interests of the nation, allowing the Counsel to appear
before the Mediator is intended to facilitate in arriving
at a settlement, which is legally valid and otherwise just.
We have noticed that a settlement arrived at in prelitigation mediation under Section 12A, is to be treated
as an award under Section 30(4) of the Arbitration and
Conciliation Act. Section 30(4) of the Arbitration and
Conciliation Act, 1996, reads as follows:
“30(4) An arbitral award on agreed
terms shall have the same status and
53
effect as any other arbitral award on
the substance of the dispute.”
A mediation settlement arrived at under Section 89 of
the CPC must be scrutinised by the court and only on its
imprimatur being given it is effective [see paragraph 40
of Afcons Infrastructure Limited and Another v. Cherian
Varkey Construction Company Private Limited and Others25].
Since a settlement under Section 12A of the Act is accorded
the status of an award under the Arbitration & Conciliation
Act, it unerringly points to the object of the legislature
to make pre-litigation mediation compulsory. We again
underscore the vital role, the lawyers engaged can and must
discharge in arriving at a just and valid settlement
translating into an effective award and therefore, a
decree.
52. Rule 7 deals with the procedure to be adopted by the
Mediator. Rule 9 enshrines the principle of confidentiality
of mediation. The Mediator, the parties, their authorised
representatives or Counsel are to maintain confidentiality
about the mediation. Rule 9 further declares that the
Mediator is not to allow stenographic or audio or video
25 (2010) 8 SCC 24
54
recording of the mediation sittings. Rule 11 provides for
the mediation fee. There is to be one-time mediation fee,
which is to be shared equally, as per the quantum of claim
as specified in Schedule II. We may set out Schedule II.
“SCHEDULE-II
Mediation Fee
[See rule 11]
S.NO QUANTUM OF CLAIM MEDIATION FEE
PAYABLE TO
AUTHORITY
(in Indian rupees).
1. From Rs. 3,00,000 to
Rs.10,00,000.
Rs. 15,000/-
2. From Rs. 10,00,000. to Rs.
50,00,000.
Rs. 30,000/-
3. From Rs. 50,00,000. to Rs.
1,00,00,000.
Rs. 40,000/-
4. From Rs.1,00,00,000. to
Rs.3,00,00,000.
`Rs. 50,000/-
5. Above Rs. 3,00,00,000. Rs. 75000/-
53. Timelines are contemplated, both in the matter of
pleadings and also other steps to be taken. They are geared
to ensure an expeditious culmination of the proceedings.
Originally, the specified value within the meaning of
Section 2(i) was fixed as ‘which shall not be less than one
crore rupees’. Within three years of the birth of the Act,
55
Parliament found that it was necessary to reduce the
specified value from the sum of Rs.1 crore to Rs.3 lakhs,
which is what is reflected in the present avatar of the
definition of the word ‘specified value’. It is
simultaneously with the reduction of the specified value
and by the same amendment that Section 12A came to be
inserted. We have already noticed the Statement of Objects
and Reasons, which led to the amendment. On a conspectus
of the Act, as from its birth till the Law-giver steppedin with the amendment in 2018, the Act read with the Rules
represent an economic experiment as much as it deals more
directly with a vital aspect of administration of justice.
Commercial disputes have been clearly identified. The value
has been fixed. Courts, at different stages, have been
contemplated. Timelines are contemplated. The whole object
of the law is clear as day light. Disputes of a commercial
hue, must be extinguished with the highest level of
expedition. The dispute resolution would witness a
termination of the lis between the feuding parties. But
even, more importantly, it would prepare the ground for the
country becoming a destination attracting capital by
enhancing the ease of doing business. It does not require
56
much debate to conclude that there is a direct relationship
between ease of doing business and an early and expeditious
termination of disputes, which may arise in commercial
matters. The speed with which the justice delivery system
in any country responds to the problem of docket explosion,
particularly in the realm of commercial disputes can be
regarded as a very safe index of the ease of doing business
in that country. The Act, therefore, is, in the said sense,
a unique experiment to push the pace of disposal of
commercial disputes. It is in this background that the Court
must approach the issue of whether Section 12A has been
perceived as being a mandatory provision. We say this for
the reason that the decisive element in the search for the
answer, in the interpretation of such a Statute, must be
to ascertain the intention of the Legislature. The first
principle, of course, must be the golden rule of
interpretation, which means, the interpretation in
conformity with the plain language, which is used. There
cannot even be a shadow of a doubt that the language used
in Section 12A is plainly imperative in nature. However,
we will not be led by the mere use of the word ‘shall’.
Even going by the sublime object of the Act, as we have
57
unravelled, we are fully reinforced in our opinion that the
pre-institution mediation is intended to produce results,
which has a direct bearing on the fulfilment of the noble
goals of the Law-giver. It is apparent that the Legislature
has manifested a value judgement. We are not called upon
to decide the constitutionality of the provision.
Parliament is presumed to be aware of the felt necessities
of the times. It best knows the manner in which the problems
on the ground are redressed. Section 89 of the CPC, does
contemplate mediation ordered by a Court. However, it must
be noticed that Section 12A contemplates mediation without
any involvement of the Court as it is done prior to the
institution of the suit.
54. The potential of Section 89 of the CPC for resolving
disputes has remained largely untapped on account of the
fact that mediation has become the product of volition of
the parties. Courts, no doubt, have begun to respond
positively. However, there was a pressing need to decongest
the trial courts, in commercial matters in particular, as
they bear the brunt of docket explosion. It is noteworthy
that Section 12A provides for a bypass and a fast-track
route without for a moment taking the precious time of a
58
court. At this juncture, it must be immediately noticed
that the Law-giver has, in Section 12A, provided for preinstitution mediation only in suits, which do not
contemplate any urgent interim relief. Therefore, preinstitution mediation has been mandated only in a class of
suits. We say this for the reason that in suits which
contemplate urgent interim relief, the Law-giver has
carefully vouch-safed immediate access to justice as
contemplated ordinarily through the courts. The carving out
of a class of suits and selecting them for compulsory
mediation, harmonises with the attainment of the object of
the law. The load on the Judges is lightened. They can
concentrate on matters where urgent interim relief is
contemplated and, on other matters, which already crowd
their dockets.
55. Section 9 of the CPC is not the law, which creates a
right to file a civil suit. It would, undoubtedly, require
a law, however, to invade, absolutely or conditionally, the
vital civil right of a person to take his grievance to a
civil court. A civil suit can be barred by a law, either
expressly or by necessary implication. The jurisdiction of
a civil court can be ousted. In other words, there is no
59
Fundamental Right with anyone to contend that he has a
right to file a civil suit, which cannot be taken away. It
is another matter that the courts will not lightly infer
the ouster of a jurisdiction of a civil court. The very
presence of Order VII Rule 11(d), which mandates rejection
of a plaint, where a suit is barred, is a reminder of the
principle that there is no absolute right to file a civil
suit.
56. Under Section 12A, all that is provided is, a cooling
period wherein the parties are to be referred for mediation
at the hands of skilled Mediators. While on mediation, we
may notice the following views expressed by this Court in
the judgment reported in Vikram Bakshi and Others v. Sonia
Khosla (Dead) by Legal Representatives26:
“16. According to us it would have been
more appropriate for the parties to at least
agree to resort to mediation as provided
under Section 89 CPC and make an endeavour
to find amicable solution of the dispute,
agreeable to both the parties. One of the
aims of mediation is to find an early
resolution of the dispute. The sooner the
dispute is resolved the better for all the
parties concerned, in particular, and the
society, in general. For parties, dispute
not only strains the relationship but also
26 (2014) 15 SCC 80
60
destroys it. And, so far as society is
concerned it affects its peace. So what is
required is resolution of dispute at the
earliest possible opportunity and via such
a mechanism where the relationship between
individual goes on in a healthy manner.
Warren Burger, once said:
“The obligation of the legal profession
is … to serve as healers of human conflict
… we should provide mechanisms that can
produce an acceptable result in shortest
possible time, with the least possible
expense and with a minimum of stress on
the participants. That is what justice is
all about.”
MEDIATION is one such mechanism which has been
statutorily brought into place in our
justice system. It is one of the methods of
alternative dispute resolution and resolves
the dispute in a way that is private, fast
and economical. It is a process in which a
neutral intervenor assists two or more
negotiating parties to identify matters of
concern, develop a better understanding of
their situation, and based upon that
improved understanding, develop mutually
acceptable proposals to resolve those
concerns. It embraces the philosophy of
democratic decision-making [Alfin, et
al., Mediation Theory & Practice (2nd Edn.,
2006) Lexis Nexis].
xxx xxx xxx
19. This Bench is of firm opinion that
mediation is a new dimension of access to
justice. As it is one of the best forms, if
not the best, of conflict resolution. The
concept of Justice in mediation is advanced
in the oeuvres of Professors Stulberg, Love,
Hyman, and Menkel-Meadow (SelfDetermination Theorists). Their definition
61
of justice is drawn primarily from the
exercise of party self-determination. They
are hopeful about the magic that can occur
when people open up honestly and
empathetically about their needs and fears
in uninhibited private discussion. And, as
thinkers, these jurists are optimistic that
the magnanimity of the human spirit can
conquer structural imbalances and resource
constraints.
xxx xxx xxx
19.3. Professor Carrie Menkel-Meadow
presents a related point of view in making
the case that settlement has a political and
ethical economy of its own and writes:
“Justice, it is often claimed,
emerges only when lawyers and their
clients argue over its meaning, and,
in turn, some authoritative figure or
body pronounces on its meaning, such
as in the canonical cases of the late
twentieth century … For many years
now, I have suggested that there are
other components to the achievement
of justice. Most notably, I refer to
the process by which we seek justice
(party participation and
empowerment, consensus rather than
compromise or command) and the
particular types of outcomes that
might help to achieve it (not binary
win-lose solutions, but creative,
pie-expanding or even shared
solutions).”
[Emphasis supplied]
62
57. On the one hand, the staunchest criticism against
mediation has been that it is opposed to the fundamental
principle of access to justice. It is in keeping with the
traditional notions of the right of a person to have a
dispute adjudicated by an impartial and a trained Judge.
On the other hand, as noticed by this Court in Vikram
Bakshi(supra), mediation offers a completely new approach
to attaining the goal of justice. A win-win situation
resulting from assigning a greater role to the parties
themselves, with no doubt, a spirit of accommodation
represents a better and what is more in the era of docket
explosion, the only meaningful choice. The realisation has
been growing over a period of time, that formal court rooms,
long drawn-out proceedings, procedural wrangles, mounting
and crippling costs, delay, which never wanes but only
increases with the day that at least, in certain categories
of cases, mediation can be the way out. It, undoubtedly,
requires a complete change in the mindset. The change in
approach, undoubtedly, can be achieved only if the
litigants become aware of its benefits in comparison with
the great disadvantage in waiting in the serpentine queue
for the day of reckoning to arrive in a court of law. The
63
role of the Bar is vital in taking mediation forward. With
increase in population and a skewed Judge-population ratio
and a huge spiralling of litigation in the courts, it is
logical, just and imperative, to attempt and persevere in
out of the box thinking. We can no longer afford to remain
in the past. A clean break with the past is urgently needed.
What was a mere writing on the wall as early as in the last
decades of the previous century has become the harsh
reality. It is important that the courts also adapt to the
changing times. At least when the Parliament has decided
to move ahead, it becomes the court’s duty not to greet it
with undue scepticism. It becomes necessary to fulfil the
intention of the Parliament by realising the true role of
judiciary.
58. A perusal of the Act and the Rules reveal the existence
of a complete Code. Mediation contemplated under Section
12A and the Rules, may not succeed in every case. To begin
with, the figures may not be reassuring but even if success
does not elude the Mediator, in a few of the cases, a good
part of the object of the Legislature, would stand achieved.
Such is the condition of the docket explosion perceived
particularly in commercial disputes. It is not difficult
64
to appreciate the concern of the people through their
elected representatives. Particularly with the lowering of
the monetary limit from rupees one crores to rupees three
lakhs, there would be a stupendous load on the courts to
achieve the timeline and dispose of commercial matters by
the conventional mode of adjudication, even with the
amended provisions of the CPC as applicable under Section
16 of the Act.
59. We are not impressed by the argument of Shri Saket
Sikri that Section 12A does not provide for any penalty
and, therefore, the provision is not mandatory. No doubt,
he does admit that it is only one of the aspects to be
considered whether the word ‘shall’ is to be treated as
mandatory. If the argument of learned Counsel is accepted,
neither Section 80 of the CPC nor Section 69 of the
Partnership Act, which do not provide for any penalty for
a suit brought in contravention of their terms, would be
mandatory. However, it is a settled law that a plaint
instituted transgressing the mandate of Section 80, that
is, when there is no notice at all and no urgent relief is
contemplated and leave sought, the plaint would have to be
rejected, as the suit would not be maintainable. The
65
position is equally the same in regard to absence of
registration contemplated under Section 69 of the Indian
Partnership Act. Therefore, the principle canvassed by the
learned Counsel would not apply.
60. Equally, we are unimpressed by the contention of the
learned Counsel Shri Saket Sikri that contravention of
mandate of Section 12A does not affect any legal right of
the defendant and therefore, the suit filed without
resorting to compulsory mediation must be countenanced. It
may be true that it may be relevant input to inquire as to
whether, not following a mandate of a statute, will violate
the right of another person.
61. We may proceed on the basis that if the suit is brought
without complying with Section 12A, where no urgent interim
relief is sought, may not in one sense, affect the legal
right of the defendant. But this argument overlooks the
larger picture which is the real object of the law. This
object is not to be viewed narrowly with reference to the
impact on the parties alone. This is apart from also
remembering that 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
66
court, which, undoubtedly, would entail costs, whereas, the
mediation costs, as we have noticed, 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. The chief
advantage and highlight of mediation is that it is a winwin for all sides, if the mediation is successful.
Therefore, it cannot, in one sense, be argued that no legal
right of the defendant is infracted. Further, on the same
logic, Section 80(1) of the CPC and Section 69 of the Indian
Partnership Act would not be mandatory. This is however
not the case.
62. One of the arguments of Shri Saket Sikri is that, if a
plaint is rejected under Order VII Rule 11, the plaintiff
would be saddled with the deprivation of the court fee
paid. He would contend that this aspect may be considered,
when the Court decides the question as to whether the
provision is mandatory or not. Whenever a plaint is rejected
on the ground that the suit is barred under any law, this
consequence is inevitable. [We may only, in this context,
observe, that under Section 4A of the Kerala Court Fee and
67
Suit Valuation Act, 1959, the plaintiff needs to pay only
one-tenth of the total court fee at the time of institution
of the suit. The balance is to be paid not later than
fifteen days from the date of framing of issues, inter
alia. Section 4A further provides that if the parties
further settle the dispute within the period specified or
extended by the Court for payment of the balance court fee,
the plaintiff shall not be called upon to pay the balance
court fee.] If a plaint is rejected for failure to give a
notice, as contemplated in Section 80 of the CPC, the court
fee paid, may be lost. Equally, for violation of Section
69 of the Indian Partnership Act, if the plaint is rejected,
the plaintiff loses the court fee. While it may appear to
be hard on the plaintiff, the effect of the provision
contained in Order VII Rule 11, cannot be diluted.
Therefore, we are not impressed by the argument, subject
to what we will hold later on.
63. One of the aspects which weighed with the learned
single judge of the Bombay High Court in Ganga Taro (supra)
is that in a case where the suit is instituted under Section
80 of the CPC without issuing any notice, if the defendant
does not take up the plea of violation of Section 80, there
68
can be waiver. Thus, even if Section 12A in a given case,
where the defendant does not set up the case there can be
waiver and therefore, Section 12A is not mandatory. No
doubt, the Division Bench of the Bombay High Court while
reversing the learned single judge proceeded to hold that
there cannot be waiver as Section 12A is based on public
interest. The approach of the learned Single Judge does not
commend itself to us. The question as to whether Section
12A is mandatory or not, must be decided with reference to
language used, the object of the enactment and a host of
other aspects. The fact that if a defendant does not raise
the plea about compliance of Section 12A, it may result in
a given case of waiver cannot result in Section 12A not
being mandatory. If it were so, then in a case where there
is no notice under Section 80, a plaint can never be
rejected. It is legally untenable and defies logic. Another
argument raised by Shri Saket Sikri, learned counsel is
that by the impugned order, the High Court has affirmed the
trial Court order that the suit be kept in suspended
animation and referred the parties for mediation.
According to him, it is substantial compliance of Section
12A of the Act. It is eminently just. He also points out
69
the conduct of the appellant in not even cooperating in the
mediation process. We are unable to accept this argument.
We will refer to Section 80 of the CPC to assist us in
justifying our conclusion. Under Section 80 (1) of the
CPC, a suit not covered by Section 80(2), which is filed
in defiance of the former provision, that is without serving
any notice, is not maintainable. The suit would be barred
and liable to be rejected under Order VII Rule 11. The only
exception is what is provided in Section 80 (2). It
contemplates a suit to obtain an urgent or interim relief.
Such a suit may be instituted with the leave of the court
without serving any notice as required under Section
80 (1). In a case where a plaintiff does not seek urgent
interim relief under Section 80(2), the suit would fall
within the four walls of Section 80(1). Section 80(1) is
mandatory. In regard to such suit, there is no question of
substantial compliance. The suit must culminate in
rejection of the plaint on invoking power under Order VII
Rule 11. We may immediately draw a parallel between Section
80(1) of the CPC and 12A of the Act. In Section 12A also,
the bar of institution of the suit is applicable only in a
case in which plaintiff does not contemplate urgent interim
70
relief. The situation is akin to what is contemplated in
Section 80(1) of the CPC. In other words, the suit under
the Act which does not contemplate urgent interim relief
is like a suit covered by Section 80(1) of the CPC which
does not project the need for any urgent or interim relief.
In regard to a suit covered under Section 12A of the Act,
namely, in a suit where interim relief is not contemplated,
there can be no substantial compliance by way of post
institution reference to mediation. The argument of the
plaintiff overlooks the object apart from the language used
besides the design and scheme of the law. It will, if
accepted, lead to courts also spending their invaluable
time on such matters which follow from adjournments,
objections and hearings. There is no need to adopt such a
course.
64. Take a case where notice is given under Section 80(1).
A contention is taken that the notice is not effective as
it does not comply with what is required in Section 80(1).
In such a case, it may be a different matter that the Court
may take a liberal view as to whether there is compliance.
In fact, Section 80(3) makes this position clear. Even
before Section 80 was substituted by Act 104 of 1976 by
71
which 80(3) was inserted, in Raghunath Das v. Union of India
& Another27 while dealing with a case where a notice was
given, this Court inter alia held as follows:
“8. The object of the notice contemplated
by that section is to give to the
concerned Governments and public officers
opportunity to reconsider the legal
position and to make amends or settle the
claim, if so advised, without litigation.
The legislative intention behind that
section in our opinion is that public mone
y and time should not be wasted on
unnecessary litigation and the Government
and the public officers should be given a
reasonable opportunity to examine the
claim made against them lest they should
be drawn into avoidable litigations. The
purpose of law is advancement of justice.
The provisions in Section 80 of the CPC
are not intended to be used as boobytraps
against ignorant and illiterate persons. I
n this case we are concerned with a narrow
question. Has the person mentioned in the
notice as plaintiff brought the present
suit or is he someone else? This
question has to be decided by reading the
notice as a whole in a reasonable manner.
9. In Dhian Singh Sobha Singh v. Union of
India [(1958) SCR 781, 795] this Court
observed that while the terms of Section
80 of the CPC must be strictly complied
with that does not mean that the terms of
27 AIR 1969 SC 674
72
the section should be construed in a
pedantic manner or in a manner completely
divorced from common sense. The relevant
passage from that judgment is set out
below:
“We are constrained to observe that
the approach of the High Court to this
question was not well founded. The
Privy Council no doubt laid down
in Bhagchand Dagadua v. Secretary of
State that the terms of section
should be strictly complied with. That
does not however mean that the terms
of the notice should be scrutinised in
a pedantic manner or in a manner
completely divorced from common sense.
As was stated by Pollock C.B.
in Jones v. Nicholls, “we must import
a little common sense into notices of
this kind”. Beaumont, C.J. also
observed in Chandu Lal Vadilal v. Gove
rnment of Bombay “One must construe Se
ction 80 with some regard to common
sense and to the object with which it
appears to have been passed.”
65. The period of mediation is three months. If parties
warm-up to the prospect of settlement through mediation,
on their consent, it can be extended for another two months.
Thus, for payment of a one-time fee, in the case, which is
successfully mediated by a skilled Mediator and with the
assistance of Counsel, the very dispute gets settled. The
pressure on the courts is taken off to the extent that the
73
parties, without reference of the court, are compelled to
undergo mediation.
66. Section 12A of the Act provides for mediation. This
is a provision, which was inserted as per the Amending Act
(Act 28 of 2018) enacted in the year 2018 and it came into
force w.e.f. 03.05.2018. By the said amendment, in fact,
Chapter IIIA was inserted and Section 12A is the sole
Section in the said Chapter. A plain reading of Section 12A
makes the following position clear:
The Law-giver has declared that if a Suit under
the Act does not ‘contemplate’ any urgent interim
relief, then, it cannot be instituted unless the
plaintiff seeks pre-litigation mediation. The preinstitution mediation is to be done in the manner,
procedure, which is to be prescribed by the Central
Government. The pre-litigation mediation is to be
completed within a period of three months from the date
of the application made by the plaintiff under SubSection (1) [See Section 12A sub-Section (3)]. The
period of three months can, however, be extended for a
period of two months provided there is consent to the
same by the parties [See the first proviso to Section
74
12A sub-Section (3)]. By the second proviso, the
Legislature has taken care to provide that the period,
during which the parties remained occupied with the
pre-litigation mediation, is not to be reckoned for the
purpose of computing the period of limitation under the
Limitation Act, 1963. As to what would happen, if the
parties arrive at the settlement, is provided for in
Section 12A sub-Section (4). The settlement is to be
reduced into writing and signed by the parties to the
dispute and the Mediator. The effectiveness of a
settlement arrived at in the course of the preinstitution mediation contemplated in Section 12A, has
been dealt with in Section 12A sub-Section (5).
Parliament has accorded the settlement, 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. Spread over
five sub-Sections, this standalone Section in Chapter
IIIA, no doubt, supported by the Rules, in our view,
substantially manifests a definite scheme to
effectively deal with the perceived urgent problem of
acute clogging of the justice delivery system, which
75
had to be de-congested. Section 12A cannot be perceived
as merely intended to reach quicker justice, and what
is more, on terms, which are mutually acceptable to the
parties concerned. Even, more importantly, it was to
produce a vital and significant effect on the very
interest of the nation. We have perused the Statement
of Objects and Reasons. To attract foreign capital by
enhancing its rather low standard in the ease of doing
business, it was and is still necessary to showcase an
efficient and quick justice delivery system in
commercial matters. In fact, India, which was ranked
at 142 out of 189 countries, in the Ease of Doing
Business Index, in 2015, climbed-up to only 130 in the
year 2016. By 2020, India stood at the 63rd position.
THE REGIME UNDER ORDER VII RULE 11 OF THE CPC
67. Order VII Rule 11 declares that the plaint can be
rejected on 6 grounds. They include failure to disclose
the cause of action, and where the suit appears from the
statement in the plaint to be barred. We are concerned in
these cases with the latter. Order VII Rule 12 provides
that when a plaint is rejected, an order to that effect
76
with reasons must be recorded. Order VII Rule 13 provides
that rejection of the plaint mentioned in Order VII Rule
11 does not by itself preclude the plaintiff from presenting
a fresh plaint in respect of the same cause of action.
Order VII deals with various aspects about what is to be
pleaded in a plaint, the documents that should accompany
and other details. Order IV Rule 1 provides that a suit
is instituted by presentation of the plaint to the court
or such officer as the court appoints. By virtue of Order
IV Rule 1(3), a plaint is to be deemed as duly instituted
only when it complies with the requirements under Order VI
and Order VII. Order V Rule 1 declares that when a suit
has been duly instituted, a summon may be issued to the
defendant to answer the claim on a date specified therein.
There are other details in the Order with which we are not
to be detained. We have referred to these rules to prepare
the stage for considering the question as to whether the
power under Order VII Rule 11 is to be exercised only on
an application by the defendant and the stage at which it
can be exercised. In Patasibai and Others v. Ratanlal28, one
of the specific contentions was that there was no specific
28 (1990) 2 SCC 42
77
objection for rejecting of the plaint taken earlier. In
the facts of the case, the Court observed as under:
“13. On the admitted facts appearing from
the record itself, learned counsel for the
respondent, was unable to show that all or
any of these averments in the plaint
disclose a cause of action giving rise to
a triable issue. In fact, Shri Salve was
unable to dispute the inevitable
consequence that the plaint was liable to
be rejected under Order VII Rule 11, CPC on
these averments. All that Shri Salve
contended was that the court did not in
fact reject the plaint under Order VII Rule
11, CPC and summons having been issued, the
trial must proceed. In our opinion, it
makes no difference that the trial court
failed to perform its duty and proceeded to
issue summons without carefully reading the
plaint and the High Court also overlooked
this fatal defect. Since the plaint suffers
from this fatal defect, the mere issuance
of summons by the trial court does not
require that the trial should proceed even
when no triable issue is shown to arise.
Permitting the continuance of such a suit
is tantamount to licensing frivolous and
vexatious litigation. This cannot be done.”
(Emphasis supplied)
68. On a consideration of the scheme of the Orders IV, V
and VII of the CPC, we arrive at the following conclusions:
(A) A suit is commenced by presentation of a plaint.
The date of the presentation in terms of Section 3(2)of
78
the Limitation Act is the date of presentation for the
purpose of the said Act. By virtue of Order IV Rule 1
(3), institution of the plaint, however, is complete only
when the plaint is in conformity with the requirement of
Order VI and Order VII.
(B) When the court decides the question as to issue of
summons under Order V Rule 1, what the court must
consider is whether a suit has been duly instituted.
(C) Order VII Rule 11 does not provide that the court
is to discharge its duty of rejecting the plaint only on
an application. Order VII Rule 11 is, in fact, silent
about any such requirement. Since summon is to be issued
in a duly instituted suit, in a case where the plaint is
barred under Order VII Rule 11(d), the stage begins at
that time when the court can reject the plaint under
Order VII Rule 11. No doubt it would take a clear case
where the court is satisfied. The Court has to hear the
plaintiff before it invokes its power besides giving
reasons under Order VII Rule 12. In a clear case, where
on allegations in the suit, it is found that the suit is
barred by any law, as would be the case, where the
plaintiff in a suit under the Act does not plead
79
circumstances to take his case out of the requirement of
Section 12A, the plaint should be rejected without
issuing summons. Undoubtedly, on issuing summons it will
be always open to the defendant to make an application
as well under Order VII Rule 11. In other words, the
power under Order VII Rule 11 is available to the court
to be exercised suo motu.(See in this regard, the
judgement of this Court in Madiraju Venkata Ramana Raju
(supra).
PRESENTATION OF PLAINT AND INSTITUTION OF SUIT
69. Another area of debate has been about the distinction
between the presentation of a plaint and institution of a
suit. Section 3(2) of the Limitation Act, 1963, provides
that for the purpose of the Limitation Act, a suit is
instituted in the ordinary case, when the plaint is
presented to the proper Officer. In the case of a pauper,
the suit is instituted when his application to leave to sue
as a pauper is made. Order IV Rule 1 of the CPC reads as
follows:
“Order IV Rule 1. Suit to be commenced by
plaint.—(1) Every suit shall be instituted
by presenting a plaint in duplicate to the
80
Court or such officer as it appoints in this
behalf.
(2) Every plaint shall comply with the rules
contained in Orders VI and VII, so far as
they are applicable.
(3) The plaint shall not be deemed to be
duly instituted unless it complies with the
requirements specified in sub-rules (1) and
(2).”
70. Sub-Rule (3) of Order IV Rule 1 was inserted by Act 46
of 1999 w.e.f. 01.07.2002. Shri Sharath Chandran has drawn
our attention to the Judgment of the High Court of Madras
reported in Olympic Cards Limited v. Standard Chartered
Bank29. In the said case, the question, which arose was,
whether there was an abandonment or withdrawal of suit
within the meaning of Order XXIII Rule 1 of the CPC, which
would operate as a bar to file a fresh suit. In this
context, we notice the following discussion:
“16. Rule (1) of Order 4 of C.P.C. provided
for institution of Suits. Rules 3 & 4 of
Order 4 contains the statutory prescription
that the Plaint must comply with the
essential requirements of a valid Plaint and
then only the process of filing would
culminate in the registration of a Suit.
Rule 21 of Civil Rules of Practice contains
the basic difference between presentation
and institution. There is no dispute that
the date of filing the Plaint would be
counted for the purpose of limitation.
29 (2013) 1 CTC 38
81
However, that does not mean that the Suit
was validly instituted by filing the Plaint.
The Plaint, which does not comply with the
Rules contained in Orders 4 & 7, is not a
valid Plaint. The Court will initially give
a Diary Number indicating the presentation
of Suit. In case the Plaint is returned, it
would remain as a “returned Plaint” and not
a “returned Suit”. The act of numbering the
Plaint and inclusion in the Register of
Suits alone would constitute the institution
of Suit. The stages prior to the
registration of Suit are all preliminary in
nature. The return of Plaint before
registration is for the purpose of complying
with certain defects pointed out by the
Court. The further procedure after admitting
of the Plaint is indicated in Rule 9 of Order
7. This provision shows that the Court would
issue summons to the parties after admitting
the Plaint and registering the Suit.
Thereafter only the Defendants are coming
on record, exception being their appearance
by lodging caveat. Even after admitting the
Plaint, the Court can return the Plaint on
the ground of jurisdiction under Rule 10 of
Order 7 of C.P.C. The fact that the
Plaintiff/Petitioner served the
Defendant/respondent the copies of
Plaint/Petitions before filing the
Suit/Petition would not amount to
institution of Suit/filing Petition. It is
only when the Court admits the Plaint,
register it and enter it in the Suit
register, it can be said that the Suit is
validly instituted.
17. It is, therefore, clear that any
abandonment before the registration of Suit
would not constitute withdrawal or
abandonment of Suit within the meaning of
Order 23, Rule 1, C.P.C., so as to operate
as a legal bar for a subsequent Suit of the
very same nature. It is only the withdrawal
82
or abandonment during the currency of a
Legal proceedings would preclude the
Plaintiff to file a fresh Suit at a later
point of time on the basis of the very same
cause of action.”
71. The contention appears to be that it may be a fair view
to take that there is no institution of the suit within the
meaning of Section 12A, until the Court admits the plaint
and registers it in the suit register. In other words,
presentation of the plaint may not amount to institution
of the suit for the purpose of Order IV Rule 1 of the CPC
and Section 12A of the Act. If this view is adopted, it is
pointed out that before the plaint is registered after
presentation and there is non-compliance with Section 12A,
the plaintiffs can, then and there, be told off the gates
to first comply with the mandate of Section 12A. This
process would not involve the Courts actually spending time
on such matters. In the facts, this question does not arise
and, it may not be necessary to explore this matter further.
72. We may sum-up our reasoning as follows:
The Act did not originally contain Section 12A. It
is by amendment in the year 2018 that Section 12A was
inserted. The Statement of Objects and Reasons are
83
explicit that Section 12A was contemplated as
compulsory. The object of the Act and the Amending Act
of 2018, unerringly point to at least partly foisting
compulsory mediation on a plaintiff who does not
contemplate urgent interim relief. The provision has
been contemplated only with reference to plaintiffs who
do not contemplate urgent interim relief. The
Legislature has taken care to expressly exclude the
period undergone during mediation for reckoning
limitation under the Limitation Act, 1963. The object
is clear. It is an undeniable reality that Courts in
India are reeling under an extraordinary docket
explosion. Mediation, as an Alternative Dispute
Mechanism, has been identified as a workable solution
in commercial matters. In other words, the cases under
the Act lend themselves to be resolved through
mediation. Nobody has an absolute right to file a civil
suit. A civil suit can be barred absolutely or the bar
may operate unless certain conditions are fulfilled.
Cases in point, which amply illustrate this principle,
are Section 80 of the CPC and Section 69 of the Indian
Partnership Act. The language used in Section 12A,
84
which includes the word ‘shall’, certainly, go a long
way to assist the Court to hold that the provision is
mandatory. The entire procedure for carrying out the
mediation, has been spelt out in the Rules. The parties
are free to engage Counsel during mediation. The
expenses, as far as the fee payable to the Mediator,
is concerned, is limited to a one-time fee, which
appears to be reasonable, particularly, having regard
to the fact that it is to be shared equally. A trained
Mediator can work wonders. Mediation must be perceived
as a new mechanism of access to justice. We have already
highlighted its benefits. Any reluctance on the part
of the Court to give Section 12A, a mandatory
interpretation, would result in defeating the object
and intention of the Parliament. The fact that the
mediation can become a non-starter, cannot be a reason
to hold the provision not mandatory. Apparently, the
value judgement of the Law-giver is to give the
provision, a modicum of voluntariness for the
defendant, whereas, the plaintiff, who approaches the
Court, must, necessarily, resort to it. Section 12A
elevates the settlement under the Act and the Rules to
85
an award within the meaning of Section 30(4) of the
Arbitration Act, giving it meaningful enforceability.
The period spent in mediation is excluded for the
purpose of limitation. The Act confers power to order
costs based on conduct of the parties.
73. In the cases before us, the suits do not contemplate
urgent interim relief. As to what should happen in suits
which do contemplate urgent interim relief or rather the
meaning of the word ‘contemplate’ or urgent interim relief,
we need not dwell upon it. The other aspect raised about
the word ‘contemplate’ is that there can be attempts to
bypass the statutory mediation under Section 12A by
contending that the plaintiff is contemplating urgent
interim relief, which in reality, it is found to be without
any basis. Section 80(2) of the CPC permits the suit to
be filed where urgent interim relief is sought by seeking
the leave of the court. The proviso to Section 80 (2)
contemplates that the court shall, if, after hearing the
parties, is satisfied that no urgent or immediate relief
need be granted in the suit, return the plaint for
presentation to the court after compliance. Our attention
is drawn to the fact that Section 12A does not contemplate
86
such a procedure. This is a matter which may engage
attention of the lawmaker. Again, we reiterate that these
are not issues which arise for our consideration. In the
fact of the cases admittedly there is no urgent interim
relief contemplated in the plaints in question.
SOME CONCERNS
74. Mediation can become a potent alternate dispute
resolution device. There are, however, a few indispensable
requirements. The first requirement is the existence of
adequate infrastructural facilities and, what is more
important, availability of trained and skilled Mediators.
The role of the Mediator, as per Rule (5) of the Rules, is
to facilitate the voluntary resolution of a commercial
dispute and assist the parties in this regard. How can a
Mediator, who is not properly trained, fulfil his
responsibility under Rule (5)? Another area of concern is
the availability in the number of Mediators in the country,
particularly, in the light of lowering of the monetary
valuation from Rs. 1 crore to Rs. 3 lakhs. It is all well
to pass a law with sublime objects as in this case. However,
the goal will not be realised unless the State Governments
87
and all other relevant Authorities bestow their attention
in the matter of providing adequate facilities. Knowledge
of the laws, which are the subject matter of the suits
under the Act, is indispensable for a Mediator to
effectively discharge his duties. His role is supreme and
it is largely shaped by his own knowledge of the law that
governs commercial cases. There must be training by
Experts, including at the State Judicial Academies. This
must be undertaken on a regular and urgent basis,
particularly keeping in mind when there is a dearth of
trained mediators. There is a need to have a dedicated bar
for mediation. The effective participation of the bar which
must be adequately remunerated for its service will assist
in mediation evolving. The concerned High Court may also
undertake periodic exercise to establish a panel of trained
mediators in District and Taluka levels as per need.
75. In Civil Appeal arising out of SLP(C) No. 14697 of
2021, it is brought to our notice that after the filing of
the Special Leave Petition, suit was proceeded with under
Order XXXVII of the CPC, Shri Ayush Negi, would contend
that the respondent\plaintiff has pressed the summary
88
judgment and, in case, this Court does not grant relief to
the appellant, safeguard may be incorporated allowing the
appellants written statement to be treated as leave to
defend.
THE RELIEF
76. On the findings we have entered, the impugned orders
must be set aside and the applications under Order VII Rule
11 allowed. This would mean that the plaints must be
rejected. Necessarily, this would involve the loss of the
court fee paid by the plaintiffs in these cases. They would
have to bring a fresh suit, no doubt after complying with
Section 12A, as permitted under Order VII Rule 13.
Moreover, the declaration of law by this Court would relate
back to the date of the Amending Act of 2018.
77. There is a plea by Shri Saket Sikri, that if this
Court holds that Section 12A is mandatory it may be done
with only prospective effect. He drew support of the
judgment of this Court in, Jarnail Singh and Others v.
Lachhmi Narain Gupta and Others30.
30 2022 SCC Online SC 96
89
“35. While interpreting the scope of Article
142 of the Constitution, this Court held that
the law declared by the Supreme Court is the
law of the land and in so declaring, the
operation of the law can be restricted to the
future, thereby saving past transactions.
36. The power of this Court under Article 142
of the Constitution is a constituent power
transcendental to statutory prohibition
[(1997) 5 SCC 201]. In Orissa Cement
Ltd. v. State of Orissa [(1991) Suppl.1 SCC
430], this Court observed that relief can be
granted, moulded or restricted in a manner most
appropriate to the situation before it in such
a way as to advance the interests of justice.
The doctrine of prospective overruling is in
essence a recognition of the principle that the
Court moulds the reliefs claimed to meet the
justice of the case, as has been held
in Somaiya Organics (India) Ltd. v. State of
U.P. [(2001 5 SCC 519]. It was further clarified
that while in Golak Nath (supra), ‘prospective
overruling’ implied an earlier judicial
decision on the same issue which was otherwise
final, this Court had used the power even when
deciding on an issue for the first time. There
is no need to refer to other judgments of this
Court which have approved and applied the
principle of prospective overruling or
prospective operation of judgments. There
cannot be any manner of doubt that this Court
can apply its decision prospectively, i.e.,
from the date of its judgment to save past
transactions.”
90
78. The Doctrine of prospective overruling began its
innings with the decision of this Court in L.C. Golak Nath
and Others v. State of Punjab and Another31. This Court in
the said case relied upon Articles 32, 141 and 142 of the
Constitution and extended this doctrine which was in vogue
in the United States. The principle involves giving effect
to the law laid down by this Court, from a prospective
date, ordinarily the date of the judgment. There is no
dispute that while initially the doctrine was confined to
matters arising under the Constitution, later on it has
been applied to other areas of law as well.
79. In Taherakhatoon (D) By Lrs. v. Salambin Mohammad32,
this Court while dealing with its powers or rather
limitation on its power even after grant of special leave
under Article 136 held as follows:
“20. In view of the above decisions, even
though we are now dealing with the appeal after
grant of special leave, we are not bound to go
into merits and even if we do so and declare
the law or point out the error — still we may
not interfere if the justice of the case on
facts does not require interference or if we
31 AIR 1967 SC 1643
32 (1999) 2 SCC 635
91
feel that the relief could be moulded in a
different fashion.…”
80. In M/s. Somaiya Organics (India) Ltd. v. State of Uttar
Pradesh33, the Court went on to hold as follows in regard
to the doctrine of prospective overruling.
“25. The words “prospective overruling”
implies an earlier judicial decision on the
same issue which was otherwise final. That is
how it was understood in Golak Nath [AIR 1967
SC 1643: (1967) 2 SCR 762]. However, this Court
has used the power even when deciding on an
issue for the first time. Thus, in India Cement
Ltd. v. State of T.N. [(1990) 1 SCC 12] when
this Court held that the cess sought to be
levied under Section 115 of the Madras
Panchayats Act, 1958 as amended by Madras Act
18 of 1964, was unconstitutional, not only did
it restrain the State of Tamil Nadu from
enforcing the same any further, it also
directed that the State would not be liable for
any refund of cess already paid or collected.
28. In the ultimate analysis, prospective
overruling, despite the terminology, is only a
recognition of the principle that the court
moulds the reliefs claimed to meet the justice
of the case — justice not in its logical but
in its equitable sense. As far as this country
is concerned, the power has been expressly
conferred by Article 142 of the Constitution
which allows this Court to “pass such decree
or make such order as is necessary for doing
complete justice in any cause or matter pending
33 AIR 2001 SC 1723
92
before it”. In exercise of this power, this
Court has often denied the relief claimed
despite holding in the claimants' favour in
order to do ‘complete justice’.”
81. We may next notice the judgment of this Court in, P.V.
George & Ors. v. State of Kerala & Ors.
34 In the said case,
the doctrine was sought to be invoked in a service matter.
The Full Bench of the High Court overruled a Division Bench
which had declared a rule unconstitutional. On the strength
of the Full Bench decision the employees were sought to be
reverted. This Court adverted to the decision of the House
of Lords reported in National Westminster Bank
Plc. v. Spectrum Plus Ltd. & Ors.35 wherein the Court held:
“9. Prospective overruling takes several
different forms. In its simplest form
prospective overruling involves a court giving
a ruling of the character sought by the bank
in the present case. Overruling of this simple
or ‘pure’ type has the effect that the court
ruling has an exclusively prospective effect.
The ruling applies only to transactions or
happenings occurring after the date of the
court decision. All transactions entered into,
or events occurring, before that date continue
to be governed by the law as it was conceived
to be before the court gave its ruling.
10. Other forms of prospective overruling are
more limited and ‘selective’ in their departure
from the normal effect of court decisions. The
34 AIR 2007 SC 1034
35 (2005) UK HL 41
93
ruling in its operation may be prospective and,
additionally, retrospective in its effect as
between the parties to the case in which the
ruling is given. Or the ruling may be
prospective and, additionally, retrospective
as between the parties in the case in which
the ruling was given and also as between the
parties in any other cases already pending
before the courts. There are other variations
on the same theme.”
(Emphasis supplied)
82. This is not a case where this Court is overruling its
previous decision, which was the case in the decision
reported in 2005 8 SCC 618. This is also not a case where
this Court is pronouncing a law under which various
transactions have been affected void. It may be true that
the doctrine of prospective overruling may not be confined
to either of the above circumstances as such and its ambit
is co-extensive with the equity of a situation whereunder
on the law being pronounced it is likely to intrude into
or reopen settled transactions. This is not a matter where
the court is overruling a decision of the High Court which
has held the field for a long period. See in this regard,
Harsh Dhingra v. State of Haryana and others36. In the said
judgment this Court held as follows:
36 (2001) 9 SCC 550
94
“7. Prospective declaration of law is a device
innovated by this Court to avoid reopening of
settled issues and to prevent multiplicity of
proceedings. It is also a device adopted to
avoid uncertainty and avoidable litigation. By
the very object of prospective declaration of
law it is deemed that all actions taken
contrary to the declaration of law, prior to
the date of the declaration are validated. This
is done in larger public interest. Therefore,
the subordinate forums which are bound to apply
law declared by this Court are also duty-bound
to apply such dictum to cases which would arise
in future. Since it is indisputable that a
court can overrule a decision there is no valid
reason why it should not be restricted to the
future and not to the past. Prospective
overruling is not only a part of constitutional
policy but also an extended facet of stare
decisis and not judicial legislation. These
principles are enunciated by this Court
in Baburam v. C.C. Jacob [(1999) 3 SCC 362:
1999 SCC (L&S) 682: 1999 SCC (Cri) 433]
and Ashok Kumar Gupta v. State of U.P. [(1997)
5 SCC 201: 1997 SCC (L&S) 1299]”
83. The statute which has generated the controversy is the
Amending Act of year 2018. We have noticed that there is
undoubtedly a certain amount of cleavage of opinion among
the High Courts. The other feature which is to be noticed
is that, this is a case where the law in question, the
Amending Act containing certain Section 12A is a toddler.
The law necessarily would have teething problems at the
95
nascent stage. The specified value has been lowered
drastically from Rs.1 crore to Rs.3 lakhs. The imperative
need to comply with the mandate of Section 12A which we
have unravelled if it has not been shared by the parties
on the advice they received or on the view prevailing in
the High Courts would necessarily mean that unless we hold
that the law, we declare is prospective such suits must
perish. The court fee paid would have to be written off.
In a fresh suit which would be otherwise barred by
limitation, shelter can be taken only under Section 14 of
the Limitation Act. The availability of the power under
Section 14 itself may have to be decided by the court.
84. Having regard to all these circumstances, we would
dispose of the matters in the following manner. 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. This power can be exercised even suo moto by the
court as explained earlier in the judgment. We, however,
make this declaration effective from 20.08.2022 so that
concerned stakeholders become sufficiently informed. Still
further, we however direct that in case
96
plaints have been already rejected and no steps have been
taken within the period of limitation, the matter cannot
be reopened on the basis of this declaration. Still further,
if the order of rejection of the plaint has been acted upon
by filing a fresh suit, the declaration of prospective
effect will not avail the plaintiff. 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.
85. In Civil Appeal arising out of SLP (C) No. 14697 of
2021 taking note of the fact that it is a case where the
appellant would have succeeded and the plaint rejected, it
is also necessary to order the following. The written
statement filed by the appellant shall be treated as the
application for leave to defend filed within time within
the meaning of Order XXXVII and the matter considered on
the said basis. While we disapprove of the reasoning in the
impugned orders we decline to otherwise interfere with the
orders and the two appeals shall stand disposed of
accordingly. In Civil Appeal arising out of SLP (C)No.5737
of 2022, we set aside the order directing payment of costs
97
of Rs.10,000/-. The petition for permission to file SLP
in SLP (C) Diary No. 29458 of 2021 and the said SLP shall
stand disposed of as already indicated in the judgment.
 ……………………………………………J.
 [K.M. JOSEPH]
 ……………………………………………J.
 [HRISHIKESH ROY]
NEW DELHI
DATED; AUGUST 17, 2022

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