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

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

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

(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.

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

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

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

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

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

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.

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

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

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

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

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

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

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.

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

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

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

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

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.

(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

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

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

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.”

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

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

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;

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

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

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

“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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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;

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.”

“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;

(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

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

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

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

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

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,

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

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

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

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

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

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

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]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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

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

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,

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

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

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,

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

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

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

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

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

“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.”

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

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

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

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

“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

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

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

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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