Civil Procedure Law

Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd.

(2022) 10 SCC 1

Facts

Rakheja Engineers filed a commercial summary suit under Order XXXVII CPC seeking recovery of approximately ₹1 crore with interest.
The suit did not seek any urgent interim relief.
The plaintiff instituted it without first undertaking pre-institution mediation under Section 12A of the Commercial Courts Act.
The defendant applied under Order VII Rules 10 and 11 CPC, arguing that:
Section 12A was mandatory; and
The plaint should be rejected.
The trial court accepted that mediation was important but declined to reject the plaint.
Instead, it:
Kept the suit in abeyance; and
Directed the parties to attempt mediation after institution.
The High Court affirmed that approach, reasoning that procedural rules should not defeat substantial justice.
Similar questions arose from proceedings before other High Courts.
The Supreme Court considered whether Section 12A imposed a mandatory precondition to institution.

Whether pre-institution mediation under Section 12A is mandatory.
Whether a commercial suit filed without compliance can be retained and sent to mediation afterwards.
Whether the plaint must be rejected under Order VII Rule 11.
Whether the ruling should operate prospectively.

Section 12A states that a suit which does not contemplate urgent interim relief shall not be instituted unless pre-institution mediation is exhausted.
The word “shall,” the statutory object and the prohibition against institution make the requirement mandatory.
The provision seeks to:
Promote settlement before litigation;
Reduce commercial-court congestion;
Lower litigation costs; and
Support speedy commercial justice.
Post-institution mediation is not equivalent because the statute requires the process to occur before institution.
Non-compliance means the suit is barred by law for the purpose of Order VII Rule 11(d).
The court may reject the plaint:
On the defendant’s application; or
Suo motu.
The exception applies where the suit genuinely contemplates urgent interim relief.
The requirement is not ordinarily waivable because it embodies public policy and institutional objectives.

Rakheja’s suit sought only recovery of money and interest.
It did not identify an urgent situation requiring immediate protection before mediation could be attempted.
Section 12A therefore applied directly.
The trial court’s solution of keeping the suit pending and directing mediation afterwards contradicted the statutory sequence.
The legislature had not merely encouraged mediation.
It had prohibited institution until mediation was exhausted.
Describing the requirement as a technicality ignored:
The mandatory language;
The detailed mediation rules;
Exclusion of mediation time from limitation; and
The special design of commercial litigation.
At the same time, the Supreme Court recognised that:
High Courts had expressed conflicting views;
The 2018 provision was relatively new; and
Retrospective rejection of numerous pending suits could produce serious hardship.
It therefore applied the declaration prospectively from 20 August 2022, subject to limited qualifications.
The Court disapproved the reasoning of the lower courts but did not mechanically destroy settled procedural positions arising before the operative date.

The Supreme Court declared Section 12A mandatory.
A commercial suit instituted without pre-institution mediation, where no urgent interim relief is contemplated, must be rejected under Order VII Rule 11.
The court may exercise this power even suo motu.
The declaration was made effective from 20 August 2022, with the qualifications stated in the judgment.
Use this case for: Pre-institution mediation is a mandatory condition for non-urgent commercial suits, and later mediation cannot cure prohibited institution.