India: Invocation Of Urgent Relief Not A Pretext To Circumvent Section 12A Of The Commercial Courts Act, 2015: Allahabad High Court

Introduction

The Commercial Courts Act was enacted in 2015 to improve efficiency and reduce delays in deciding commercial cases. In the course of three years, by way of an amendment to the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018, Section 12A was inserted, which provides for a compulsory pre-litigation mediation before the institution of a suit, where no urgent interim relief is contemplated in such suit. The main aim and object of Section 12A, apart from de-clogging the docket of the court, is to ensure that before a commercial dispute is filed, the alternative means of dispute resolution are adopted and unnecessary litigations are avoided. The Supreme Court in Patil Automation Pvt. Ltd. and others v. Rakheja Engineers Pvt. Ltd. [(2022) 10 SCC 1] has ended the long pending controversy regarding whether section 12A is mandatory or directory while holding that it is a mandatory provision and any suit instituted while violating the mandate of section 12A must be rejected under Order VII Rule 11 of Code of Civil Procedure, 1908 (CPC).

However, soon the courts found themselves grappling with the attempts made by parties to bypass and evade the statutory pre-litigation mediation under section 12A, thereby making the provision otiose by contending that the Plaintiff is contemplating urgent interim relief, which in reality found to be without any basis. Finding itself in one such circumstance, the Hon'ble High Court of Allahabad, in a recent case of Pankaj Rastogi versus Mohd Sazid & Anr. [2024: AHC:15223], while upholding the pivotal nature of section 12A, has relegated the Plaintiff therein to a pre-litigation mediation process, thereby returning a finding that there is no urgent interim relief contemplated in the suit.

The Hon'ble High Court has relied upon the judgment of the Hon'ble Supreme Court in Yamini Manohar v. TKD Keerthi [2023 SCC Online SC 1382], wherein the Supreme Court has negated the proposition that the Plaintiff has the absolute choice and right to paralyze section 12A by making a prayer for urgent interim relief and has held that commercial courts are empowered to examine the nature and subject matter so as to ascertain if a suit contemplates and seeks an urgent interim relief or not.

Factual Background

The appeal before the High Court was preferred against an order dated 31.10.2023 whereby the District Court rejected the suit filed by the Plaintiff and allowed the application under Order VII Rule 11 of CPC of the Defendants on the ground that prayer for urgent interim relief is imaginary and section 12A cannot be bypassed. Before filing the said suit, the Plaintiff had earlier filed one suit against the same Defendants on the basis of the same cause of action without making any prayer for urgent interim relief, and the said earlier suit was withdrawn. Therefore, since the first suit was filed without any prayer for urgent interim relief, the learned District Court held the prayer of urgent interim relief in the second suit as "imaginary" and an attempt by the Plaintiff to bypass the mandate of pre-litigation mediation as per Section 12A of the Act. Contentions of the counsels for the Appellant and the Respondent(s)

The counsel for the Plaintiff before the High Court argued that there is always an urgency in cases pertaining to trademarks. The counsel objected to the argument for the Defendants, who contended that on the factual matrix of the case, there is no urgency demonstrated by the Plaintiff, which is also evident from the fact that the Plaintiff filed the first suit without seeking any urgent interim relief.

Observation of the Hon'ble Court

The High Court observed that section 12A underscores the legislative intent to promote alternative dispute resolution mechanisms and reflects the broader global trend towards embracing consensual and collaborative approaches to conflict resolution instead of traditional litigation's adversarial nature. The High Court referred to Patil Automation (supra) and outlined that in the absence of a prayer for urgent interim reliefs, a suit cannot be instituted without mandatory compliance with section 12A of the Act, and the same can be rejected under Order VII Rule 11 of CPC. Therefore, while following the principles laid down by the Supreme Court in TKD Keerthi (supra), the High Court held, under the facts of the case, that since the Plaintiff did not show any urgency in the earlier suit, the second suit along with prayers for urgent interim reliefs was rightly adjudicated by the District Court to be imaginary and an attempt to bypass the mandatory provision of section 12A.

Conclusion

The object of the lawmaker in inserting section 12A in the Commercial Courts Act 2015, apart from de-clogging the courts, is surely for the advancement of justice and for securing the public good by avoidance of unnecessary litigation. The interpretation of section 12A by the High Court in the present case as well as by the Supreme Court in the case of TKD Keerthi (supra), apart from furthering the intentions of the lawmakers, also empowers the Commercial Court to verify and examine, though to a limited extent, as to whether a suit contemplates any urgent interim relief or not. Thus, it can be safely inferred that there is no absolute or unfettered right upon the Plaintiff alone to decide whether to resort to the procedure under Section 12A.

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