Pre-instituted mediation

PRE-INSTITUTION MEDIATION

What is Pre-institution mediation?

As suggested by the term, pre institution mediation, refers to the requirement of parties to undergo the process of mediation prior to the institution of a suit to resolve the dispute. In other words Pre institution mediation is nothing but an attempt by the parties to resolve their dispute through the means of mediation prior to filing a suit, as opposed to directly instituting a suit.

Official definition/ legislative definition

Pre-institution mediation has been provided for under section 12 A, under Chapter IIIA of the Commercial Courts Act, 2015["The Act"] Section 12A (1) reads” A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government”.

Legal provisions relating to the term:

Responsible authorities

The Act grants central government the power to authorize the Authorities constituted under the Legal Services Authority Act, 1987 for the purpose of carrying out Pre-instituted mediation.

Time period of mediation

The Act directs authorities responsible for carrying out the mediation, to complete the process of mediation within three months from the date 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.

Limitation

The Act provides that the duration for which the parties remain occupied with pre-institution mediation will be excluded for the purpose of computing the limitation period.

Settlement

If parties arrive at a settlement through mediation, the same shall be reduced in writing and signed by the parties. Further, the settlement herein enjoys the same status and effect as an arbitral award on agreed terms under section 30(4) of the Arbitration and Conciliation Act.

Applicable rules:

The detailed rules and procedure applicable to pre-institution mediation under Section 12 A of the Act is contained in the Commercial Courts (Pre-institution mediation and Settlement) Rules, 2018[“PIMS 2018 Rules”].

Regional Variations:

As previously mentioned, the Act grants central government the power to authorize the Authorities constituted under the Legal Services Authority Act, 1987 for the purpose of carrying out pre-instituted mediation. In addition to PIMS Rules, Specific Rules, Guidelines, and Standard Operating Procedures (SOPs) etc., for the purpose of carrying out pre-instituted mediations are framed by the State Legal Services Authorities of various states such as Karnataka, Delhi, Maharashtra, Kerala, Gujarat, etc.

Government database pertaining to pre-instituted mediations:

Rule 10 (1) of the Commercial Courts (Pre- Institution Mediation and Settlement) Rules, 2018 mandates the District Legal Services Authorities to forward Data pertaining to pre- instituted mediations dealt by it to the State Legal Services Authorities. Sub rule 2 requires the State Legal Services Authorities to maintain the data of all mediations undertaken under its jurisdiction and publish data on quarterly basis on its website. Form 6(i), specified under schedule 1 of the Act specified the format in which this quarterly data should be presented. However, Commercial Courts (Pre-Institution Mediation and Settlement) Amendment Rules, 2020 [“PIMS 2020 Rules”] has now amended the 2018 Rules to mandate State Legal Services Authorities to publish data both on quarterly basis as per the format prescribed in Form 6(ii), and on monthly basis as per the format provided in Form 6(i).

Form 6(i)-Presentation of mediation data on monthly basis

Form 6(ii)- Presentation of Pre-institution mediation data on quarterly basis

While a set format is provided for recording data pertaining to Pre-institution Mediation, not all State Legal services Authorities adhere to this format. However, the data recorded by them can be found on the websites of the respective State Legal Services Authority. Rajasthan, Karnataka, Delhi, Punjab, Maharashtra, Madhya Pradesh, Jharkhand, and Chattisgarh are among states that publish this data, though not necessarily in the prescribed format.

Courts on Pre- Instituted Mediation

Pre-institution is mandatory in nature:

In Patil Automation Private Ltd. v. Rakheja Engineers Private Ltd. [“Patil Automation”] the Supreme Court held that section 12 A of the Commercial Courts Act, that provides for Pre-instituted mediation, is a mandatory provision. Thus Pre- instituted mediation for cases covered under section 12 A is mandatory unless the suit contemplates urgent interim relief. This ruling has clarified the position of law with respect to the mandatory/ compulsory nature of section 12 A, which was previously unclear due to conflicting stances taken by various High Courts. For instance, While the Bombay and Calcutta High Court held that section 12 A was mandatory in nature, the Madras high court took a conflicting stance.

Courts must ensure that the prayer for urgent interim relief is not used as a means to escape pre-instituted mediation

In Yamini Manohar v TKD Keerthi, the Delhi High Court held that the use of the “Contemplate” I in section 12 A indicates that the legislature intended the Courts to deliberate and consider whether the case at hand merited urgent interim relief. There is a need for application of mind vis-à-vis the prayer for interim relief, so as to ensure that the prayer is not a tactic or strategy employed to escape mandatory pre-instituted mediation under section 12. In conclusion, it was held that A prayer for urgent interim relief does not ipso facto give the parties an ‘absolute and unfettered’ right to not be subjected to pre-instituted mediation.

Non compliance shall result in rejection of the plaint.

. ===In Patil Automation the Supreme Court held that non-compliance with section 12 A of the Commercial Courts Act shall result in the rejection of plaint under Order VII, Rule 11 of the Code of Civil Procedure, 1908.

Effect of Defendant’s refusal to participate in pre-instituted mediation

In Kapil Goel v Ram Dulare Yadav it was held that section 12 A is satisfied even if the mediation is a non-starter due to the defendant’s refusal to participate in mediation. In this case though the plaintiff filed an application for the institution of pre-institution mediation, the mediation was a non-starter as both parties refused to participate in the mediation. The Delhi High Court thus distinguished this case from Patil Automation on the ground that in instant case both the parties, and not the plaintiff alone, had refused to mediate the issue. Consequently the Delhi High Court held “the Defendant having refused to participate in the Pre-Institution Mediation would suffice for the Suit of the Plaintiff to be allowed to proceed without any encumbrance”.