Pre-Institution Mediation Under Commercial Courts Act

Since the amendment to the Commercial Courts Act, 2015, parties intending to file a commercial suit where no urgent interim relief is sought are required by law to first attempt mediation through the designated authority.

This pre-institution mediation mechanism — governed by Section 12A of the Act — is a significant procedural step that lawyers and businesspersons must understand.

Who Does This Apply To?

Any person or entity intending to file a suit relating to a commercial dispute of a Specified Value (currently Rs. 3 lakhs and above) must, before approaching the Commercial Court, apply to the District Legal Services Authority (DLSA) for mediation.

The DLSA then issues notice to the opposite party to appear for mediation within the prescribed time.

What Happens at Mediation?

A trained mediator facilitates discussions between the parties with the objective of reaching a mutually acceptable settlement.

Confidential process protecting business interests
Encourages amicable dispute resolution
Typically concludes within three months
Reduces litigation cost and delays

If Mediation Fails or the Other Party Does Not Appear

If the opposite party fails to appear or if the mediation concludes without settlement, a Non-Starter or Failure Report is issued.

The applicant may then proceed to file the commercial suit before the appropriate Commercial Court. Crucially, failure to undergo this pre-institution mediation renders the commercial suit non-maintainable at the threshold — a procedural pitfall that can result in dismissal.

Practical Importance

The pre-institution mediation stage is not merely a formality. It is an opportunity for parties to resolve commercial disputes without the cost, delay, and unpredictability of litigation.