This article has been authored by Ishika Vats, 4th Year Law Student at the Institute of Law, Nirma University

Abstract

Section 12A of the Commercial Courts Act, 2015, aims to promote pre-litigation mediation as the initial step of resolving commercial disputes. However, the exception for “urgent interim relief” has led to inconsistent judicial interpretations, which are used by plaintiffs to bypass mandatory mediation. This blog examines legislative intent and landmark judgments, keeping the case of Patil Automation v. Rakheja Engineers as the benchmark while highlighting the lack of uniformity and wide judicial discretion. It also explores the legal status of settlement agreements as arbitral awards. The blog concludes by questioning the need for clear guidelines to ensure Section 12A fulfils its legislative purpose effectively.

Introduction

Recently, in the case of Exclusive Capital Ltd. v. Clover Media Pvt. Ltd. and Ors,2025 DHC 6513, the court was yet again tasked with scrutinizing the phrase “contemplate any urgent interim relief” provided in Section 12A of the Commercial Courts Act, 2015 (“CCA”). The court emphasised that the phrase is mostly used by plaintiffs to bypass the mandatory nature of pre-institutional mediation. Further, the court in this case reiterated that an imminent and irreversible harm must be proved, which cannot wait until the conclusion of the mediation process. However, even after various judicial pronouncements on the question of urgent interim relief, the courts have divergent opinions, and there is still no uniform answer to: What constitutes urgent interim relief? This blog seeks to analyse the conflicting judicial opinion on the interpretation of urgent interim relief under Section 12A of CCA, against the backdrop of the Supreme Court judgment of Patil Automation v Rakheja Engineers, AIR 2022 SC 3848. 

Legislative Intent and Practical Shortcomings of Section 12A

The intent of the legislature in incorporating the provision for mandatory pre-litigation mediation under section 12A of the CCA via the Amendment Act of 2018 was twofold: first, to promote amicable and speedy settlement of commercial disputes, and second, to align the dispute resolution mechanism with the broader economic principle of ease of doing business. The resolution of commercial disputes through mediation at the initial stage of dispute allowed the parties to reach a settlement amicably, compared to the court proceedings, which could take years and incur heavy costs, this made the traditional dispute resolution mechanism less attractive to foreign investors.

The Supreme Court in Patil Automation v Rakheja Engineers (“Patil Automation”), highlighted the legislative intent by emphasing that the mandatory nature of pre-institutional mediation could prove to be a better alternative to court proceedings for the speedy settlement of commercial disputes, and any other interpretation of the provision as being directive, pre-procedural in nature or otherwise could defeat the purpose and intention of lawgivers. The court concluded that section 12A is not a mere pre-procedural step which can be bypassed; if the pre-requisites are not complied with, the result will be rejection of the plaint. This power can also be exercised suo moto by the court, and the plaintiff will not be entitled to any relief unless pre-institutional mediation is sought. While the court clarified that pre-institutional mediation is not merely a pre-procedural step, but a precondition before filing a commercial suit, the court refrained from providing any guidelines as to the interpretation of urgent interim relief. 

The Madras High Court in K. Varathan v. Prakash Babu Nakundhi Reddy, 2022 SCC OnLine Mad 9556 attempted to fill the void by providing clarity on the meaning of ‘contemplates’ used in the context of urgent interim relief provided in Section 12 CCA by establishing specific criteria for determining the nature of urgency. 

  “16. This Commercial Division having explained the expression ‘contemplation of urgent interim relief’ deems it appropriate to make an adumbration of parameters/tests and they are as follows: (a) whether the prayer for interim relief is a product of profound thinking carefully about the possibility of the happening; (b) whether the matter demands prompt action and that promptitude is of such nature that exhausting the remedy of pre institution mediation without any intervention in the mean-time can lead to an irreversible situation, i.e., a situation where one cannot put the clock back; (c) where the urgency is of plaintiff’s own doing, if that be so the plaintiff cannot take advantage of its own doing; (d) high standard is required to establish the requirement of this prompt action (urgency); (e) plaintiff should be on fair ground in urging urgency and an interim measure; (f) actual or apprehended wrong or injury should be so imminent that the plaintiff should be able to satisfy the court that plaintiff should not be made to stand and suffer the same.”

These parameters have not been uniformly applied by courts because the concepts of ‘urgency’, ‘imminent danger’, and ‘irreversible situation’ require judicial discretion in interpretation and vary with every change in factual circumstances, leaving room for inconsistent interpretations. Moreover, the aforementioned parameters have persuasive value for other courts but are not binding; other courts may take a divergent approach, depending on the factual scenario.

The Supreme Court sought to provide a uniform and binding approach to interpreting Section 12A in Yamini Manohar v. TKD Keerthi, 2023 SCC OnLine Del 2653. It emphasised that when the urgency exception is pleaded, the court has to confine its prima facie analysis to the nature, subject matter of the suit, cause of action, and prayer for interim relief. It is pertinent to mention here that the exception should not be pleaded by the plaintiffs as a means to bypass the mandated mediation. The facts and circumstances of the case have to be considered in an exhaustive manner by the commercial court from the plaintiff’s viewpoint. Thus, the supporting facts and relevant documents should in themselves demonstrate the genuineness of the urgent interim relief pleaded.

Recently, the Delhi High Court in M/S Exclusive Capital Limited v. Clover Media Private Limited & Ors. revisited the urgency exception. The court pressed on the fact that urgency should be real and imminent, which can be derived from the cause of action; herein, time is the crucial aspect, and it must be shown that if time is spent on mediation, it would cause irreparable damage to the plaintiff. These safeguards are necessary because it is seen that plaintiffs are using the urgency exception to bypass the mandatory nature of Section 12A of CCA. Thus, it is imperative to limit and clearly define the scope of urgency. The court has attempted to confine the scope of urgency to imminency of harm, but did not lay down any exhaustive test on the subject matter. Thus, again leaving the scope for judicial discretion. 

Nevertheless, despite the judicial efforts at addressing the question of urgent interim relief, the issue still persists. The courts have approached the issue through various lenses, but the subjective element to the interpretation will always remain, as the determination of urgency will depend upon the facts of each dispute, leading to wider judicial discretion available to courts.  

Status of Mediation Agreement under Section 12A of CCA

The legislative intent contemplates the mandatory and binding nature of pre-litigation mediation, which is also substantiated by clause 5 of section 12A of CCA, which states that the settlement agreement arrived between the parties will have the same effect as that of an arbitral award. It is due to the fact that arbitral awards are directly enforceable under Order XXI of the Code of Civil Procedure, 1908, and binding on the parties. It is pertinent to mention here that in order to ensure this framework functions effectively, the exception to it, i.e., urgent interim relief, must be given a restrictive interpretation and leave no room for judicial discretion, because it would lead to plaintiffs misusing the exception to opt out of mediation. Following the interpretation envisaged by the legislature will preserve pre-legislation mediation as the primary stage for resolving commercial disputes. The binding nature of the settlement is the core of legislative intent to promote Alternative Dispute Resolution and ensure that the parties who have arrived at the settlement need not knock on the doors of commercial courts, except to enforce it. Furthermore, it ensures that a win-win situation is created for the parties, allowing them to reach an amicable settlement without resorting to cumbersome court proceedings for commercial disputes. Thus, in turn, aligning with the goal of achieving ease of doing business.

Conclusion

Section 12A is a progressive step for promoting Mediation as a primary route for settlement of commercial disputes. However, despite the promising framework, its practical implementation has not been up to the mark and lacks robustness and uniformity due to the wider judicial discretion available in the interpretation of the law that contemplates urgent interim relief. The courts have attempted to narrow the scope of urgency by restricting its interpretation to imminent harm and providing time as the essence. Nevertheless, in the absence of any exhaustive guidelines on the subject matter, there will always remain the problem of subjective interpretation. The plaintiffs are taking advantage of this loophole and invoking the exception to opt out of the mediation process, which in turn defeats the legislative intent. To conclude, it is the need of the hour to lay down a uniform, exhaustive list for the interpretation of the provision, so that the vision with which the provision was introduced could be upheld.