Pre-Institution Mediation in Commercial Matters

The Commercial Courts, Commercial Division, Commercial Appellate Division of High Courts Act, 2015, was enacted in the year 2015 with the objective of achieving speedy adjudication of Commercial Disputes. Moreover, the Commercial Courts (Pre Institution Mediation and Settlement) Rules, 2018 were also framed in line with the aforesaid act for the purpose of resolving the matters relating to commercial disputes in an efficacious and expeditious manner.

As per the said enactments, all disputes falling within the definition of “Commercial Dispute” under Section 2(1)(c) of the Commercial Courts Act, which are valued Rupees 3 Lakhs or more, shall not be instituted unless the plaintiff mandatorily exhausts the remedy of Pre-Institution Mediation, to be conducted by the Legal Services Institutions. Accordingly, the Legal Services Institutions are conducting Pre Institution Mediation in respect of Commercial Disputes across the country.

Section 12A of the aforesaid Act states as follows:

12A. Pre-Institution Mediation and Settlement—

(1) 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.

(2) The Central Government may, by notification, authorise the Authorities constituted under the Legal Services Authorities Act, 1987 (39 of 1987), for the purposes of pre-institution mediation.

(3) Notwithstanding anything contained in the Legal Services Authorities Act, 1987 (39 of 1987), the Authority authorised by the Central Government under sub-section (2) shall complete the process of mediation within a period of three months from the date of application made by the plaintiff under sub-section (1):

Provided that the period of mediation may be extended for a further period of two months with the consent of the parties:

Provided further that, the period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963 (36 of 1963).

(4) If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator.

(5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996 (26 of 1996).